$25K in Sight. Can BTC Get There Before the Retracement?

One Last Volatility Cocktail for the Week: NFP, Hourly Earnings, and Unemployment Rate.

The Fed added 25 bps to the interest rate, which was in line with the market’s expectation but the FOMC Statement contained interesting clues which sent the dollar higher. As a consequence of this newfound US Dollar strength, BTC/USD dropped from a $24,258 high to $23,420 where it is currently trading.

The FOMC Statement reads: “ongoing increases in the target range will be appropriate”. The plural form (“increases”) is a strong clue that we will get at least two more rate hikes before pausing and reassessing the situation. Furthermore, the text of the Statement changed from “determining the pace of future increases in the target range” to “determining the extent of future increases in the target range“.

The swapping of the word “pace” with “extent” suggests that the pace is known (25 bps) but the extent (how many of these hikes) is not known. At the moment there’s an 85.6% chance that the Fed will lift the rate by 25 bps at their March meeting, and only a 14.4% chance that the rate will remain unchanged – data from CME’s FEDWATCH tool.

A full suite of jobs data is scheduled for later today so BTC/USD may still show some strong movement. The Non-Farm Payrolls report comes out at 1:30 pm GMT, together with the Average Hourly Earnings and the Unemployment Rate.

Technical Outlook – BTC/USD

Bitcoin has been climbing relentlessly since the ‘explosion’ at $17,000 but on the other hand, it entered overbought right after the break of $18,250. Being overbought or oversold doesn’t mean that price is going to reverse right away, especially if the extreme condition occurs after a long period of sideways movement.

However, the pair started to show bearish divergence after the touch and consequent break of $21,400. The two lines drawn on the top of price peaks and the top of the RSI peaks show the price is going higher while the RSI is going lower, aka bearish divergence. Also, the candles have long wicks and small bodies, indicating that bearish pressure is starting to mount.

The first key resistance level is located at $25,000 and this will be a crucial point going forward. A break of the said level would be a massive psychological victory for the bulls, as well as a technical win. We could go even as far as saying that a break of $25K would indicate a shift from the bear market to the bull market.

Given the current situation, the probability of a break of $25K without a proper pullback is limited. I am not saying it cannot happen, just that the probability is low. After a pullback (and depending on where it ends), we might see a break of $25K. Today’s U.S. jobs data will play an important role so make sure you don’t miss it.