Market expects general PCE at 3.5% and underlying PCE at 3.2%, still high levels.
Bitcoin remains under pressure after failing to surpass USD 80,000, with focus on US inflation data.
Bitcoin faces one of the most sensitive weeks in recent weeks for financial markets, in a context where inflation in the United States and expectations about the Federal Reserve’s interest rates are once again at the center of attention. The behavior of the BTC price will largely depend on a battery of macroeconomic indicators that could redefine the risk appetite on Wall Street and, by extension, the performance of cryptocurrencies.
The main focus will be on the Personal Consumption Expenditure (PCE) index, the inflation metric preferred by the Federal Reserve to measure the evolution of prices in the United States. The April report will be published on Thursday, May 28 at 07:30 a.m. Eastern Time, at an especially sensitive time for the markets, who are still trying to determine whether the Fed will have room to initiate rate cuts during the second half of the year.
Currently, the consensus projects a headline PCE of 3.5% year-over-year and an underlying PCE of 3.2%. Any deviation could quickly alter monetary expectations. Persistent inflation would reinforce the idea of higher rates for longer, while a slowdown would restore strength to the monetary easing narrative that recently boosted risk assets.
Market implied probabilities continue to point to the Fed leaving rates unchanged in June. However, uncertainty about future cuts has increased the sensitivity of the markets to each macroeconomic data. In that context, bitcoin is especially exposed to sudden changes in expectations about liquidity, yields and monetary policy.
The week will also be loaded with economic references that could increase volatility. On Thursday, May 28, along with the PCE, initial applications for unemployment benefits will also be released, estimated at 212,000 compared to 209,000 previously, as well as new home sales for April. These data will help measure whether the US economy remains strong enough to sustain high rates without deteriorating rapidly.
Internationally, attention will also be focused on inflation data in Australia, Canada’s GDP, manufacturing indicators in China, as well as monetary decisions in other relevant economies. All this could influence the global risk sentiment in a market that is especially sensitive to signs of growth or inflation.
The outlook is also complicated by geopolitical tensions in the Middle East.which keep oil prices and the risk of new inflationary pressures under pressure. A sustained rally in energy could make it harder for US prices to slow down and force the Fed to maintain a tightening stance for longer, a historically unfavorable environment for bitcoin and other risk assets.
In parallel, the markets will continue to pay attention to the new stage of Kevin Warsh as head of the Federal Reserve after his confirmation. Although the focus will be on macroeconomic data, any change in the central bank’s tone could directly impact rate expectations and BTC behavior.
What could be the market sentiment?
From a technical point of view, bitcoin enters this week showing signs of fragility after the bullish momentum registered between April and May. The cryptocurrency failed to consolidate above $80,000 and encountered resistance near the 200-day moving average, located around $81,000. Added to this is a weakening in some momentum indicators, while the Relative Strength Index (RSI) returned to neutral levels after losing bullish strength.
If the PCE report shows higher-than-expected inflation, the market could interpret that the Fed will have to keep rates high for longer. That scenario would raise US Treasury yields and could reduce the appeal of risk assets, pushing bitcoin towards support zones between $75,000 and $76,000.
Conversely, a more moderate inflation reading could quickly boost risk appetite. In that case, operators would have more arguments to bet again on future rate cuts, a narrative that has historically favored to both technology stocks and the cryptocurrency market. Under that scenario, bitcoin could try to recover the range between USD 80,000 and USD 82,000 and even open space for a broader recovery if other economic data accompany the inflationary slowdown.
In short, bitcoin enters a week where inflation, economic growth and monetary policy will once again set the pulse of the market. The PCE report appears as the main short-term catalyst and could define whether cryptocurrencies regain momentum or face a new stage of pressure due to expectations of high rates in the United States.