Bitcoin, BTC/USD, Inflation, Real Yields, Chinese Credit – Talking Points
- Bitcoin sinks alongside risky assets after US CPI beats forecast
- China’s credit growth in focus as new yuan lending data approaches
- BTC/USD Threatens 2021 Low As Crypto Scare Rises
Thursday’s Asia-Pacific Outlook
An overnight risk aversion move is likely to extend into today’s Asia Pacific session. US stocks closed in the red after traders digested the latest US inflation data. The US consumer price index (CPI) crossed the line at 8.3% against 8.1% forecast by the Bloomberg consensus. Although this figure is lower than the figure of 8.5% of the previous month, it has revived the problems of inflation. Bitcoin fell more than 9%, nearly surpassing its 2021 low at 27,734.00. This took the cryptocurrency’s monthly loss to over 23%, a stunning development considering April’s 17.31% decline.
US short-term equilibrium rates rose on the back of CPI data, with the 2-year equilibrium rising nearly 20 basis points, although still below 4%. This helped push down real yields, which in turn helped push up gold and silver prices. The tailwind in real yield moves came just in time for XAU, as the metal was trading at critical support. Other safe havens also benefited from falling stock prices. The Japanese yen managed to gain against a US dollar which appreciated against the euro and the British pound. This pushed the DXY index slightly higher.
The stronger dollar helped push down iron ore prices, dragging the commodity-sensitive Australian dollar down. China’s battle with Covid under its “Zero-Covid” policy has put pressure on industrial metals as factories in the Asian economy operate at reduced capacity. A report by the China Passenger Car Association, released on Tuesday, said production at five automakers in Shanghai fell 75% in April from a month earlier. Although less severe, other automakers elsewhere in China have seen significant production cuts.
Traders are on the lookout for a credit update from China. New yuan lending data for April could cross the wires today. Analysts see new loans crossing the wires at 1.53 trillion, according to a Bloomberg survey. This would represent almost half the amount of new loans created in March, representing a sharp contraction in the country’s credit creation. A weaker-than-expected figure could further weaken sentiment, especially as lending falls sharply at a time when the PBOC and Beijing are stepping up support for the economy.
BTC/USD Technical Forecast
Bitcoin prices fell overnight, nearly hitting 2021 lows before paring some losses. Downside pressure could build further now that prices are below the psychological 30,000 level. The Relative Strength Index (RSI) is in oversold territory and declining, reflecting the recent bout of extreme weakness. The 2021 low at 27,734 is likely to remain crucial, with a drop below the level perhaps bringing additional weakness.
BTC/USD daily chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter