October 9 REX Wire Market Outlook

The game-changer this week is the sudden and unexpected strike within Israel by Palestine's Hamas, which caught Israeli intelligence services completely unprepared. With the formal declaration of war by Israel, the world is now looking at another major conflict that could spread further across the Middle East. The Lebanese group Hezbollah, backed by Iran, has supported and equipped Hamas, and there have been additional direct skirmishes between Hezbollah and Israel in the north of the country.

It remains unclear how this will affect the existing Russia-Ukraine conflict, since the US will now have its attention pulled in a different direction, or how this development will further embolden China in its designs on Taiwan.

Dollar Remains Strong, For Now

In times of conflict and uncertainty, traders tend to park funds in the dollar, the world's reserve currency. While the USD is currently bumping against its local high, though, with the DXY just below its local peak of 107, there are possible signs of exhaustion. While it's early days, that would be a natural move at this point, after many consecutive weeks of gains.

September non-farm payroll (NFP) figures were unexpectedly strong. US employers hired 336,000 people, smashing the 170,000 forecast. Moreover, August figures were revised from 187,000 to 227,000. The Unemployment Rate remained at 3.8%, but slightly higher than the expected 3.7%.

US PPI and CPI figures to be released on Wednesday and Thursday will feed into this picture of a persistently strong economy, which, as far as the Fed is concerned, is unwelcome. It raises the odds of a further interest rate rise early in November, as inflation remains a problem.

This would, of course, put further downward pressure on risk assets, including crypto.

Bitcoin's Trend Stays Intact

Bitcoin closed the first full week of the quarter at $27,900, just below both the 200-week moving average and the 200-day MA. These critical moving averages are both acting as resistance, along with the $28,000 mark that has seen multiple touches from both sides over the last three years. To the downside, $26,800 remains as support. BTC is currently trading slightly down on the day, at $27,500.

At this point, analysts are divided. Some are seeing promising consolidation/accumulation, even a breakout, as the dollar potentially tops out. Others are seeing rejection from resistance and eyeing a significant move lower, possibly to the $22-23k zone.

For now, we can see that bitcoin is grinding higher, with macro higher lows, but needs to break that $32k ceiling for ultimate confirmation. This is characteristic of an early-stage bull market, though we know from experience there's room for a significant pullback within that structure—and indeed, that would be fairly common at this point in the cycle.

Should those intermediate lows of $22-23k (also around the 50% mark of the move off the bear market low to the local high) be broken, then we might have to rethink and consider sub-$20k or even $15k coming back into play.

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