Morning rebound faded as PPI remains elevated, Oracle impresses, MicroStrategy all-in on bitcoin, bitcoin holding above USD20k

Wall Street was quick to fade the morning rebound that stemmed a modest improvement with producer prices, possibly providing some hope that core inflation continues to ease for businesses. Wholesale prices are still climbing higher and while they are slightly off the record annual pace, this report does not change anything for the Fed.  Aggressive tightening over the next handful of policy meetings is the only course of action for the Fed.

PPI

PPI rose 0.8% for the month and 10.8% over the past year.  The April reading downward revisions across the board, so that could support the idea that consumers might see slightly less price increases passed on. The Fed will focus on the month-over-month readings and those are still rising.  The headline 10.8% increase in wholesale prices for the month of May was lower by a tick for both the downwardly revised prior reading and consensus estimate.

Oracle earnings sparkle

Thank you, Oracle!  If Oracle didn’t crush earnings and remind Wall Street that it is not all doom and gloom out there, US stock markets might have kept the selling pressure going.  Oracle boasted a strong outlook as they saw a “major increase in demand” for cloud infrastructure.  Oracle is somewhat viewed as a safe-haven tech trade and this strong fourth quarter performance will keep it as a must hold on Wall Street.

MicroStrategy

One of the biggest bitcoin backers, Michael Saylor remains committed to relentless belief with the world’s largest cryptocurrency.  Saylor tweeted, “When @MicroStrategy adopted a #Bitcoin Strategy, it anticipated volatility and structured its balance sheet so that it could continue to #HODL through adversity.”

MicroStrategy is in danger of a massive margin call and there is no going back for them. In May, their president, Phong Le noted that bitcoin would need to lose half its value around USD 21,000 before they’d have a margin call.

Regardless of what happens with bitcoin, investors should be hesitant to use MicroStrategy as their way of gaining exposure to cryptos.  MicroStrategy could have bought protection at any point and they remain blindly bullish on cryptos.

Bitcoin ​

Bitcoin traders better be buckled up heading into the FOMC decision.  Bitcoin is still holding the USD 20,000 level and if Wall Street gets a very hawkish decision and press conference, Treasury yields and the dollar could surge once again and that would test the line in the sand many crypto traders have drawn.  If bitcoin breaks below the USD 20,000 level, support might not emerge until the USD 17,000 level. Another crypto plunge might not see major support until the 2019 summer high around the USD 14,000 level.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya