Bitcoin (BTC) Bulls Emerging, US Dollar Struggles, Focus on Powell Testimony Risk

[MongiIG]

BTC, US Dollar Analysis and News

• Short Term Bullish Bitcoin View Playing Out
• US Dollar Struggles Despite Increased Fed Tightening Bets

Short Term Bullish Bitcoin View Playing Out

As noted yesterday, a false break below 40k could prompt a short term bullish rebound in Bitcoin, which now looks to be taking shape. The view of being a short term bull on Bitcoin had not only been predicated on a false break through 40k but also as I mentioned yesterday that the hubris within the crypto community has faded somewhat, while the buy the dip crowd has also gone very quiet. As such, the focus is now on 45k, potentially stretching to 47-48k, which will need to support equities stabilising. While on the flip side, my view is wrong should we close below 39k.

Bitcoin Chart: Daily Time Frame

Source: Refinitiv

US Dollar Struggles Despite Increased Fed Tightening Bets

The move above 96 for the USD was brief with the greenback failing to take advantage of markets pricing in an even more hawkish Fed. This perhaps may be a sign that positioning may be a worry for the greenback and thus, if the USD struggles to rise on good news, maybe it is time to reduce exposure.

A few factors to mention is that the US Citi surprise economic indicator is weakening, suggesting that the US data is missing expectations. Alongside this, in light of the rise in treasury yields, US tech stocks have felt the brunt of this, prompting US equities to underperform in international counterparts. At the same time, with Fed hawkish bets near enough maxed out, given that a March hike is near enough fully priced, the USD may have little else to glean from Fed tightening bets, unless a fourth hike is priced in. That being said, today’s major focus will be on Fed Chair Powell’s testimony, where he stated in prepared remarks that the Fed will use the full suite of policy tools to prevent higher inflation from becoming entrenched, while also stating that the economy is expanding at its fastest pace in many years.

USD (Green) vs US/Eurozone Citi Surprise Index Spread (Black)

Source: Refinitiv

 

Jan 11, 2022 |   Justin McQueen, Strategist. DailyFX