Yesterday’s US inflation report showed that the consumer price index slowed to +7.1% in November, the lowest level of the year ahead of the Federal Reserve’s interest rate decision today. The recent easing of inflationary pressures confirms the bank’s intention to slow the aggressive pace of tightening, increasing optimism for a faster and smaller rate hike.
CME’s FedWatch tool sees a move on a smaller scale, rising 50 basis points today as expectations for a terminal rate eased after the CPI report. The Fed had previously forecast an average interest rate of 4.6%, but Chairman Powell recently said it was likely to be higher.
We will therefore look to today’s updated forecasts and dot chart rather than the interest rate decision itself and the rhetoric of Mr Powell’s monetary policy statement and press conference. The outcome of this meeting could reveal volatility and determine Bitcoin’s trajectory against the greenback.
Couple BTC/USD responded positively to a surprise drop in inflation and extended the recovery from two-year lows in November. It broke through key resistance at the 200 EMA and the 38.2% Fibonacci retracement high and low last month. This allows him to reach 50% Fibonacci (18,384-18,430), but he will need the help of events to reach this level and 19,931-20,000 to be in the target.
On the other hand, a couple BTC/USD it stayed clear of the aforementioned key resistances and declined today as the relative strength index reached its most overbought levels in three months. This creates room for a pullback, but a catalyst will be needed for new monthly lows (16,680) and year indicators currently look a long way off (15,455).
In addition, concerns about the state of the cryptocurrency industry remain in the spotlight following the collapse of FTX. The US Department of Justice has charged its founder and former CEO, Samuel Bankman-Fried, with fraud, money laundering and campaign finance crimes.