Bitcoin (BTC) edged lower on Thursday, trading near $63,700, even as the latest US inflation data came in line with expectations and reduced the likelihood of another Federal Reserve rate hike. The muted reaction underscores the market's focus on positioning and technical levels rather than macro headlines.
Inflation report matches forecasts
The July Consumer Price Index (CPI) rose 0.1% month-over-month and 3.4% year-over-year, matching economists' projections. Core inflation, which strips out volatile food and energy prices, increased 0.2% on the month and slowed to an annual rate of 2.5%. The data gave the Fed room to hold rates steady at its September meeting, with futures markets pricing a 38% chance of a hike, down from 46% before the release.
Initial market reactions were positive: gold climbed 1.3%, ether gained just over 1%, and S&P 500 futures advanced 0.2%. Bitcoin rose about 0.5% but quickly gave back those gains, reflecting the pre-positioned leverage in the crypto market.
Why the rally fizzled
According to Maksym Sakharov, CEO of WeFi, the softer inflation print gives the Fed more flexibility, but one report won't settle the debate over the inflation path. "The bigger story was the positioning already built before the release," he said. "Economists were split enough to support bets in both directions, so the number was always going to leave one side exposed to liquidations."
The initial move, he added, "says more about leverage than conviction. Until the Fed gives markets a clearer policy path, CPI days will keep producing sharp reversals and forced exits."
The report also contained details that could allow the Fed to remain patient. Shelter costs rose just 0.1%, while energy prices fell 1.5% and gasoline dropped 2.9%. Some goods categories are moving past the tariff-related price increases from the previous year.
What's next for Bitcoin
Investors now turn to the Fed's Jackson Hole symposium later in August for policy clarity, followed by the September 4 employment report and the next CPI release on September 11. Unexpected weakness in jobs or inflation could boost expectations for looser policy and support risk assets like Bitcoin.
Technical outlook: bearish bias persists
The 4-hour chart for BTC/USD remains bearish, with the price trading below key moving averages. The Relative Strength Index (RSI) sits at 42, below the neutral 50, indicating growing bearish momentum. The MACD lines are also in negative territory.
If selling pressure continues, Bitcoin could break below $63,000 and retest the August 3 swing low of $62,185. A deeper decline might target the July 6 low of $61,228, with a major demand zone at $57,659. On the upside, bulls need to push past the 4-hour Inducement Liquidity (ILQ) at $64,430 before challenging resistance at $65,423.
Related: US inflation cools in July and July CPI report analysis.
This article is for informational purposes only and does not constitute financial advice.
