Bearish view
Sell the BTC/USD pair and set a take-profit at 58,000.
Add a stop-loss at 65,000.
Timeline: 1-2 days.
Bullish view
Buy the BTC/USD pair and set a take-profit at 65,000.
Add a stop-loss at 58,000.
Bitcoin price retreated sharply overnight as geopolitical risks returned and as investors embraced a risk-off sentiment ahead of the US consumer inflation report. The BTC/USD pair dropped to 61,920, down by over 4% from its highest point during the weekend.
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Geopolitics and US Inflation Report
Bitcoin and other risky assets dropped sharply as investors embraced a risk-on sentiment after the US and Iran went back to war. The Trump administration has already blocked Iran’s oil shipments and reinstated the blockade. Trump also suggested that the US will impose a 20% fee on all cargo passing through the Strait.
As a result, crude oil prices continued rising, with Brent and the West Texas Intermediate (WTI) hitting $84 and $78, respectively. The rising energy prices mean that inflation will remain stubbornly high in the near term, pushing the Federal Reserve to maintain a more hawkish tone.
Some Federal Reserve officials have started to make the case for higher interest rates. In a statement, Christopher Waller, who Trump considered to be the next Fed Chair, warned that the Fed may decide to hike rates to battle core inflation. Bitcoin often does well when the Fed is signaling that it will cut interest rates.
BTC/USD pair also retreated even as Strategy paused its Bitcoin purchases. In a statement, the company said that it boosted its cash holdings to over $3 billion by selling shares. The company has been raising cash to boost its cash reserves after its preferred shares tumbled.
The next key catalyst for Bitcoin will be the upcoming US consumer price index (CPI) report. Economists expect the data to show that the headline and core CPI retreated slightly in June as gasoline prices dropped. It will also react to the upcoming US retail sales report and Kevin Warsh’s testimony.
BTC/USD Technical Analysis
The BTC/USD pair has remained under pressure in the past few days, reaching its lowest level since July 9. It has retreated from this month’s high of 64,640.
Bitcoin remains below the descending trendline that connects the highest swing on June 15 this year. It has remained below the 50-day moving average, while the Relative Strength Index (RSI) has dropped below the neutral level.
Therefore, the pair will likely remain on edge in the near term, potentially to the year-to-date low of 57,655. A move above the key resistance at 64,640 will invalidate the bullish outlook.
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