Bitcoin continues to trade higher Wednesday, shrugging off impending U.S. inflation data that could amplify fears of an early unwinding of monetary stimulus by the Federal Reserve.
The top cryptocurrency by market value reached a two-week high of $55,822 earlier today after a five-day winning streak that saw prices claw their way back from below $47,000.
Scheduled for release at 08:30 a.m. ET today, the U.S. Consumer Price Index (CPI) is expected to show the cost of living in the world's largest economy rose 0.4% in February from 0.3% in January. In annualized terms, the CPI is forecast to have risen to 1.7% from 1.4% in January.
The data could influence bitcoin's price, given the cryptocurrency is considered a hedge against inflation and monetary and fiscal policy imprudence. While a bigger-than-expected jump in inflation would strengthen bitcoin's long-term bullish case, the cryptocurrency's immediate reaction could be bearish.
That's because an above-forecast CPI would validate the narrative that the cocktail of monetary and fiscal stimulus, alongside an economic rebound, is stoking inflation. That could lead to an early tightening of stimulus by the Fed and another leg higher in Treasury yields and the U.S. dollar.
Treasury yields spiked in the last week of February, lifting the dollar and pushing bitcoin and stocks lower, as investors priced in the likelihood of the Fed's first interest rate hike occurring at the end of 2022 rather than 2024 in the wake of rising inflation expectations and signs of economic recovery.
In other words, the markets were expecting some pickup in inflation two weeks ago. As such, bitcoin and other assets may not see much price action if the growth in the CPI matches estimates.
From a technical analysis standpoint, the cryptocurrency is looking bullish, having cleared a key price hurdle.
Bitcoin has flipped resistance at $52,666 (March 3 high) into support.
The MACD histogram, an indicator used to gauge trend strength and trend changes, has risen back above zero, indicating a bull revival. The 5- and 10-day price averages are again trending north, indicating a bullish setup.
The immediate resistance is seen at $58,332 (record high), followed by the psychological level of $60,000.
Support at $50,000 may come into play if the CPI beats estimates by a big margin, unsettling traditional markets.
At press time, bitcoin is changing hands near $54,790, representing a 1.6% gain on a 24-hour basis. The 10-year yield is seen at 1.56%, having risen by more than 50 basis points to above 1.6% in the past five weeks. Elsewhere, the S&P 500 futures are up 0.30%.
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