Bitcoin Breaches Key Resistance After Soft US CPI Inflation
BTC/USD Analysis
Yesterday's inflation report form the US showed that the Consumer price index decelerated to +7.1% in November and the lowest level of the year, ahead of today's rate decision by the Federal Reserve. The recent moderation in inflationary pressures supports the bank's intention to slow the aggressive pace of tightening, creating some optimism for a faster and lower peak in rates.
CME's FedWatch Tool prices-in a downshift with a 50 basis points increase today, while expectations around the terminal rate eased after the CPI report [1]. The Fed had previously projected the median rate to peak at 4.6%, but Chair Powell recently said that it will likely be higher than that. [2]
As such, we will be anticipating today's updated projections and the dot-plot, other than the rate decision itself and the rhetoric of the policy statement and Mr Powell's press conference. The outcome of this meeting can spark volatility and determine the trajectory of Bitcoin against the greenback.
BTC/USD reacted positively to the downside surprise in Inflation, extending its recovery from November's two-year lows. It took out the key resistance provided by the EMA200 and the 38.2% Fibonacci of last month's high/low plunge. This allows it to push for the 50% Fibonacci (18,384-18,430), but will need help from the incoming events to extend its advance past this level and bring 19,931-20,000 in the spotlight.
On the other hand, BTC/USD has not strayed far from the aforementioned key resistances and eases today, as the Relative Strength Index reached the most overbought levels in three months. This creates scope for a pullback, but a catalyst will be required for fresh monthly lows (16,680), whereas those of the year appear distant at this stage (15,455).
Furthermore, fears around the state of the crypto industry remain in the spotlight, after the collapse of FTX. The US Justice Department indicted its founder and former CEO Samuel Bankman-Fried, for fraud, money laundering and campaign finance offenses. [3]
Nikos Tzabouras
Senior Market Specialist
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.
References
| Retrieved 14 Dec 2022 https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html | |
| Retrieved 14 Dec 2022 https://www.federalreserve.gov/newsevents/speech/powell20221130a.htm | |
| Retrieved 30 Mar 2023 https://www.justice.gov/opa/pr/ftx-founder-indicted-fraud-money-laundering-and-campaign-finance-offenses |
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