28.08.202615:21 Forex Analysis & Reviews: Warsh to speak at Jackson Hole first time as Fed chair: why crypto market risks swinging sharply in either direction

The cryptocurrency market is on pause. Tonight, Kevin Warsh will take the stage at the Jackson Hole symposium with his first full program speech since taking office on May 22. In the two meetings since then, he has kept the rate in the 3.50-3.75% range, but has not provided the market with clear guidance for the future. Investors assessed that the July press conference demonstrated a lack of resolve to bring inflation to target rather than a clear strategy.

The theme of this year's symposium, "Financial Innovations: Implications for Payments and Policy," directly suggests a discussion on the digital dollar and stablecoins, meaning that the speech could impact the crypto market not only through interest rates but also directly through regulatory signals regarding digital assets. Banks have differing forecasts, but they converge on the main point: a direct signal regarding the rate is unlikely. Goldman Sachs and Morgan Stanley believe that Warsh will reaffirm the 2% inflation target, explain the abandonment of active forecasts, and focus on long-term structural issues like productivity and demographics. A BofA survey among fund managers shows a similar consensus, with 53% anticipating a neutral speech, 31% a hawkish tone, and only 7% a dovish one. Meanwhile, the Fed itself remains more divided than it seems from the formal unanimity of recent decisions. Beth Hammack has stated that now is the time to raise rates, suggesting that inflation could linger around 3% until the end of the year. Jeffrey Schmied pointed out that the current rate is not effectively restraining economic activity, and Austan Goolsbee warned of the risk of renewed inflation acceleration, while Susan Collins characterized the baseline scenario as a gradual decline in inflation but did not rule out a rate hike should progress stall.

If Warsh clearly echoes Hammack's rhetoric about the need to act against inflation or uses phrases like "inflation remains persistent" and "it is premature to talk about easing," the market risks sharply reevaluating the likelihood of a rate hike in September upward, which would negatively impact the already weakening momentum of August's ETF rally, where daily inflows have decreased from $606 million to $232 million, and the Fear and Greed Index has fallen from 74 to 65.

The opposite scenario, where Warsh limits himself to philosophical musings on productivity and the global economy without specifics regarding rates, is likely to be perceived by the market as maintaining the status quo and will not trigger a sharp movement in either direction, as this outcome is already fully priced in.

The most explosive reaction is expected in the case of a surprise, be it an unexpectedly hawkish tone directly hinting at agreement with the committee's hawkish wing or an unexpected admission of economic weakness that opens the door for easing sooner than the market expects. Given that cryptocurrencies have recently demonstrated heightened sensitivity to surprises rather than expected outcomes, today's twenty minutes at the podium in Wyoming could determine the market direction for weeks to come, long before the actual September Fed meeting.

Trading recommendations

Bitcoin

Buyers are now aiming to return to the $80,600 level, which opens a direct path to $82,100, and from there, it's just a short step to the $83,600 level, the breach of which would signify attempts to return to a bull market. In case Bitcoin falls, I expect buyers at the $78,800 level. A return of the trading instrument below this area could quickly push BTC down to around $77,200. The farthest target will be the $75,300 area.

Ethereum

A clear consolidation above the $2,550 level opens a direct path to $2,625. The farthest target will be the high around $2,684, the breach of which would signify strengthening bullish sentiment in the market and return interest from buyers. If Ethereum falls, I expect buyers at the $2,488 level. A return of the trading instrument below this area could quickly push ETH down to around $2,436. The farthest target will be the $2,373 area.

What's on the chart

• The red lines represent support and resistance levels, where the price is expected to either pause or react sharply.
• The green line shows the 50-day moving average.
• The blue line is the 100-day moving average.
• The lime line is the 200-day moving average.

Price testing or crossing any of these moving averages often either halts movement or injects fresh momentum into the market.