(Kitco News) – Stocks opened higher on Tuesday, while cryptos and gold saw slight declines as investors are now focused on Thursday’s CPI inflation report, which will provide clues on the path forward for interest rates.
A pullback in the Hong Kong stock market, which fell 9% after China failed to announce another major stimulus package, has rekindled recession fears in the minds of many, while a drop in the price of crude oil helped to ease the level of concern in the minds of U.S. investors.
“Some negative sentiment crept in yesterday which wiped out all of Friday’s gains following an unexpectedly strong set of jobs numbers,” noted David Morrison, senior market analyst at Trade Nation. “Non-Farm Payrolls came in well above expectations, with the added bonus of some upward revisions to prior months’ data. In addition, there was a welcome moderation in the Unemployment Rate, all of which helped to cool fears that the US economy was on course for a hard landing, thanks to the Fed keeping interest rates too high for too long.”
“But there’s another side to the story, as the solid data led to a revision in rate cut expectations for the rest of the year,” he added. “Investors are now pricing in 50 basis points worth of cuts in 2024, down from the 75 basis points forecast ahead of Friday’s data. This also brought about a reassessment of longer-dated yields with the key 10-year Treasury Note trading above 4.0% for the first time since August. Yields have risen sharply over the past three weeks, as the 10-year was around 3.60% in mid-September.”
“Volatility has also been on the rise,” Morrison noted. “The chart of the front-month futures contract shows a succession of higher lows since July, even ignoring the huge spike at the beginning of August, which coincided with a poor Non-Farm Payroll report, and the unwinding of the yen carry-trade.
“Now the VIX is butting up against resistance around 20-22.00, an increase of 25% since earlier this summer,” he said, adding that the rise has led to “investors [being] more cautious now, and putting some downside protection in place.”
After spiking to a high near $64,500 on Monday, Bitcoin (BTC) retested support at $62,000 overnight as bears look to spoil any hopes of an ‘Uptober’ rally amid mounting global headwinds.
BTC/USD Chart by TradingView
“The cryptocurrency market rolled back 1.8% in 24 hours to $2.17 trillion due to a reduction in risk appetite among investors, sparking a sell-off in bonds and equities,” noted Alex Kuptsikevich, senior market analyst at FxPro. “That said, as the less risky of the cryptocurrencies, Bitcoin has been gaining ground relative to the overall market during similar periods, now holding 56.9% of the capitalization of all currencies - its highest since April 2021.”
“Technically, Bitcoin sold off to consolidate above its 200-day moving average, a demonstration of bearish strength,” he added. “But we're still inclined to see this as more of a short-term correction for now, as the latest episode of risk-off is driven by strong data.”
“While this is a formal reason to sell, strong employment is still a positive factor, promising more demand for final consumption and investment,” Kuptsikevich said. “The threat to cryptocurrencies so far is a combination of a new round of rising prices with signs of a weakening economy. Perhaps they'll be found in economic reports this week and next. But that's nothing more than a risk.”
According to analysts at Bitfinex, the 10% sell-off that occurred between September 27 and October 3 was anticipated in their base case scenario, and the “current market dynamics remain largely reactionary.”
“The market is yet to adopt a predictive stance, making it still quite sensitive to news events and economic data, before a clear directional bias can be determined,” they said. “However, our base case that a correction needs to take place has been satisfied. What is crucial now is how the equity markets react to upcoming catalysts such as the Consumer Price Index inflation data later this week and whether any de-risking across risk assets take place, given the ongoing geopolitical tensions.”
TradingView analyst Xanrox remains bullish and sees a new all-time high for Bitcoin in the weeks ahead.
“The current price is 64k and I predict Bitcoin to hit 73,777 in the next few weeks!” he wrote. “This would be a new all-time high.”
As for why this is a significant price level, Xanrox said, “First we need to look at the previous price action because we have multiple lower highs at a similar price around 73k - 70k.”
“The major liquidity is exactly at the major swing high!” he noted. “There are a lot of orders that the market wants, and that's why we can expect huge volume near this level. This level is definitely a good profit target, as we may see a significant short-term pullback there as well, [plus a] consolidation period. After that, we may continue to levels above 100k.”
“From the Elliott wave perspective, Bitcoin started its wave 3 and you probably know that wave 3s are usually the strongest and longest,” he added. “Bitcoin has been in a sideways consolidation period since March 2024 and formed a triple three WXYXZ corrective pattern. This pattern is now confirmed as the price broke out of the symmetrical triangle and successfully retested it!”
At the time of writing, Bitcoin trades at $62,657, a decline of 1.77% on the 24-hour chart.
