The US Dollar Gains Strength After September FOMC Meeting – Fed Expects Higher Funds Rate

Financial market participants have witnessed two distinct phases this year in terms of the strength of the US dollar. Initially, the dollar showed weakness, followed by a period of significant strength. The US dollar’s influence extends to both traditional and cryptocurrency markets, with the correlation between EUR/USD serving as a prime example. While EUR/USD began the year at 1.06, it rallied to 1.12 during the summer before relinquishing its gains. Similar dollar cycles can be observed in various cryptocurrencies. For instance, Ethereum experienced a rally at the beginning of the trading year, reaching a peak at $2,000, encountering resistance, and subsequently undergoing a correction. Consequently, cryptocurrency traders should pay close attention to the dollar’s direction to ensure they are on the right side of the cryptocurrency market.

The Federal Reserve’s September Meeting and the Dollar’s Trajectory

The United States Federal Reserve released its monetary policy decision on Wednesday, maintaining the funds rate at its current level given the encouraging inflation news. While market participants largely anticipated this decision, the focus shifted to the subsequent press conference. During the conference, Jerome Powell retained a hawkish stance by keeping all options on the table, including the possibility of further rate hikes. This hawkish tone hinted that interest rates would remain at higher levels for an extended period. As a result, the dollar experienced a rally in response to this outlook.

Ethereum: Trapped in a Narrow Range

Ethereum stands out as one of the most prominent and liquid cryptocurrencies. Before the rally that commenced in 2023, Ethereum formed a contracting triangle. The significance of this triangle lies in its tendency to emerge at the conclusion of complex corrections. Consequently, when these triangles function as reversal patterns, the subsequent move represents a different pattern altogether.

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Looking at the chart above, we can observe that Ethereum experienced a 50% correction from its highs. However, it continues to trade within a relatively narrow range. It is essential to note that “narrow” in the context of the cryptocurrency market still implies historically high volatility. Bullish traders may opt to wait until Ethereum demonstrates a close above $2,000 before considering long positions. Additionally, they should monitor Ethereum’s ability to hold above the $1,400 support level. On the other hand, bearish traders would likely want to witness a drop below the $1,400 support level, signaling a potential move towards $1,000.

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