Bulls and Bears Contest in Markets Amid Fed's Rate Cut Expectations
Summary:
Despite the Federal Reserve Chair Jerome Powell dismissing a March rate cut, U.S. stock markets persisted on an upward trend. The U.S. Dollar Index reached an 11-week peak amid reduced rate cut expectations. Bitcoin's prospects could be affected in the short term due to its inverse correlation with the dollar. However, the substantial inflows into Bitcoin ETFs may provide a downsizing limit. Analysis of several indices and cryptocurrencies, including the S&P 500 Index, Dollar Index, Bitcoin, Ether, BNB, XRP, Solana, Cardano, Avalanche, and Dogecoin, revealed a complex interplay between bulls and bears at various levels.
American stock markets continued their upward trajectory last week, undeterred by the Federal Reserve Chair Jerome Powell's dismissal of a March rate cut. Powell, however, mentioned a probable rate cut later in the year, during a CBS news show 60 Minutes interview. Favoured by favourable macro-economic data and Fed comments, hopes for rate cuts by the Fed have reduced to 120 basis points for 2024, a drop from 150 basis points at 2020's end, as shown by the Fed funds futures. Consequently, the U.S. dollar Index (DXY) reached an 11-week peak.
Historically, Bitcoin (BTC) follows an inverse correlation with the U.S. dollar, putting a damper on Bitcoin's prospects in the short-term due to the current strength of the greenback. A sliver of optimism for the bulls, however, springs from the substantial inflows into BlackRock and Fidelity’s Bitcoin exchange-traded funds (ETFs) during January, amounting to nearly $4.8 billion. Consistent inflows into the ETFs could provide a downside limit.
Coming to expectancies of Bitcoin's performance - whether it will remain within its current range or if a breakout is imminent. Similar ambiguousness surrounds altcoins' behaviour. As such let’s examine the charts to derive better clarity.
Beginning with the S&P 500 Index, it bounced off the 20-day exponential moving average (4,850) on Feb. 1, hitting a new all-time high on Feb. 2. Negative divergence on the relative strength index (RSI) necessitates prudence, as the up move could witness selling at the 5,000 psychological resistance. If buyers manage to drive through, the next target could be 5,200. Crucial support on the downside is the 20-day EMA, with a slide below this level signifying a possible panic sell by the bulls.
As for the U.S. dollar Index, it rebounded robustly from the 50-day SMA (102.84) on Feb. 2, breaking above the inverted head-and-shoulders pattern. The bulls have a tough battle ahead with likely resistances at 104.55 and 106, and in case the bears stage a comeback, they need to bring the price beneath the 50-day SMA to reclaim control.
With regards to Bitcoin, even after numerous attempts, the bears have been unsuccessful in sending Bitcoin below the 20-day EMA ($42,463), indicating the level's strong defence by the bulls. The bears will have their work cut out defending the $44,000 to $44,700 overhead resistance zone. If unsuccessful, we could see BTC/USDT pair hurtling towards the momentous $50,000 level.
Ether (ETH) has been persisting below the moving averages for several days, but the bears have not managed to yank the price to the substantial support at $2,100. The bulls are working to push the price above the moving averages, with their sights set on the $2,400 level. If they manage to break and hold above this resistance, it will be a clear sign of the bulls having gained an upper hand.
Other altcoins like BNB (BNB), XRP (XRP), Solana (SOL), Cardano (ADA), Avalanche (AVAX), and Dogecoin (DOGE) are all undergoing a battle between the bulls and the bears around different levels, with future directions yet to be determined. Investing and trading are always risky, with the need for conducting individual research before making any decisions.
Published At
2/5/2024 9:25:00 PM
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