Gold and Bitcoin took advantage of market volatility and climbed to multi-month highs. According to market analyst Eren Şengezer, the technical outlook for gold suggests a correction before the next foot. The Fed’s policy announcements and dot chart will be the key risk event for gold and Bitcoin next week. Crypto analyst Sahana Vibhute is assessing whether the exit of Bitcoin is real or a trap.
How will the Fed’s action affect the markets?
Gold and Bitcoin are likely to struggle to make decisive moves in either direction early next week as investors step aside ahead of the Federal Reserve’s highly anticipated policy announcements. Markets were pricing in the possibility of a 50 basis point hike in March, right after FOMC Chairman Jerome Powell told Congress they were ready to ramp up rate hikes if data warranted it. Earlier this week, the market position changed dramatically, with the probability of no change in rates exceeding 50%. By the middle of the week, the probability of a 25 basis point increase reached 90%. Market analyst Eren Şengezer makes the following assessment:
At this point, it seems highly unlikely that the Fed will raise interest rates by 50 basis points. If this is the case, the initial reaction could provide support for the USD and put pressure on gold. However, such a decision could also rekindle fears of a deepening financial crisis and trigger a new run towards safe-haven bonds, allowing US T-bond yields to fall sharply and the price of gold to rise by a foot.
At the other extreme, markets are likely to enter panic mode again, even if the Fed leaves the policy rate unchanged to address the tightening in financial conditions. The analyst states that investors may consider such a decision as the situation in the banking sector is much worse than they were led to believe.
Key point for Bitcoin and gold: Powell’s policy outlook and comments
However, the most likely outcome looks like a 25 basis point hike. As a matter of fact, 76 of 82 economists surveyed by Reuters recently said that they expect the Fed to increase the policy rate by 25 basis points to the range of 4.75-5%. In this scenario, the language of the Fed and Chairman Powell’s comments on the policy outlook and banking sector will be key. At this point, the analyst draws attention to the following possibilities:
If Powell downplays what’s happening with the SVB and says they will continue to take the necessary policy steps to contain inflation while monitoring the situation, the USD could regain its strength and put pressure on gold. On the other hand, gold price could turn north if the president adopts an anxious tone and reiterates his willingness to take action if the Bank sees signs of additional financial stress.
The effect of the dot chart on the markets
Alongside its policy statement, the Fed will release the revised Summary of Economic Projections (SEP), called the dot chart. In the SEP in December, the median outlook for the end-2023 policy rate was 5.1%. After January’s impressive employment report and hot inflation data, it was said that the final rate estimate in the market could rise up to 6%.
Policy makers are unlikely to predict such a high final rate after the SVB. However, a final rate forecast of 5.5% or above will be seen as a hawkish outlook, while data below 5.5% may indicate that the Fed is approaching a pause in its tightening cycle. Additionally, risk sensitivity may improve if the dot chart shows that some policymakers expect a rate cut before the end of the leap year. The analyst interprets the impact of the SEP as follows:
To sum up, the rate decision itself will not help investors understand what the Fed’s policy will look like after the recent turmoil. According to Powell’s comments, the revised SEP will lead to increased midweek market volatility before the dust settles. Therefore, betting on a particular gold direction during a Fed event can be risky. Movement in US T-bond rates and global stock indices will help clear the fog.
On Friday, S&P Global will release its preliminary Manufacturing and Services PMI surveys for March, but it’s hard to predict a possible market reaction without knowing what the Fed will do.
Gold price technical view and forecast survey
Market analyst Eren Şengezer depicts the technical outlook of gold as follows. Should the markets enter a consolidation phase in preparation for the Fed event early next week, gold could correct a correction as the Relative Strength Index (RSI) indicator on the daily chart remains in the overbought territory above 70. In this scenario, $1,940 and $1,920, align as static supports ahead of $1,900 (psychological level, static level).
On the upside, $1,980 (static level in April) is aligned as the next bullish target before $2,000 (psychological level, static level). It is worth mentioning that if US T-bond yields continue to decline, investors may ignore overbought conditions for gold.
The FXStreet Forecast Survey shows that some experts do not expect the price of gold to continue rising in the short term. The one-week average target aligns just below $1,950. The one-month outlook looks bearish, while the one-quarter outlook remains neutral with a slight bearish bias.
Is the exit of Bitcoin (BTC) real or a trap?
cryptocoin.com As you follow, Bitcoin has been showing great moves lately. Therefore, prices continue to rise over the next weekend and aim to reach $30,000 at the earliest. However, these levels are extremely important as, apart from being a strong resistance zone, it is the POC (Checkpoint) where the largest number of tokens are traded at a higher volume.
Based on its past performance, BTC shows the possibility of dropping to $20,000 to fully or partially fill the GAP formed on CME Futures. These gaps were at least partially filled each time. So when will the current Void be filled? Bitcoin is rising now and the next strong resistance is around $30,000. The price has witnessed large fluctuations at these levels where large volume was also recorded before. Therefore, breaking these levels may not be easy, but once done it can trigger a small bull run ahead.
Previously, the token was stuck at these price levels for quite some time, while the bulls and bears continued to do their job. This has attracted massive volume on the platform and thus testing these levels seems extremely important for BTC, which could completely negate the bearish effect. Also, given the Elliot Wave perspective, there are valid bearish and bullish scenarios in the entire uptrend starting at $15,500 to current highs above $27,000. Moreover, the price is flowing within an extended channel that could lead to rejection of the resistance just above a few dollars. If the price breaks this level, a clear test of $30,000 could continue.
Therefore, Bitcoin is expected to reach $30,000 and show a different trend at these levels. There have been large trades at these levels in the past, thus increasing the possibility of large price action. A break from these levels could push the levels above $35,000 to reach $40,000, while a drop could bring the price closer to $20,000.