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Bitcoin: Support Zone Near 3-Month MA Becomes Critical After Failed Breakout

Published 06/14/2024, 06:35 PM
BTC/USD
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Bitcoin faces a critical decision point after failing to break above key resistance near $69,500 last week. Employment data triggered a dip, and positive inflation news failed to spark a significant recovery. Hawkish comments from the Fed, hinting at a slower pace of rate cuts, further dampened investor enthusiasm.

Risk assets, including Bitcoin, remain stuck in neutral as the Fed maintains a cautious stance. Cooling inflation seemingly argues for rate cuts, but the central bank's signals remain hawkish. This keeps Bitcoin trading sideways around its $66,500 average level.

Bitcoin Technical View

Technically, finding support at $66,500 despite the recent decline suggests some resilience might be priced in. However, a weekly close below this level could trigger a downward spiral towards the 3-month EMA (currently around $64,800). A breach of this level could send Bitcoin plummeting to $61,000, the lower band of its long-term rising channel.

Bitcoin Daily Chart

If Bitcoin dips to $61,000, it would also test the long-term rising channel's lower boundary. This potential downside move is further emphasized by the 8-day and 21-day EMAs on the daily chart, which are nearing a bearish crossover.

How buyers react to a price drop below $65,000 will be crucial. In short, if Bitcoin closes below the 3-month EMA on a daily basis, a trend towards the $60,000-$61,000 zone, the lower limit of the long-term channel, could emerge. Bitcoin Weekly Chart

If Bitcoin can conquer the $66,500 hurdle this week, where it's found recent support, it could signal the market has absorbed the latest economic data. This success could propel Bitcoin towards a retest of its average resistance around $71,500, a level holding strong since March. If a breakout occurs, the $77,000-$83,000 zone becomes a potential target range for Bitcoin's price.

Technically, a breakout above resistance would be bullish. It would push Bitcoin's price above both its short-term and medium-term EMAs and trigger a breakout for the Stochastic RSI indicator out of the oversold zone on both daily and weekly charts. These technical signals would strongly suggest Bitcoin's uptrend is poised to continue.

Conclusion

The Federal Reserve's hawkish stance – signaling fewer rate cuts and a preference for higher interest rates – is putting pressure on Bitcoin. This tighter monetary policy could constrain Bitcoin's growth in the short term. However, a potential silver lining exists.

The high cost of borrowing in a prolonged high-interest-rate environment might force the Fed's hand, pushing them towards looser monetary policy later this year. Additionally, the upcoming US elections could add pressure for a more accommodative stance from policymakers.

On the flip side, a wave of optimism is washing over the cryptocurrency market. Both leading US presidential candidates have expressed pro-crypto stances, a development seen as highly positive for Bitcoin and altcoins. This political support could lead to a softening of regulatory hurdles, similar to the recent surprise approval of spot Ethereum ETFs.

These positive developments, if they continue throughout the year, could bolster Bitcoin's long-term outlook. While short-term fluctuations are inevitable due to the ever-shifting macroeconomic landscape, the overall trajectory for Bitcoin could remain bullish.

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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

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