Bitcoin at crossroads after hawkish Warsh: traders waiting for 77K-80K range break

<p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">FUNDAMENTAL ANALYSIS</p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;"> </p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">Bitcoin dropped on Friday after <a href="https://investinglive.com/central-banks/fed-s-warsh-numbers-on-price-stability-are-more-concerning/" rel="follow" style="color: rgba(70, 120, 134, 1); text-decoration: underline;">Fed Chair Warsh delivered a hawkish speech</a> at the Jackson Hole Symposium. The key passage was him saying "I would be hard pressed to describe broad financial conditions as restrictive". The market interpreted that as him leaning against the recent easing in financial conditions and, therefore, retightened them.</p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">As you recall, Bitcoin and other cryptocurrencies, rallied strongly on “debasement” fears following the <a href="https://investinglive.com/news/us-treasury-is-increasing-the-size-of-liquidity-support-buyback-operations-for-longer-dated-securities/" rel="follow" style="color: rgba(70, 120, 134, 1); text-decoration: underline;">US Treasury buyback announcement</a> to suppress long-term yields. Warsh’s speech has triggered a reversal in the "debasement" trades, with gold and the US dollar returning to pre-US Treasury announcement levels. Bitcoin, on the other hand, showed notable resilience, as it just extended the consolidation process near recent highs. </p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">The technicals might be more helpful going forward, as a break above Warsh’s speech level around 79,887 could point to an extension of the uptrend, while a break below the post-speech level could lead to a bigger selloff. </p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">Warsh has also reiterated that the Fed is focused solely on inflation now and mentioned that the progress has been slow. For this reason, I think only a soft US CPI report could bring the probabilities below 50% (currently at 67%) and deter the Fed from hiking at the upcoming meeting. If the probabilities stay at or above 50%, the Fed might be forced to hike regardless because failure to do so would send a dovish message and ease financial conditions again. </p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">For Bitcoin, easing in financial conditions and dovish repricing in interest rate expectations would be positive drivers and extend the upward momentum. Conversely, a hot CPI report or hawkish surprises should weigh on the cryptocurrency and trigger selloffs. </p><p> </p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">BITCOIN TECHNICAL ANALYSIS – DAILY TIMEFRAME</p><p></p><p>On the daily chart, we can see that Bitcoin is consolidating just below the major swing high around the 82,500 level. That swing high will likely act as resistance. If the price rallies into the resistance, we can expect the sellers to step in with a defined risk above it to position for a drop into the 67,000 level. The buyers, on the other hand, will want to see the price breaking higher to increase the bullish bets into the 98,000 level next. </p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">BITCOIN TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME</p><p></p><p>On the 4 hour chart, we can see that the recent price action might have formed a head and shoulders pattern. The buyers will likely continue to lean on the neckline with a defined risk below the left shoulder’s low to keep targeting new highs. The sellers, on the other hand, will want to see the price breaking lower to pile in for a drop back into the 67,000 support next.</p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">BITCOIN TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME</p><p></p><p>On the 1 hour chart, we can see more clearly the rangebound price action after the Warsh-induced drop. The market participants will likely continue to play the range by buying at support and selling at resistance until we get a breakout on either side. </p><p class="MsoNormal" style="margin: 0 0 11px; line-height: 106%; font-family: Aptos, sans-serif; font-size: 15px;">UPCOMING CATALYSTS</p><p class="MsoNormal" style="margin: 0 0 8px; font-family: Aptos, sans-serif; line-height: 110%; font-size: 15px;"><a href="https://investinglive.com/EconomicCalendar" rel="follow">Today</a>, we have the US ISM Manufacturing PMI and the US Job Openings data. Tomorrow, we get the US ADP report. On Thursday, we have Fed’s Waller, the US Jobless Claims and the US ISM Services PMI. On Friday, we conclude the week with the US NFP report.</p> This article was written by Giuseppe Dellamotta at investinglive.com.