- The BTC/USD price declined to a key support ahead of the US CPI data.
- The US dollar index and VIX have made a strong comeback recently.
Bitcoin price continued pulling back as investors wait for a major earthquake scheduled for Tuesday when the US publishes its consumer inflation data on Tuesday. This decline has coincided with a sharp rebound of the US dollar index (DXY), which has risen by ~3% from its lowest point this year. Similarly, the VIX index has surged by over 25%.
US dollar index rebounds
The BTC/USD price has drifted lower in the past few weeks. It continued dropping on Monday as investors wait for the most important economic numbers of the month that are scheduled for Tuesday this week.
The past two weeks have had several important events. First, the Fed decided to hike interest rates by 0.25%. Officials sounded a bit upbeat about the economy even as they made the smallest rate hike in months.
Second, the United States published strong jobs numbers. The numbers revealed that the American economy added over 500k jobs in January while the unemployment rate dropped to 3.4%. Wage growth continued to accelerate during the month.
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In a statement last week, Jerome Powell warned that the tight labor market would make it difficult for inflation to come down. Therefore, the main catalyst for Bitcoin price will come on Tuesday when the US publishes its January jobs numbers.
These numbers will have the biggest impact on Bitcoin and other crypto prices because they will provide more information on what the Fed will do. Economists expect that inflation moved up slightly in January, led by service prices.
If they are accurate, we could see a more aggressive Fed, which could push interest rates above 7% later this year. However, if inflation comes short of expectations, we could see the Fed start easing in the coming months.
Therefore, Ethereum, Ripple, Cardano, TORN, BOND, and BNX prices could pull back or rise depending on the strength of inflation numbers.
Bitcoin price prediction
On the daily chart, we see that the BTC price has drifted downwards in the past few days. This pullback happened after the coin moved below the 23.6% Fibonacci Retracement level. It also formed a small shooting star pattern.
It has also retested the key support at $21,586, the highest point on November 5. Therefore, Bitcoin prices will likely continue falling ahead of the latest inflation data. If this happens, we can’t rule out a situation where it slips to about $20,000. It could then rebound after the report as investors buy the dip.
