Bitcoin (BTC) remained under pressure on Wednesday despite US inflation data coming in broadly in line with expectations, with traders now watching the $63,000 support level and upcoming economic data for further direction.
BTC fell below $63,500 during the Wall Street session, giving back earlier gains as markets digested the latest US Consumer Price Index (CPI) figures.
US CPI increased 0.1% month-on-month in July and rose 3.4% year-on-year, matching market expectations.
The US Bureau of Labor Statistics reported that shelter prices increased 0.1% during the month and accounted for around two-thirds of the monthly rise in the overall index. Food prices also increased 0.1%, while the energy index declined 1.5%.
The relatively calm inflation reading reduced concerns about a renewed hawkish shift from the Federal Reserve.
Market expectations for Federal Reserve policy have shifted following the latest inflation data and recent weakness in the US labor market.
CME Group’s FedWatch Tool showed a 60% probability of the Fed keeping its policy rate at 3.50%-3.75% at the September meeting, compared with around 30% a month earlier.
Analysts said softer inflation and weaker employment data could reduce pressure on the Federal Reserve to raise interest rates, potentially supporting liquidity conditions for risk assets such as Bitcoin.
Attention is now turning to Thursday’s US Producer Price Index (PPI) report, which could provide another signal about the direction of inflation and monetary policy.
Despite the more favorable macroeconomic backdrop, Bitcoin has struggled to maintain key technical levels.
Trader and analyst Rekt Capital warned that repeated bounces from around $63,000 have become progressively weaker, raising concerns that the support level could eventually fail.
Bitcoin has also faced persistent resistance around the $65,000-$65,500 zone.
According to Bitfinex Alpha, Bitcoin encountered resistance around this region six times over a recent period, while the cryptocurrency has failed to record a daily close above $65,000 since July 26.
Bitcoin’s 50-month exponential moving average (EMA), currently around $65,827, is also acting as an important resistance level.
Market participants are also monitoring options positioning for signs of downside risk.
Andrei Grachev, managing partner at DWF Labs, said Bitcoin options were still pricing a notable premium for downside protection, with strikes around $60,000 carrying higher costs than comparable upside strikes near $70,000.
With Thursday’s PPI data next in focus, traders will be watching whether softer inflation signals can improve Bitcoin’s outlook or whether weakening support around $63,000 leads to another decline.
For now, Bitcoin remains caught between expectations of easier Federal Reserve policy and persistent technical resistance, leaving the $63,000 support level as a key area for traders to monitor.
