Following our previous article, bitcoin continues to capitulate. There are two technical patterns at work here. The first is the rising wedge (turquoise converging lines). This pattern is a bearish continuation, and its measured move gives a target of around 19K (turquoise horizontal).
The second pattern is a large head and shoulders top, which is a reversal pattern. I.e. the reversal of bitcoin's previous uptrend. The left shoulder (LS) is higher than usual, but that is due to the underlying emotion driving price action (the RSI was overbought for six months at the time). This pattern's measured move gives a downside target of just below 16K (red horizontal).
The stochastic measures momentum and is below 20 (green rectangle). This area represents intense downwards pressure, and the longer this position is maintained, the more credible the targets become.
Today's Fed rate announcement and press conference will significantly determine if the stochastic stays below 20. The proverbial writing is on the wall if it signals that it will continue to fight inflation aggressively. In this case, yields are likely to respond, which will support the dollar.
Any yielding by the Fed in this regard will most likely give some relief to the battered cryptocurrency market. However, this is not our base case scenario.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.