BTC Slips Despite Inflation Fall

It continues to be a frustrating time for Bitcoin bulls with the market still caught in flux around the $68k mark roughly. BTC futures came under heavy selling pressure last week as a bumper set of US NFP results saw the Dollar rallying. However, the market started to recover yesterday as traders reacted to lower-than-forecast US inflation. Despite CPI cooling for a second month in a row, however, the Fed caught traders off-guard with a more hawkish outlook at the June FOMC yesterday. BTC slipped from highs as the Fed revised its inflation forecast higher, cut its rate-cut projections to 1 this year from 3 prior and warned that inflation was still too high.  

Confusing Signals from Fed

Bulls had initially taken the fresh inflation drop as a greenlight, so the subsequent FOMC outcome will no doubt be disappointing. Looking ahead today, however, we could see BTC recover if USD trades lower in response to a weak set of PPI figures. Powell noted that more rate cuts could still be seen this year, dependent on how inflation develops and so incoming inflation-linked data remains the key driver to monitor for now. If we start to see inflation falling faster in coming months, a September cut is still on the table and USD should start to move lower, allowing BTC room to push higher. The risk to this view is if inflation remains sticky at current levels or rises again.

Technical Views

Bitcoin

For now, BTC is holding below the 69,355 level having broken below the rising trend line and back inside the bear channel. While below here, the focus is on a further rmove lower in line with weakening momentum studies. Back above 69,355, focus will shift back onto 74,325 highs and a fresh breakout.