BTC Return to $28,000 Hinged on China PMI and the US Debt Ceiling Vote

Key Insights:

• On Wednesday, BTC fell by 1.81% to end the day at $27,220.
• China PMI numbers and market angst ahead of the House of Representative vote on the US debt ceiling deal weighed.
• The technical indicators turned bearish, signaling a return to sub-$26,000.

On Wednesday, bitcoin (BTC) fell by 1.81%. Following a 0.18% loss on Tuesday, BTC ended the day at $27,220. Significantly, BTC saw its first monthly loss of 2023, falling by 6.95% in April.

A mixed start to the day saw BTC rise to an early morning high of $27,856. Falling short of the First Major Resistance Level (R1) at $27,995, BTC fell to a late afternoon low of $26,858. BTC fell through the First Major Support Level (S1) at $27,526 and the Second Major Support Level (S2) at $27,328.

However, finding support at the Third Major Support Level (S3) at $26,859, BTC wrapped up the day at $27,220.

China PMIs and Market Angst Toward the US Debt Ceiling Vote Weighed

It was a busy Wednesday session. Private sector PMI numbers from China fueled a flight to safety in the morning session.

NBS Manufacturing and Non-Manufacturing PMI figures for May gave investors a better view of the macroeconomic environment midway through the second quarter.

The NBS Manufacturing PMI declined from 49.2 to 48.8, with the Non-Manufacturing PMI falling from 56.4 to 54.5. Economists forecast the NBS Manufacturing PMI to rise from 49.2 to 49.4 and the Non-Manufacturing PMI to fall from 56.4 to 55.0.

The NBS numbers are a precursor to the Caixin Manufacturing PMI numbers that will have more impact on riskier assets later this morning.

However, economic indicators from the US failed to move the dial despite a sharp increase in job openings. Job openings increased from 9.745 million to 10.103 million in April versus a forecasted 9.775 million.

Significantly, investors also brushed aside more dovish Fed chatter. The talk of hitting the pause button in June to allow the FOMC to digest economic indicators led to the markets taking off bets on a June interest rate hike.

According to the CME FedWatch Tool, the chances of a 25-basis point interest rate hike tumbled from 66.6 to 26.4% on Wednesday as the markets responded to Fed chatter that favored a June pause.

While the economic indicators and shift in the Fed’s policy stance were bullish, market angst toward the debt ceiling vote left riskier assets in negative territory.

The NASDAQ Composite Index fell by 0.63%, with the Dow and S&P 500 seeing losses of 0.41% and 0.61%, respectively.

There were no crypto events to add to the bearish mood.

The Day Ahead

It is a busy Thursday session. China’s Caixin Manufacturing PMI will draw interest this morning. Another disappointing set of numbers would test buyer appetite. However, a House of Representatives vote on the debt ceiling deal could deliver relief. US lawmakers will vote on the debt ceiling deal this morning (2030 ET).

Looking ahead to the US session, ADP nonfarm employment change, initial jobless claims, and the ISM Manufacturing PMI will move the dial. While investors are pricing in a more dovish Fed, solid labor market numbers could refuel bets on a 25-basis point June interest rate hike.

However, the influence of the numbers will hinge on the outcome of this morning’s vote.

Investors should also continue to track the crypto news wires. SEC activity, SEC v Ripple updates, and Binance and Coinbase (COIN)-related news would draw interest.

Bitcoin (BTC) Price Action

This morning, BTC was up 0.13% to $27,255. A range-bound start to the day saw BTC rise to an early high of $27.255.

BTC Technical Indicators

Resistance & Support Levels

BTC needs to move through the $27,311 pivot to target the First Major Resistance Level (R1) at $27,765 and the Wednesday high of $27,856. A return to $27,500 would signal an extended bullish session. The US debt ceiling vote and economic indicators 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 $28,309 and resistance at $28,500. The Third Major Resistance Level (R3) sits at $29,307.

Failure to move through the pivot would leave the First Major Support Level (S1) at $26,767 in play. However, barring an event-fueled sell-off, BTC should avoid sub-$26,000. The Second Major Support Level (S2) at $26,313 should limit the downside. The Third Major Support Level (S3) sits at $25,315.

Looking at the EMAs and the 4-hourly candlestick chart (below), the EMAs were bearish. BTC sat below the 100-day EMA ($27,243). The 50-day EMA converged on the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA, sending bearish signals.

A move through the 100-day ($27,243) and 50-day ($27,253) EMAs would support a breakout from the 200-day EMA ($27,444) and R1 ($27,765) to target R2 ($28,309). However, a bearish cross of the 50-day EMA through the 100-day EMA would bring S1 ($26,767) into view. A move through the 50-day EMA would send a bullish signal.