BTC/USD Bounces Back Despite a Strong US Dollar

Bitcoin (BTC/USD) Talking Points:

The recent FOMC rate decision rattled markets after Fed chair Jerome Powell confirmed that the central bank will continue to raise its key interest rates until inflation shows significant signs of easing. With Bitcoin prices rising to a weekly high of $20802 prior to the commentary, a change in sentiment forced BTC/USD lower before finding support above $20000.

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Although markets had already priced a fourth consecutive 75bp rate hike, the press conference that followed wasn’t completely aligned with market expectations.

With Powell altering the forward guidance of the Federal Reserve to make provision for additional rate hikes over a longer period of time, higher yields and a stronger USD caused S&P 500, Nasdaq and the Dow Jones to plummet. However, unlike historical meetings that once sent Bitcoin on a rampage, the major cryptocurrency has recently failed to replicate the moves seen in the equity market.

Bitcoin (BTC/USD) Price Action

After a temporary retest of $20039, BTC/USD was quick to bounce back, driving prices into the same mundane range. While the macro-fundamental backdrop continues to threaten demand for speculative assets, a break of the broader zone of support and resistance between $18000 and $22000 is still required to drive price action either way.

Bitcoin (BTC/USD) Daily Chart

Chart prepared by Tammy Da Costa using TradingView

With the October high now holding as imminent resistance at $21078, another layer of horizonal support has formed around the $20500 mark. While technical and psychological levels assist in establishing firm levels of support and resistance, a clear break of the above-mentioned levels may be necessary for either bulls or bears to gain momentum. If prices fall below $20000, the next zone of support remains at the December 2017 high of $19666 with a break below bringing the September low back into the spotlight at $18157 which could provide opportunity for bearish continuation and a potential retest of the June low at around $17592.

— Written by Tammy Da Costa, Analyst for DailyFX.com

Contact and follow Tammy on Twitter: @Tams707