BTC Bears Eye a Return to Sub-$27,000 on US Stats and Fed Chatter

Key Insights:

• On Wednesday, BTC extended its losing streak to five sessions, falling by 0.17% to end the day at $27,622.
• US inflation figures delivered brief support before news of a US government BTC sale reversed midday gains.
• The technical indicators were bearish, signaling a return to sub-$27,000.

On Wednesday, bitcoin (BTC) slipped by 0.17%. Following a 0.12% fall on Tuesday, BTC ended the day at $27,622. Significantly, BTC extended its losing streak to five sessions and fell to sub-$27,000 for the first time since March.

After a range-bound morning, BTC rose to an early afternoon high of $28,340. BTC broke through the First Major Resistance Level (R1) at $27,882 and the Second Major Resistance Level (R2) at $28,095 before hitting reverse.

The reversal saw BTC fall to a late morning low of $26,850. BTC fell through the First Major Support Level (S1) at $27,419 and the Second Major Support Level (S2) at $27,169. However, finding late support, BTC moved through S2 and S1 to wrap up the day at $27,622.

US CPI Report and US Government BTC Sale Delivered a Choppy Session

It was a busy Wednesday session. The heavily anticipated US CPI Report drew interest midway through the session. In April, the US core annual inflation rate softened from 5.6% to 5.5%, with headline inflation easing from 5.0% to 4.9%. Economists forecast the headline inflation rate to hold steady at 5.0%.

BTC and the broader crypto market responded positively to the CPI Report despite inflation being too high and reducing the chances of a 2023 interest rate cut.

According to the CME FedWatch Tool, the probability of a 25-basis point June interest rate hike fell from 21.2% to 5.0% in response to the CPI Report. However, the chances of a June rate cut remained at 0%.

On Wednesday, the NASDAQ Composite Index and S&P 500 saw gains of 1.04% and 0.45%, respectively, while the Dow fell by 0.09%.

While the US CPI Report delivered brief BTC support, sentiment toward Fed monetary policy and the news of the US Government offloading BTC weighed on buyer appetite.

On Wednesday, WhaleWire attributed the BTC reversal to the US Government selling 9.8k of BTC, equivalent to $227 million. WhaleWire also went on to say,

“They still own over 200k BTC – if they decided to sell that, prices would be back under $10k in a heartbeat.”

The Day Ahead

It is a busy day ahead for the global financial markets. US wholesale inflation and jobless claims will be in focus this afternoon.

Following the US CPI Report, softer wholesale inflation numbers and rising jobless claims would take further pressure off the Fed and support BTC and the broader crypto market. Economists forecast initial jobless claims to increase from 242k to 245k and for the producer price index to increase 2.4% year-over-year in April versus 2.7% in March.

With inflation and the labor market in focus, we expect FOMC member commentary to also influence. FOMC member Christopher Waller is on the calendar to speak later today.

However, US lawmakers and regulatory activity will remain a focal point. Investors should track SEC v Ripple case updates, with a Court ruling likely to have a material impact. Binance and Coinbase (COIN)-related news will also influence.

Bitcoin (BTC) Price Action

This morning, BTC was down 0.01% at $27,618. A range-bound start to the day saw BTC fall from an opening price of $27,625 to a low of $27,607 before steadying.

Technical Indicators

Resistance & Support Levels

BTC needs to avoid the $27,604 pivot to target the First Major Resistance Level (R1) at $28,358. A return to $28,000 would signal an extended bullish session. The crypto news wires and the US economic indicators should be crypto-friendly to support an extended rally.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $29,094. The Third Major Resistance Level (R3) sits at $30,584.

A fall through the pivot would bring the First Major Support Level (S1) at $26,868 into play. However, barring a risk-off-fueled sell-off, BTC should avoid sub-$26,500 and the Second Major Support Level (S2) at $26,114. The Third Major Support Level (S3) sits at $24,624.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was bearish signals. BTC sat below the 50-day EMA ($28,278). The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA closing in on the 200-day EMA, sending bearish signals.

A move through the 50-day EMA ($28,278) would support a breakout from R1 ($28,358) and the 200-day ($28,370) and 100-day ($28,484) EMAs to target R2 ($29,094). However, failure to move through the 50-day EMA would leave S1 ($26,868) in view.