- United States Core Personal Consumption Expenditure (PCE) is expected to accelerate to 0.3% from 0.1% month-on-month.
- Even if the headline Core PCE rises 3.7% per market expectations, it would still mark the lowest rate observed in 28 months.
- Bitcoin price is expected to take a hit if the Core PCE rises as forecasted, potentially knocking BTC down to $31,500.
Bitcoin price could witness some decline as the United States Core Price Consumption Expenditure (PCE) data is scheduled to be released by the US Bureau of Economic Analysis (BEA) on Friday. This data is the Federal Reserve's go-to inflation measure and is expected to rise this time around.
US Core PCE expected to increase
The Core PCE for the month of September is expected to increase to 0.3% on a monthly basis against the 0.1% witnessed at the last release. The month-on-month PCE incline would also result in the year-on-year Core PCE declining to 3.7% compared to the 3.9% of the prior release.
Providing its forecast on the PCE data, the National Bank of Fujairah stated,
"The annual core PCE deflator may have progressed 0.2% MoM in September, a result which should translate into a two-tick decline of the 12-month rate to 3.7%. Although still high, this would still be the lowest rate observed in 28 months.
If the PCE data comes in as forecast, then the impact on the crypto market could be considerably bearish. The reason behind this is that higher inflation (PCE) can cause traders to think that the current interest rate environment will 'stay higher for longer'.
Consequently, high interest rates demotivate investors from pouring their money into riskier assets in an attempt to reduce their risks of facing losses. Since Bitcoin and other cryptocurrencies fall under the category of riskier assets, investors could pull out of the crypto market, unlike precious metals such as Gold.
Bitcoin price to see red
The result of high PCE would be that Bitcoin price reverses its recent rally and potentially decline. On the 3-day chart, it can be noted that at the time of writing, BTC is trading at $34,127, attempting to sustain above the support level of $33,901. If this level is lost, Bitcoin price could very well be seeing a drop to $31,500.
This could potentially undo the recent rally in Bitcoin price witnessed when it rose by nearly 25% over a period of nine days. If the $31,500 support is also invalidated, BTC might see a steeper decline to the significant psychological support of $30,000.
BTC/USD 3-day chart
But if the US Core PCE data is lower than expectations, Bitcoin price might have a chance at continuing its increase. Testing the $33,901 level as a support floor would provide BTC a boost to take a shot at reclaiming $35,000. This would invalidate the bearish thesis and support a further increase in the cryptocurrency's value.
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