The main cryptocurrency started the new trading week above $20,000 per coin. However, since September, bitcoin has been in a range between the July lows and the resistance of $20,700, which could not be overcome last week.
This week the fundamental background will be saturated. But before discussing it, I propose to look at the nearest technical benchmarks for BTCUSD.
So now the main cryptocurrency is consolidating under the resistance level of the $18,763 - $20,700 range. Some analysts see the formation of a double top reversal pattern in this consolidation. It is possible, especially if you go down to the four-hour timeframe. The neck line of this pattern is at $20,000 per bitcoin.
Thus, having fallen below this key psychological level, we can expect further weakening of the price sideways to the July lows.
If we assume that risk appetite improves and BTCUSD breaks through the resistance of $20,700, the next target for price recovery will be the resistance level in the $22,000 area.
Focus on the Fed
The first week of October will be rich in macroeconomic terms. And not only because, traditionally, the US employment report will be released on Friday.
The main event of the week will be the two-day Federal Reserve meeting, the results of which will be announced on Wednesday. In addition to other macroeconomic data, this will form the backdrop for the general sentiment of the broader market outside of cryptocurrencies.
It is worth noting that the monthly October candle closes on Monday. This could spark a last-minute spike in volatility despite October 2022 being one of the quietest on record.
But let's move on to the Fed. On November 1-2, US central bank officials will decide to raise the base interest rate in November, which is calculated by an overwhelming majority of 0.75%.
And while this will be in line with the previous two Fed hikes in September and July, respectively, markets will be watching for something else, namely subtle hints of a change in quantitative tightening (QT).
There is already talk in the market that the subsequent rate hike will be neutral, which means the end of the aggressive monetary policy adopted almost a year ago.
For the top cryptocurrency and risky assets in general, this could end up being a major upside driver as conditions loosen.
However, in the short term, a standard reaction to the forthcoming FOMC announcement is expected. We are likely to see a small pullback this week, which is pretty typical when the Fed announces a rate decision.
Inflation: an alternative scenario
Despite the fact that last week they began to talk about the slowdown in monetary policy tightening, which put pressure on the US dollar and improved risk appetite, we should not forget about the inflationary factor.
An alternative view was offered by analyst Kevin Swanson this weekend, who warned that with "rising" inflation expectations, there is little reason to hope for a reduction in rate hikes in the near future.
"Every time the stock market has risen in this current downtrend, it has done so with anticipation of a Fed reversal," he noted.
"Inflation expectations have been on the rise lately, making it less likely that the Fed will turn around. Is the trend your friend? If so, stocks will find another lower high after the FOMC."
Swenson continued that if the Fed surprises with a rise below 0.75%, the bullish momentum should "take over".
"Obviously it could be wrong if the Fed does a 'soft turn' and raises rates by 50 basis points. If that happens, the market will roar and bullish speculation will take over for a while," he added.
According to CME Group's FedWatch Tool, the odds of going below 0.75% are currently 19%.
The US central bank is unlikely to stop its rally until inflation falls to about half its current level. The strongest tightening cycle in decades has brought more recession risks than ever before. In December, the Fed will make another rate adjustment.
If we take into account the prospects outside the current week, then on November 11 the US will publish data on inflation for October. This event, with a high probability, will cause fluctuations in the cryptocurrency market.
Meanwhile, investors are studying the risks as the Fed considers the market tightening in response to inflation, implying that the likelihood of injecting money into the market this year is lower.
