The BTC/USD pair rose above 113,200 as investors embraced a risk-on sentiment following weaker-than-expected US wholesale inflation data. By Thursday morning, Bitcoin was trading at $113,200, higher than this month’s low of $107,365. The brokers at Fletrade provide a comprehensive breakdown of this topic in this article.
The rally was fueled by speculation that the Federal Reserve may deliver a 0.50% interest rate cut in its next meeting. The Producer Price Index (PPI), both headline and core, dropped sharply in August despite ongoing US tariffs, signaling slowing inflationary pressures.
The US President quickly urged the Fed to act aggressively, repeating his earlier proposal for a dramatic 300 basis point cut that would lower the benchmark rate to just 1%.
While such a drastic move is unlikely, analysts see the Fed cutting by 25 basis points, bringing rates from 4.50% to 4.25%. Others argue that weak labor market conditions, bordering on recession, could justify a larger 50-basis point cut.
Periods of easy monetary policy tend to benefit Bitcoin and other risk assets. Investors often rotate away from low-yielding US Treasuries toward assets with higher growth potential. This shift explains why American equities have also jumped alongside Bitcoin.
At the same time, the US Dollar Index (DXY) has weakened significantly, sliding from 110 to 97. As the greenback loses ground, investors have diversified into other currencies and digital assets, supporting BTC/USD’s short-term strength.
Institutional Demand Strengthens
Another supportive factor is sustained institutional demand. Data shows that spot Bitcoin ETFs have accumulated inflows worth over $54.8 billion since January of last year. So far in the current month, they have already attracted $637 million in new inflows, underlining strong appetite among investors.
This growing demand from exchange-traded funds provides a crucial floor for Bitcoin’s valuation, ensuring liquidity and deepening market participation. However, even with steady inflows, technical risks remain elevated for the BTC/USD pair.
BTC/USD Technical Analysis
The daily timeframe chart reveals that BTC/USD has rebounded from the early September low of 107,289 to trade around 114,200. Despite this recovery, the pair is flashing bearish technical signals.
A rising wedge pattern has developed, characterized by two ascending and converging trendlines. This structure is typically a reversal formation, signaling that momentum is weakening despite upward price movement. Historically, rising wedges often precede sharp pullbacks once support breaks.
In addition, BTC/USD is also forming a bearish flag pattern, another negative indicator suggesting that sellers are regaining control. The pair currently hovers near the 50-day moving average, a level that has often acted as both support and resistance in previous trading cycles.
The Average Directional Index (ADX), a widely used tool for measuring trend strength, has fallen to its lowest level since July. A weak ADX reading suggests that bullish momentum is fading, leaving the pair vulnerable to renewed downward pressure.
If the wedge breakdown materializes, the likely target could be around 100,000, which aligns with previous psychological support and historical consolidation levels.
Broader Market Dynamics
The current backdrop highlights the tension between fundamental drivers and technical risks. On the one hand, falling US inflation, expectations of Fed easing, and persistent ETF inflows provide a constructive environment for Bitcoin. On the other hand, chart structures and weakening momentum raise the risk of a sharp correction.
Moreover, the global macroeconomic environment adds complexity. While rate cuts tend to support risk assets, they are also a response to economic weakness. If the US economy slips deeper into recessionary conditions, investor appetite for highly volatile assets like Bitcoin could diminish.
Another risk factor is US dollar volatility. While the recent decline in the Dollar Index has supported Bitcoin, a rebound in the greenback, triggered by geopolitical shocks, policy surprises, or stronger-than-expected economic data, could reverse BTC/USD gains quickly.
Key Levels to Watch
- Support: 110,000, 107,000, and the critical 100,000 psychological mark
- Resistance: 114,500, 116,000, and 120,000
- Indicators to monitor: 50-day moving average, ADX levels, and wedge support trendline
Conclusion
The BTC/USD Forex signal points to an increasingly fragile situation. While risk-on sentiment and ETF inflows have driven Bitcoin higher in recent sessions, the development of a rising wedge and bearish flag raises the probability of a breakdown.
With the Fed meeting approaching and speculation about rate cuts intensifying, volatility in both the US dollar and Bitcoin markets will likely accelerate. Traders should closely monitor technical levels, as a decisive break below wedge support could send BTC/USD tumbling toward the 100,000 zone.
Until then, the market remains caught between fundamental optimism and technical caution, with Bitcoin walking a fine line between sustained recovery and a potential crash.
