Wall Street focused on inflation and earnings, stock investors brace for bad updates, crypto pessimism

US stocks are in for a rough start to the trading week as Wall Street braces for a wrath of downgraded corporate outlooks alongside what will likely be another hot inflation report. ​ Inflation is ‘public enemy number one’ and that will continue to drive fears that the Fed will aggressively tighten policy and send the US economy quickly into a recession. ​ This is a massive week on Wall Street as Fed expectations for the July 27th policy decision will be cemented after this inflation report and the big banks will tell us if the US consumer and the economy are weakening faster than most earnings estimates are implying. Second-quarter corporate profits will struggle given inflation has run much hotter than anyone expected. ​

Which way will cryptos go?

It seems Wall Street is convinced there’s more pain coming for bitcoin investors. A Bloomberg MLIV Pulse survey was the talk over the weekend as it highlighted just how pessimistic both retail and institutional investors have become. ​ The survey showed that 60% of respondents thought bitcoin was first heading lower to USD 10,000, while 40% believed it would recover to USD 30,000.

The latest bearish cycle for bitcoin is close to testing the historically known 80% drops that we would see in past crypto winters. ​ The USD 14,000 level seems like it could provide significant support if bitcoin breaks later this week. ​ This week’s inflation report could be the trigger for one last major plunge for cryptos. ​

Despite all the pessimism and negative headlines for bitcoin, the fact that it is putting up a fight at the USD 20,000 level is a promising sign. ​ The risks are still elevated for risky assets, especially crypto, but there is a good chance that the deteriorating macro backdrop of high inflation and rising rates is close to getting fully priced in. ​

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