Although the gold price started the day with a decrease, it later moved to the green zone. Bitcoin, on the other hand, is hovering below $30,000, an important psychological barrier before the Fed rate decision. Traders are eagerly awaiting the outcome of the Federal Open Market Committee (FOMC) meeting before placing any new direction bets.
Focus of gold and BTC investors: FED interest rate decision
cryptocoin.com As we have announced, the Federal Reserve (Fed) will announce its interest rate decision today at 21.00 TSI. Then, at 21.30, Fed Chairman Jerome Powell will make a speech. Diikaler will be in the cues of the Fed Chairman’s statements. Meanwhile, expectations are for the Fed to increase interest rates by 25 basis points (bps). Also, markets expect the Fed to potentially put an end to the current monetary tightening cycle. But investors remain skeptical about whether the central bank will take a more dovish stance.
Therefore, the focus will be on the monetary policy statement, which will be examined closely for clues on the future rate hike path, and the statements made by Fed Chairman Jerome Powell at the post-meeting press conference. This outlook will play a key role in influencing the short-term US Dollar (USD) price dynamics. Hence, it will help determine the short-term trajectory of gold and Bitcoin price.
Bitcoin and altcoin prices likely to be affected
Market participants are confident that the Fed will raise interest rates by 0.25 percentage points. At the Fed’s last meeting in June, policy makers decided to keep interest rates constant. However, since the Fed has signaled further increases, expectations have been on for a while to raise interest rates. Projections in June showed that there would be two additional rate hikes by the end of 2023. Fed Chairman Jerome Powell referred to “additional policy tightening”, implying that June is just a pause before further rate hikes. The CME Group Fedwatch tool shows the probability of a 25 bps increase in July as 98.9%.
CME Fedwatch Tool Predictions for the July 26 Fed meetingAccording to the Fed’s June forecasts, two committee members want no further rate hikes. Four of them only demand a rate hike. However, twelve are seeking two or more rate hikes by the end of 2023. It is therefore unlikely that a consensus will be reached at the current Fed meeting. Therefore, market participants are watching the decision closely.
A rate hike is likely to negatively impact Bitcoin and risk asset prices. Thus, it is possible that it will trigger a drop in BTC price and slow the asset’s recovery to the $30,000 level. Moreover, a drop in crypto prices could wipe out alt-season gains for altcoins in the top 50 cryptocurrencies by market cap.
Artificial intelligence shows Bitcoin price to fall
According to Chain of Demand (CoD), an analytics platform that uses Artificial Intelligence (AI) to predict Bitcoin price action, the forecast for BTC price is bearish after Wednesday’s meeting. The CoD team found that the Open Interest on Binance Perp Futures for BTC is a great leading indicator for BTC price action the day after the FOMC meeting.
T+1 BTC Price Estimate for the upcoming FOMC Meeting: Bearish
Confidence: High (90%)
A thread:
— Chain of Demand (@ChainofDemandAI) July 25, 2023
This pattern has been correct in 10 of the 11 previous FOMC meetings. In this context, based on the current tracking of Open Interest, Bitcoin price is likely to correct on Thursday.
Modest rise in DXY suppresses gold price
Meanwhile, upbeat macro data from the United States (USD) on Tuesday, pointing to a highly resilient economy, helped the USD pull some buying and hold steady just below its two-week high. A survey by the Conference Board showed that consumer confidence in the US rose to its highest level in two years in July, as the tightness in the labor market continued and inflationary pressures eased. This adds to the optimism that the economy can emerge from recession this year. It also acts as a tailwind for the dollar. Apart from that, the expectation of more stimulus from China and the prevailing risk atmosphere are putting pressure on gold.
Combination of factors limits losses for gold
However, the risks of approaching recession, worsening US-China relations, the world’s two largest economies, and geopolitical risks will help limit losses of the precious metal. Concerns about a deeper global economic downturn flared again on Monday after disappointing July Purchasing Managers’ Index (PMI) results. The survey showed broad-based declines in business activity across the manufacturing and services sector in the Eurozone, the UK and the US. Traders can also avoid placing aggressive bearish bets around the gold price towards the key central bank activity risk, which requires caution before taking positions for the resumption of the recent pullback from the two-month high.
Technical view of gold price
Market analyst Haresh Menghani draws attention to the following levels in the technical outlook for gold. Technically speaking, the nightly low of $1,952-1,951 could protect the downside just ahead of the $1,946-1,945 region. However, some trailing selling will indicate that the last bullish trajectory witnessed since the beginning of this month continues to run its course. This will pave the way for deeper losses. It is possible for gold to later decline to the $1,934 horizontal support and move towards the $1,926-1,925 region. The next relevant support is near the $1,909 area. Below this, gold is likely to drop below the $1,900 mark. Thus, a retest of the multi-month low is possible around the $1,893-1,892 region.
On the other hand, the $1,977-1,978 region is likely to act as a close barrier. This is followed by a monthly peak of around $1,987-1,988 set last week. Also, above this, gold will aim to retrace the $2,000 psychological mark. The upside trajectory is likely to extend towards the next hurdle near the $2,010-2,012 supply zone.
