Technicals Suggest Broader Crypto Correction, Aligned With More Hawkish Fed

Macro vs Technicals

A big macro week is ahead with a plethora of central bank meetings, but the focus is obviously on the Fed and forward guidance. For crypto, it will be the effect this has on the US equity market, but particularly the Nasdaq.

As Dalvir highlights, bitcoin and Nasdaq remain positively correlated, and recent big tech earnings have supported the index. A more hawkish Fed, however, would likely see equity markets come back under pressure and that is the greater risk for Dominique. It would certainly align with the technical studies, which see the risk of a broader correction at this stage.

Ethereum vs Bitcoin

Last week my studies were suggesting we move into a corrective pullback after the aggressive reversal from 0.062, back through the March breakout levels. This correction is now into the Fibonacci support region between 0.065 and 0.064. As such, we should start to look for a higher low to develop, a reversal back through 0.067 and then 0.070 opening a run up to the 0.075 range highs.

This outlook is wrong on a break of 0.064 and then 0.062, such a move opening 0.057.  

Bitcoin

Prices remain in a correction phase after the spike up to ~31,000. So far, the pullback has held over the previous 4^th wave and Fibonacci support in the 26,645 region. We are now faced with two options. We remain in a choppy range between that support and the highs for a while and then break higher to next resistance in the 33,000 region. Or we break that support and see a deeper correction back towards 25,400 weekly support before we should look for signs of a higher low. It’s hard to tell which correction phase will play out at this stage.

A decline and close below 25,400 would suggest 31,000 was a more significant peak than my studies currently suggest and risks a broader pullback towards 19,500 again. 

Longer 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 the 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.

A decline back through 19,500 would negate and signal the whole move up to around 30,000 has just been a 3-wave correction process and we are likely to remain in a side and choppy range between 15,000 and 30,000 for several months.

Ethereum

The short-term outlook has become more complicated. The reversal from just ahead of 2166 resistance extended again this week to see the test of support in the 1800-1715 region, which has so far held. So, from a trend-following perspective, important support has held. However, from an Elliott Wave perspective it is unclear whether the decline is still an A wave, meaning a deeper setback to at least 1714, if not 1660 in the coming 2-3 weeks, or the correction is complete.

The trend gets the benefit of the doubt at this stage. But we should watch near-term price action closely as if this is just a B wave bounce, a lower high should develop at/under 1965-2065 resistance.

Longer term, the reversal from last year’s lows targets ~2400/2450 resistance, but through there can extend towards 3000-3300. A decline back through 1400 negates this underlying bullish outlook, signalling the gains have just been another 3-wave correction and keeping us in a wide but lower choppy range.

Robin is a global market veteran, with over 30 years of experience on the sell and buy-side, as a strategist and trader. He now provides strategic trading and investing advice to hedge funds, family offices, HNW individuals and trading desks around the globe.

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(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)