Investors focus on Fed path, stocks were oversold, bitcoin above USD 30k

US stocks are playing a game of dizzy bat (players place a baseball bat on the ground and spin 10 times) as traders remain divided with recession calls and when the Fed could be in a position to pause their interest rate hikes. Hopes for a less aggressive tightening campaign by the Fed improved after a wrath of economic data suggests the economy is softening and that inflation is cooling.  We might not see a significant deceleration with inflation prints, but expectations are growing that the Fed won’t maintain an aggressive inflation rate hiking campaign.

US stocks are rallying ahead of Friday’s nonfarm payroll report as some traders expect to see cooler labor demand, which could slightly ease some inflation worries.

Earlier in Europe, stocks were supported as oil prices softened on expectations OPEC+ would ramp up production in July.  The mood early in NY was rather downbeat after Microsoft had to lower their quarterly outlook, but a good amount of that could be attributed to unfavorable FX moves. ​

Bearish sentiment remains overdone, and a lot of the upcoming profit warnings should mostly be already priced in.  Stocks should start to eventually push higher this summer as economic activity moderates.

Bitcoin remains rangebound

Bitcoin trading has been almost as boring as watching paint dry. Bitcoin remains rangebound and hovers around the USD 30,000 level.  Risk appetite is staging a rally and that has helped send bitcoin slightly higher on the day.

Bitcoin will get its groove back once bearish sentiment on Wall Street improves, but that will likely take several more weeks.  The key to risk appetite will be investor expectations for what the Fed will do beyond the summer.  Bitcoin is forming a base but most traders are still licking their wounds. If bitcoin can recapture the USD 33,500 level, that is what is needed for technical buying to get triggered.

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