BTC Bears to Target Sub-$27,000 on Debt Ceiling Relief

Key Insights:

• On Thursday, BTC extended its losing streak to four sessions, falling by 1.42% to end the day at $26,833.
• BTC decoupled from the NASDAQ Composite Index as investors returned to traditional asset classes on the US debt ceiling deal.
• The technical indicators are bearish, signaling a return to sub-$26,000.

On Thursday, bitcoin (BTC) fell by 1.42%. Following a 1.81% loss on Wednesday, BTC ended the day at $26,833. Significantly, BTC ended the day at sub-$27,000 for the first time in five sessions.

A mixed start to the day saw BTC rise to a first-hour high of $27,359 before hitting reverse. Falling short of the First Major Resistance Level (R1) at $27,765, BTC fell to an early morning low of $26,666. BTC briefly fell through the First Major Support Level (S1) at $26,767 before striking an afternoon high of $27,189.

However, a bearish end saw BTC fall through S1 for a second time before ending the day at $26,833.

BTC Decouples from the NASDAQ on US Debt Ceiling Deal

It was a busy Thursday session. Private sector PMI numbers from China briefly provided support, with the Caixin Manufacturing PMI rising from 49.5 to 50.9 in May. However, the numbers failed to stave off a bearish pre-US session.

Economic indicators from the US sent mixed signals. While the ADP reported a marked increase in nonfarm employment, labor costs came in weaker-than-expected, supporting the bets on a June pause.

According to the ADP, Nonfarm employment increased 278k in May versus a forecasted 170k rise. In April, nonfarm employment rose by 291k. However, while initial jobless claims also continued to signal tight labor market conditions, unit labor costs fell short of forecasts, rising by 4.2% in Q1 versus 3.2% in Q4. Economists forecast a 6.3% increase.

While labor market conditions remain tight, cracks continue to show. The US ISM Manufacturing PMI fell from 47.1 to 46.9 in May, with the prices sub-component affirming weak demand. Significantly, the ISM Manufacturing Prices Index tumbled from 53.2 to 44.2.

The easing bets on a Fed pause and progress on the debt ceiling deal drove demand for US equities at the expense of BTC and the broader crypto market.

The NASDAQ Composite Index rose by 1.28%, with the Dow and S&P 500 seeing gains of 0.47% and 0.99%, respectively.

The Day Ahead

It is a quieter Friday session. There are no economic indicators from China to consider this morning. The lack of stats will leave the US Jobs Report, Fed commentary, and debt ceiling-related news to influence.

While the markets are betting on the Fed to hit pause in June, a more marked pickup in wage growth and a solid increase in nonfarm payrolls could test the theory.

Bets on a 25-basis point Fed interest rate hike tumbled from 66.6% to 26.4% on Wednesday in response to Fed talk of favoring a June pause.

According to the CME FedWatch Tool, the chances of a 25-basis point interest rate hike fell from 26.4 to 20.4% on Thursday as investors responded to the ADP nonfarm employment and initial jobless claims numbers.

Notably, the marked decline in the chances of a June interest rate hike has failed to provide BTC price support.

While the US Jobs Report will be the focal point, investors should continue to track the crypto news wires. SEC activity, SEC v Ripple updates, and Binance and Coinbase (COIN)-related news would draw interest.

Bitcoin (BTC) Price Action

This morning, BTC was down 0.04% to $26,822. A range-bound start to the day saw BTC rise to an early high of $26,843 before falling to a low of $26,809.

BTC Technical Indicators

Resistance & Support Levels

BTC needs to move through the $26,953 pivot to target the First Major Resistance Level (R1) at $27,239 and the Thursday high of $27,359. A return to $27,000 would signal an extended bullish session. US debt ceiling-related news and 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 $27,646 and resistance at $28,000. The Third Major Resistance Level (R3) sits at $28,339.

Failure to move through the pivot would leave the First Major Support Level (S1) at $26,546 in play. However, barring an event-fueled sell-off, BTC should avoid sub-$26,000. The Second Major Support Level (S2) at $26,260 should limit the downside. The Third Major Support Level (S3) sits at $25,567.

Looking at the EMAs and the 4-hourly candlestick chart (below), the EMAs were bearish. BTC sat below the 50-day EMA ($27,155). The 50-day EMA pulled back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, sending bearish signals.

A move through the 50-day ($27,155) and 100-day ($27,191) EMAs would support a breakout from R1 ($27,239) and the 200-day EMA ($27,405) to target R2 ($27,646). However, failure to move through the 50-day EMA ($27,155) would leave S1 ($26,546) in view. A move through the 50-day EMA would send a bullish signal.