Market Pulse: Inflation Set for Steady Print, BTC Eyes Range Breakout

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results.

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Pre-Inflation Data

Good afternoon, all. Tomorrow, we have the release of new inflation data. In this report, we'll go through what we're expecting and possible scenarios.

• Core Inflation MoM: Forecast 0.3%
• Core Inflation YoY: Forecast 3.0%
• Inflation Rate MoM: Forecast 0.4%
• Inflation Rate YoY: Forecast 3.0%
• Expectations Going into the Prints

The expectations going into the prints are for the numbers to come in unchanged from last month, but for the Headline Inflation rate to tick up to 3.0% from last month's 2.9% print, and for the Core YoY print to come in slightly lower at 3.0%, down from 3.1% last month.

Even though inflation remains elevated, it's not at a level that concerns the Fed, especially when key components that make up the data are showing downward trending inflation rates, e.g., 'Food & Beverages' and 'Housing'.

'Housing' has the biggest weighting in the inflation index, accounting for 23.2% of the index.

Housing as a key component of the inflation index - 1Y Chart

Should the numbers come in as expected, this won't change much for a Fed that is still largely focused on the weakening labour market, and hence, 2 more interest rate cuts are priced in for 2025 (the October 29th and December 10th Meetings).

Our base case is that tomorrow's inflation numbers come in as expected, and markets will likely take this in their stride and most likely just remain unchanged. However, should we get hotter or softer numbers, then this is how we expect the market to react:

• Scenario 1: Hotter numbers

Should the numbers come in hotter (higher) than expected, the markets can still take this in their stride, as they know the focus is on the labour market that's more materially weakening. However, it depends on how high the numbers come in at. Should we see a significant upside surprise (MoM figures at 0.5% or higher, and YoY figures north of 3.4% or higher), then the market would likely react negatively to this.

• Scenario 2: Softer numbers

If the data comes out softer (lower numbers) than expected, then it's likely that the markets would move higher on this. However, we wouldn't expect a huge move higher, as we mentioned already, the Fed and the markets are more greatly focused on the labour market.

BTC:

BTC remains towards the lows of its range, with price now compressed between $106,000 and $110,700, having not been able to sustain the breakout move above $112,600.

We expect the price to be forming a bottoming structure, and we expect a breakout of $112,600 to come in the short to medium term. We would look to bid sub $107,000 down to $101,000, although we wouldn't expect it to get as low as $101,000. We'd see moves into $104,000-$106,000 as deviations, and therefore we'd look to bid those levels.

BTC 1D Chart

Cryptonary's Take

We expect tomorrow's inflation numbers to come in line with forecasts and for the markets to move on from it relatively swiftly. As mentioned above, the focus from markets and the Fed is elsewhere for now: trade war tensions, the labour market, and corporate Earnings.

Unless we see much hotter than expected numbers (north of 0.5% MoM and north of 3.4% YoY), our short-to-medium term outlook will likely remain unchanged - bullish.

Should BTC pull back into the $104k-$107k area, we'd be buyers. We're impressed with how it held up yesterday, considering the move lower we got in the Nasdaq, hence we have now upped our buy zone slightly from $101k-$107k, to a slightly more concentrated zone of $104k-$107k.

See you this evening for tonight’s stream at 5 PM UK time.