Bitcoin, the prominent cryptocurrency, has been hovering around a price of $28,000, demonstrating a stable trend in recent days.
However, a notable selling activity has been witnessed in the last 24 hours. The financial ecosystem is closely watching the upcoming release of the United States Consumer Price Index (CPI) data on Thursday at 12:30 GMT, which is expected to instigate a spike in market volatility.
To comprehend why the CPI data garners such attention, it’s essential to recognize its role in the economic scenario.
The CPI monitors the average market basket of consumer goods and services, acting as a crucial indicator of inflation by noting the changes in prices paid by consumers.
Bitcoin has shown acute sensitivity to US macroeconomic events due to fluctuations in liquidity, primarily characterized by the circulation of the US dollar, also referred to as Greenbacks.
Factors such as the US CPI and the Nonfarm Payrolls (NFP) have significantly influenced Bitcoin prices. The NFP reported an unexpected addition of 336,000 jobs in September, challenging the Federal Reserve’s anticipations of a hiring slowdown.
Consequently, this puts the Federal Reserve under the microscope, compelling them to address inflation assertively.
Analysts are projecting the headline inflation number to be 3.6%, marginally lower than the previous month’s figure of 3.7%.
What might the US CPI unveil?
In light of past events, it is pertinent to recall a few notable occurrences:
- PCE Price Index YoY: An exact match of actual and forecast at 3.5%.
- Nonfarm Payrolls: A significant overachievement with 336K against a forecast of 170K.
- A spike in inflation numbers for July and August.
- Federal Reserve’s Statement: In September, Chairman Jerome Powell asserted that inflation has moderated and further declared their readiness to augment rates if suitable. Moreover, the plan is to keep rates restrictive until inflation is confidently moving towards the 2% target.
Given these precedents, several outcomes might unfold post the US CPI release:
- US CPI at 3.7%: Though not highly probable, this scenario could induce a brief rally in the US Dollar, with Gold and stocks potentially retreating in the interim. Bitcoin might encounter a short-term dip but is likely to recuperate swiftly.
- US CPI Surpasses 3.7%: This outcome would denote a third consecutive inflation increase, potentially sparking a US Dollar rally, and thereby triggering a withdrawal from investors in Gold, stocks, and Bitcoin.
- US CPI Falls Below 3.7% or 3.6%: Under this circumstance, the US Dollar may not experience robust demand, paving the way for risk-on assets to flourish.
Bitcoin’s Crucial Price Levels Amidst the US CPI Release
Key levels that CPI traders should monitor are:
- Overhead resistance level: $27,300 to $27,400.
- Fundamental support level: $26,400 to $26,500.
With the impending US CPI release on Thursday and collected data, the Federal Reserve is set to finalize its stance on interest rates on November 1, poised to influence not only the US stock market but numerous correlated assets as well, including Bitcoin, in the throes of economic subtleties and speculations.
