Bitcoin (BTC) is holding above the $58,000 support. This week will confirm the first rate cut by the Federal Reserve, signalling a pivot into a looser monetary cycle. The U.S. dollar is continuing to weaken, and gold has taken advantage. Will Bitcoin now follow gold’s lead?
First rate cut to be made on Wednesday
A very uncertain economic environment still pervades across the globe, and political incertitude continues amid the latest unsuccessful assassination of presidential hopeful Donald Trump. However, high unemployment and lower inflation in the U.S have enabled the Federal Reserve to confidently predict the first rate cut since the pandemic hit in early 2020.
The market’s expectation of the size of the rate cut to be announced on Wednesday has been extremely volatile. From only a 15% chance of a 50 basis points cut only a week ago, the Fedwatch tool is now signalling a 59% chance of a bigger first cut.
Some analysts had predicted that the first cut would only be for 25 basis points, with the view that the Fed would not want to go directly to 50 basis points, given that this might smack of desperation, and send the message to markets that the Fed was late to start cutting.
Dollar Index continues to weaken
Source: TradingView
In the meantime, the dollar is persisting in its downward movement. Currently at an important support level, the U.S. Dollar Index (DXY) has already fallen through its local upward trend line, potentially spelling good news for risk assets such as gold and Bitcoin.
Short term bounce for $BTC
Source: TradingView
In the short term time frame, the $BTC price is continuing to move up inside an ascending channel. The important horizontal level at $58,000 has held, at least for now, and should this current bounce continue, the price could potentially head back to the top of the channel.
Lower low needs to be avoided
Source: TradingView
Looking at the $BTC price in the daily time frame, it should be noted that there is a possibility of a lower high being made if $BTC fails to break above the descending trend line, and does not surpass the last local high at $65,050. Should this happen, another drop lower could be expected.
That said, the price may be supported at the current 0.382 fibonacci level for this move. It can be seen that the fib levels were important at 0.618, and the 0.786 level precisely marked the bottom.
Stochastic RSI on weekly crosses up
Source: TradingView
Zooming out into the weekly time frame, the bull flag remains intact, and the expectation might be that the price continues to rise to the top of the flag. Looking at the Stochastic RSI at the the bottom of the chart, it should be noted that the indicator lines have crossed up - a very bullish signal for momentum should both indicator lines get above the 20 level.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
