Markets corrected as U.S. jobs data reflected a stubbornly robust labor market, adding further confirmation to investors’ belief that the Federal Reserve will continue with its aggressive rate hikes.
The United States nonfarm payrolls increased by 263,000 in September, marginally below the Dow Jones estimate of 275,000, but the unemployment rate dropped to 3.5% compared to the forecast of 3.7%.
Some analysts believe the report shows that the jobs market remains strong in spite of the Federal Reserve’s efforts to slow down the economy and that could encourage the Fed to go ahead with another aggressive rate hike in its next meeting in November. This led to a sharp fall in the U.S. equities markets on Oct. 7.
Daily cryptocurrency market performance. Source: Coin360
Although Bitcoin (BTC) has traded in close correlation with the U.S. equities markets for most of 2022, it could change in the second half of the year and Bitcoin could “shift toward becoming a risk-off asset, like gold and US Treasury’s,” said Bloomberg Intelligence senior commodity strategist Mike McGlone in the Oct. 5 Bloomberg Crypto Outlook report.
Let’s study the charts of the S&P 500 index, the U.S. dollar index (DXY) and the major cryptocurrencies to determine the short-term price outlook.
The S&P 500 index (SPX) plunged and closed below the June low of $3,636 on Sept. 30, but the bears could not sustain the lower levels. Buyers aggressively purchased the dip and pushed the price back above the breakdown 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 exponential moving average (EMA) ($3,779) on Oct. 4.
SPX daily chart. Source: TradingView
In a bear market, experienced traders continue to sell on rallies and that is what happened with the index. The bears stalled the recovery at the 20-day EMA and the price turned down sharply on Oct. 7.
The zone between $3,636 and $3,584 is vital for the bulls to defend because a break and close below it could signal the resumption of the downtrend. The index could then decline to $3,500 and thereafter to $3,325.
Conversely, if the price rebounds off the support zone, it will suggest accumulation by the bulls at lower levels. Buyers will then again try to push the price above the 20-day EMA. If they succeed, the index could rise to the downtrend line.
The bulls will have to overcome this barrier to indicate that the short-term corrective phase may be over. The index could then start a rally to $4,100.
The U.S. 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 dips pushed the price back above the 20-day EMA on Oct. 5.
DXY daily chart. Source: TradingView
The bears are trying to stall the up-move in the zone between the 50% Fibonacci retracement level of $112.41 and the 61.8% retracement level of $112.96. If the price turns down sharply from this zone, it will suggest that traders are selling on rallies. That could again pull the price 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 then drop to the uptrend line. A close below this support could indicate that the index may have topped out.
Instead, if bulls drive the price above $112.96, the index could retest the multi-year high at $114.77. A break above this resistance could suggest the resumption of the uptrend. The next target on the upside is $117.14.
Bitcoin’s relief rally is facing strong resistance in the zone between the 50-day simple moving average (SMA) ($20,019) and the downtrend line. This shows that bears are selling on rallies and will try to pull the price to $18,626.
BTC/USDT daily chart. Source: TradingView
The repeated retest of a support level tends to weaken it. If bears sink the price below the strong support at $18,626, the BTC/USDT pair may witness panic selling. That could open the doors for a possible retest of the June low at $17,622.
To invalidate this bearish view, the bulls will have to push and sustain the price above the downtrend line. If that happens, the bullish momentum could pick up and the pair could rally to $22,799. The bears may 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 recovery to extend further.
ETH/USDT daily chart. Source: TradingView
If buyers thrust 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 may attract strong selling by the bears.
If the price turns down sharply from the resistance line, it will suggest that the pair may extend its stay inside the channel for a few more days.
The bullish momentum may pick up after bulls propel the price above the channel. Alternatively, the selling could intensify if bears sink the price below the $1,220 support.
BNB broke above the moving averages on Oct. 3 but the bulls could not push the price above the next hurdle at $300. This suggests that bears are active at higher levels.
BNB/USDT daily chart. Source: TradingView
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 more time. The flattening 20-day EMA ($283) and the relative strength index (RSI) near the midpoint hint at a consolidation in the near term.
Alternatively, if the price rebounds off the current level, the bulls will again attempt to force the price above the overhead resistance zone between $300 and $308. If they manage to do that, the pair could rally to the stiff overhead resistance at $338.
XRP has been attempting to clear the first overhead hurdle near $0.51 and retest the intraday high of $0.56 made on Sept. 23. This is the critical level to watch on the upside because a break above it could signal the resumption of the uptrend.
XRP/USDT daily chart. Source: TradingView
The upsloping moving averages and the RSI in the positive territory indicate that the path of least resistance is to the upside. If buyers push the price above $0.56, the XRP/USDT pair could further pick up momentum and rally to $0.66.
On the contrary, if the price turns down from the current level or the overhead resistance at $0.56, the bears will attempt to pull the pair to the 20-day EMA. A strong rebound off this level could keep the advantage in favor of the buyers but a break below this support could pull the pair to $0.41.
Cardano (ADA) broke below the uptrend line on Sept. 30 and the bears successfully defended the level during the retest from Oct. 4–6. This suggests that bears have flipped the uptrend line into resistance.
ADA/USDT daily chart. Source: TradingView
The bears will attempt to challenge the crucial support at $0.40. If this support breaks down, the selling could pick up momentum and the ADA/USDT pair could start the next leg of the downtrend. The pair could then decline to $0.35.
If bulls want to avoid another leg down, they will have to quickly push the price above the moving averages. If that happens, the pair could climb to the downtrend line. Buyers will have to surpass this obstacle to suggest a potential trend change.
Related: Why is the crypto market down today?
Solana (SOL) rose above the moving averages on Oct. 4 but the bulls could not build upon this strength. This suggests that bears continue to view rallies as a selling opportunity.
SOL/USDT daily chart. Source: TradingView
The 20-day EMA ($33.17) is flat and the RSI is near the midpoint, suggesting a balance between supply and demand. If the price sustains below the moving averages, the SOL/USDT pair could decline to $31.65. If the price rebounds off the support with strength, it will suggest the range-bound action may continue for a few more days.
Buyers will have to push the price above the overhead resistance at $35.50 to clear the path for a possible rally to $39. On the other hand, if the price slips below $31.65, the pair could retest the important support at $30.
Dogecoin (DOGE) soared above the moving averages on Oct. 4 but the bulls could not extend the momentum. The price turned down from $0.07 and has reached the moving averages.
DOGE/USDT daily chart. Source: TradingView
If the price rebounds off the moving averages with strength, 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 seize the advantage in the near term. As there is no major resistance between $0.07 and $0.09, the DOGE/USDT pair may cover this journey quickly.
In contrast, if the price breaks below the moving averages, the bears will again try to sink the pair below the support near $0.06. The break below this support may pull the pair to the June low near $0.05.
Polygon (MATIC) ascended above the moving averages on Oct. 4 and reached the downtrend line on Oct. 5. The bears are trying to stall the recovery at the downtrend line but a minor positive is that the bulls have not ceded ground to the sellers.
MATIC/USDT daily chart. Source: TradingView
The 20-day EMA ($0.80) is gradually sloping up and the RSI is in the positive territory, indicating that bulls have the upper hand. This improves the prospects of a break above the downtrend line. If that happens, the MATIC/USDT pair could rise to $0.94 and thereafter to $1.05.
This positive view could invalidate in the near term if the price turns down and breaks below the 20-day EMA. The pair could then decline to the strong support at $0.69. The bears will have to pull the price below this level to gain the upper hand.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Market data is provided by HitBTC exchange.