Bullish View
- Buy the BTC/USD pair and set a take-profit at 42,000.
- Add a stop-loss at 38,400.
- Timeline: 1 day.
Bearish View
- Set a sell-stop at 38,800 and a take-profit at 36,000.
- Add a stop-loss at 40,000.
The BTC/USD pair rose after the Fed raised its interest rates. The pair rose to a high of 40,000, which was the highest level since April 29th. It has risen by more than 6% from its lowest level last week.
Fed Interest Rate Hike
Bitcoin and stocks edged upwards in the overnight session as investors digested the Fed interest rate decision. Bitcoin retested the important resistance level at 40,000 while the Dow Jones and Nasdaq 100 indices rose by more than 2%.
At the same time, the US dollar index, which tracks the performance of the greenback against a basket of currencies, declined by more than 0.50%.
In its first monetary meeting since March, the Fed decided to hike interest rates by 0.50%. This increase was the highest it has been since 2000. It was also the first time that the bank has hiked interest rates in two straight meetings.
In theory, such a big rate hike and a commitment to continue tightening should be bearish for Bitcoin and stocks. However, prices rose simply because the situation was already priced in by the market. It is a situation known as sell the rumours and then buy the news.
The BTC/USD is also rising as investors believe that the Fed has become overly ambitious considering that the economy is slowing. It barely moved in the first quarter and flash economic numbers show that the economy has declined. For example, the number of job additions has slowed and pending home sales have declined.
Therefore, since the Fed has a long history of being over-ambitious, there is a likelihood that it will not implement the hikes it has pledged.
BTC/USD Forecast
The BTC/USD pair has been making a comeback in the past few days. This comeback accelerated when the Fed made its decision. It managed to move above the upper side of the descending channel shown in black. The pair has moved above the 25-day and 50-day moving averages while the MACD has moved above the neutral level.
Bitcoin managed to jump above the important resistance level at 39,000, which was the highest point on Tuesday. Therefore, there is a likelihood that the pair will keep rising as bulls target the key resistance at 42,000.
