CPI Aftershock: Bitcoin Sends Bullish Signal

US Consumer Price Index (CPI) data came in modestly better than consensus, though broadly in line with expectations on Thursday, but nevertheless, this sent the broader cryptocurrency market significantly higher. Of note, the crypto market leader, Bitcoin (BTC), posted bullish technical analysis signals.

CPI Aftershock

In Thursday’s report, we highlighted the likely importance across financial asset classes and also for the cryptocurrency markets, of the release of the US inflation data, the CPI numbers for December.

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The Year-over-Year data posted at 6.5% for December, which was in line with markets expectations. The monthly inflation reading was negative, falling by 0.1%. This means that average prices fell for US consumers in December (compared to November). This has not happened since May 2020 and was better than analyst’s consensus expectations for a reading of flat, 0.0%. The core CPI data, which excludes food and fuel prices posted in line with expectations.

Although the data did not have as large an impact on the wider financial markets as the prior four releases of CPI, the cryptocurrency, altcoins, stablecoins and meme coins markets all saw significant price action, notably bullish!

Bitcoin Bull Signals

Bitcoin surged on Thursday by just over 5% both pre- and post-release of the US CPI data %.  From a technical analysis standpoint, this BTC price action reinforced robust gains seen from the beginning of 2023 and also the more erratic recovery and basing attempt evident since the bear market cycle low was put in in mid-November 2022 at 15480.

Moreover, yesterday’s advance above 18369, the swing peak from mid-December and also just above the downtrend line from August 2022, has secured a far better chart bottom and more sustainable intermediate-term recovery theme for BTC into the second half of January, potentially on for the balance of Q1 2023.

Upside targets: The risk now is for a continuation to the topside towards the early November swing peak at 21425 into mid-Q1 and even to 22778. The target for the first quarter could be as high as 25204.

Downside risks: Back below 17318 would ease the positive recovery theme and target a correction back lower for 16343/277, even for the November and 2022 bear cycle low at 15480.