Bitcoin (BTC) erased its intraday losses and rose by around 2.5% to $62,410 immediately after the US inflation report, even as the headline Consumer Price Index (CPI) hit its highest level in more than three years.
BTC/USD hourly chart. Source: TradingView
Key takeaways:
- Bitcoin rose as the latest US CPI reading matched economists’ expectations.
- BTC still faces short-term downside risks as it trades below strong resistance levels.
May US inflation matched expectations
The US CPI rose 4.2% year over year in May. On a monthly basis, headline inflation increased 0.5%, while core inflation, which excludes food and energy, rose 2.9% annually and 0.2% month over month.
US headline and core CPI. Source: Bureau of Labor Statistics/Yahoo Finance
The headline jump came largely from higher energy and gasoline prices, as renewed Middle East tensions lifted oil prices and reignited inflation concerns.
At first glance, the report looked bearish for Bitcoin. Higher inflation usually reduces the odds of Federal Reserve rate cuts, keeps Treasury yields elevated, and tightens financial conditions. That typically pressures risk assets, including crypto.
But BTC rallied because the inflation print did not come in worse than feared.
Economists had already expected headline CPI to hit 4.2%. The actual number matched that forecast, removing the risk of a hotter surprise.
Traders did not see the report as strong enough to force the Fed into a tougher stance, giving them room to buy risk assets again.
That gave Bitcoin the chance to bounce from long-term support zones, including the 200-week exponential moving average (200-week EMA, the blue line) and the psychological $60,000–$62,000 price floor area, as shown below.
BTC/USD weekly chart. Source: TradingView
Is Bitcoin undergoing a bullish reversal?
Bitcoin’s post-CPI rebound does not yet confirm a full bullish reversal.
From a technical perspective, BTC still trades below key short-term resistance levels, including the 20-period SMA, shown in green, and the 50-period SMA, shown in red, on the four-hour chart.
BTC/USD four-hour chart. Source: TradingView
BTC also appears to be consolidating inside a bear flag pattern.
This setup forms when the price rebounds inside an upward-sloping parallel channel after a sharp decline. In simple terms, the bounce may only be a pause before the next leg lower, not the start of a new uptrend.
As a rule of technical analysis, a bear flag confirms when price breaks below the flag’s lower trend line. The measured downside target equals the height of the previous sell-off, projected from the breakdown point.
That puts Bitcoin’s bearish target near $57,800 in June, down about 7.6% from current levels.
Bitcoin relief bounce scenario also in play
Conversely, a clear breakout above the resistance confluence, comprising the 20-period SMA, the 50-period SMA, and the flag’s upper trend line, would weaken the bear flag structure and invalidate the immediate downside setup.
BTC/USD four-hour chart. Source: TradingView
In that scenario, Bitcoin could extend its recovery toward the $64,000–$68,000 range in June, aligning with the 0.236 and 0.318 Fibonacci retracement lines.
