Tensions between the United States and Iran, now entering their second month, show no signs of abating. The US carried out another targeted strike on Thursday. Officials had previously made clear that such limited strikes might be used to accelerate negotiations and emphasized this latest action does not signify an end to ceasefire efforts. However, the long-term consequences of the standoff are continuing to mount.
Inflation report in focus
The Federal Reserve operates with a dual mandate: achieving 2% inflation and maximum employment. Under former President Trump’s immigration policies, despite a tightening labor supply, unemployment was held at 4.3%, exactly as envisaged by his team. As a result, the Fed had little left to do regarding its employment mandate, with no urgent need for emergency interest rate cuts like those seen in late 2025.
But price stability, the Fed’s second task, requires bringing inflation back down to 2%. Until the start of the Iran conflict, that goal seemed within reach. The outbreak of war, however, led to the closure of the Strait of Hormuz, the destruction of multiple oil production sites in the region, and strikes targeting storage capacity—all driving oil prices up to around $120 per barrel from levels near $70. This steep rise has yet to be reversed.
With oil prices up, the US has experienced monthly inflation increases of around 1%. The impact of energy inflation on production costs and other sectors suggests these increases may persist over the next three months. Even if an agreement were reached today, experts estimate it would take at least three months—and potentially up to a year—for oil production capacity and prices to return to normal.
The key US inflation report is scheduled for release on Tuesday. Current expectations are for a 0.6% monthly jump, bringing annual inflation to 3.7%. Producer Price Index (PPI) figures due Wednesday are forecast to show a 0.5% monthly rise, with an annual rate of 4.9%. As these headline figures reflect 2024-like levels, the Fed may even consider raising rates, rather than cutting them as markets had previously hoped.
Cryptocurrencies are poised to react sharply to the reality of inflation when the data is released on Tuesday and Wednesday. A price drop is likely, and as markets often price in expectations, a wave of selling could begin later today and accelerate into Monday. Still, as always, cryptocurrencies often defy predictions.
BTC’s downside target emerges
CME data indicates that interest rates are likely to remain unchanged until at least late 2027, and the odds of a rate hike outweigh the chances of a cut. Factoring in both the short-term downward risk discussed earlier and profit-taking after recent upward moves, market momentum currently favors the downside.
Analyst Michael Poppe shared an analysis today highlighting a chart which suggested that even during uptrends, prices often need to pull back for consolidation.
Michael Poppe emphasized that there are two key resistance zones for Bitcoin: $86,000–$88,000 and $93,000–$95,000, aligning with the 50-week moving average. He noted that in the early phase of bull cycles, Bitcoin often encounters resistance around prior support levels and the 50-week average.
Poppe explained: “This was evident in the 2017, 2021, and 2024 cycles too. Bitcoin could consolidate around resistance for several weeks as altcoins rally. That is typically the time when you can either recover losses or boost your gains.”
He added that before continuing higher, a retest of the $70,000–$75,000 range would not surprise him and that he believes the bear market low has already occurred.
Investors are bracing themselves for increased volatility as the upcoming inflation data could push the Fed to signal changes in monetary policy. Any sign that rate cuts are off the table could ripple through global markets, particularly in high-risk assets like Bitcoin and other cryptocurrencies.
The interplay between geopolitical events, energy markets, and monetary policy is fueling uncertainty, prompting many traders to reduce risk in their portfolios ahead of next week’s data releases.
While some analysts still see long-term opportunities, the short-term picture remains clouded by inflation fears and the potential for additional Fed tightening. Any unexpected figures in the upcoming reports could serve as a catalyst for sharp moves in $BTC and related markets.
