Bitcoin: Tests 200-day SMA ahead of Powell & US data

• Bitcoin ↑ 6% since Fed cut last week

• Fundamental spark could trigger price swings

• Powell’s pre-recorded speech & US data in focus

• Tough resistance at 200-day SMA

• Technical levels - $68,250, $64,000 & $60,000

Bitcoin has struggled for direction since the Federal Reserve announced its 50-basis point rate cut last week.

Despite rising roughly 6% post-Fed decision, bulls failed to conquer the 200-day SMA at $64,000.

Note: Lower US interest rates may boost appetite for riskier assets such as cryptocurrencies.

Looking at the daily charts, prices seem to be trending higher but the Relative Strength Index (RSI) is near overbought territory – signalling a potential throwback.

Still, the world’s largest cryptocurrency could experience big price swings with the right fundamental drivers. This may come in the form of a pre-recorded speech by Powell and key US data including the jobless claims in addition to the personal consumption expenditure gauge.

The biggest takeaways from the Fed decision last week were:

• Dot plot projections showed two more 25 bp cuts expected.

• Future rate cuts would be data-dependent.

• Markets currently expect 75 bp of cuts by the end of 2024.

So, investors are likely to closely scrutinize Powell’s pre-recorded speech and US data for additional clues on the Fed’s next move in Q4.

Traders are currently pricing in a 60% probability of a 50 bp Fed cut by November with 75 bp worth of cuts priced in by the end of 2024.

Taking a deeper dive, the initial jobless claims is expected to rise 223k in the week ended September 21st. A figure that exceeds market forecasts could fuel fears over the health of the US labour market – supporting the argument for deeper rate cuts.

Golden nugget: Over the past 12 months, the initial jobless claims have triggered upside moves as much as 1.5% or declines of 2% in a 6-hour window post- release.

Note: It will be worth keeping an eye on the second quarter GDP data (final print) which is expected to confirm that the US economy expanded 3%.

On Friday, Fed speeches and the US August PCE report will be in focus. Ultimately, further signs of cooling price pressures may reinforce bets around the Fed cutting rates by 75 bp by the end of 2024.

Golden nugget: Over the past 12 months, the PCE report has triggered upside moves as much as 0.7% or declines of 2% in a 6-hour window post- release.

 

Looking at the technical picture...

Bitcoin is on breakout watch with prices lingering around the 200-day SMA.

• A solid breakout and daily close above $64,000 may open a path toward $68,250.

• Should $64,000 prove to be reliable resistance, this could trigger a selloff back towards the 100-day at $61,000 and $60,000 – where the 50-day SMA resides.

Bitcoin Jerome Powell inflation EU data Federal Reserve