Hot CPI Data at 3.8% Threatens Rally as Fed Rate Cut Hopes Fade

The latest US inflation data released on Tuesday came as a surprise to the markets, with headline CPI rising 3.8% year over year in November. This exceeded the forecast of 3.7% and marked a significant increase from the previous reading of 3.3%. Core CPI also saw a jump to 2.8%, surpassing expectations. The monthly core inflation rate increased by 0.4%, indicating that price pressures in the broader economy are persistent.

The release of this data has put Bitcoin at a critical juncture. Prior to the CPI announcement, analysts had outlined two possible scenarios for Bitcoin’s price action. A soft reading could have pushed Bitcoin towards $86,000 to $90,000, while a hot reading would have increased pressure towards the $76,527 support level. The latest data points towards the latter scenario, with tighter liquidity expectations, a stronger dollar, and rising Treasury yields posing as headwinds for risk assets. Bitcoin’s 21-week exponential moving average now becomes a crucial support level to monitor.

Following the CPI print, key levels to watch for Bitcoin include immediate resistance at the $82,000 to $84,000 cluster, with the 21-week EMA and May 8 low serving as the first support level. A break below $76,527 could open the path towards the $68,700 to $75,700 Fibonacci box, indicating a deeper correction.

To confirm more upside potential for Bitcoin, the market needs to see a break above the upper boundary line of the trend channel and a clean move above the swing highs from May 6 and May 10 in the $82,900 area. This would signal that the market is entering a powerful phase of an Elliott Wave advance.

In conclusion, the latest inflation data has placed Bitcoin at a critical juncture, with key levels and scenarios to watch for in the coming days. As the market reacts to the changing economic landscape, investors should remain vigilant and monitor price movements closely to make informed decisions.