On Sunday (November 17), Bitcoin continued to hover above $90,000. This week's strong performance significantly outperformed gold. Billionaire Elon Musk entered the cabinet to lead the US government's efficiency department, and the "Trump Trade" fermented again. Federal Reserve Chairman Powell said he was not in a hurry to cut interest rates, and supported by the US Consumer Price Index (CPI) and retail sales data, the strong dollar closed at 106.71, suppressing precious metal buying.
CPI, retail sales support the "Trump deal", and the US dollar and Bitcoin are the big winners
On Wednesday, the U.S. released its “core” consumer price index (CPI), which strips out volatile costs such as food and energy, showing prices rose 3.3% in October for the third straight month. Then Thursday’s “core” producer price index (PPI) showed prices rose 3.1% in October, up from 2.8% the previous month and beating economists’ expectations of 3%.
Retail sales data were revised sharply upward ahead of the important U.S. shopping season, with Thanksgiving, Black Friday and Christmas being key events for consumers and the retail industry.
The recent slow progress in inflation could prompt the Fed to adjust its minutes, which had predicted four rate cuts by 100 basis points in total by 2025.
The U.S. Commerce Department’s Census Bureau said on Thursday that retail sales increased 0.4% last month, beating expectations for a 0.3% gain and following an unrevised 0.1% increase in August. Economists polled by Reuters had forecast retail sales, which are mostly goods and not adjusted for inflation, would rise 0.3%.
U.S. CPI, PPI and retail sales data supported the "Trump trade" and added fuel to the strength of the U.S. dollar index.
The CME Fed Watch tool predicts that the Fed will cut interest rates by another 25 basis points (bps) at its meeting on December 18, with a probability of 58.7%. The probability of keeping interest rates unchanged is 41.3%. Although a rate cut is the most likely scenario, traders have significantly cut some of their rate cut bets compared with a week ago.
Powell's hawkish signal: The Fed is not in a hurry to cut interest rates
Powell said the U.S. economy has performed "very well" recently, which gives the Fed room to cut interest rates cautiously. "The economy is not sending any signals that we need to be in a hurry to cut rates," he said in Dallas on Thursday. "The strength of the economy that we're seeing right now gives us the ability to make decisions cautiously."
The Fed began slashing borrowing costs in September with a 50 basis point cut and last week cut its policy rate by another 25 basis points. They have said they are willing to cut rates further as long as inflation continues to slow. Powell's comments appeared to be in line with some of his colleagues who have advocated for a slow approach in future rate cuts.
FXStreet pointed out that Powell's speech on Thursday surprised the market. Although the Fed will still rely on data, some traders and strategists pointed out that the Fed may have already priced in the Trump trade effect.
Boston Fed President Susan Collins said in an interview with the Wall Street Journal that a December rate cut is not a done deal and that she does not see signs of price pressures.
“We’re on the brink of a pause,” said Lindsey Piegza, chief economist at Stifel Financial Corp. “Clearly the Fed is tightening policy more than it needs to.”
In a moderated discussion after the speech, Powell added that uncertainty about the neutral rate level, where policy neither stimulates nor suppresses growth, provides another reason for caution. Several Fed officials said they believe the federal funds rate remains in restrictive territory and favor gradual cuts to that level.
“We need to be careful in this situation,” he said. With the Fed nearing a “reasonable neutral range,” he added, “we may slow the pace of action to increase the chances that we get it right.”
Trump officially announced that Musk will join the cabinet to lead the US government efficiency department
President-elect Trump announced on Tuesday that Musk and Ramaswamy will lead a new Ministry of Government Efficiency whose mission will be to "dismantle the government bureaucracy, cut redundant regulations, slash wasteful spending and reorganize federal agencies," Bloomberg reported.
“All actions of the Government Efficiency Unit will be posted online for maximum transparency,” Musk said, according to Watcher.Guru.
Musk also released the logo of the U.S. government's efficiency department, which has a Shiba Inu waving an American flag and the full name and abbreviation of the Department of Government Efficiency. This further boosted the rise of meme coins such as Dogecoin and Shiba Inu Coin.
Trump's newly established government efficiency department said it plans to close the FBI and fire 1.5 million federal government officials in an effort to cut unnecessary costs.
Musk released data showing that the US government wasted $900 billion in taxes in 2023. The post he cited also pointed out that remember, over the past eight years, the US government has spent an average of $2 trillion more than it earns each year. Any company that operates this way will fail, and anyone who lives this way will go bankrupt. There is no reason to continue doing this.
He previously predicted that the U.S. federal budget could be cut by at least $2 trillion, but this would be more than Congress spends each year on government agency operations, including defense. This could require significant cuts to popular welfare programs such as Social Security, Medicare, Medicaid and veterans' benefits.
Trump's strategic advisor: Nation states are actively buying Bitcoin and have become the top 5 holders
David Bailey, CEO of Bitcoin Inc, the publisher of Bitcoin Magazine, and Bitcoin strategic adviser to the Trump campaign, posted that at least one nation-state continues to actively purchase Bitcoin and has now become one of the top five Bitcoin holders.
Dennis Porter, founder of the Satoshi Action Fund, which helped pass the Bitcoin and cryptocurrency bill in Pennsylvania, posted: “I’m not going to lie… I’m more optimistic today than I’ve ever been that big things are going to happen.”
He then posted again to emphasize: "I just finished another international call. I can confirm that the nation-state's 'fear of missing out' (FOMO) is real. The super cycle is happening."
Trump promised to establish a national strategic reserve asset for Bitcoin. Michael Saylor, founder of MicroStrategy, the largest Bitcoin listed whale on Wall Street, emphasized in a post: "We believe that Bitcoin may become the next strategic reserve asset."
US Dollar Technical Analysis
FXStreet analyst Filip Lagaart said that the dollar index fell slightly at the close of Friday, but a warning must be issued because Powell's remarks are good for the dollar. The Federal Reserve hinted that it may pause the interest rate cut cycle, while central banks such as the European Central Bank may still continue to cut interest rates. This will widen the interest rate gap between the two countries and will support the dollar as a high-yield currency relative to other currencies.
The round number of 107.00 for the US dollar index will still play a role. 107.07 has already set a new yearly high. If it breaks through 107.35, it may reach a two-year high.
On the downside, new support levels are on the horizon. The first support is Tuesday's close at 105.93. Slightly below, the key 105.53 (April 11 high) should prevent a fall towards 104.00.
Gold Technical Analysis
Bruce Powers, an analyst at FXEmpire, said that gold's price action on Friday represented a pause after Thursday's successful test of support. However, the pattern needs to be triggered to be effective, which will happen in a rebound above Thursday's high of $2,581.
On Friday, support was found near the previous resistance August high of $2,532, with the 50% retracement near $2,534. Also, note that the extended bottom channel line from the previous bull flag formation also suggests possible support near Thursday's low. Therefore, there is some technical evidence that a bottom may be in place, which could at least lead to a rebound.
The current correction has inflicted some technical damage on the way down, which may take a little time to fully resolve. The decisive decline was a break below the 50-day moving average, an inside uptrend line, and the previous daily swing low, which is also a monthly low. This is the first break below the previous monthly low in nine months. Moreover, the break below the trendline triggered a breakdown of the ascending parallel trend channel.
The channel represents a certain level of symmetry, which has now been broken. This also raises the possibility that gold could eventually test support near the lower uptrend line. This would be the natural direction for prices to move after such a clear channel breakout. The price represented by the line will depend on when the line is reached.
The rebound from Friday's lows looks to move gold up to potential resistance at the prior low of $2,600 and then Thursday's high of $2,619. Currently, Thursday's high serves as a rough proxy for trendline prices. Then there is the 50-day moving average, currently at $2,652. Given the potential impact of a breakout, it would not be surprising to see a bounce to resistance followed by a drop to test this week's low and potentially break below it. This situation could begin to change with a daily close above the 50-day moving average.
Bitcoin Technical Analysis
CoinTelegraph noted that Bitcoin could break through $93,500 in the fourth quarter and rise nearly 50%, but compared to many macro assets, the Bitcoin price breakthrough has not yet occurred.
Caleb Franzen, founder of financial research resource Cubic Analytics, said the S&P 500 and Nasdaq 100 remain unbeaten by Bitcoin — and the same is true for the NYSE FANG tech index and gold.
“It’s a matter of when, not if,” he predicted.
A key moment in Bitcoin’s history for the U.S. stock market was early 2021, even before Bitcoin hit an all-time high of $69,000, a high that remained unchanged for more than two years.
Despite the dollar’s repeated record losses, Bitcoin continues to struggle to set new all-time highs in the macro asset space.
Last week, Charles Edwards, founder of quantitative bitcoin and digital asset fund Capriole Investments, predicted that a “rapid repricing” would occur because bitcoin had already broken out. He then shared a long-term chart of gold’s breakout in the 21st century, after spending the previous 20 years below its all-time high in 1980. He said bitcoin could do the same now.
Bearish views on Bitcoin continue to surface, with fellow trader Credible Crypto recently predicting that the price of Bitcoin will fall to $50,000 or lower.
In his latest Twitter analysis, Credible Crypto marked $72,000 as a downside target to watch. “If we set a high at $93,800 in a clear, impulsive move above $100,000, then levels at $72,000 and below will likely disappear until the next bear market,” he wrote in the accompanying chart.
“If we sweep the highs but fail to generate the final fifth sub-wave, then that means this move is indeed a correction and makes our chances of retesting $70,000-72,000 at least exponentially higher.”
