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This week’s market focus shifts to the persistent inflation trend in the U.S., with core CPI expected to rise 0.3% month-over-month for the third consecutive month. Higher import duties continue to feed price pressures, keeping the Federal Reserve’s battle against inflation very much alive. Coupled with declining Treasury yields and cautious equity momentum, investors are navigating a delicate balance between risk and safety, making disciplined positioning critical.

Here’s what we’ll cover today:

Let’s dive in 👇

Analysts expect U.S. core CPI to rise 0.3% month-over-month when the data is released this week, marking the third consecutive month of elevated inflation. Higher import duties are among the key contributors to this persistent price pressure. While we’ll explore the broader market implications of the CPI release in our Key Events Ahead section, this ongoing trend makes it clear that the Federal Reserve’s fight against inflation is not yet over. The bond market’s repricing of rate expectations could trigger short-term volatility, making now a prudent time to review portfolio hedges and ensure diversification across asset classes.

The U.S. 10-year Treasury yield has now broken below the psychologically important 4% level, driven by mounting recession concerns and growing expectations of Fed rate cuts. This move signals that bond markets are increasingly pricing in economic weakness. The implications are twofold: investment-grade bonds are becoming more attractive as a source of stable income, while high-yield credit warrants caution due to rising default risks. Falling yields reduce the discount rate on future earnings, a near-term positive for equities, but the recession fears driving those yields lower suggest any equity rally could prove short-lived if economic data continues to weaken. In this environment, quality matters more than ever, not only in equities, but also in crypto, which underpins our Q4 Altcoin Watchlist positioning.

The parabolic rise in gold reflects heightened concerns over inflation, geopolitical risks, and currency debasement. However, with technical indicators now stretched, new buyers face unfavorable risk-reward dynamics at current levels. For investors who have benefited from the rally, this may be a good time to trim exposure and lock in gains, especially in leveraged gold positions.

Meanwhile, the MSCI All Country World Index continues to trade comfortably above its 50-day moving average, signaling persistent market strength through 2025. Yet beneath the surface, momentum indicators are beginning to cool, with both short- and long-term oscillators rolling over from overbought territory.

For tactical traders, this setup suggests it may be wise to take partial profits after such an extended rally, while long-term investors might consider raising modest cash reserves to deploy on future pullbacks. Rather than chasing strength at current levels, patience and selectivity could offer more favorable risk-reward opportunities in the weeks ahead.

As Bitcoin continued trending lower throughout last week, bottoming at 103,600 on Friday, the crypto fear and greed index has not yet recovered and remains in a negative reading, currently in fear at 28 points. Despite price rebounding over the weekend and moving back up to around 111,200, sentiment and conviction across investors have not yet appeared to rebound either.

While this may seem bearish and short-term momentum is still lacking, it’s important not to misunderstand the lag of this metric and sentiment as a whole. Historically, “buy fear, sell greed” has proven to be a wise approach, and when zooming out, Bitcoin remains in a very clear long-term bullish trend, supported by equities that continue to trend higher as well.

Bitcoin Spot ETF net flows closed last week exceptionally weak, with outflows on almost all trading days except Tuesday, where minor inflows were not able to offset the previous days’ outflows. As mentioned many times before, with Bitcoin now being a Wall Street-traded asset, significant and sustainable upside depends on consistent ETF net inflows. Gold’s recent rally has been driven largely by ETF demand too, further highlighting this dynamic. We continue to track BTC ETF flows closely, as strong demand and renewed inflows would signal a period of strength and ideally outperformance, especially for those willing to buy when fear dominates.

The most important macro event for markets this week will be Friday’s U.S. CPI inflation report, alongside the Services and Manufacturing PMI releases. Together, they will provide crucial insight into whether inflation pressures are cooling fast enough for the Federal Reserve to begin cutting rates sooner rather than later.

If CPI softens and PMI data confirm a slowdown in activity, markets are likely to price in earlier and potentially deeper rate cuts. That scenario would weaken the dollar and yields, improving risk appetite across equities, gold, and crypto. Conversely, if inflation remains sticky or PMI data show resilience, investors could scale back rate cut bets, strengthening the dollar and pressuring risk assets in the short term.

Ahead of these key reports, Thursday’s Existing Home Sales will offer an additional read on consumer demand and housing market strength, a sector closely tied to broader financial conditions.

With inflation, growth, and rate expectations all in focus, Friday’s data cluster has the potential to reshape short-term market sentiment. Expect volatility, and possibly the next major directional move, across Bitcoin, Ethereum, and Solana as traders react to shifting Fed expectations.

After reaching fresh lows at $103,600, Bitcoin rebounded over the weekend, reclaiming the $106,100 and $109,300 key levels. With the move to $109,300, the first profit target from Friday’s scenario has been hit. The next higher key level of interest now sits at $111,900.

The one-week Bitcoin liquidation heatmap currently shows leverage positioned on both sides of the market, with the largest cluster just above current price, starting around $112,400 and extending up to $120,000. This makes moves in either direction possible, though short-term trend structure remains bearish until $116,000 is reclaimed.

Bullish Scenario:
In the bullish case, Bitcoin reclaims $111,900 and continues higher, regaining momentum and resuming its uptrend. Long setups emerge on a confirmed reclaim of this level, targeting $113,300, $115,300, and ultimately $116,900, with invalidation if price drops back below entry. If price retests $109,300 first, additional long opportunities appear on a confirmed bullish retest targeting $111,900.

Bearish Scenario:
In the bearish case, Bitcoin fails to reclaim $111,900 and faces rejection. Short setups may develop on a confirmed bearish retest, targeting $109,300, with invalidation if price reclaims entry. If $109,300 fails to hold, further short setups emerge on a bearish retest of that level, targeting $106,100 again.

Altcoins managed to rebound collectively as well, with TOTAL3 showing a clear relief rally after retesting the 950B key technical level. The metric even managed to reclaim the 1T mark and is now pushing higher, targeting the next technical level at 1.05T. Notably, as bitcoin reached fresh lows this week, falling below its previous liquidation wick, TOTAL3 did not. The recent low at 950B was in fact a higher low, potentially hinting at a market structure shift that would be confirmed if 1.09T is reclaimed.

Ethereum/Bitcoin (ETH/BTC) also moved higher after its liquidation wick perfectly retested the 0.03255 key technical level. Since then, ETH/BTC has quickly approached 0.03723 but has not yet managed to reclaim it, consolidating just below this critical level.

Our focus remains on maintaining a crypto portfolio concentrated in bitcoin and top altcoins (Q4 Watchlist), without yet increasing exposure to lower market cap coins or higher-risk bets. Volatility and uncertainty remain elevated, and the smartest approach in these conditions is to minimize potential downside. Once bullish momentum confirms and altcoins clearly begin to lead, a shift that has not occurred yet, we’ll adjust toward a more risk-on positioning. Until then, we stay disciplined.

We hope this report provided you with valuable insights into the latest market developments and geopolitical shifts.

As always, stay informed, stay prepared, and have a fantastic week ahead! 🚀

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