On Wednesday (September 18), Bitcoin surged overnight to $61,318 before fluctuating around $60,000, ushering in a wave of buying before the Fed's decision. U.S. Democratic senators called on the Fed to cut interest rates by 75 basis points, and the strong pricing of the "black swan" event boosted doves. Technical analysis shows that if Bitcoin bulls firmly break through the key resistance of $60,365, it will be expected to rush to $64,000.
Bloomberg reported that three Democratic senators urged Federal Reserve Chairman Powell and other policymakers to significantly cut the central bank's benchmark interest rate in September, including a 75 basis point cut this week, to protect the U.S. economy from potential damage.
“If the Fed is overly cautious in cutting rates, it would unnecessarily risk tipping the economy into recession,” U.S. Senators Elizabeth Warren, Sheldon Whitehouse and John Hickenlooper said in a letter to Powell on Monday. “The Committee must consider implementing rate cuts more aggressively and earlier to mitigate potential risks to the labor market.”
On Tuesday, U.S. retail sales data supported investors' expectations of a soft landing for the U.S. economy. Retail sales rose 0.1% in August, compared with a 1.1% increase in July. It is worth noting that economists had expected retail sales to fall. Retail sales account for more than 60% of the U.S. gross domestic product (GDP), and the data shows the resilience of the U.S. economy.
Despite the better-than-expected retail sales data, the CME Fed Watch tool showed an increase in the probability of a 50 basis point rate cut by the Federal Reserve. The probability of a 50 basis point rate cut by the Federal Reserve rose to 64.0% on Tuesday from 62.0% at the beginning of the week.
Later on Wednesday, the Federal Reserve will announce its September interest rate decision. A 25 or 50 basis point rate cut is still within market expectations, but a 75 basis point rate cut may indicate that the risk of the economy falling into recession is greater than expected, which may cause Bitcoin to fluctuate more violently. Traders must pay attention to the risks.
In addition to interest rate decisions, the market will also pay close attention to two key points that may affect the price trend of the currency, namely the "Dot Plot" in the Fed's quarterly forecast update, which will show the expectations of Fed members for interest rate trends in the next few years. If it is too aggressive, it may deepen market expectations of recession.
In addition, Powell’s press conference is worth focusing on. He will express his views on future policies. If he is too hawkish, it may impact market sentiment.
Bitcoin Technical Analysis
FXEmpire analyst Bob Mason said Bitcoin remains above the 50-day and 200-day EMAs, sending a bullish price signal.
A break above the $60,365 resistance could allow the bulls to rush towards the $64,000 resistance. Moreover, a break above the $64,000 resistance could signal a move towards $67,500.
Conversely, a break below the 50-day and 200-day EMAs could signal a drop towards $57,500. A break below $57,500 could trigger the $52,884 support level.
With a 14-day RSI reading of 54.62, Bitcoin could break above the $64,000 resistance level and then move into the overbought zone.
