Bitcoin holds support - will Fed Chair Powell’s speech aid a bounce?

Bitcoin holds support - will Fed Chair Powell’s speech aid a bounce?

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Bitcoin dipped as much as 5% on Tuesday before recovering back above the support at $67,000. Federal Reserve Chairman Jerome Powell gives his customary speech on Wednesday after the FOMC meeting. Will he be dovish and add fuel to a potential bounce, or will sticky inflation incline him to be more hawkish and thereby suppress risk assets?

Powell’s speech

At 2pm ET, Federal Reserve Chairman Jerome Powell will go to the lectern once more to deliver his customary speech at the end of the Federal Open Markets Committee (FOMC) meeting. 

The usual game will be played whereby market participants will analyse everything that Powell says, how he says it, and any nuances thereof. The direction and flow of billions, if not trillions of dollars will depend on this speech.

With a rate cut or a hike on Wednesday completely ruled out by market predictions it just remains for Powell to do his jawboning and set a dovish or hawkish tone for the market to pick up on and be duly influenced by. 

One more influential thing that comes out of these meetings is the Federal Reserve ‘dot plot’, which gives the expectations from Fed officials as to the number of future cuts that might be made, how big they might be, and when they could occur.

It’s into these muddy waters that risk assets have to find their way. Bitcoin suffered a bit of a dip on Tuesday, but given that inflation data came in without expressing anything out of the ordinary, this dip did not upset the apple cart too much.

Bitcoin bounces from support

Source: TradingView

The $BTC price came down into the support band as seen in the chart above, and a bounce was duly made from $66,000. Also, the upward-sloping trend line has provided support, and today’s minor bounce took place off of this. 

Dovish or hawkish?

If Chairman Powell’s speech today is construed as ‘dovish’ by the market, Bitcoin could once again rise and test the descending bull flag trend line at the $70,000 level. 

If on the other hand Powell seeks to quell the market because of his fears over inflation, and his speech is particularly ‘hawkish’, $BTC might drop the support and descend to lower levels. This scenario is the least likely of the two, but is worth preparing for.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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