(Kitco News) – Bitcoin (BTC) and the broader crypto market trended higher in early trading on Monday, while stocks and gold were negative, as traders reassessed their expectations for a rate cut in November. The CME FedWatch Tool currently shows the likelihood of a 25 bps rate cut at the next Federal Open Market Committee (FOMC) meeting at 84%.
According to David Morrison, Senior Market Analyst at Trade Nation, the pullbacks come as investors are “responding to an uptick in bond yields with the 10-year Treasury Note creeping back above 4.0% for the first time since early August.”
“At the end of last week, the majors enjoyed a rollercoaster session following the release of a stronger-than-expected Non-Farm Payroll report, along with a small, but countertrend downtick in the Unemployment Rate,” he noted. “This led to a sharp re-evaluation in the market’s forecasts for future Fed rate cuts.”
The re-evaluation has been so sharp that expectations that the Fed will hold rates steady at the next FOMC meeting have now risen to 16%.
“According to the CME’s FedWatch Tool, investors are now betting on two 25 basis point rate cuts before year-end, rather than the 75 basis points-worth that had been priced in ahead of the payroll update,” Morrison said. “As made clear by several senior Fed members, the belief is that inflation is now on a sustainable path back towards its 2% target. This means that the FOMC can now focus on maximising employment, the other side of its dual mandate.”
“Back in the summer there were signs that the labour market was softening quite rapidly, leading many investors to believe that the Fed would be forced to cut interest rates aggressively to prevent a hard landing,” he highlighted. “But last week’s jobs data have helped to counter this fear to some extent, and this week everyone can return to worrying about inflation, along with corporate earnings.”
Market watchers will now be closely eyeing Wednesday’s release of the minutes from last month's FOMC meeting for any clues on what the Fed may do next. “Then there are two key inflation updates: CPI on Thursday and PPI on Friday,” Morrison said. “There will also be a succession of Fed speakers throughout the week. Just to round things off, the third quarter earnings season unofficially kicks off this week with Friday seeing updates from JP Morgan, Wells Fargo, BlackRock, the Bank of New York Mellon, and Fastenal.”
According to Oleg Bevz, Managing Partner at INPUT Communications, the recent jobs data “has calmed the storm in the mainstream financial markets. The US 10-year Treasury Note jumped by 3.962%, while the 6-month Treasury yield closed Friday’s session up 4.46%.”
“Over the weekend, Bitcoin rebounded to nearly $63,520 during Monday morning Asian hours, reflecting a 1.13% increase in 24 hours,” Bevz added. “Given the influence of macroeconomic trends on Bitcoin, investors are closely watching the Fed’s next move.”
While the whole of the crypto market fell in the middle of last week, with the total capitalization declining by 3% to $2.21 trillion, Alex Kuptsikevich, senior market analyst at FxPro, noted that Thursday saw “the return of positive sentiment” after “buyers found Bitcoin attractive at $60K. The cryptocurrency fear and greed index is right in the middle, having risen out of the fear zone.”
“Last week, Bitcoin successfully bounced out of the area where the 50-day moving average and the $60K round level intersect,” he added. “The cryptocurrency's 1.5% rise since the start of the day on Monday to $63.5K has brought the price back to test the 200-day moving average. A consolidation above would act as a bullish signal, indicating that the corrective pullback is over and buyers are taking over.”
BTC/USD Chart by TradingView
At the time of writing, Bitcoin has risen above the 200MA and trades at $63,716, for a gain of 1.9% on the session. As Kuptsikevich noted, it remains to be seen if King Crypto can hold above support at $64,000 and consolidate above the 200MA.
According to John Glover, Chief Investment Officer at Ledn, Bitcoin bulls need to continue pushing higher in the near term. Otherwise, BTC risks falling back to the lower end of the range it’s been trading in over the past six months.
“The pennant (blue lines) held once more on a test of the topside and we’ve since seen a decent sell-off to current levels,” Glover said in a note to Kitco Crypto. “The further along this pennant we travel, the less effective it is as an indicator of a continuation pattern.”
“It seems that the market is waiting for the November elections before committing to a clear direction in price,” he suggested. “While the consensus is that a Republican victory will be more supportive of digital assets prices than a Democratic win, both parties have been putting forth positive statements towards digital assets, so the upward trend will be in place regardless of the outcome, in my opinion.”
“Continue to be patient but watch the $49k level very closely as a break below there will negate the count and open up the downside,” Glover concluded.
And TradingView analyst Arman Shaban also warned about the possibility of Bitcoin retesting lower support levels, pointing to the conflict in the Middle East as one factor that could spoil the growing rally by the bulls.
“By analyzing the #Bitcoin chart on the weekly timeframe, we can see that the current price is around $62,640,” he said. “We observed that after dropping to $60,000 due to the ongoing conflict between Iran and Israel, the price was met with strong demand and, as mentioned earlier, has rebounded 4% to the current level.”
“If the conflict continues, there is a high probability that Bitcoin will See target levels below $60,000 and even $52,000,” Shaban warned. “Therefore, keep in mind that the most crucial support level for Bitcoin at the moment is between $60,000 and $60,200.”
