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.

Inflation Data is Out

• Core PCE MoM: Forecast 0.3%, Actual 0.2%
• Core PCE YoY: Forecast 3.0%, Actual 2.9%
• Personal Income MoM: Forecast 0.3%, Actual 0.4%
• Personal Spending MoM: Forecast 0.3%, Actual 0.6%

This is perhaps the best possible data for the bulls. We've had slightly softer inflation numbers, whilst the consumer remains robust and is still spending. This will allow the Fed to cut at the end-of-October Fed Meeting.

This initial price reaction has been slightly up, and this might help a small relief rally occur, although the amount of upside we've seen is probably weaker than we'd have expected considering this is one of the more "positive" prints we could have got here.

Recent Price Action:

Risk assets have pulled back over the last few weeks, with Crypto hit the hardest and the TradFi Indexes now also experiencing a small pull back in the last few days. This pull back has most likely stemmed from recent economic data coming in more resiliently, which has meant that the markets are now pricing in lower odds of consecutive interest rate cuts at upcoming Meetings, which is why we've seen a risk-off rally.

However, there is still an 85.5% chance that the Fed cuts rates at the October Fed Meeting, up from 83% following the data. This is reflected in Bond Yields which have moved higher - a suggestion that less future interest rate cuts will be needed, which is why we're not looking to add to positioning at current prices for now.

Alongside this, we've seen large Spot sellers along with the ETF's seeing more considerable outflows.

US2Y Bond Yield:

The US2Y Yield is up 18bps since the 17th of September Fed Meeting.

What‘s Our Positioning From Here?

For now, we remain positioned, however, should we get a more meaningful bounce, we'd look to trim some of our size in the Majors down slightly. This would mean, if you're 100% allocated, we'd suggest trimming positions down to 80% size.

We're not expecting that this is the start of a new bear market, otherwise we'd suggest a heavier cash positioning. But should we continue to see the inflation data remain elevated, this would likely continue to see the number of interest rate cuts be reduced and this could bring prices down further over the medium term. We would therefore like to have some cash at our disposal so that we can take advantage of dip buys.

BTC:

$106-$112k is the key range for BTC. We'd be concerned should the price break below $106k, and it would be a big vote of confidence to see the price reclaim the $112k level. Whilst price chops between these levels, we'll remain patient.

• Bullish above $112k.
• Bearish below $106k.

Cryptonary's Take:

Ultimately, we've been disappointed by the market's reaction following the mid-September rate cut and forward guidance for further rate cuts. The reason being has been the US2Y Yield has increased since which has hindered risk assets.

For now, we'll continue to monitor price action as the recent weakness has surprised us, particularly as we still expect further rate cuts in the October and December Fed Meeting. For this reason, we remain positioned but with a slightly more cautious, but calm approach than before.

Next week, we have new jobs data to look forward to. This will be pivotal in the forward path for rates and therefore likely risk assets.