Key Takeaways:
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July US CPI held steady at 2.7% year-over-year, boosting Fed rate cut bets to 93.9% for September.
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Key price support lies between $117,650 to $115,650, with a deeper drop potentially testing a CME gap at $95,000.
US CPI Data and Its Impact on Bitcoin
In July, the US Consumer Price Index (CPI) remained unchanged at 2.7% year-over-year, defying the 2.8% forecast. This stabilization in inflation figures is pivotal, as it propels the probability of a Federal Reserve rate cut to 93.9% for the upcoming September meeting, according to CME FedWatch. Such a shift in monetary policy could favor risk-on assets like Bitcoin, providing a potential bullish backdrop.
Core CPI, which excludes volatile food and energy prices, increased by 3.1% annually, aligning with market expectations. On a monthly basis, the overall CPI rose by 0.2%, a slight deceleration from the previous month’s 0.3% increase, while core CPI witnessed a 0.3% rise compared to the prior 0.2% gain. This data suggests a cooling inflation environment, which may encourage the Federal Reserve to consider easing monetary policy.
Market Implications and Bitcoin’s Trajectory
The likelihood of a rate cut presents a favorable scenario for Bitcoin, as lower interest rates could reduce the opportunity cost of holding non-yielding assets like cryptocurrencies. This potential influx of capital into Bitcoin markets can be attributed to investors seeking alternatives in a low-interest-rate environment.
Despite the positive sentiment following the CPI release, the core CPI’s alignment with expectations suggests persistent underlying price pressures. This means the Federal Reserve might require additional evidence before committing to a rate cut.
Bitcoin Price Outlook
Following the CPI data, Bitcoin experienced a volatile trading session. It initially surged to a high of $122,190 before retracting by 3% to settle at $118,500. The post-CPI rebound saw Bitcoin climbing back to $119,500. However, a decisive daily close above $120,000 remains essential to solidify upward momentum. Such a close would mark a historic first, potentially triggering the next phase of Bitcoin’s rally.
Technical analysis indicates a bullish flag pattern on the daily chart that has recently broken to the upside. The current pullback may be a retest ahead of a continued move toward the primary target of $130,000. Technical analyst Titan of Crypto shares a similar outlook, predicting a potential rise to $137,000 based on a descending trendline breakout.
Conversely, failure to maintain levels above $120,000 could invite short-term downside pressure, with immediate support pegged between $117,650 and $115,650. This support zone also aligns with a CME gap formed over the weekend, making it a critical area for traders to monitor.
Despite these bullish prospects, Bitcoin is not entirely immune to corrections. A significant downturn could see prices testing support as low as $95,000, highlighting the need for caution in the current market environment.
For more insights, visit the original article on Cointelegraph: Read more.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
