Bitcoin Volatility Intensifies as Conflicting Inflation Data Shifts $120K Liquidity Battle

Bitcoin experienced significant price swings following back-to-back US inflation reports, with the cryptocurrency initially plunging below $116,000 after June's Consumer Price Index (CPI) showed inflation rising for the second consecutive month. The headline CPI reached 2.7% year-over-year – the highest since February – while core CPI hit 2.9% annually, causing the US Dollar Index (DXY) to surge 2.1% in July to 98.5 and reducing expectations for Federal Reserve rate cuts. Markets now price just a 54.3% chance of a September cut according to CME FedWatch.

However, Bitcoin rebounded to $119,000 after the subsequent Producer Price Index (PPI) release showed cooling inflation, with the June PPI rising only 2.3% unadjusted annually – 0.2% below expectations and 0.4% lower than May's increase. The data revealed a 0.3% advance in goods prices offset by a 0.1% decrease in services, providing relief after the hot CPI print. This helped BTC avoid testing the CME futures gap between $114,300-$115,600 that typically acts as a price magnet.

Technical analysis indicates Bitcoin is now targeting nearby liquidity clusters between $119,500-$120,500, with traders noting that reclaiming the $119,250-$120,700 resistance zone is crucial for bullish momentum to target new highs above $123,000. Key support lies at the $113,700-$115,300 fair value gap (aligned with the 200-day EMA) and the former all-time high of $112,000. Failure to break $120,000 could trigger another pullback toward $115,000.