The top daily candlestick chart shows the 10-year real rate, and the bottom daily candlestick chart shows BTCUSD.
From August until two-thirds into September, the real rate appreciated and bitcoin depreciated (blue arrows). Over the last month, the two charts then moved sideways (blue rectangles).
The direction of the real rate has an inverse relationship to bitcoin and will tend to direct the price of the cryptocurrency based on its trend.
If the real rate continues to trend up, it will be a headwind for bitcoin. However, if it starts to moderate, BTCUSD will likely be supported.
Inflation remains a problem. Although lower than forecast, Friday's core PCE came in higher at 5.1% YoY than its previous print of 4.9% YoY. This backdrop makes the Fed meeting this week a huge event. It will likely hike another 75bps, the 4th such increase since June.
The market will listen to the statement's tone and Fed Chair Powell's press conference. How it is perceived will be market-moving. The real rate looks to be setting up for a trough (green arrow). If so, bitcoin may be charting a peak. I.e. if the tone is hawkish and the real rate moves up, bitcoin is likely to come under pressure.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.