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Rate Cuts Are Off The Table

January 11, 2024
Frank Cabibi

CPI numbers came out this morning in the US, and the results were not what investors hoped for. The benchmark reported hotter inflation than expected and Core remained unchanged. The likelihood of a March rate cut will probably not even be a consideration for at least the first half of the year, and here is what this means for the forex market.

EdgeFinder Analysis

All pairs trading against the USD have lost points on their previous bullish scores. CPI y/y rose higher than expected and Core did not move. On the EU pair particularly, the inflation score fell by 3 points because of what happened today.

This could spell more downside for the pair because rate cuts are not coming any time soon to weaken the dollar. EURUSD is mixed on retail sentiment with a slight lean in euro favor on the COT report.

Despite this news, bitcoin is continuing to perform well. A bitcoin ETF was launched today on the New York Stock Exchange which sparked a large amount of demand at the opening bell. Price has finally reached the $48,000 mark that I've been looking for since November.

However, now that we have seen this move complete, what's going to come next? There are arguments against the crypto ETF because it has made bitcoin more regulated than before. If the crypto can't close above this strong level of resistance, we could be in for a pullback.

Gold is now leaning bearish on the EdgeFinder after higher CPI. What we are seeing now is a score flip from +6 to -4. This could suggest that gold has reentered bearish territory. Retail is still showing us a mixed sentiment overall.

Higher rates for longer could clog economic production which may help gold's bullish case, however. The metal also performs well during periods of high inflation. The problem is that the dollar may get stronger as a result too.

Retail Spotlight

The majority of retail traders are bearish on bitcoin and USDJPY. On the other hand, gold, GU, UC, EU, NU are all mixed. And oil is still one of the top most bought assets.

Smart Money Spotlight

A bullish case for EU revolves around market sentiment. As retail becomes increasingly short, smart money is still buying up the euro and selling dollar.

Fundamental Spotlight

The score breakdown shows what happened to inflation levels and why we got a weaker reading on the indices. The score impact is the recent change from 3.1% to 3.4% while staying above the inflation target between 1 and 3%. Core CPI did not change, however, so the score could have been more bearish if it rose.

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