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Bitcoin price forecast: BTC/USD faces 2021 low as risk assets plummet

Bitcoin sinks alongside risk assets after US CPI beats forecast; China’s credit growth in focus as new yuan loans data nears and BTC/USD threatening 2021 low as crypto fear exponentiate.

Thursday’s Asia-Pacific outlook

A risk-off move from overnight is likely to extend into today’s Asia-Pacific session. US stocks closed in the red after traders digested the latest inflation data out of the United States. The US consumer price index (CPI) crossed the wires at 8.3% versus the 8.1% Bloomberg consensus forecast. While that was lower than the prior month’s 8.5% print, it reignited inflation woes. Bitcoin fell over 9%, nearly breaching its 2021 low at 27,734.00. That brought the cryptocurrency’s monthly loss to over 23%, a stunning move considering April’s 17.31% drop.

Short-term US breakeven rates rose following the CPI data, with the two-year breakeven rising nearly 20-basis points, although it remains below 4%. That helped push real yields lower, helping to boost gold and silver prices. The tailwind from the move in real yields came just in time for XAU, given that the metal was trading at critical support. Other safe-haven assets also benefited as equity prices fell. The Japanese yen managed to gain versus a US dollar that rose against the euro and the British pound. That pushed the DXY index slightly higher.

The stronger dollar helped to push iron ore prices lower, dragging on the commodity-sensitive Australian dollar. China’s battle with Covid under its 'Zero-Covid' policy has pressured industrial metals as factories across the Asian economy run at reduced capacity. A report from the China Passenger Car Association, released Tuesday, stated that production among five auto companies in Shanghai dropped by 75% in April from the month prior. Although not as severe, other auto manufacturers elsewhere in China saw significant production drops.

Traders are on watch for a credit update out of China. New yuan loans data for April may cross the wires as soon as today. Analysts see new loans crossing the wires at 1.53 trillion, according to a Bloomberg survey. That would be nearly half the amount of new loans created in March, representing a sharp contraction in the country’s credit creation. A softer-than-expected figure may weaken sentiment further, especially given that loans would be falling severely at a time when the PBOC and Beijing are bolstering support for the economy.

BTC/USD technical forecast

Bitcoin prices dropped overnight, nearly touching the 2021 low before trimming some losses. The bearish pressure may grow further now that prices are below the psychological 30,000 level. The Relative Strength Index (RSI) is in oversold territory and moving lower, reflecting the recent bout of extreme weakness. The 2021 low at 27,734 will likely remain pivotal, with a drop below the level perhaps bringing additional weakness.

BTC/USD daily chart


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This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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