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US inflation data will be ‘messy’ – 5 things to know in Bitcoin this week

US inflation data will be 'messy' - 5 things to know in Bitcoin this week
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Bitcoin (Bitcoin) begins another week in a precarious position near $20,000 before renewed macro reversal.

After admittedly sealing its best weekly gains since March, the largest cryptocurrency is struggling to hold its recently reclaimed levels.

Major zones of resistance remain overhead and with inflation data set to be released later in the week, the coming days could prove worrying for risk assets everywhere.

At the same time, crypto market sentiment is showing signs of recovery and on-chain metrics continue to underscore what should be Bitcoin’s recent macro price bottom.

Amid conflicting data, Cointelegraph takes a deeper look at potential market-moving factors for the week ahead.

The 200-week moving average is a headache

At around $20,850, the weekly close of June 10th was hardly anything special for BTC/USD, but the pair still posted its best seven-day growth in several months.

Bitcoin ended Sunday a whopping $1,600 higher than where it started the week, sealing an advance not seen since March.

The success didn’t last, however, as the hours turned negative after the week’s close. At the time of writing, BTC/USD is targeting $20,400, data from Cointelegraph Markets Pro and trading view shown.

BTC/USD 1 Hour Candlestick Chart (Bitstamp). Source: TradingView

Bitcoin’s ability to hold current levels could be crucial to sentiment this summer, as relief in global stocks would provide an opportunity for crypto to erase some of its losses over the past few months.

Commentators, including trading suite Decentrader, eyed the weekly chart with interest.

Others were less enthusiastic, noting that BTC/USD still had another close below the key 200-week moving average (WMA) at around $22,500.

In previous bear markets, the 200 WMA acted as the overall support level, with bitcoin dipping briefly below to hit macro bottoms. However, this time seems different as $22,500 has been off the chart for a month.

Meanwhile, popular trader TechDev advocated a more optimistic outlook for the remainder of 2022.

By the end of the year, he argued over the weekend, a reclamation of more major WMAs should result in Bitcoin ending its “reaccumulation phase” altogether.

“32-35k BTC flip likely confirms end of reaccumulation and correction this year+,” TechDev said Twitter followers.

“This is most likely to occur once both 100W and 50W EMAs are in this area. 100W currently at 34.8K and 50W at 37.2K.”

Elsewhere, continued liquidation of assets from embattled crypto lending platform Celsius added selling pressure.

The relentless dollar is back as Asian markets plummet

Asian equities trended lower on July 11 as news of the macro week marred the start of the week social unrest in China.

Markets felt the strain as protesters demanded the release of frozen funds amid a scandal involving both bank officials and local authorities accused of abusing COVID-19 tracking apps.

At the time of writing, the Shanghai Composite Index was trading 1.5% lower, while Hong Kong’s Hang Seng was down 3.1%.

Europe fared slightly better, with modest growth for the FTSE 100 and Germany’s DAX, with the US still open.

However, before Wall Street returned, the US Dollar Index (DXY) was already making fresh moves higher, erasing a retracement that made for a cooler end to last week.

DXY was at 107.4 on July 11, just 0.4 points below the 20-year highs of the days before.

Analyzing the situation, an analyst at trading firm The Rock described DXY as “about as extreme as it gets” in terms of year-to-date growth.

“Based on the extreme rally this year, the DXY is now up 16% year-on-year,” he said wrote.

“This is as extreme as has been historically seen and, unfortunately, it typically coincides with major financial stresses in the markets, a recession, or both.”

Bitcoin did it Desire its traditional inverse correlation to DXY last week, climbing in tandem with the index.

US Dollar Index (DXY) 1-day candlestick chart. Source: TradingView

Inflation is said to make for a ‘messy week’

As if that weren’t enough, the age-old theme of inflation could provide another test of markets’ resilience this week.

The US Consumer Price Index (CPI) read out June is due July 13, and the monthly number is expected to be even higher year-on-year.

The higher inflation is and the further it deviates from these already high expectations, the more likely risk assets are to react in anticipation of a response from policymakers.

For macro analyst Alex Krueger, the expected course for this week is clear.

“Getting messy,” he summarized on Twitter.

While the CPI shrugged off many of the leading inflation indicators, it even caught the attention of mainstream commentators over the weekend with a murky suggestion that this week’s numbers could put the cat among the doves.

“As US CPI inflationary pressures could get very close to 9% next week, some will be quick to point out that this move is backward-looking,” said economist Mohamed El-Erian reacted.

“Yes… but it captures the pain felt by many, particularly the less fortunate sections of society; and affects inflation expectations.”

Any knee-jerk reaction could finally spook bitcoin markets in line with other risk assets, or at least trigger a lot of volatility, as has been seen throughout previous CPI events.

MACD hints at bottom

With multiple bitcoin price metrics either “down” or even flashing reach all-time lowthere is no shortage of signals to suggest that at current prices, investing in BTC has an historically unrivaled risk-to-reward ratio.

This week the latest metric to join the herd is the weekly chart’s Moving Average Convergence/Divergence (MACD).

The MACD is effectively tracking a chart trend that is already playing out. It does this by subtracting the 26-period exponential moving average (EMA) from the 12-period EMA.

If the resulting reading is below zero, Bitcoin tends to be in a bottoming scenario, meaning that the recent trip to $17,600 could be as well should historical norms repeat itself.

Meanwhile, commentator Matthew Hyland written down a similar MACD structure is still playing out on the 3-day chart.

“The 3-day MACD is still on a bullish cross,” said market analyst Kevin Svenson added.

“Despite the withdrawal, I remain optimistic in the medium term.”

Ace Cointelegraph reportedBitcoin’s Relative Strength Index (RSI) is already at its most “oversold” level in history.

Last week, meanwhile, a dealer Called July 15th as a key date by which another chart feature will call the bottom, this one composed of two separate MAs.

2-month highs for the Crypto Fear & Greed Index

As a modest silver lining, the average crypto investor is slowly regaining their confidence, the latest data shows.

Related: Top 5 Cryptocurrencies to Watch This Week: BTC, UNI, ICP, AAVE, QNT

Building on previous strength, crypto market sentiment reached its highest level since early May over the weekend and now stands at 22/100.

While they are still in “extreme fear” territory, the Crypto Fear & Greed Index The renaissance represents a clear contrast to what has happened over the past two months, in which it has fallen as low as 8/100 – even below some previous bear market lows.

Crypto Fear & Greed Index (Screenshot). Source: Alternative.me

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should do your own research when making a decision.