Macro vs Technicals
US annual CPI inflation slowed again, but core components are still worrying and proving sticky. Post the inflation data, the Fed left rates unchanged, as expected, suggesting the move is a pause and that there are potentially two more hikes coming this year. Chair Powell was less hawkish in his presser.
The potential for two more hikes did not stop the Nasdaq from extending this year’s bull run, with the move driven by only a handful of core companies.
However, crypto has completely decoupled from the likes of the Nasdaq. Both Ethereum and Bitcoin dropped sharply through important technical support levels and negated the previous bullish outlook, at least for now. The technical outlook has become confused/mixed as a result and pushes us to a more neutral stance.
Ethereum vs Bitcoin
The bullish outlook has been wrong and reversed with the breakdown through the 0.06890-0.06810 trend support region. This leaves a short-term double-top/range high at 0.0708, suggesting we will remain in this lower range for the foreseeable future, but with downside risks in the short-term to re-test the 0.0639-0.0672 range low region before recovering.
Prices failed to break back through resistance in the 26,250-26,600 region after holding the 25,250 area of support, instead dropping back through this support area. While the decline is still respecting the channel support levels, the failure to stage a convincing rally increases the risks that the move to 31,013 was merely a 3-wave process and that we are actually developing into a medium/long-term range under that level.
I stress this merely increases the risks, and further evidence is needed of that outcome.
For now, though, while under 26,600 resistance, my studies suggest a move down to Fibonacci support around 24,000 and potentially 22,000 is the greater risk. An impulsive rally through that resistance and then the channel at 27,670 is needed to re-energise the bullish outlook for a move back to 31,000 and even 33,000.
Long term, my studies suggest the bear cycle from the 2021 highs completed last year around 15,500. First targets and resistance in the bull move lies in the 33,000 region, but the main target is 36,000 (that being Fibonacci and head and shoulders projection). I suspect we see that region hold on the first test, but ultra long-term targets are 42,000-48,000.
To change this long-term outlook, we would need a decline through 19,500. Such a move would suggest we are in a choppy range between 15,000 and 30,000 for a number of months.
As with Bitcoin, the breakdown through 1740 and 1714 supports creates confusion in the wave counts, increasing the risk that we are returning to the lower range type process that we had been in since the June 2022 low was set. The long-term bullish outlook is not affected yet, but the medium-term has been.
As such, while under 1796-1860 resistance, the risks are for a move back to channel support at 1552-1548, with a break there opening a return to test the 1370 lows set in March.
From a longer-term perspective, the reversal from last year’s lows targets ~2400/2450 resistance, but through there can extend towards 3000-3300. A decline back through 1370 negating this bigger picture outlook, signalling the gains have just been another 3-wave correction and keeping us in a wide but lower choppy range, potentially into the end of 2023.