The Tables Turn: Warsh's First Bullish Impact

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We’re taking a short break from the Q3 Outlook series this week (Parts 3 and 4 will land next week) because today’s price action demands the attention instead. Bitcoin is up 4.3% today and back above $65k, its best single day percentage gain since April 13, on the back of comments from Fed Chair Kevin Warsh. It’s the first time his commentary has actually moved all markets higher since he officially took over as Fed Chair back in May.

It’s a good reminder that volatility brings opportunity. Yesterday we covered the hawkish comments from Fed Governor Christopher Waller, who warned the Fed shouldn’t repeat the mistake of waiting too long to hike rates, comments that dragged Bitcoin and PAXG lower ahead of the CPI release. Today the story has flipped entirely.

June’s CPI print, released yesterday, came in well under expectations. Economists had pencilled in headline inflation at 3.8% year on year, with the monthly figure expected to fall just 0.1%. Instead, headline inflation dropped 0.4% month on month, the largest single month decline since April 2020, and the annual rate fell all the way to 3.5%. Core inflation was flat on the month too. Coming in that far under consensus is what really propelled markets, taking a lot of heat out of the hike case Waller had been building just a day earlier.

Then came Warsh himself. Testifying before Congress this week (House on Tuesday, Senate today), he kept his usual caution intact, warning lawmakers against reading “mission accomplished” into one month of data. But he paired that with an unusually confident line: “if we get policy right, and we will, the inflation surge of the last five years will be a thing of the past.” Markets had already rallied hard on the CPI beat, and that line gave the move somewhere to keep going rather than fade. Combined with the softer CPI print, the market’s odds of the Fed holding rates at the July 28 to 29 meeting have jumped sharply in the space of two days.

Put it all together and altcoins are following Bitcoin higher, with traditional markets seeing green across the board too.

We’re not out of the woods though. Oil is continuing its bounce, with the conflict in the Middle East continuing to escalate rather than ease. The naval blockade on Iranian shipping was reinstated just this week. It’s also worth remembering that the CPI print markets are celebrating describes a world that no longer exists by the time it was published. June’s data captured the ceasefire window, before hostilities resumed on July 8 and oil began climbing again. July’s inflation data, the number that will actually reflect this energy shock, is still to come.

Stormrake Spotlight: Pax Gold (PAXG) ($4,048)

Source:https://www.tradingview.com/x/lx70U9lv/

PAXG bounced over 1% due to the bullish appetite that spread throughout markets over the last 24 hours, but it is clear where gold and PAXG stands. Whilst it was green on the day, Bitcoin was up over 4%, equities continued to bounce and hover around all time highs, whilst PAXG is still heavily bearish, with bears continuing to reject price at the 21 exponential moving average, which was seen again overnight.

We can expect PAXG to continue lower and retest the key zone once more.

BTC/USD Key Levels and Price Action:

Source: https://www.tradingview.com/x/G3HuYSG5/

After looking like the bears had momentum, the bulls turned the tables and are looking to sustain this move above the key moving average that has been the battleground for the last nine days.

We now turn our attention to the bullish target of $66.8k. This would set in another high, which strengthens the bulls’ control.

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*All prices are denominated in USD unless stated otherwise*

Written by Alexandar Artis

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