Can We Expect A Relief Rally In BTC, ETH Before The Fed's Next Rate Decision?

• BTC and ETH continue to move following US economic data
• A relief rally appears possible, but only in the short term
• Technically, yesterday's action indicates a potential bear trap pattern 

After the release of the highly anticipated U.S. inflation data yesterday, volatility in the crypto markets increased considerably. Like U.S. stocks, Bitcoin (BTC) and Ethereum (ETH) first sold off, only to reverse considerably higher later, pushing the positive sentiment into the Asian trading session. 

But despite the bullish turnaround, there is no change in the ongoing pattern of cryptocurrencies moving solely on macroeconomic data. And, as seen in the latest FOMC minutes, the US Central Bank will likely maintain its hawkish views for the time being. 

Since the market reacted positively yesterday, a short-term relief rally in risky markets, including the crypto market, is likely before the Fed's next rate decision in November. Still, it would only reduce the impact of selling pressure, not reversing the much-larger bearish trend.

Yesterday's outlook reflected on cryptocurrency charts as a bear trap pattern. Bitcoin saw a bounce toward $20,000 after falling as low as $18,190 in the last 24 hours. Ethereum, on the other hand, quickly returned to the $1,300 band after testing below $1,200. The lows tested by both cryptocurrencies were remarkable. 

What's The Outlook For Bitcoin?

Bitcoin started the week testing levels below the resistance area. Buyers, who maintained the $19,000 level in the first half of the week, saw BTC as low as $18,200 in yesterday's volatility as a buying opportunity at the bottom, leading the crypto market to turn its direction upwards.

BTC/USD Daily Chart

First, if we evaluate the positive price action, the low this week showed that the $18,000 band is still a solid support point. In fact, this area has been holding since June 2022, which saw the sharpest weekly decline. This move strengthened the narrative that the bottom in Bitcoin is the $18,000 band.

On the other hand, with the bullish turnaround in the US session and the follow-up buying action in Asia, Bitcoin started to trade above the $19,400 - $19,500 resistance area. That can be considered another positive development as the cryptocurrency moves above the short-term EMA values. In addition, the Stochastic RSI on the daily chart has turned north from oversold territory, reflecting a bullish potential. 

However, as seen on the daily chart, BTC/USD is yet to break the falling trend line that originated in March despite its recent bounce. Accordingly, as long as the BTC price remains below $19,600 on daily closes, it will likely face new selling pressure. 

In an optimistic scenario, if Bitcoin can close above the $19,900 band tested earlier in the day, this could be interpreted as a break of the medium-term falling trend line, and BTC could gain momentum toward the $21,000 band next week. 

In summary, While $19,400 is the closest support in the lower zone, $19,600 will be followed as the first resistance price in the up zone and then $19,900 as the second. On the downside of the support, BTC/USD may retreat to the other support area at $18,600 - $18,800. 

Ethereum Continues To Trade Within Range

Ethereum has returned to channel movement after yesterday's downward volatility. The currency has moved sideways between $1,275 and $1,340 since the second half of September.

ETH/USD Daily Chart

ETH, which rose as high as $1,340 in the early hours, hit the 21-day EMA resistance at this point and saw some decline, but the positive outlook remains valid. 

The world's second-largest cryptocurrency has been moving with the broader market recently, highly correlated with Bitcoin. This suggests that the positive effects of Ethereum's major update, the Merge, have not been priced so far. However, early data from the Merge shows that Ethereum issuance has decreased significantly. 

However, we must observe that supply has started to decrease recently. On the other hand, the number of addresses opened on the Ethereum network last week also jumped to a new daily record. All these internal dynamics appear not yet to have been priced in the Ethereum market. 

Technically, we can see that the current range of $1,340 - $1,350 can work as the first resistance zone for the ETH price. Thus, a weekly close above this zone could be seen as a bullish potential towards the 3-month EMA at $1,500 in the short term. 

On the other hand, the first support price for ETH price, $1,300, and then the bottom line of the channel, $1,275, can be followed as a more critical support point.

Disclaimer: The author does not own any of the securities mentioned in this article.