Bullish view
- Buy the BTC/USD pair and set a take-profit at 45,000.
- Add a stop-loss at 40,000.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 42,000 and a take-profit at 40,400.
- Add a stop-loss at 45,000.
Bitcoin price bounced back after the encouraging Federal Reserve decision. The BTC/USD pair jumped to a high of 42,800, its highest point since Monday. It has jumped by more than 2,700 points from its lowest point this year.
Risk-on sentiment
Bitcoin and other risk assets resumed the bullish trend as investors embraced risk-on sentiment. American equities bounced back, with the Dow Jones, Nasdaq 100, and S&P 500 indices rising by almost 1%.
Meanwhile, the US dollar index fell by over 40 basis points while the closely-watched VIX index fell to its lowest point in over 4 years. The VIX is widely seen as the fear gauge in Wall Street.
In addition to Bitcoin, other cryptocurrencies like Ethereum, Ripple, and Solana also rose. The total market cap of all coins jumped to over $1.6 trillion.
In a statement, the Federal Reserve decided to leave interest rates unchanged between 5.25% and 5.50% as most analysts were expecting. The dot plot showed that the bank would consider implementing three rate cuts in 2024.
This was a change of tune for a bank that has been hiking rates aggressively in a bid to fight inflation. It has hiked rates by about 550 basis points in the past two years.
Still, the bank has more work to do since inflation remains at an elevated level. Data published on Tuesday showed that the headline Consumer Price Index (CPI) dropped slightly from 3.2% in October to 3.1% in November.
Most importantly, the core inflation remained at 4.0%, double the Fed’s target of 2.0%. In his statement, Powell noted that the bank was seeing progress in core inflation, which is a positive thing.
Bitcoin and other risky assets tend to do well when the Fed turns dovish. For example, it jumped to a record high in 2021 as the bank was cutting rates.
BTC/USD technical analysis
Bitcoin dropped from last week’s high of $45,000 to a low of $40,000 on Monday. It then bounced back after the dovish Federal Reserve decision. As it rose the pair crossed the 25-period and 50-period moving averages. It also formed a small double-bottom pattern at 40,495.
The Relative Strength Index (RSI) and the Stochastic Oscillator pointed upwards. Therefore, the pair will likely continue rising as buyers target the key resistance point at 45,000, the highest point this year.
Ready to trade our daily Forex signals? Here’s a list of some of the best crypto brokers to check out.