The Fed Stifles BTC’s Rebound. More Rate Hikes to Come
Bitcoin Rejected at Resistance. Bears Aim for $17,000 Break.
Inflation in the U.S. finally appeared to slow down last week, which prompted a swift and bullish reaction from Bitcoin and other cryptocurrencies. The inflation numbers for November showed a rather significant discrepancy between forecast and actual: monthly CPI actual 0.1% (forecast 0.3%); yearly CPI actual 7.1% (forecast 7.3%, previous 7.7%) and monthly Core CPI actual 0.2% (forecast 0.3%). This triggered a wave of optimism throughout the crypto market and lifted Bitcoin above $18,250 resistance to a high at $18,400 on Binance charts.
The rally was short-lived and was subdued Wednesday by the Fed rate hike and the consequent press conference. The rate decision didn’t bring any surprises as 50 basis points were added, which is what almost everyone was expecting. Thursday, central banks in Europe, the UK, Switzerland, Mexico, and a few others have also raised their respective interest rates.
During the press conference, Fed Chair Jerome Powell reiterated the fact that the FOMC will maintain a tight monetary policy until there is a solid indication that the inflationary trend is over. It looks like the Fed is not pivoting and that interest rates will be high for a longer time than originally anticipated by investors.
Technical Outlook – BTC/USD
The rejection at $18,250 was caused by the confluence of the technical and fundamental sides. A hawkish Fed and the prospect of a higher terminal rate fuelled the bears and hindered the rally of risk assets.
On the technical side, we have the confluence of the 50-day Moving Average and the resistance at $18,250, as well as a pinbar on the Daily chart. Thursday’s candle has a long wick and a small body and is formed right on a resistance level. The price also touched the upper Bollinger band, which usually acts as S/R.
So, what can we expect next? Unless Bitcoin erases the latest drop immediately and shoots through $18,250, it’s fairly probable that the pair will touch $17,000 again. That price point will be very important for medium-term direction and we will be dealing with a ‘bounce or break’ scenario.
If $17K holds, the consequent bounce will probably take the price above $18,250 and obviously above the 50-day Moving Average, which will create a mildly bullish environment. A break of $17K will open the door for a move into the $15,600 area and for a possible downtrend resumption.
