The reason for today's decline is clear to everyone. The July PPI data was released: significantly higher than expected, leading to a noticeable rebound in August inflation, reducing rate cut expectations (the PPI annual rate recorded at 3.3%, significantly higher than the expected 2.5%, and much higher than the previous value of 2.3%). PPI itself is an important component of inflation, and the core PCE that the Federal Reserve is most concerned about includes core CPI and core PPI in its calculation formula, so changes in PPI data are absolutely key reference indicators for decision-makers.
Although the probability of a rate cut is still at 94.4%, trading sentiment has clearly changed. The previous rhythm was 'regardless of the data, Trump will cut rates,' but that doesn’t mean his allies in the Federal Reserve can ignore data risks. If the data is moderate, it’s fine, but if inflation rises significantly, those who continue to support Trump could easily be questioned for their fairness.
Don't forget, the Federal Reserve's primary task is to maintain the stability of the U.S. economy, and it emphasizes 'not being subject to political interference.' If they force a rate cut against the backdrop of soaring inflation, it would be like handing a weapon to the Democrats, giving them the opportunity to attack Trump. In a sense, this PPI is one of the strong bargaining chips for Powell and other conservatives.
By the way, this data also comes from the U.S. Bureau of Labor Statistics — the same department whose director was replaced by Trump. However, the current head is not Trump's person, but rather an acting director, and the newly nominated candidate is still stuck in the Senate.
Of course, there is still time until the September interest rate meeting, and a bunch of data will come out subsequently, leaving room for maneuver. My personal judgment is that this PPI will slightly discount the probability of a rate cut, but it’s not enough to make a definitive decision; the pressure is on tomorrow's retail data!
As for the upcoming trading strategy, it is relatively simple: if there are no strong rebound signs in the early morning, the probability is that Bitcoin will return to around 112k; if it can recover, the market will continue to rise.
If the decline continues, today’s high will mark the top position of this phase. There will be a wave of market movements similar to the end of last year. The cryptocurrency market is filled with both risks and opportunities, and both bulls and bears need to maintain proper stop losses to avoid getting caught off guard.
