FUNDAMENTAL ANALYSIS
Bitcoin dropped on
Friday after Fed
Chair Warsh delivered a hawkish speech at the Jackson Hole Symposium. The
key passage was him saying “I would be hard pressed to describe broad
financial conditions as restrictive”. The market interpreted that as him
leaning against the recent easing in financial conditions and, therefore,
retightened them.
As you
recall, Bitcoin and other cryptocurrencies, rallied strongly on “debasement”
fears following the US
Treasury buyback announcement to suppress long-term yields. Warsh’s speech has
triggered a reversal in the “debasement” trades, with gold and the US
dollar returning to pre-US Treasury announcement levels. Bitcoin, on the other
hand, showed notable resilience, as it just extended the consolidation process
near recent highs.
The technicals
might be more helpful going forward, as a break above Warsh’s speech level around
79,887 could point to an extension of the uptrend, while a break below the post-speech
level could lead to a bigger selloff.
Warsh has also reiterated that
the Fed is focused solely on inflation now and mentioned that the progress has
been slow. For this reason, I think only a soft US
CPI report could bring the probabilities below 50% (currently at 67%) and deter
the Fed from hiking at the upcoming meeting. If the
probabilities stay at or above 50%, the Fed might be forced to hike regardless
because failure to do so would send a dovish message and ease financial
conditions again.
For Bitcoin, easing
in financial conditions and dovish repricing in interest rate expectations
would be positive drivers and extend the upward momentum. Conversely, a hot CPI
report or hawkish surprises should weigh on the cryptocurrency and trigger
selloffs.
BITCOIN TECHNICAL
ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can
see that Bitcoin is consolidating just below the major swing high around the
82,500 level. That swing high will likely act as resistance. If the price
rallies into the resistance, we can expect the sellers to step in with a
defined risk above it to position for a drop into the 67,000 level. The buyers,
on the other hand, will want to see the price breaking higher to increase the
bullish bets into the 98,000 level next.
BITCOIN TECHNICAL
ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we can
see that the recent price action might have formed a head and shoulders pattern.
The buyers will likely continue to lean on the neckline with a defined risk
below the left shoulder’s low to keep targeting new highs. The sellers, on the
other hand, will want to see the price breaking lower to pile in for a drop
back into the 67,000 support next.
BITCOIN TECHNICAL
ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, we can
see more clearly the rangebound price action after the Warsh-induced drop. The
market participants will likely continue to play the range by buying at support
and selling at resistance until we get a breakout on either side.
UPCOMING CATALYSTS
Today, we have the
US ISM Manufacturing PMI and the US Job Openings data. Tomorrow, we get the US
ADP report. On Thursday, we have Fed’s Waller, the US Jobless Claims and the US
ISM Services PMI. On Friday, we conclude the week with the US NFP report.
This article was written by Giuseppe Dellamotta at investinglive.com.