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Bitcoin decides that bad news is not bad enough as upside volatility accompanies proof that U.S. inflation remains sticky.
Bitcoin (BTC) made snap gains at the May 26 Wall Street open as United States macroeconomic data delivered a nasty surprise.
BTC/USD 1-hour candle chart on Bitstamp. Source: TradingView
Bitcoin shrugs off new U.S. inflation woes
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD nearing $27,000 on Bitstamp.
The pair rose unexpectedly after the day’s Personal Consumption Expenditures (PCE) data showed its first rises since October 2022.
Such a reading should present a headwind for risk assets, including crypto, as it implies that inflation remains persistent and that more financial tightening may be required to tame it.
“This is a major setback to the Fed’s fight against inflation,” financial commentary resource The Kobeissi Letter wrote in part of a response.
Kobeissi noted that expectations for interest rate hikes from the Federal Reserve were “shifting rapidly” thanks to the PCE event.
According to CME Group’s FedWatch Tool, the market now narrowly favors a fresh hike in June, whereas before, it was more than 80% certain that a pause would occur.
Fed target rate probabilities chart. Source: CME Group
Financial commentor Tedtalksmacro, meanwhile, acknowledged that the PCE gains were relative.
“US PCE data came in hot, above analyst expectations. On a 3-month annualised basis, however, core PCE printed sharply lower... down to 4.2%,” he reacted.
Cause for relief for traders, meanwhile, came from accompanying news that the Biden administration was nearing a deal on the debt ceiling, with the deadline now just days away.
The S&P 500 and Nasdaq Composite Index were up 1% and 1.65%, respectively, at the time of writing.
DXY hits 10-week highs
Turning to Bitcoin itself, Michaël van de Poppe, founder and CEO of trading firm Eight, flagged the potential for upside continuation.
Related: Bitcoin losing its 200-week trendline puts $20K in play — BTC price analysis
“That’s step one for Bitcoin, as we reclaim $26,600 and are looking for continuation towards the range highs,” he commented on the day’s price action.
“If the recent correction is deviation, we might break to $29,000 next week.”
BTC/USD annotated chart. Source: Michaël van de Poppe/Twitter
He cautioned that PCE was “not a great sign” for risk assets, noting the knee-jerk reaction for United States dollar strength — traditionally inversely correlated with crypto.
The U.S. Dollar Index (DXY) hit 104.4 on the day, its highest levels since March 17.
“Some consolidation following this month’s rally would be healthy for the dollar,” popular trader Justin Bennett wrote in a dedicated forecast.
“But a daily and weekly close above 104.20 opens up 105.00 early next week. The only thing that would turn me bearish on the DXY is a daily close below 103.50.”
U.S. Dollar Index (DXY) 1-day candle chart. Source: TradingView
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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.
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.