New inflation data influenced market participants to expect a significant rate hike

Dogecoin was introduced in December 2013 by programmer Billy Markus and marketer Jackson Palmer, who created the coin as a joke based on the Doge meme. Interest in the coin began when developers were exploring the possibilities offered by Bitcoin’s invention, and to this day, DOGE is primarily used for tipping online content creators or crowdfunding efforts.

DOGE may be considered less appealing as an investment due to its unlimited supply, but it is worth noting that Dogecoin’s most significant asset is its vibrant community of passionate supporters. Recently, Elon Musk reiterated his support for Dogecoin in an interview, stating that the only thing holding the coin back from becoming the “official currency of the internet” is its concentration among a small number of wealthy holders.

Difficult weeks for cryptocurrencies

Recent weeks have been exceptionally tough for the cryptocurrency market, and DOGE remains under pressure amidst a decline in market interest and a deteriorating macroeconomic environment. Economists have warned of a potential global recession, particularly if central banks continue their aggressive actions. Notably, the U.S. economy contracted for two consecutive quarters in the first half of the year, but the National Bureau of Economic Research has yet to declare a recession.

This Thursday, cryptocurrencies saw another drop due to inflation data in the U.S. coming in hotter than expected. The price of Bitcoin fell to a fresh intraday low of $18,183, impacting the price of DOGE negatively. The latest inflation report from the Bureau of Labor Statistics revealed a 0.4% increase in the consumer price index (CPI) for September, above the expected 0.3% rise. Year-over-year, inflation increased by 8.2%, indicating that the U.S. Federal Reserve still has significant work ahead.

This new inflation data prompted market participants to factor in a larger rate hike by the Federal Reserve, with analysts suggesting a 95% probability of a 75 basis-point rate hike when the Fed meets in early November. Quincy Krosby, chief global strategist at LPL Financial, commented:

“The Fed has more work to do, and the market knows it. The transition towards a slower pace of rate hikes, or even lower rates following the expected 75 basis point move on November 2, is still distant until the Fed is convinced that victory against inflation is complete.”

Are tough times ahead?

Given these circumstances, Dogecoin (DOGE) could face challenges maintaining its current price levels, with Brandon Pizzurro, director of public investments at GuideStone Capital Management, stating that the worst is still ahead. Bridgewater Associates founder and billionaire Ray Dalio predicts that financial markets will remain weak for the next five years, which, according to him, is likely to also apply to the cryptocurrency market. However, both CryptoChipy and Stanko consider Dalio’s scenario to be overly pessimistic.

Technical analysis for Dogecoin (DOGE)

Dogecoin (DOGE) has dropped from $0.091 to $0.055 since August 16, 2022, with the current price standing at $0.059. Traders should be mindful that the risk of further declines has not passed, as analysts expect the U.S. Federal Reserve to maintain an aggressive stance in combating inflation through rate hikes.

Looking at the chart below, we see that DOGE has been trading within a range of $0.055-$0.070 for the past several months. As long as DOGE’s price remains below $0.070, a trend reversal cannot be confirmed, and the price remains in the SELL-ZONE.

Key support and resistance levels for Dogecoin (DOGE)

The chart from April 2022 highlights crucial support and resistance levels that can help traders understand potential price movements. Dogecoin (DOGE) remains under pressure, but if the price breaks above the critical resistance level at $0.070, the next target could be $0.080. Conversely, if the price falls below the strong support at $0.050, the next target might be around $0.040.

Factors supporting the rise of Dogecoin (DOGE)

The fourth quarter of 2022 is expected to be challenging for DOGE, with the near-term outlook for risk appetite remaining bleak. The sentiment within the crypto market is still struggling to show positive signs, partly due to the high probability (95%) of a 75 basis-point rate hike by the Fed when they meet in early November. Barclays analyst Jonathan Millar stated on Thursday:

“Barclays maintained its call for a 75 basis-point hike next month but raised its expectations for December and February to 75 basis points and 50 basis points, respectively, up from previous forecasts of 50 basis points and 25 basis points. This would push the target range for the fed funds rate to 5.00%-5.25% by February, up from the firm’s previous outlook of 4.50%-4.75%.”

Although the volume of DOGE traded in recent weeks has decreased, if the price moves above the resistance at $0.070, the next target may be around $0.080. Additionally, DOGE’s price tends to correlate with Bitcoin, so if Bitcoin surpasses $20,000, DOGE may also experience a price increase.

Indicators of potential further decline for Dogecoin (DOGE)

The upside potential for DOGE in Q4 appears limited, especially considering the Fed’s indication that rate cuts are not expected until 2024. There is concern that continued aggressive interest rate hikes could trigger a more significant sell-off. As such, Dogecoin (DOGE) may struggle to maintain its current price levels.

Currently priced at $0.059, DOGE may fall below the key support level of $0.050, in which case the next target could be around $0.045 or even $0.040.

Expert price expectations for Dogecoin (DOGE)

The cryptocurrency market remains bearish, largely due to a lack of demand and the broader macroeconomic environment. The recent inflation data has caused market participants to price in a significant rate hike by the Fed, with analysts predicting a 95% likelihood of a 75 basis-point hike in early November. Given these conditions, Dogecoin (DOGE) could find it difficult to hold its current price levels. Brandon Pizzurro, director of public investments at GuideStone Capital Management, stated that the worst may still be ahead. Fortunately, with crypto CFD brokers such as Skilling (for Europeans), Kucoin (for Asians), and Coinbase Pro (for Americans), traders can go both long and short with crypto assets.