On Wednesday (July 3), the US dollar index fell to 105.70, gold rebounded weakly at $2,328, and Bitcoin fell sharply below the $62,000 mark. Fed Chairman Powell released a "hawkish but dovish" signal, suggesting that the inflation rate is lower than expected, but hopes to see more progress before starting to cut interest rates. The US JOLTS data for May was 8.14 million, exceeding market expectations.
Powell's "hawkish" signal suddenly appeared, and JOLTS data exceeded expectations
The Job Openings and Labor Turnover Survey (JOLTS) released by the U.S. Bureau of Labor Statistics (BLS) on Tuesday showed that the total number of job openings on the last working day of May was 8.14 million. This is a sharp increase from 7.9 million in April (revised to 8.05 million) and exceeded the market forecast of 7.9 million.
Key points of Powell's speech include his mention that wage growth is falling back to a more sustainable level, which indicates that the labor market is cooling. In addition, he added that inflation may return to 2% by the end of next year or the year after, suggesting that inflation will be lower than expected. However, he reiterated that he hopes to see more progress before he has enough confidence to start cutting interest rates.
"Service sector inflation is generally firmer and wage gains are retreating to more sustainable levels," he said. "Wage gains remain above equilibrium and the labor market is cooling. Inflation could return to 2% by the end of next year or the year after that."
As the week ends, the focus will be on the June Non-Farm Payrolls report due on Friday. Bloomberg consensus shows expectations of 190K, compared to 272K in May, while the current forecast number is 198K. Wage inflation and unemployment will also be closely watched.
US Dollar Technical Analysis
FXStreet analyst Patricio Martín said that despite the smaller contraction, the relative strength index (RSI) and moving average convergence divergence (MACD) still show strong momentum. The RSI remains above 50 and has slightly flattened, while the MACD continues to show green bars, suggesting that bullish momentum is strengthening.
The US dollar index is firm above the 20, 100 and 200-day simple moving averages (SMAs), stabilizing at highs since May, with the 106.50 and 106.00 areas seen as targets. If shorts intervene, investors should also consider the possibility of a pullback to the 105.50 and 105.00 areas.
Gold Technical Analysis
Bruce Powers, an analyst at FXEmpire, said that gold trading continues to show a sideways consolidation trend, which has been the case for the past few days. Gold has been in a relatively narrow range, with a low of $2,318 and a high of $2,340. On Wednesday, gold is expected to complete an inside market as trading occurred within the price range on Monday. These three days are contained in a larger seven-day sideways consolidation price range, with the same high price, but a lower low price of $2,294.
The narrowing price range represents shrinking volatility, which is also reflected in the recent convergence of the two moving averages on the chart. The purple 20-day moving average and the orange 50-day moving average have been approaching each other since June 17, when the shorter 20-day moving average fell below the 50-day moving average.
In addition, a symmetrical triangle pattern has been added to the chart. This is also a good representation of contracting volatility. If gold stays within the triangle boundaries, consolidation will continue. But once a breakout occurs, whether it is upward or town triggered, volatility should expand. After a period of contracting volatility, there is usually a clear momentum pick-up.
Over the past few days, the resistance level has been retested near the 50-day SMA, with the price being rejected each time to the downside. Moreover, the top uptrend channel line has also successfully tested the resistance level as it has converged with the 50-day SMA. Moreover, the recent price action has also confirmed the resistance near the downtrend line. In summary, there are two trend lines and two moving averages that have confirmed the resistance level near the highs of the past seven trading days.
Since gold is in a downtrending price structure, seeing resistance at the resistance line that once represented support is a bearish sign and supports gold to eventually continue lower. However, a signal is needed because a bullish reversal is still possible. Sometimes, when the chart pattern looks clear but momentum and volatility have contracted, a swing to the other direction occurs. Still, it is best to be prepared for a continuation lower or a bullish reversal and higher prices.
A break below the lower triangle line and below the recent swing low of $2,294 would be more significant, indicating an impending market breakdown. There are several medium-term price targets, but the main downside targets are $2,211 to $2,195. Meanwhile, bullish momentum should accelerate after a break above $2,340 and further accelerate if last week's high of $2,369 is breached.
Bitcoin Technical Analysis
CoinTelegraph noted that Bitcoin's price is trying to recover from its losses in June, but on-chain data shows that it may encounter resistance around $65,000. CoinGlass data shows that when Bitcoin performs poorly in June, it tends to rebound strongly in July. In fact, Bitcoin's average return in July was 7.98%, and the median return was 9.60%.
However, technical and on-chain data suggest that any recovery attempt this month could be dampened by seller pressure at $65,000. Looking at the daily chart, Bitcoin price faces strong resistance on the road to recovery.
This is the area between $61,817 and $56,914, which is surrounded by the 100-day exponential moving average (EMA) and the 50-day EMA, respectively.
“In the short term, we should expect some resistance around the $65,000 level as short-term market speculators may seek to exit positions at the ‘breakeven’ level,” Blockware Intelligence analysts said in their latest newsletter.
“Last summer, when Bitcoin lost the short-term holder (STH) RP support level, the price moved sideways for two months before finally breaking out again.”
Note that the June decline took Bitcoin’s spot price well below the widely tracked STH cost basis, raising concerns about a deeper pullback.
According to LookIntoBitcoin data, as of June 28, short-term holders had a cost basis of $64,513, while the spot price hovered around $60,317.
The realized price or total cost basis refers to the average price at which a currency was last used on-chain, which means that short-term holders are now facing losses and may try to exit the market at a loss or breakeven, which may increase selling pressure around $65,000.
Independent analyst Ali Martinez confirmed this view in his analysis, saying that based on a measure of market value versus realized value, the price of Bitcoin may encounter resistance above $65,000.
Martinez said that breaking through this level could pave the way for Bitcoin to rise to $78,700.
Interestingly, a one-month Bitcoin liquidation heat map drawn by CoinGlass shows that the total selling bid has reached $1.23 billion, reaching $64,940.
Meanwhile, Thomas Fahrer, founder of cryptocurrency company Apollo, is more optimistic about Bitcoin’s ability to break through $65,000. He declared in a post on Tuesday: “$940 million of Bitcoin short positions will be liquidated at $65,000.”
“The first rule of Bitcoin is don’t short Bitcoin,” he added in a follow-up post. “The money will flow in and the short sellers will be punished.”
