BTC/USD, Australian dollar dive as chance for 75-bps Fed hike spooks market

Tuesday's Asia-Pacific outlook

Market sentiment deteriorated sharply overnight in New York, pushing US stock indexes deep into the red and driving the safe-haven US dollar higher. Wall Street traders hit the sell button as Federal Reserve rate hike bets increased following Friday’s US consumer price index (CPI) report. The benchmark S&P 500 closed 3.88% lower, placing it within official bear market territory.

The sour market tone tanked risk-sensitive cryptocurrencies, pushing BTC/USD down by over 10% to its lowest levels traded at since December 2022. Although largely dispatched months ago, the narrative over Bitcoin being an inflation hedge is effectively dead in the water. Feds funds futures are pricing in more than 70-basis points of hiking for Wednesday’s FOMC rate decision. Even without a more-aggressive 75-bps hike, the Fed may provide tougher forward guidance following the latest inflation data. In any case, the consensus is that Mr. Powell will respond in some fashion.

The risk-off move is hardly contained to US markets and crypto, however. Asia-Pacific stock markets will likely feel the pressure today, and bond yields across the region—including in Japan—may fly higher, as Treasury yields did overnight. AUD/USD plummeted into the morning trading hours, falling to the lowest point since May. Australian stock markets are set to start trading after an extended holiday weekend, and a move lower is likely, given the broader market sentiment.

This morning, food inflation in New Zealand rose 6.8% on a year-over-year basis in May. That was up from April’s +6.4% y/y increase. Australia is set to report its first-quarter house price index at 01:30 GMT. Analysts expect to see that figure cross the wires at +1.4% on a quarter-over-quarter basis, down from 4.7% q/q. Australia’s May business confidence survey from National Australia Bank (NAB) is also due out. Japan’s industrial production for April will see a final update, and China’s foreign direct investment (FDI) data for May is expected to wrap the economic docket for the day.

BTC/USD technical forecast

Bitcoin prices accelerated lower overnight, extending recent losses. A break below the 28,000 area last week appeared to trigger some intense selling action. The Relative Strength Index (RSI) crossed into “oversold” territory, and the MACD oscillator crossed below its signal line. The 20,000 psychological level may soon be tested if the selling continues.

BTC/USD daily chart

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