Markets corrected as US employment data reflected a stubbornly robust job market, adding further confirmation to investors’ belief that the Federal Reserve will continue its aggressive rate hikes.
US non-farm payrolls rose by 263,000 in September, slightly below the Dow Jones estimate of 275,000, but the unemployment rate fell to 3.5% versus the 3.7% forecast.
Some analysts believe the report shows the jobs market remains strong despite the Federal Reserve’s efforts to slow the economy and that could encourage the Fed to go ahead with another aggressive rate hike at its next meeting in November. . This caused a sharp drop in US stock markets on October 7.
Although Bitcoin (BTC) has traded in close correlation with US equity markets for most of 2022, this could change in the second half of the year and Bitcoin could “turn into a risky asset, like gold and the US Treasury,” Bloomberg Intelligence senior commodity strategist Mike McGlone said in the Oct. 5 Bloomberg Crypto Outlook report.
Let’s study the charts of the S&P 500 Index, the US Dollar Index (DXY), and the major cryptocurrencies to determine the short-term price outlook.
The S&P 500 Index (SPX) tumbled and closed below the June low of $3,636 on Sept. 30, but the bears could not hold the lower levels. The buyers aggressively bought the dip and pushed the price back above the breakout level of $3,636 on Oct. 3. This may have caught the aggressive bears off guard, resulting in a short squeeze, which pushed the price to the 20-day EMA ($3,779) on Oct. 4.
In a bear market, experienced traders continue to sell on rallies and that is what happened with the index. The bears stopped the rally at the 20-day EMA and the price turned down sharply on Oct. 7.
The $3,636-$3,584 zone is vital for the bulls to defend as a breakout and close below it could signal a resumption of the downtrend. The index could then drop to $3,500 and subsequently to $3,325.
Conversely, if the price bounces off the support zone, it will suggest an accumulation by the bulls at lower levels. The buyers will once again try to push the price above the 20-day EMA. If they succeed, the index could rally to the downtrend line.
The bulls will have to break through this barrier to signal that the short-term corrective phase may be over. The index could then start a rally to $4,100.
The US dollar index remains in a strong uptrend. The sellers pulled the price below the 20-day EMA (111) on Oct 4, but could not sustain the lower levels. Aggressive buying on the dips caused the price to break back above the 20-day EMA on Oct 5.
The bears are attempting to cap the move up in the zone between the Fibonacci 50% retracement level of $112.41 and the 61.8% retracement level of $112.96. If the price breaks down sharply from this zone, it will suggest that traders are selling on rallies. This could take the price back to the 20-day EMA and then to $110.05.
If the support at $110.05 gives way, it will suggest that the short-term bullish momentum has weakened. The price could drop to the uptrend line. A close below this support could indicate that the index has peaked.
Instead, if the bulls propel the price above $112.96, the index could retest the multi-year high at $114.77. A breakout of this resistance could suggest a resumption of the uptrend. The next target target on the upside is $117.14.
Bitcoin’s relief rally is facing stiff resistance in the area between the 50-day SMA ($20,019) and the downtrend line. This shows that the bears are selling on the rallies and will try to push the price to $18.626.
Repeated testing of a support level tends to weaken it. If the bears sink the price below the strong support at $18.626, the BTC/USDT pair could witness a panic sell-off.. That could open the doors to a potential retest of the June low at $17.622.
In order to invalidate this bearish view, the bulls will have to push and sustain the price above the downtrend line. If this happens, the bullish momentum could increase and the pair could rally to $22,799. The bears could pose a strong challenge at this level.
Ether (ETH) has been trading near the 20-day EMA ($1,364) since Oct. 4. The bears are defending the level, but a positive sign is that the bulls have not given up much ground. This suggests that buyers expect the rally to spread further.
If the buyers push the price above the 20-day EMA and the horizontal resistance at $1,410, the ETH/USDT pair could rally to the resistance line of the descending channel. This level could attract strong selling from the bears.
If the price breaks down sharply from the resistance line, it will suggest that the pair may extend its stay within the channel for a few more days.
The bulls could pick up the momentum after the bulls push the price above the channel. On the other hand, the selling could intensify if the bears sink the price below the support at $1,220.
BNB broke above the moving averages on Oct. 3, but the bulls were unable to push the price above the next hurdle at $300. This suggests that the bears are active at higher levels.
If the price sustains below the moving averages, it will suggest that the BNB/USDT pair could remain stuck between $258 and $300 for some time to come.. The flattening out of the 20-day EMA ($283) and the RSI near the midpoint hint at a short-term consolidation.
Alternatively, if the price bounces from the current level, the bulls will once again try to force the price above the $300-$308 overhead resistance zone. If they manage to do that, the pair could rally to the stiff overhead USD resistance. 338.
XRP has been attempting to break through the first hurdle above near $0.51 and retest the intraday high of $0.56 reached on Sept. 23. This is the critical level to watch on the upside because a break above it could signal a resumption of the uptrend.
The rising moving averages and the RSI in positive territory indicate that the path of least resistance is to the upside. If the buyers push the price above $0.56, the XRP/USDT pair could continue to pick up momentum and move up to $0.66.
Conversely, if the price turns down from the current level or the overhead resistance of $0.56, the bears will try to push the pair towards the 20-day EMA. A strong bounce from this level could keep the upper hand in favor of the buyers, but a break below this support could take the pair to $0.41.
Cardano (ADA) broke below the uptrend line on Sep 30 and the bears successfully defended the level during the retest on Oct 4-6. This suggests that the bears have turned the uptrend line into resistance.
The bears will try to challenge the crucial support at $0.40. If this support breaks, the selling could pick up momentum and the ADA/USDT pair could start the next leg of the downtrend. The pair could drop to $0.35.
If the bulls want to avoid another leg down, they will have to quickly push the price above the moving averages.. If this happens, the pair could rally to the downtrend line. Buyers will have to overcome this hurdle to suggest a possible trend reversal.
Solana (SOL) rallied above the moving averages on Oct. 4, but the bulls were unable to take advantage of this strength. This suggests that the bears continue to see rallies as a selling opportunity.
The 20-day EMA ($33.17) is flat and the RSI is close to the midpoint, which suggests a balance between supply and demand. If the price sustains below the moving averages, the SOL/USDT pair could drop to $31.65. If the price bounces off the support strongly, it will suggest that the range action may continue for a few more days.
The buyers will have to push the price above the resistance at $35.50 to clear the way for a potential rally to $39. On the other hand, If the price slides below $31.65, the pair could retest the important support at $30.
Dogecoin (DOGE) broke out above the moving averages on Oct. 4, but the bulls were unable to extend the momentum. The price turned down from $0.07 and has reached the moving averages.
If the price bounces off the moving averages strongly, it will suggest that the bulls are attempting to form a higher low. The buyers will then try to push the price above $0.07 and take advantage in the short term. As there is no major resistance between $0.07 and $0.09, the DOGE/USDT pair could quickly cover this path.
Conversely, if the price breaks below the moving averages, the bears will once again try to sink the pair below the support near $0.06. The break below this support could take the pair to the June low near $0.05.
Polygon (MATIC) climbed above the moving averages on Oct 4 and reached the downtrend line on Oct 5. The bears are trying to stall the rally at the downtrend line, but a small silver lining is that the bulls have not given ground to the sellers.
The 20-day EMA ($0.80) is gradually sloping up and the RSI is in the positive territory, which indicates that the bulls have the upper hand. This improves the prospects for a break above the downtrend line. If this occurs, the MATIC/USDT pair could go as high as $0.94 and subsequently as high as $1.05.
This positive view could be invalidated in the short term if the price turns down and breaks below the 20-day EMA. In that case, the pair could drop to the strong support at $0.69. The bears will have to pull the price below this level to gain an advantage.
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Market data is provided by the HitBTC exchange.