Key Indicators for Bitcoin and Crypto - Trading Week 19
- 7 minute read
The past trading week was mainly marked by price consolidations in both the stock and crypto markets. Bitcoin (BTC) corrected at its peak by about 10% to US$25,810, before staging a US$1,000 recovery. The BTC price ended the trading week below the relevant support zone of recent weeks at just under US$27,000.
In addition to weaker-than-expected consumer expectations and declining U.S. consumer confidence, a significant rise in the U.S. dollar index (DXY) created a noticeable headwind for the crypto sector. U.S. equity indices also ended the week mostly weaker. Although further declines in consumer and producer prices initially led to a bullish price reaction in the middle of the week, core inflation pointed to continued uncertainties on the price front, leading to more earnings releases in the second half of the week. A stronger than expected rise in initial unemployment claims by market experts fueled additional concerns about a noticeable slowdown in U.S. economic activity at the end of the week. As a result, much selling pressure arose in the crypto market, which also caused Bitcoin to fall in.
Brief summary:
✔️ On Tuesday, final U.S. retail sales figures for the month of April will be released. Market participants expect a 0.7% recovery.
✔️ On Wednesday, April inflation figures for the Eurozone will be released. Analysts of an inflation rate of 7.0%.
✔️ Thursday is dominated by the latest Philadelphia Fed manufacturing index. These will be presented then. Analysts expect a final figure of -19.0.
✔️ The trading week concludes on Friday with a speech by Fed Chairman Jerome Powell. Powell's statements often have an effect on Bitcoin prices.
Table of Contents
- Retail sales US to start the week
- Inflation figures for the Eurozone
- Philly Fed Manufacturing Index
- Fed Chairman Powell's speech at the end of the week
Retail sales US to start the week
On Tuesday, May 16, the US Census Bureau will release final US retail sales figures for the month of April at 2:30 p.m. (CET). They are considered an important measure for assessing household consumption sentiment. In the last two reporting periods, the experts' conservative estimates were significantly exceeded on several occasions despite subsequent revisions. The final figures for March showed a decline of 0.6%, significantly below the expected 0.4% decline. For the past trading month of April, market participants expect a 0.7% recovery in U.S. retail sales. If expectations are met or even exceeded, this indicates a possible stabilization of consumer confidence and would be an indication of rising U.S. economic growth over the past month. A stabilization of U.S. consumer sentiment could accelerate the price recovery of the U.S. dollar index (DXY) and that could create headwinds for the crypto market. On the other hand, if the experts' estimates are not met, this is actually bad news for the US dollar. The US dollar index would then have to consolidate again, which is actually positive news for the crypto market, as the Bitcoin price traditionally responds positively to this.
Inflation figures for the Eurozone
This Wednesday, May 17, market participants can look forward to the inflation data for the Eurozone. At 11:00 a.m. (CET), Eurostat is going to release the final consumer price data for Europe for the previous month of April. In the pre-release on May 2, the inflation data came in at 7.0%, slightly above expectations of 6.9%. Experts also expect an unchanged inflation rate of 7.0% for the final data. However, given further declining U.S. consumer prices, a surprise is conceivable here. If the previous month's inflation rate is unexpectedly lower than analysts expect, the European stock market could initially react positively. This is similar to the previous week following the release of declining U.S. inflation data. The crypto market could then stabilize in the short term. On the other hand, should consumer prices exceed analyst expectations and thus rise again sequentially, this would be another setback in the fight against the persistent inflation problem in the euro zone. Persistently high inflation rates in the countries of Europe could increasingly become a problem for the Eurozone economy. European financial markets could return their gains of the past few weeks and also negatively affect Bitcoin prices.
In the afternoon, at 2:30 p.m. (CET), the Census Bureau will then present preliminary figures on U.S. building permits for the month of April. The number of permits issued serves as a leading indicator of the strength of the US housing market. Recently, the number of new building permits reached 1.430 million, slightly above experts' expectations, indicating an initial stabilization of the real estate sector. Compared to the previous month, the analysts' forecast remains unchanged at 1.430 million building permits. Recently, the US stock market and subsequently the Bitcoin price reacted positively to better-than-expected figures from the real estate market. However, if the number of building permits issued is once again weak and does not meet experts' expectations, it could lead to another downturn in the US stock market, which could also have a negative effect on the cryptocurrency sector.
Philly Fed Manufacturing Index
On Thursday, May 18, 2023, at 2:30 p.m. (CET), the latest Philadelphia Fed manufacturing index will be presented. The index surveyed measures the state of Philadelphia's manufacturing sector. The Philly Fed index is considered a leading indicator for the important ISM purchasing managers' index. Index values above 0 indicate positive business development of industrial companies, while a decline below 0 indicates negative business development. Over the past three months, the experts' forecasts were consistently clearly missed. Most recently, the final data of -31.3 was significantly below expectations of -19.2 and led to significant price losses in the stock and crypto markets. If the manufacturing index remains weak for the fourth consecutive month and falls below analyst expectations of -19.0, the bearish reaction of April 20 is likely to repeat itself. If, contrary to expectations, market participants' forecasts are beaten, it would be the first indication that the business prospects of U.S. industrial companies are stabilizing. As a result, there could be a strong recovery in the U.S. stock market, as the likelihood of the start of a recession would diminish in the near future. The crypto market is also likely to take this development positively.
Fed Chairman Powell's speech at the end of the week
The trading week concludes with a speech by Jerome Powell on Friday, May 19. The Fed chairman steps in front of the cameras on the last trading day of the week. Investors hope the Fed chief will specify future U.S. monetary policy. It remains to be seen whether Powell will confirm his latest statements from the press conference following the last interest rate decision on May 3, in which he confirmed his somewhat dovish outlook. Although U.S. inflation continued to fall recently, persistently high core inflation could convince Powell to leave interest rates unchanged for now. Market participants are increasingly speculating on a first rate cut in the coming months. Powell may also feel compelled to address the problematic situation in the U.S. banking sector. Again, investors could react to news with more buying or selling.