- Ethereum price has formed a head and shoulders pattern.
- The Federal Reserve is expected to hike interest rates by 0.50% on Wednesday.
Ethereum price has formed a troubling chart pattern, signaling that the coin could have a bearish breakout before or after the Fed decision. ETH price dropped to a low of $1,533 on January 30th, the lowest level since January 25. It has fallen by more than 5% from the highest point in 2023.
Federal Reserve decision
The main stimulant for Ethereum and other cryptocurrencies is this week’s monetary policy decision by the Federal Reserve. This will be an important meeting for two main reasons. First, it will be the first Fed meeting of the year, meaning that it will set the agenda for what we should expect for the remaining part of the year.
Second, it will be a vital meeting because of the recent price action of key financial assets. Highly volatile cryptocurrencies and growth stocks have led the recovery. At the same time, the VIX index declined to $20 while the fear and greed index has risen to the greed region. Most of these gains are because investors are pricing in rate cuts for later this year.
Read more: How to buy Ethereum.
Economists expect that the Fed will continue hiking interest rates and maintain its hawkish tone in a bid to drag asset prices lower. In a statement, Adam Taggart of Wealthion said:
“With inflation still high (6.7% CPI and 5.% PCE ), unemployment still low (3.5%), credit spreads low, volatility low, and the markets in rally mode -- Powell has a lot of leeway to keep hiking & tightening here without having to worry about the consequences.”
An excessively hawkish tone will be bad for risky assets like Ethereum and Bitcoin and stocks in theory. However, investors already expect the bank to be hawkish, which explains why they have retreated recently. As such, we could them buy the fact.
Ethereum price prediction
On the 4H chart, we see that Ethereum price has moved sideways in the past few days. In this period, it has formed what looks like a head and shoulders pattern that is shown in green. In price action analysis, this pattern is usually a bearish sign. The coin has also moved below the 25-day and 50-day EMAs.
Therefore, after its spectacular performance in January, we can’t rule out a situation where Ethereum price makes a bearish breakout in February. In most cases, this pattern is usually one of the most bearish signs. If this view is accurate, the key reference level to watch will be at $1,353, the highest point on December 14.
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