Judgment Day for the Fed: Investors Hold Their Breath Ahead of CPI

Judgment day has come for the Federal Reserve! Has their policy been enough to bring inflation considerably down without causing a recession? All eyes today will be on the US inflation figures, this includes both the Consumer Price Index and Core CPI. If the predicted inflation figures are incorrect and miss by more than 0.1%, then high volatility can be expected.

Currently, the expectation is that the yearly inflation rate will decline from 7.7% to 7.3% and the monthly Core Consumer Price Index will remain at 0.3%. This year inflation peaked at 9.1% for the States but the rate has not fallen as fast as the Federal Reserve would have liked. The inflation rate is more than 3 times higher than the Fed’s target.  The US Dollar, Stocks and Gold are expected by analysts to see higher levels of volatility over the next 48 hours.

Gold forms a Breakout

Gold is correlated with the US Dollar, hence why it is important for Gold traders to also monitor  the developments over the next 48 hours. The price of Gold is also correlated with economic stability, the market’s risk profile and the performance of other safe haven assets such as the bond market.

The latest economic data from the UK feeds into a need for safe haven assets in 2023. The UK’s Claimant Count Change increased to 30,500, which is the highest since March 2021. The Unemployment Rate also increased to a 4-month high. Economists expect the UK economy to come under pressure in December from multiple strikes from Airport, Healthcare workers, Rail and ports.

Furthermore, investors were mainly focusing on this morning’s breakout which formed at $1,786 which also resulted in a “higher high”. However, traders should also note the price previously formed a “head and shoulder” price pattern which is a bearish signal. For this reason, traders should be cautious if the price does not correct back within the previous range. Currently, the price is receiving mixed signals depending on the timeframe.

According to the US Commodity Futures Trading Commission, the short positions within the market still remain more than double that of bullish traders. In spite of that, the price will mainly be influenced by today’s inflation figures.

Cryptocurrency Market - Bankman-Fried Arrested

Bitcoin continues to remain within the established price range and attempted breakouts simply correct back to the previous range. The latest news within the market is that Sam Bankman-Fried has been arrested at the request of the US.

Bitcoin/USD 1-Hour Chart on December 13th

According to experts, this is positive news for the cryptocurrency market as it shows that authorities will not accept mismanagement and financial negligence within the sector. Experts believe this will continue to encourage crypto exchanges to self-regulate and put further safety procedures in place. In the longer term, this may indeed increase confidence within the market, but the price may not be instantly influenced.

NASDAQ again at Resistance Level and awaits Inflation Data

The price of NASDAQ is again at previous resistance levels from Friday but rises during this morning’s futures market. The price has formed mainly bullish days over the past week, but each day has shown signs of sellers. Technical analysis is currently pointing to a bullish breakout but it is vital traders monitor inflation and forward guidance.

NASDAQ 1-Hour Chart on December 13th

Most economists have indicated over the past month that the Fed is likely to take a less restrictive approach in December. This makes sense as the interest rate is already above 4% and is high enough to lower demand and inflation. The central bank also does not want to be blamed for destabilizing the economy. The regulator has also noted that inflation is not only due to high demand but also from supply issues.

The Federal Reserve will not only confirm its rate decision but also its economic projections for the next quarter. The report is only released 4 times a year and can influence the market’s sentiment and risk appetite. In addition to this, investors will also be evaluating the Chairmen’s “forward guidance”. Traders are specifically looking to see when the Fed will stop hiking. Currently, analysts are trying to determine whether the Fed will increase to 5% or 5.5% before halting hikes.

Summary:

• All eyes today will be on the US inflation figures, this includes both the Consumer Price Index and Core CPI.
• The expectation is that the yearly inflation rate will decline from 7.7% to 7.3% and the monthly Core Consumer Price Index will remain at 0.3%.
• The UK’s Claimant Count Change increased to 30,500, which is the highest since March 2021.
• Sam Bankman-Fried has been arrested at the request of the US.
• NASDAQ Trades at a resistance level but price movement is dependent on inflation data.