What to Know
- The PENGU price recently surpassed its 20-day EMA level, signalling a bullish sentiment.
- Lark Davis expects the memecoin to hit $0.05 in the near future.
- The prediction comes amid major macro events like today’s FOMC meeting wherein the market is pricing in a 25 bps rate cut.
PENGU, the native currency of Pudgy Penguins, is also experiencing a resurgence of momentum in the run-up to the policy announcement of the Federal Reserve. Market participants are preparing to see a Fed interest rate cut affect the risk assets, including cryptocurrencies, in the next few months.
Technical Structure: Retest of Key Moving Average
At the time of writing, the PENGU price is above the level of 0.0337 on the daily chart. The memecoin has just witnessed a breakout from a multi-week downward trendline, which has limited upward movements since the end of July. The price action has since then bounced back after that breakout to retest the 20-day exponential moving average (EMA) as indicated by the yellow line on the chart.
Wealth Mastery founder Lark Davis spotlighted this technical juncture on social media. He wrote on X: “PENGU has just pulled off a 20-day EMA retest. The first one since the breakout from the downtrend.”
This is deemed important since, in most instances, this retest is used to gauge whether or not bullish momentum will be able to persist following a breakout of resistance. In the past, the trending markets with successful retests of the 20-day EMA have been followed by additional rallies.
The memecoin’s 50-day EMA indicated in blue is also providing support that is just below the current prices. The volume is not as high as it would be during the spike events during the early July rally, and this indicates that investors are on hold waiting for a catalyst to make any new commitment.
Counting on a chart, the second significant resistance point is approximately at the level of $0.05, which is the area that analysts discussed as the target point in case the breakout becomes effective. However, he cautioned regarding volatility around the FOMC meeting today. Nonetheless, he remains bullish on the $0.05 target, which suggests a whopping 50% surge from current levels.
Macro Backdrop: Fed Expected to Reduce Interest Rates
The greater context is the work of monetary policy. The CME Fedwatch Tool is indicating that the Federal interest rate is likely to be cut by 25 basis points in the current Federal Open Market Committee (FOMC) meeting, with a high probability of 94%. The most likely outcome is a 50-basis-point reduction, which has a thin-sliced 6% chance of happening, but is viewed as a far-fetched possibility as economic faults grow.
The size of the rate move, however, is not the only noteworthy aspect of this cycle, as the period within which the costs of borrowing will be restrictive will prove to be quite lengthy. Throughout much of 2024 and early 2025, traders were arguing about whether or not the Fed would reduce by 25 or 50 basis points in each meeting. The attention is currently shifting to the duration of the high rates as compared to the so-called neutral rate of 3%.
The existing estimates indicate that the federal funds rate is likely to fall below 4 percent as early as October 2025, compared with the current level of 5.25-5.50. Still, projections indicate that a rate of around 6% will not be experienced until late 2026. Such a trend suggests a slow shift toward less challenging situations as opposed to a shift back to almost zero interest rates on loans.
Weak Labor Market to Play Major Role
This change of policy is partly instigated by a souring employment outlook. Recent statistics have indicated that there have been revisions of payrolls, and previous projections of job growth have been reduced by half. The number of once plentiful job vacancies is now at its lowest in years, as compared to the number of unemployed individuals. In the meantime, the number of jobless claims per week was at its highest level since late 2021.
Inflation Still Sticky
Although there has been a decrease in the demand for labor, the inflation has not yet regained its position to the target of the Fed. The pressures on prices are more than 2% and the threat of a new rise is still apparent, especially due to wages and energy markets. This makes decision-making by the central bank difficult, since it endeavours to maintain a balance between growth and the danger of fueling back the inflationary pressures.
Under such conditions, the speculative assets such as PENGU are highly correlated with the expectations of more lenient financial conditions. A critical technical retest and a growing expectation of a rate cut are making traders watch the results of the FOMC approach.
Also Read: SEC Greenlights Bitcoin ETFs for Listing on Nasdaq and NYSE
