Bitcoin falls as Nasdaq 100 scores wild swings amid Fed jitters, US PCE data ahead

BITCOIN OUTLOOK:

• Bitcoin rumbles as US stocks struggle for direction
• Nasdaq 100 score swings wildly as Fed jitters undermine sentiment
• The market’s attention is now turning to the US PCE data on Friday

Read more: EUR/USD subdued as US dollar retains upper hand, gold can’t shake off blues

The Nasdaq 100 rose at the cash open as solid corporate earnings from chip maker Nvidia bolstered positive sentiment, but the optimism was short-lived as sellers quickly returned to fade strength in the stock market amid Fed turmoil. In late afternoon trade, however, the technology index resumed gains, but wild intraday swings suggest traders are reluctant to maintain heavy exposure ahead of Friday’s US PCE data.

Increased volatility and unpredictable market swings undermined cryptocurrencies, prompting Bitcoin (BTC/USD) to erase morning gains and slip into negative territory for a third straight session, a move that reinforces the argument that stocks and digital assets are becoming increasingly correlated, which which gives little diversification benefit.

In any case, focusing on Bitcoin, the token has clearly run out of upside momentum after its solid performance in the early stages of 2023. In fact, prices have started to pull back after failing to break above $25,200, an area that has acted as a strong resistance last August.

While the recent pullback may be a temporary pause before the next leg higher, more technical evidence is needed to confirm that the worst in the crypto space is over and that Bitcoin could extend its recovery in the near term.

BITCOIN TECHNICAL TEAM

Bitcoin chart prepared using TradingView

A signal that could point to a bullish continuation would be a clean and decisive break of the $25,200 ceiling, especially if the move is accompanied by above-average volume. Such a breakout could attract new buyers to the market, at least in theory, and set the stage for a run toward the $28,000 psychological level.

On the other hand, if BTC/USD deepens its descent, traders should keep an eye on trendline support crossing $23,000. If this floor is taken out, selling pressure could accelerate, creating the right conditions for a bearish decline towards $21,500, a key support established by the 38.2% Fibonacci retracement of the November 2022/February 2023 rally.

With January consumer spending data out on Friday morning, volatility could increase heading into the weekend, causing sharp swings in assets. In terms of expectations, core PCE, the Fed’s favorite inflation indicator, is seen easing to 4.3% y/y from 4.4% y/y in December, a small but welcome directional improvement.

Recent economic data has shown that inflationary pressures remain sticky amid tight labor markets and robust demand, so core PCE is likely to surprise to the upside. This scenario could trigger a risk-off move on Wall Street, weighing on stocks as well as cryptocurrencies.