Bitcoin Rally Blunted

Following a strong push higher earlier in the week, bitcoin prices have softened through the back end of the week with the futures market now back under the 65,380 level. The re-escalation of the US/Iran war and its impact on oil prices and Fed tightening expectations has blunted risk markets this week. Oil prices have rallied around 30% of the July lows with more than half of that push coming this week as the US and Iran step up their fighting. The US has now carried out 13 straight days of missile strikes on Iranian targets while Iran has retaliated against US targets in neighbouring countries. More recently Houthi rebels in the Red Sea have joined the fight by actioning a naval blockade against Saudi Arabia, targeting oil tankers trying to enter ports there.

Oil Surging

With oil prices surging higher once again, Fed tightening expectations are being rebuilt amidst a renewed focus on inflation concerns. Oil back at almost $100 p/b has reignited inflation risks in the US with traders now once again firmly looking for the Fed to tighten this year accordingly. Pricing for a hike by year end has now jumped back above 90% from around 70% at the start of the week. While this narrative remains, BTC is at risk of a further push lower, particularly if we see near-term rate pricing rising: an October hike is currently priced around 85% and September around 80%.

Technical Views

BTC

The rally in BTC has stalled for now into the mid-June highs around 65,500. Price is now back below 65,380 signalling room for a deeper move. The key level for bulls now is the 62,470 zone which could prove to be the right shoulder of an inverse head and shoulders pattern, if held. Below there, focus turns back to the key 60k mark.