Bitcoin Under Geopolitical and Economic Pressure Ahead of the Fed

The leading cryptocurrency retreats as US consumer data disappoints and the dollar strengthens as a safe haven, testing the resilience of its uptrend.

The world's leading cryptocurrency, Bitcoin (BTC), registered a significant decline this Tuesday, losing -1.38% in the morning hours to trade at $105,321. This drop in Bitcoin comes amid a slight recovery in the US dollar, which acts as a safe haven asset amid the geopolitical tension between Israel and Iran. Adding to this pressure is the release of worse-than-expected US Retail Sales data, which raises alarms about the health of consumer spending and the possible direction of Federal Reserve (Fed) interest rates this Wednesday.

Bitcoin remains above dynamic support at $103,000, which coincides with the 50 EMA, a critical level for maintaining the uptrend. / TradingView

The Perfect Storm: Geopolitics and Consumer Spending

Bitcoin's decline is not an isolated event. Instability in the Middle East, with the crisis between Israel and Iran, boosted the dollar as a safe haven, diminishing the appeal of more volatile assets. Added to this is a crucial economic figure: US Retail Sales Month-over-Month (MoM). The latest report showed a contraction of -0.9%, negatively exceeding the forecast of -0.7% and accelerating the decline from -0.1% the previous month.

This reading is alarming for the US economy, where consumption is a key driver of GDP. Such a sharp drop suggests that consumer confidence is waning, impacted by persistent inflation, high interest rates, or general uncertainty. This contraction could be a harbinger of a deeper economic slowdown or even disinflationary pressures affecting risk appetite in the markets.

The Fed Factor: Strong Dollar vs. Weak Crypto

Pressure on Bitcoin is intensifying just hours before the Federal Reserve's crucial release of new interest rates, scheduled for this coming Wednesday. The market consensus is overwhelming: 99.8% of participants in the federal funds futures market are betting that the Fed will keep the rate at 4.50%, without implementing a new rate cut.

This expectation of rate stability, despite weak economic data, further strengthens the US dollar, making it more attractive to investors seeking safety in an uncertain environment. Historically, a strong dollar tends to act as a headwind for cryptocurrencies, as it reduces demand for assets perceived as riskier or alternative.

Technical Analysis: Is BTC's Uptrend Running Out?

Despite the current pullback, Bitcoin remains in a notable uptrend, trading above the 50 and 200 EMAs.

EMA50 and EMA200 aligned upwards: When the Bitcoin price consistently remains above the 50- and 200-period Exponential Moving Average (EMA), and these EMAs also point upwards, it is considered a strong sign that the asset is in a robust uptrend. This indicates that the average price over the past 50 and 200 days is steadily rising, signaling underlying strength.

However, this uptrend could be weakening or exhausting. After a pullback, BTC's recent high price fell below the previous high recorded on May 25.

High price falling lower: This pattern, known as "falling highs," is a clear sign of weakening in an uptrend. It suggests that buyers are losing strength and that the asset is failing to break above its previous peaks, indicating a possible exhaustion of buying pressure and a potential reversal or consolidation.

Additionally, Bitcoin's uptrend is diverging with falling trading volume.

Divergence with falling trading volume: A divergence between price and volume occurs when an asset's price continues to rise (maintaining an uptrend) but the trading volume associated with those upward movements decreases. This is a warning sign, as it indicates that the uptrend is not supported by strong market participation, suggesting that buying pressure is running out and the trend could soon reverse or consolidate.

Bitcoin remains above dynamic support at $103,000, which coincides with the 50 EMA, a critical level for maintaining the uptrend. On the other hand, it faces firm resistance at $112,000, a threshold it must overcome to strongly resume its upward momentum.

Bearish Pressure

Bitcoin is at a critical crossroads. Macroeconomic factors, driven by disappointing retail sales data and expectations of an immovable Fed, along with geopolitical tension, are exerting palpable bearish pressure. Technically, the leading cryptocurrency is showing signs of exhaustion in its uptrend. BTC's ability to hold the key support at $103,000 and overcome the resistance at $112,000 will determine its direction in the coming days, as the market awaits the Fed's decision, which could redefine global risk sentiment.

Disclaimer: This article is for informational and journalistic purposes only and does not constitute financial advice or investment recommendations. Cryptocurrencies carry a high level of risk, and their value can fluctuate dramatically. Please conduct thorough research before making any investment decisions.