Federal Reserve
Perspective shot, shallow depth of field, selective focus macro close-up of Federal Reserve logo on USA Federal Reserve Note

The Ethereum price (ETH/USD) bounced back during the governing session as investors reacted to the positive tweet by Elon Musk on Bitcoin. Ether rose to $2,550 as Bitcoin rocketed to the important resistance level at $39,000. It has a market capitalization of more than $287 billion. It is still 43% below the highest point this year.

Transitory is the key word to watch this week

Cryptocurrencies have a close correlation. In most cases, most altcoins tend to rally when Bitcoin rallies and vice versa. This trend was evidenced in the overnight session when Elon Musk helped push Bitcoin to the important resistance level at $39,000. My colleague covered the news here.

Still, while Elon Musk has emerged as an influential figure in the crypto universe, the Federal Reserve is the biggest player. For one, Musk became a well-known figure in the industry in February this year. At the time, Bitcoin and other cryptocurrencies were already up by double digits.

Therefore, this week, Ethereum price will mostly be affected by the Federal Reserve, which will start its meeting on Wednesday and publish the decision on Thursday. This will be an important decision because of the overall state of the American economy.

For one, the labor market is tightening as evidenced by the unemployment rate, which declined to 5.8% in May this year. At the same time, consumer and producer inflation have jumped to the highest level in years. Last week, data showed that the headline CPI rose by 5% while the core CPI rose at the fastest pace since 1992.

Therefore, analysts will be watching for just one word in the Fed’s statement on Thursday: transitory. See, in the past few months, the Fed has claimed that the recent strong numbers have been transitory. As such, it has insisted that it will leave its monetary policy intact. By so doing, stocks have risen to a record high while the 10-year has dropped to 1.464%, which is lower than the year-to-date high of 1.76%. The previous statement said:

“Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.”

As such, if the term transitory remains in the statement, we will likely see Bitcoin and Ethereum prices keep rising. However, if the term is removed, it will be a signal that the bank is turning hawkish. The immediate impact of this will be to push cryptocurrencies lower. In a previous article, I wrote that in the long term, BTC and ETH prices will do well in a hawkish environment

Ethereum price anal

Ethereum price
Ethereum price chart

The three-hour chart shows that the Ethereum price has been in a tight range recently. Along the way, the coin has formed a symmetrical triangle pattern that is shown in blue. It is also between the 23.6% and 38.2% Fibonacci retracement levels and a few points above the 25-day and 15-day exponential moving averages. 

In price action, a symmetrical triangle is usually a sign that a breakout in either direction will happen soon. Still, since this triangle has happened after the coin made a deep dive, we can call it a bearish pennant pattern, meaning that there is a possibility it will have a bearish breakout. 

In the near term, however, since the triangle is not yet close to a confluence zone, we can’t rule out a situation where the consolidation extends ahead of the Fed decision. The video below shows an analyst who believes that the 10-year will drop to 1.25%.

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