Bitcoin Holds Steady Above $17K, US Dollar Tepid Ahead of Powell Speech
The Federal Reserve chairman is scheduled to speak at event hosted by Sweden's central bank.
Bitcoin (BTC) held steady as the U.S. dollar showed little signs of recovery ahead of an expected hawkish speech by Federal Reserve Chairman Jerome Powell later Tuesday.
At press time, the largest cryptocurrency by market value traded 0.5% higher on the day at $17,260, having touched a three-week high of $17,391 on Monday, according to CoinDesk data. Ether (ETH), the second-largest cryptocurrency, rose nearly 1% to $1,330.
The U.S. Dollar Index, which tracks the greenback's value against major currencies, was little changed at 103.15. The global reserve currency fell to a seven-month low of 102.91 on Monday, extending a pullback from last week's 105.63 high on expectations the recent moderation in the U.S. wage growth will prompt the Fed to abandon liquidity tightening.
Powell is scheduled to speak at a Swedish central bank conference at 14:00 UTC. Traders will follow the speech closely for clarity about the Fed's tightening plans.
"There is much interest in whether Chair Powell, who speaks at a Riksbank event, uses the opportunity to underscore the December minutes, which pushed back against the easing of financial conditions," Marc Chandler, chief market strategist at Bannockburn Global Forex, wrote in a blog post published Monday.
In recent weeks, risky assets have reflected increasing confidence that the Fed will end its rate-hike cycle this quarter and switch to rate cuts in the third quarter. That's evident from the dollar index's slide in the wake of the recently released minutes of the Fed's December meeting and some Fed officials reiterating a higher-for-longer path of interest rates.
"Certainly, the market does not buy into the Fed's narrative of the funds rate being taken to 5.00% and being kept there for a long time. Markets seem to price a 50bp easing cycle in 2H23," Frantisek Taborsky, a foreign-exchange strategist at ING, noted.
Therefore, a hawkish tone from Powell might have a minimal negative impact on the market.
"Assuming that neither Powell's comments nor the NFIB breaks the building narrative of a more relaxed Fed (and Thursday's US CPI (Consumer Price Index) will also be key for this story), we would expect momentum to remain against the dollar," Taborsky added. The National Federation of Independent Business is due to release business optimism data later Tuesday.
Continued dollar weakness will likely bode well for bitcoin, helping the cryptocurrency build on its recent bullish breakout above its 50-day simple moving average (MA).
"Bitcoin has seen upside follow-through since breaking out above its 50-day MA late last week on improved short-term momentum. The short-term breakout put the next resistance near $18,400," Katie Stockton, founder and managing partner at Fairlead Strategies, wrote in a note that was sent to clients on Monday.
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