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The last week of trading started promisingly and initially created a positive mood on the stock and crypto market. With a weekly high of $25,256, Bitcoin reached its highest value since August 15, 2022. The key cryptocurrency and the overall market were able to rise even faster than the US stock market. While the stock indices S&P 500 and Nasdaq tended sideways and increased profit-taking at the end of the week, the crypto market was able to break away from this corrective tendency. One reason for this can be seen in the setback in the US dollar index DXY.
The DXY was not able to confirm the strength of the previous days and fell back into its trading range of the previous weeks at the end of the week. In order for Bitcoin to be able to confirm the positive trend of the previous week and to sustainably overcome the strong resistance in the area of 25,000 US dollars, it needs support from good US economic data and falling inflation data from Europe and the USA. All relevant price levels are summarized in the current Bitcoin analysis.
The following economic data are in focus this week
On Tuesday, February 21st, new US home sales figures are due to be released. A day later, the FOMC minutes of the February 1st Fed meeting will be released. The latest EU consumer prices will be announced on Thursday. On the afternoon of February 23rd, the US gross domestic product will be presented. The trading week will be rounded off by the latest US PCE price index data.
New sales numbers for existing US homes
Tuesday, February 21, 2023: At 4:00 p.m. (CET), the updated sales figures for existing properties in January will be presented. The collected data describe the condition of the housing market in the USA. If the sales figures are above expert expectations, this points to increasing consumer spending in the USA. If the forecasts are missed, it would be confirmation that the US real estate sector, which is so important, is cooling off. The expert forecast for the previous month of January is 4.10 million house sales and thus above the last figure of 4.02 million.
If the published figures reach or even exceed the forecast value, the US dollar could correct as it did when it was last published on January 20th. Positive figures from the real estate sector gave the stock and crypto market a tailwind in the previous month. On the other hand, weak data from the housing market could have a negative impact on the financial market. The US Federal Reserve has repeated several times that it does not want to change its monetary policy despite poor economic data.
Fed minutes give more detailed information on monetary policy
Wednesday, February 22, 2023: At 20:00 (CET) the minutes of the last interest rate decision will be published. Taking the market reaction to the Federal Reserve’s recent rate hike as a guide to investor sentiment, market participants seem increasingly to have done with inflation. What the market wants to hear from the Federal Reserve and what the US central bank wants to communicate has recently diverged significantly. Investors seem to want to be more risk-averse again, although the Fed is currently not planning to cut interest rates for the time being.
Recently, however, several Fed members had rejected investors’ bullish market interpretation and pointed out that interest rates are likely to remain higher for longer than investors had hoped. It remains to be seen whether the new statement includes updated insights into how long Fed officials will keep rates at current levels or whether they have adjusted the interest rate projections for 2023 presented in December. Should the Fed change its mind in the latest interest rate minutes, the stock and crypto market will not remain unimpressed. Expect increased volatility on Wednesday evening.
EU consumer prices and gross domestic product for the US
Thursday, February 23, 2023: At 11:00 a.m. (CET), the final consumer prices for the euro area for January will be presented. In the advance release on Feb. 1, inflation data in Europe came in at 8.5 percent, well below expectations of 9.0 percentage points. The market experts have now corrected this forecast to 8.6 percent. If the numbers for the previous month are at this level, the market should react positively.
If, on the other hand, the rate of inflation is higher than analysts’ expectations, prices on the financial markets could correct. With core prices rising against expectations from 5.1 percent to 5.2 percent yoy, it shows that while pressure on headline prices has eased overall, there is little sign that core inflation is also easing. An indication of this is provided by the German consumer price indices, which were recently higher than expected, although the prices for natural gas have been falling sharply for months.
The publication of the US gross domestic product for the final quarter of 2022 follows at 2:30 p.m. (CET). After a weak first half of the year, the US economy held up well with strong growth in the third and fourth quarters despite several interest rate hikes. The advance release for the fourth quarter showed economic growth of 2.9 percentage points, up 0.4 percent from the forecast of 2.5 percent. If the final figures confirm the value of 2.9 percent, the market reaction should again be positive. The Bitcoin course should then also tend to be bullish. Since the beginning of the year, the financial market has been increasingly bullish about positive US economic data, a reversal of the 2022 mantra bad news is good news and good news is bad news.
Release of US PCE core inflation rate
Friday, February 24, 2023: At 2:30 p.m. (CET), the core inflation rate (PCE) for the US in January will be presented. As in the previous month, a renewed increase to 0.4 percent is forecast. If the experts’ expectations are met or even exceed them, the hawkish members of the Federal Reserve are likely to see their strategy of further interest rate hikes confirmed.
At the next Fed meeting on March 22, the Fed is likely to raise the key interest rate again. The crypto market is likely to consolidate to the south as a result. If, contrary to expectations, the PCE price index comes in at 0.3 percent or even below, the disinflation narrative would receive further support. As a result, the US stock market should receive further tailwind, which should also have a bullish effect on Cryprocurrencies.
