Is BTC likely to continue its up-move?
Last week was dominated by debt ceiling negotiations with the market driven by sentiment - shaped by shifts in talks and technical picture.
It was not affected much by incoming macro data and Fed members’ rhetoric, with probability of 25 bps hike in July having increased from 25% to 64% over the week.
BTC started last week with initial weakness continuing from the day before on the back of no progress in debt ceiling talks.
It retested $26,500 support once talks were suspended for the night and bounced up.
Later on Monday, hawkish Fed Bullard’s comments caused only a small retracement and the market continued to be bid up after McHenry named Sunday night talks as productive and the negotiating team resumed talks.
Once it got to $27,500 (an important level before the $27,700 range high, where buying pressure was absorbed on Wednesday and Thursday in the previous week), the market started trading sideways.
As buyers couldn’t push it higher and focus was turning towards debt limit negotiations, BTC started moving down. It was pressed down throughout the day on Wednesday and even broke $26,500.
Strong Nvidia earnings gave it a bounce together with equity markets.
However, on Thursday, liquidity below Wednesday’s low got swiped and BTC got to just shy of $25,800 before it was bid up again.
It was supported by positive news about the progress in debt ceiling talks incoming.
Even a stronger PCE didn’t have much effect on the market as it was marching up.
Eventually on Saturday, it was announced that a tentative debt ceiling deal had been reached, which added to the market strength and sent BTC above $27,700 resistance and range high to finish the week over $28,000.
We’ve had buyers in control since BTC retested $25,800 where it was bought aggressively early on Thursday.
Since then, not only BTC has been trending up with higher daily highs but the move accelerated over the weekend.
BTC broke $27,700 resistance and closed strong on the week above previous week high.
That’s positive for the bulls.
However, the up-move and the breakout happened on low liquidity with many traders off for the long US weekend and back only on Tuesday.
On top of that, it looks like in the short term the market has been losing steam since its strong weekly open so we are extra cautious now with a long bias.
It’s crucial to be vigilant, open-minded and not get too excited in this kind of environment.
Key levels to watch from the upside are $29,200, $30,050 and $31,050 (‘23 high).
From the downside $27,500 - $27,700 area is important as a support for continuation of current leg-up.
If broken however, we are back in the range with further weakness towards $27,100, $26,500 and even $25,800.
On the macro front, this week’s focus will be on job data with the main event – #NFP on Friday.
Other data points to watch:
Tue: House Price Index, CB Consumer Confidence
Wed: Chicago PMI, JOLTs
Thu: ADP, Manufacturing PMI, ISM Manufacturing, Jobless Claims, Eur CPI
Fri: NFP
We have Fed speakers on Tuesday, Wednesday and Thursday.
With a tentative deal on the debt ceiling reached over the weekend, market participants this week will be watching closely if all goes smoothly till its signing.
Once done, this topic will be finally taken off the table.
Have a great trading week ahead!
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