Woofun AI reports that Bitcoin and Ethereum surged immediately following the release of softer-than-expected inflation data, with both assets hitting key technical resistance levels as market participants recalibrated expectations for Federal Reserve policy. The immediate price action sets the stage for a critical test: whether this cooling inflation trend will translate into a durable repricing of monetary policy before Federal Reserve Chair Kevin Warsh delivers his congressional testimony. The initial rally pushed Bitcoin above $500 and Ethereum to $1,820, reflecting a rapid shift in risk sentiment driven by the macroeconomic data. This movement underscores the market's sensitivity to any signal suggesting a pause in tightening, even as underlying uncertainties regarding the persistence of these trends remain unresolved.

The Bureau of Labor Statistics reported that headline CPI declined 0.4% month over month in June, a significant reversal from the 0.5% rise recorded in May. Economists had anticipated a much smaller 0.1% decrease, making the actual figure notably more disinflationary than consensus estimates. On an annual basis, the inflation rate slowed from 4.2% to 3.5%, falling below the 3.8% consensus estimate. Energy costs were the primary driver of this monthly reversal. The energy index fell 5.7% during the month, including a sharp 9.7% decline in gasoline prices, after energy costs had increased significantly during the previous three months. This volatility in the energy sector played a crucial role in dampening the overall headline inflation figure, providing a temporary reprieve from the broader price pressures that had persisted throughout the year.

Core inflation metrics provided additional weight to the report’s policy implications. CPI excluding food and energy remained unchanged, contrasting with forecasts for a 0.2% increase and May’s 0.2% gain. Annual core inflation eased from 2.9% to 2.6%, indicating a gradual cooling in underlying price pressures. Shelter costs, a significant component of core inflation, increased only 0.1%, marking its smallest monthly rise since January 2021. This moderation in shelter costs suggests that some of the stickier components of inflation may be beginning to ease, although the pace of improvement remains modest. The combination of lower headline and stable core inflation weakens the case for an immediate rate increase, as both measures show signs of slowing.

However, the data does not create a clear case for a rate cut. Inflation remains above the Federal Reserve’s 2% longer-run objective, and a single month of softer data cannot establish that the improvement will persist. The central bank is likely to view this report with caution, recognizing that one positive data point is insufficient to confirm a lasting trend. The persistence of inflation above the target level means that the Fed must remain vigilant against premature easing, which could reignite price pressures. Consequently, while the immediate pressure for further tightening has eased, the path toward normalization remains uncertain, with the Fed balancing the need to combat inflation against the risks of overtightening.

The first measurable policy response appeared in federal-funds futures. CME FedWatch data captured at 7:35 a.m. Central Time, six minutes after the release, assigned an 83.4% probability that the Fed would keep its target range at 3.50%–3.75% on July 29. The probability of a 25-basis-point hike to 3.75%–4.00% fell to 16.6%, while the chance of a cut remained at 0%. One day earlier, the market had priced only a 58.3% probability of no change and a 41.7% chance of a hike. The CPI report therefore moved the hold probability higher by 25.1 percentage points and reduced the hike probability by the same amount. This repricing explains the immediate crypto response, as lower expected policy rates reduce the relative appeal of cash and short-term government debt while easing pressure on assets that do not generate conventional income. The market is pricing patience, not monetary easing, reflecting a cautious optimism about the Fed’s next move.

Woofun AI on-chain data shows that Bitcoin remains inside an ascending channel on the daily chart, continuing to form higher highs and higher lows. Price is testing the 0.236 Fibonacci retracement near $63,600, followed by a stronger resistance area around $64,500, where a horizontal level converges with the 50-day simple moving average. Breaking through the full $63,600–$64,500 resistance cluster and holding it on a retest would strengthen the short-term recovery. Failure to clear the area would leave the ascending channel intact, with its lower trendline serving as the first dynamic support. On the monthly chart, Bitcoin continues to hold above a key horizontal support area and the 50-month SMA, preserving its long-term bullish foundation, but the price remains below the former ascending channel. Resistance near $70,000 aligns with the 0.618 Fibonacci retracement and the previous lower boundary of that long-term channel. Reclaiming the level and defending it as support could signal a return to the broader uptrend, while another rejection could renew selling pressure and keep Bitcoin beneath its former channel structure.

Ethereum had been consolidating above a support zone formed by the 0.236 Fibonacci retracement and the 50-day simple moving average, where buyers repeatedly prevented a deeper decline. The softer-than-expected U.S. CPI report improved risk sentiment and pushed ETH above resistance near $1,820. Holding the breakout through the daily close and defending the level on a retest could open the way toward the 0.382 Fibonacci retracement near $1,872. A return below $1,820 probably will weaken the move and bring the 50-day SMA and 0.236 retracement back into focus as the primary support zone. The technical setup for ETH suggests that while the immediate momentum is positive, the asset remains vulnerable to broader market shifts and macroeconomic developments that could undermine the current bullish sentiment.

External risks remain significant, particularly regarding geopolitical tensions and future inflation data. The main risk is that investors treat one softer CPI report as confirmation of a lasting policy shift. Tomorrow’s producer price index could challenge that interpretation if pipeline inflation remains firm, while a further escalation between the United States and Iran, or a renewed multiday closure of the Strait of Hormuz, could push oil higher and feed into future inflation readings. The Federal Reserve may also retain a hawkish stance if officials consider June’s improvement temporary and remain concerned about energy costs or broader price pressures. These factors introduce considerable uncertainty into the market’s outlook, as any sign of renewed inflationary pressure could quickly reverse the current optimistic sentiment.

Crypto markets face a separate policy catalyst from the Clarity Act. A Senate vote could strengthen sentiment by reducing regulatory uncertainty, while a postponement or failure to advance the legislation before the August recess could disappoint investors expecting near-term progress. Rising Treasury yields, renewed rate-hike expectations, or rejection at Bitcoin’s and Ethereum’s resistance levels would indicate that the initial rally was a short-term reaction rather than the beginning of a sustained move. The interplay between regulatory developments and macroeconomic indicators will continue to shape market dynamics, with investors closely monitoring both fronts for signs of direction.

Investors are waiting for Warsh’s semiannual testimony before the House Financial Services Committee at 10:00 a.m. Eastern Time. His interpretation could determine whether the futures-market adjustment survives the session. Treating June as evidence that underlying inflation is cooling would support the higher probability of a July hold and give Bitcoin and Ethereum more room to challenge resistance. Emphasizing that headline inflation remains at 3.5%, or warning that one report is insufficient, could restore part of the hike premium. The CPI release removed much of the immediate tightening risk; it did not settle the direction of policy. For crypto, confirmation now requires both a stable policy repricing and closes above the resistance levels, marking a critical juncture for the market’s next phase of movement.