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Wednesday, February 8, 2023

Bitcoin Breaks Below 20,000 as Fed Hikes Bite Risk Assets. Will BTC/USD Recover?

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Bitcoin, BTC/USD, FED, PBOC, Iron Ore, Crude Oil, USD/CHF – Talking Points

  • Bitcoin has recovered from weekend losses, but risk appetite stays low
  • Rate hikes are clouding the growth outlook, pushing down industrial metals
  • With a quiet week of data ahead, central bank speakers will be the focus

Bitcoin broke below the psychological 20,000 mark over the weekend. It touched a low of 17,599 on Saturday before recovering back over 20,000 on Sunday. Monday has seen the price jump above and below 20,000 several times.

Risk assets have seen their prices undermined as central banks globally tighten monetary conditions to fight inflation.

This contractionary stance has raised recession fears and it has become apparent that the Fed is likely to tip the US economy toward a slowdown to rein in runaway prices.

On Saturday, Federal Reserve Governor Christopher Waller said that he would support another 75 basis point hike at the July Federal Open Market Committee (FOMC) meeting.

Equity markets remain under pressure and APAC bourses were a mixed bag following a similar lead from Wall Street on Friday. Futures markets are pointing toward a slightly positive start to the North American cash session.

The Peoples’ Bank of China (PBOC) left their 1- and 5-year loan prime rates unchanged as expected today.

The bank has made it clear that they favour an easing bias, but there are grave concerns for the economic outlook for mainland China with lockdowns continuing to weigh.

This has seen iron ore tank over 10% on Monday on the Dalian Commodity Exchange (DCE). It is also lower on the Singapore Exchange (SGX) but to a lesser extent.

Other steel products also seeing large losses. A number of Australian mining stocks are notably lower as a result.

Crude oil was unable to hold onto a rally early Monday and continues to languish near Friday’s close. Global growth concerns and demand destruction fears continue to undermine it. Gold is steady near US$ 1,844 an ounce.

The Swiss Franc was the best performing currency to start the week after last week’s surprise 50 basis point hike from the Swiss National Bank (SNB). The US Dollar is on the backfoot for now.

Looking at the calendar, it’s a bit light on compared to last week’s central bank action. The focus for today will be speakers from the ECB, BoE and the Fed. ECB President Christine Lagarde is likely to hold the spotlight.

The full economic calendar can be viewed here.

BTC/USD Technical Analysis

BTC/USD remains below a descending trend line. Nearby support could at the lows seen in late 2020 at 17,575 and 16,520.

On the topside, resistance might be at the recent high of 22,945 or a break point of 25350.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter


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