This week’s data/central bank information could develop narratives about the outlook for the US economy and Fed policy, which crypto has been sensitive in recent weeks. Broadly, anything that results in market expectations shifting in favor of more aggressive Fed tightening has been negative and vice versa.
That has not so much been the case in the last two weeks. Analysts/economists are increasingly expecting a US recession and have as such been paring back on their long-term hawkish Fed bets (as seen by the sharp pullback in US bond yields from recent highs).
But risk assets like stocks and crypto have failed to mount a sustained recovery, probably as investors focus more on near-term economic risks rather than how this might soften Fed hawkishness in 2023 and beyond.
This is a narrative that may shift in July. For instance, say market participants start focusing more on the Fed (perhaps) cutting rates in late-2023/2024 as a recession helps bring inflation back to target. Such thinking might lead to investors viewing risk assets (like stocks and crypto) in a more favorable light.
A broad rebound is a possibility if July produces more bad news on the US economy, and this bad news is taken as softening the Fed’s stance.
Decent Short-Term Technical Outlook
Back to the crypto community’s second favorite cryptocurrency Shiba Inu; SHIB/USD’s short-term technicals look promising for the bulls.
Over the weekend, as it continued to hold above $0.000010, SHIB/USD broke to the north of a downtrend that has been in play since the end of June. Meanwhile, the pair has also continued to find support from an uptrend that has been in play going all the way back to mid-June.
In other words, SHIB/USD looks to have broken to the upside of a short-term pennant structure. This is typically viewed as a bullish sign for technicians, who would normally then target a retest of recent highs. In Shiba’s case, this implies a retest of late-June highs around $0.000012.
For now, thin crypto market volumes amid US Independence Day weekend and the presence of the 50DMA, which has been offering resistance, is keeping the bulls at bay.
But maybe the bulls can take control when US market participants return on Tuesday. The first full trading week of July could well see SHIBA/USD push above its 50DMA, opening the door for a run higher towards the June highs.
