In the absence of any really impactful fundamental or on-chain events at this present time this week, I will be looking at the Fed’s interest rate decision and a substantial options contract expiry approach, plus an important technical indicator on the price charts.
According to CME Group, financial experts predict a 92% likelihood that the central bank will raise the interest rate by a quarter of a percentage point on July 26.
If the Federal Open Market Committee (FOMC) meets these expectations, it would elevate the federal fund’s target range to between 5.25% and 5.5%, a level not seen in almost 22 years.
The reality is the stock market is likely to head higher after the decision over hopes that this could be the last rate hike of the cycle.
Market participants are currently caught in the grips of a Goldilocks narrative as recession fears are once again pushed into the future while inflation is dropping.
Goldman Sachs has slashed their perceived odds of a recession in the next year to 20 percent.
However, the odds of a recession in Bankrate’s quarterly forecast are still elevated at a 59 percent chance, indicating a downturn is the most probable outcome.
Currently, markets have only priced in around 8 basis points chance for another hike beyond July, the risks could be skewed towards a hawkish reaction.
Bitcoin also has a rather huge option expiry next week, on July 28th. As we know month-end expirations can play havoc with the price and even discourage market positioning.
Deribit.com
So far, data from Deribit shows that BTC has a maximum pain point at $29,000. The total open interest for call options stands at 45,083, with the highest bets placed on a rise towards $30,000 and $31,000, representing a notional value of $300 million.
The put-to-call ratio is 0.55, and the total notional value is approximately $2 billion, which is a not insignificant number.
If Bitcoin’s price doesn’t exceed $30,000 by July 28th I would be inclined to think that BTC is going to see a sell-off below $29,000.
One indicator that is really smoothing the price charts out for me right now across multiple time frames is the Parabolic SAR indicator. Very briefly, the indicator shows that the 4-hour trend will turn bullish above $30,300, and the daily trend above $31,200.
One of the spooky things I am seeing right now is that the Parabolic SAR indicator is basically agreeing with all other forms of analysis I have for Bitcoin on the short, medium, and long-time horizons.
Just a very quick introduction to the indicator. The parabolic SAR indicator appears on a chart as a series of dots, either above or below an asset's price, depending on the direction the price is moving. A dot is placed below the price when it is trending upward, and above the price when it is trending downward.
Typically, I look for two daily price closes on the daily time frame to confirm.
Remember last week, when BTC tested $31,200 for ages and ages, and then suddenly started to collapse late Friday? Multiple daily closes above $31,200 and BTC is off to the races.
The monthly time frame is also hugely interesting.
The Parabolic SAR indicator Dots on the monthly are set at $42,000. I now have Long-term trendline analysis, Long-term Fibonacci, and the monthly Ichimoku Cloud all pointing towards $42,000 making this a huge technical resistance conversion area and a potential level of massive importance for Bitcoin in 2023.
In summary, all eyes are on the $31,200 level next week. If we don't see lift-off by next weekend then huge questions will be raised about BTC being able to sustain $30,000 and we could well see a sub $29,000 test coming.
