Bitcoin pressured by hawkish Warsh, traders eye 77K-80K range

Fundamental factors in focus.

Bitcoin declined on Friday following a hawkish address by Fed Chair Warsh at the Jackson Hole Symposium. The crucial line in his remarks was: "I would be hard pressed to describe broad financial conditions as restrictive." This was taken by markets as a signal that he opposed the recent loosening of financial conditions, prompting a retightening.

Bitcoin and other cryptocurrencies had rallied sharply on "debasement" fears after the US Treasury buyback announcement to contain long-term yields. Warsh's speech reversed those trades, pushing gold and the dollar back to levels seen before the Treasury's move. Bitcoin was more resilient, merely extending its consolidation near recent highs.

Technical analysis may offer more clarity ahead. A move above Warsh's speech level near 79,887 could signal a continuation of the uptrend, while a drop below the post-speech level might trigger a more significant decline.

Warsh also repeated that the Fed is now only concentrating on inflation, noting slow progress. The view is that only a weak US CPI reading could bring probabilities below 50% (currently 67%) and prevent a rate hike at the next meeting. If probabilities remain at or above 50%, the Fed may have to hike anyway, since not doing so would signal dovishness and loosen financial conditions again.

For Bitcoin, looser financial conditions and a dovish shift in rate expectations would be supportive and prolong the rally. Conversely, a strong CPI figure or hawkish developments would likely pressure the cryptocurrency and cause selloffs.

Technical analysis on the daily chart

On the daily timeframe, Bitcoin is consolidating just beneath the key swing high near 82,500. That level is expected to provide resistance. Should the price climb to that resistance, sellers are anticipated to enter with risk above it, aiming for a decline to 67,000. Conversely, buyers would look for a breakout higher to add to bullish positions targeting 98,000.

Technical analysis on the 4-hour chart

On the 4-hour chart, recent price moves may have created a head and shoulders pattern. Buyers are expected to support the neckline with risk below the left shoulder's low, aiming for new highs. Sellers, however, want to see a break lower to add to positions targeting a decline back to 67,000 support.

Technical analysis on the 1-hour chart

The 1-hour chart shows the consolidation range more clearly following the drop sparked by Warsh. Traders are expected to continue trading the range, buying at support and selling at resistance, until a breakout occurs in either direction.

Key catalysts ahead

Today features the US ISM Manufacturing PMI and Job Openings data. Tomorrow brings the US ADP report. Thursday includes Fed's Waller, Jobless Claims, and the ISM Services PMI. Friday ends the week with the US NFP report.