BTC at Risk of Sub-$26,000 on Hawkish Fed Sentiment

Key Insights:

• On Thursday, BTC fell 2.06% to end the session at $26,860.
• Progress toward a US debt ceiling deal failed to deliver support, with BTC and the broader market diverging with the NASDAQ Composite Index.
• The technical indicators remained bearish, signaling a return to sub-$26,000.

On Thursday, bitcoin (BTC) fell by 2.06%. Reversing a 1.37% gain from Wednesday, BTC ended the day at $26,860. The bearish session saw BTC revisit sub-$26,500 for the first time in six sessions.

After a choppy morning, BTC struck a midday high of $27,506 before hitting reverse. Falling short of the First Major Resistance Level (R1) at $27,767, BTC fell to a late afternoon low of $26,413. BTC briefly fell through the First Major Support Level (S1) at $26,847 before ending the day at $26,860.

Binance News and Regulatory Activity Leave BTC at Sub-$27,000

It was a busy Thursday session. US economic indicators had a bearish impact, with better-than-expected stats increasing bets on a June interest rate hike.

The Philly Fed Manufacturing Index rose from -31.3 to -10.4 in May versus a forecasted -19.8. Significantly, new orders fell at a less marked pace, while the prices paid sub-component signaled renewed wholesale inflationary pressures.

However, labor market conditions remain robust, with initial jobless claims falling from 264k to 242k in the week ending May 12.

Fed chatter tested investor appetite, with FOMC member Lorie Logan suggesting the latest economic indicators do not support a pause on interest rate hikes. Hawkish Fed chatter and the US economic indicators overshadowed talk of a US debt ceiling deal by the end of the week.

On Thursday, the NASDAQ Composite Index rose by 1.51%, with the S&P 500 and the Dow seeing gains of 0.94% and 0.34%, respectively.

The crypto news wires added to the bearish mood. News of Binance Australia suspending cash withdrawals weighed on investor sentiment. Earlier this month, Binance announced plans to leave Canada.

A more vocal CFTC also drew attention while US policymakers attempted to avert a US default that could send the global economy into a recession.

The Day Ahead

It is a quieter Friday session. There are no US economic indicators for investors to consider. The lack of stats leaves Fed chatter to influence investor appetite.

FOMC members Williams and Bowman will set the stage for Fed Chair Powell to wrap up the week. The Fed Chair has caught investors by surprise on numerous occasions. Sticky inflation and very tight labor market conditions could force Powell to discuss the possibility of a June interest rate hike.

However, investors should also monitor the crypto news wires for SEC v Ripple updates and Binance and Coinbase (COIN)-related news.

Bitcoin (BTC) Price Action

This morning, BTC was flat at $26,861. A range-bound start to the day saw BTC rise to an early high of $26,875 before easing back.

Technical Indicators

Resistance & Support Levels

BTC needs to move through the $26,926 pivot to target the First Major Resistance Level (R1) at $27,440 and the Thursday high of $27,506. A return to $27,000 would signal an extended bullish session. The crypto news wires and US debt ceiling-related news should be crypto-friendly to support an extended rally.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $28,019 and resistance at $28,500. The Third Major Resistance Level (R3) sits at $29,112.

Failure to move through the pivot would leave the First Major Support Level (S1) at $26,347 in play. However, barring a Fed-fueled sell-off, BTC should avoid sub-$25,500. The Second Major Support Level (S2) at $25,833 should limit the downside. The Third Major Support Level (S3) sits at $24,740.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was bearish signals. BTC sat below the 50-day EMA ($27,234). The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA easing back from the 200-day EMA, sending bearish signals.

A move through the 50-day EMA ($27,234) would support a breakout from R1 ($27,440) and the 100-day EMA ($27,855) to give the bulls a run at the 200-day EMA ($27,855) and R2 ($28,019). However, failure to move through the 50-day EMA ($27,234) would leave S1 ($26,347) in view.