Bitcoin price retests key support as Fed rate hike fears steal $27K

Bitcoin (BTC) traded again below $27,000 on May 19 as analysis indicated high volume positions were pressuring the prices.

BTC/USD 1-day candlestick chart on Bitstamp. Source: TradingView

The specter of inflation haunts the cryptocurrency markets

Data from Cointelegraph Markets Pro and TradingView showed that BTC/USD reached as low as $26,380 on Bitstamp.

A modest recovery thereafter took the pair into a familiar range from several days prior, and that remains in focus ahead of the latest week’s open on Wall Street.

The downward trend overnight came as a result of the market’s growing anticipation of a rate hike by the US Federal Reserve in June.

This came thanks to this week’s lower jobless claims data, as Federal Reserve officials added a hawkish tone.

“On the one hand, inflation is very high, and we haven’t made enough progress yet in bringing it down,” said board member Philip Jefferson at the 2023 International Insurance Forum in Washington, D.C.

“On the other hand, GDP has slowed significantly this year, and although the impact has been muted on the labor market so far, it is clear that demand is starting to feel the effects of interest rates that are 5 percentage points higher than they were a little over in ago. general “.

According to CME Group’s FedWatch tool, the odds of the Fed stopping its picnic cycle next month, at a point over 95%, were just 62% on the day.

Federal goal rate odds chart. Source: CME Group

In a detailed analysis of the events, the physical resource monitoring indicators showed bidders and liquidity demand holders placing trades to manipulate the behavior of the BTC price on short timeframes.

“After the sideways outage, markets are starting to price in the potential for another rate hike as the morning unemployment report and #FED speakers set the tone for that conversation ahead of #JPow, scheduled for Friday,” part of a Twitter comment said. summary.

“When the price started to decline, the bidding ladder was strong and the price moved to the previous support at around $26.5k, but soon a selling wall was put up to suppress the price.”

BTC/USD order book data (Binance). Source: Material Indicators / Twitter

Physical indicators indicated that BTC/USD made a retest of the 100-day moving average (MA) — the third in the past seven days.

“After about 90 minutes and a bit of nibbling on the sell wall, the cap pulled off. Shortly thereafter, a new batch of bids worth $36 million were placed below the domestic support level and the meltdown began.”

In addition to the 100-day moving average, the 200-week moving average at $26,100, the analysis concludes, could also form a bearish support area next.

One hour BTC/USD candlestick chart (Bitstamp) with 100 day and 200 week moving average. Source: TradingView

Materials indices pointed to Fed Chair Jerome Powell’s May 19 appearance, with the implication that more hawkishness on inflation would add to risky asset price pressure.

Traders are in a ‘wait and see’ mode

Hence, traders kept potential bearish targets, focusing on a wide area around $25,000.

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Michael Van de Poppe, founder and CEO of trading firm Eight, was among them, identifying $27,000 as a key support level now absent from the chart.

Popular Crypto trader Tony added in a bit of a Twitter comment: “I am looking for a long if we can break above $27,500, or a short if we close below $26,600. No trading in between this tight range.”

Annotated BTC/USD chart. Source: Crypto Tony / Twitter

Meanwhile, the Decentrader trading group cited uninspiring numbers when it came to short versus long positions, arguing that a turnaround is required for the price to regain higher levels.

“The buy/sell ratio is currently above 2 which is very high. This usually needs to be resolved and a move lower before things start to turn to the upside.” acknowledge.

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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.

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