Impending US Labor Data: Potential Impact on Bitcoin and Interest Rate Decisions

Intricate city skyline at dusk, abstract finance themed graffiti, multitude of warm colors on cool background, intense light shining on a powerful figure contemplating the future, subtle representations of Bitcoin and dollar symbols, contrast between progress and recession, looming sense of uncertainty.

The eagerly anticipated US labor market data for May, set to be released on Friday, June 2nd, could potentially trigger volatility in the Bitcoin market. Onlookers keenly scrutinize this data, factoring it into expectations for future interest rate hikes from the US Federal Reserve. According to a series of polls of economists, the labor market is predicted to add 193,000 jobs in May, slightly slower than the 253,000 pace achieved in April.

An expected increase in the unemployment rate to 3.5% from the historic low of 3.4% and a moderation in the Month over Month (MoM) pace of earnings growth to 0.3% from 0.5% could indicate that the US labor market remains steady, pushing back against fears of an impending recession. This development might affect cryptocurrencies like Bitcoin if it prompts the rebuilding of expectations for further tightening by the Federal Reserve.

However, recent communications suggest that even an optimistic Friday jobs report might not change the situation. Fed policymaker and nominee for Vice Chairman Philip Jefferson, along with Fed Chair Jerome Powell, has indicated a preference for the Federal Reserve to pause its interest rate hiking cycle at the upcoming meeting. Their reasoning revolves around observing the lagging effect of the previous 15 months of interest rate tightening and concerns about tighter credit conditions in the wake of March’s mini “bank crisis”.

Despite some Fed policymakers expressing their preference for ongoing tightening, the CME’s Fed Watch Tool indicates a strong likelihood (80%) of interest rates remaining unchanged at 5.0-5.25% this month. Even a robust labor market report may not significantly sway these expectations.

Nonetheless, downside risks remain for Bitcoin’s price, particularly if a much stronger-than-anticipated jobs report counters expectations of the Federal Reserve cutting interest rates before the end of 2023. This could add weight to Bitcoin’s recent bearish trading bias. With prices hovering near the $26,800 mark, many technicians remain pessimistic, mainly due to Bitcoin’s rejection of its 50-day Moving Average and a downtrend from the yearly highs in the low-$28,000 range.

Many analysts believe that a retest of the recent sub-$26,000 lows is likely and that Bitcoin may be in the process of forming a descending triangle structure. A downward break could trigger a test or even breach of key long-term support in the low-$25,000s. As the labor market data release approaches, eyes will be on its potential impact on both the Federal Reserve’s interest rate decisions and Bitcoin’s market performance.

Source: Cryptonews

Sponsored ad