Week Ahead with The Birb Nest (20.03.2023)

Welcome to The Birb Nest’s weekly market update. This week is expected to be a volatile one for financial markets, with major events and activities taking place. In this post, we’ll cover the previous week’s economic calendar, incoming economic news releases, and risk assets charts for Bitcoin and the main stock indices. We’ll also discuss the five main topics that occurred this week, including inflation concerns, cryptocurrency fluctuations, earnings reports, global trade tensions, and Federal Reserve policy. Let’s dive in!

Economic Calendar

The previous week’s economic calendar was very important for the incoming fundamental releases.

• CPI m/m, CPI y/y, and Core CPI m/m – The Consumer Price Index (CPI) measures the change in the prices of goods and services that consumers purchase, and is one of the main indicators used by the Federal Reserve to gauge inflation. The y/y forecast for this month’s CPI is a continued decline, with a projected decrease to 6% from the previous release of 6.4%. Since the actual result was 6%, the result for risk assets was positive.

• Core PPI m/m – The Producer Price Index (PPI) measures the change in the price of finished goods and services sold by producers, excluding food and energy. This is an important metric that the FED will consider for future Rate Funds. The previous month’s release was -0.1%, which was positive for risk-on assets. However, this month’s forecast was mixed, with a result of 0.00%.

Incoming economic news release for this week:

As we saw last week, some riskier assets had positive or neutral results. However, inflation did not decrease as expected by the FED. Moreover, due to the current economic uncertainty with banks, the FED has changed its approach from hawkish to dovish, as predicted for this week’s Federal Fund Rates. More aggressive quantitative tightening could lead to a recession in the coming weeks/months, so the FED is in a difficult position to make any decision.

The primary event scheduled for this month is happening on Wednesday, March 22. This event includes the FOMC and Federal Fund Rates, which will likely cause a significant amount of market volatility. It is expected that this month’s rate hike will be 25 basis points, as the FED attempts to combat recent bank failures resulting from an excessive and rapid quantitative tightening, one of the quickest in decades. It is highly likely that this scenario will have a positive impact on the market, leading to increased bullish pressure in assets such as Bitcoin and Stock Indices.

You can track the expectations here – https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
You can also read more about the recent bank collapses in the previous Blog Post of The Birb Nest here.

Risk Assets charts

Bitcoin – BTC has recently broken the multi-month resistance level at 25.200. This breakout came after experiencing some bearish pressure and negative comments regarding inflation and the current economic environment. In addition, Bitcoin rebounded from the 200-Day moving average, confirming the recent trend flip. It is important to keep in mind that there may be possible rejection from the high volume node above as the price moves towards this significant chart location. Otherwise, acceptance inside this range formation prices, would be ideal for Bitcoin to eventually continue with the uptrend.

SP500 – The primary stock index is currently in a macro range formation between 4160 and 3675. In order to have a clear macro bias on this asset class, a breakout above or below this sideways location is needed in the near future. Although the SP500 is currently above the 200-Day Moving Average, there is no clear trend between this macro range, and as we can see, the moving average is flat at the moment, indicating a clear sideways price action.

The financial markets have been quite dynamic lately, with several events and activities taking place. Here are the five main topics that occurred:

1. Inflation concerns: There have been growing concerns about inflation, with investors closely monitoring the rising prices of goods and services. This has led to increased volatility in the markets, with some sectors being hit harder than others.
2. Cryptocurrency fluctuations: The cryptocurrency market has been highly volatile this week, with Bitcoin and other major cryptocurrencies experiencing significant price fluctuations. This has sparked renewed interest in digital assets, with some investors seeing this as a buying opportunity.
3. Earnings reports: This week saw several major companies release their quarterly earnings reports, with some exceeding expectations while others fell short. This has had a direct impact on stock prices, with some companies seeing a boost in their share prices while others experienced a decline.
4. Global trade tensions: Tensions between major trading partners have continued to simmer, with some countries imposing tariffs and other trade restrictions on each other. This has led to uncertainty in the markets, with investors closely monitoring the situation for any signs of escalation.
5. Federal Reserve policy: The Federal Reserve has been closely watched this week, with investors eagerly awaiting any news regarding interest rate hikes or changes to monetary policy. This has had a direct impact on the bond market, with yields fluctuating in response to any announcements or statements from the Fed.

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