BTC Bears Target Sub-$27,000 as Focus Turns to the Federal Reserve

Key Insights:

• On Monday, BTC tumbled by 3.94% to end the day at $28,101.
• First Republic Bank and US economic indicators weighed on BTC and the broader crypto market.
• The technical indicators turned bearish, signaling a return to sub-$27,000.

On Monday, bitcoin (BTC) slid by 3.94%. After ending the Sunday session flat, BTC wrapped up the day at $28,101. The bearish session saw BTC visit sub-$28,000 for the first time since April 24.

A mixed start to the day saw BTC rise to an early high of $29,347. Falling short of the First Major Support Level (S1) at $29,781, BTC fell to an evening low of $27,692. BTC fell through the Major Support Levels before a partial recovery through the Third Major Support Level (S3) at $27,725 to end the day at $28,101.

First Republic Bank Salvage and US Economic Indicators Weigh

It was a relatively quiet start to the month, with the Labor Day long weekend leaving trading volumes lighter.

While volumes were on the light side, First Republic Bank (FRC) updates influenced the session. On Monday, news hit the wires of the FDIC seizing First Republic Bank, with JPMorgan Chase (JPM) winning the bid to acquire the beleaguered bank’s assets.

The news was BTC bearish, with investors seeing the crypto market as a safe haven from a US banking crisis. US economic indicators added to the bearish mood.

In April, the ISM Manufacturing PMI rose from 46.3 to 47.1. The key takeaways from the ISM survey included sharp increases in the employment and prices sub-components. The ISM Manufacturing Employment Index jumped from 46.9 to 50.2, with the Prices Index up from 49.2 to 53.2.

Significantly, while the manufacturing sector continued to contract, price pressures built, with manufacturers reporting rising headcounts for the first time in three months. The latest stats will concern the Fed looking to curb inflation and address very tight labor market conditions to ease consumption.

The combination of sticky inflation, an upward trend in hiring, and a hawkish Fed increases the chance of a hard landing.

According to the CME FedWatch Tool, the probability of a 25-basis point May interest rate hike rose from 83.9% to 93.2% in 24 hours. Significantly, the chances of a 25-basis point June interest rate hike increased from 23.9% to 27.7%.

While Fed Fear and recession jitters contributed to the pullback, profit-taking was another likely factor. BTC extended its winning streak to four months in April, the longest monthly winning streak since a six-month winning streak that ended in March 2021.

The Day Ahead

It is a relatively busy Tuesday session. While the US banking sector will remain a focal point, US economic indicators will influence the afternoon session. US JOLTs job openings and factory orders will be in focus.

With the Fed in action tomorrow, we expect the JOLTs job openings to draw more interest. However, the devil will be in the details, with quit rates needing consideration. A slide in the quit rate would signal deteriorating labor market conditions and ease pressure on the Fed to deliver a hawkish interest rate hike.

Away from the economic calendar, US corporate earnings will also influence market risk sentiment. Big names on the US earnings calendar include Pfizer Inc. (PFE), Starbucks Corp. (SBUX), and Ford Motor Co (F).

While US corporate earnings and economic indicators will influence, investors should track SEC v Ripple case updates and Binance and Coinbase (COIN)-related news.

However, regulatory activity and US lawmaker chatter will also move the dial.

Bitcoin (BTC) Price Action

This morning, BTC was down 0.28% to $28,023. A bearish start to the day saw BTC fall from an opening price of $28,101 to a low of $28,019.

Technical Indicators

Resistance & Support Levels

BTC needs to move through the $28,380 pivot to target the First Major Resistance Level (R1) at $29,068 and the Monday high of $29,347. A return to $29,000 would signal an extended bullish session. The crypto news wires and 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 $30,035. The Third Major Resistance Level (R3) sits at $31,690.

Failure to move through the pivot would leave the First Major Support Level (S1) at $27,413 in play. However, barring a crypto event-fueled sell-off, BTC should avoid sub-$26,500. The Second Major Support Level (S2) at $26,725 should limit the downside. The Third Major Support Level (S3) sits at $25,070.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was bearish signals. BTC sat below the 200-day EMA ($28,330). The 50-day EMA converged on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, sending bearish signals.

A bearish cross of the 50-day EMA through the 100-day EMA would support a fall through S1 ($27,413) to bring sub-$27,000 and S2 ($26,725) into play. However, a BTC move through the EMAs would support a breakout from R1 ($29,068) to give the bulls a run at R2 ($30,035). A move through the 50-day EMA ($28,749) would send a bullish signal.