Solana (SOL) Forms Bullish Setup as $138B China Stimulus Aligns With FOMC Week

Key Takeaways

• SOL has surged 45% in the last 30 days, breaking out of a falling channel and forming an inverse head and shoulders pattern.
• Developments, including China’s $138 billion liquidity and the upcoming FOMC decision, could impact SOL’s next move.
• If the Fed is surprised with a rate cut, Solana’s price could target $187.80, while failure to do so may lead to consolidation.

Solana’s (SOL) price has closed on the $150 mark after climbing 45% over the past 30 days. As of Wednesday, May 7, SOL has formed a bullish pattern on the charts, raising the possibility of an extended rally if current conditions hold.

This price action comes at a critical time for global markets. Earlier today, China’s central bank announced a cut to its reserve requirement ratio.

Meanwhile, the market is also bracing for the outcome of today’s U.S. Federal Open Market Committee (FOMC) meeting. This decision could introduce fresh volatility across risk assets, including cryptocurrencies.

While these developments remain a key factor, Solana’s setup suggests the potential for further upside. Here is what could be next for SOL.

Solana Continues Bullish Reversal

Solana’s price traded within a falling channel between late January and early April. During that period, SOL fell from $256 to $106.

Lately, however, the altcoin has broken out of the upper trendline of the bullish pattern and has risen above $145. But that’s not all.

On the daily chart, CCN observed that SOL has also formed an inverse head and shoulders pattern. This structure is a bullish reversal pattern that forms at the end of a downtrend, indicating a potential return to an uptrend.

As shown below, the pattern appeared after Solana’s price dropped (left shoulder), then rose slightly (head) before another dip (right shoulder). The pattern validates the upswing once it breaks above the neckline.

As seen below, SOL has surged above the neckline at $123.49. If this pattern holds and volume increases, SOL’s price might breach the resistance at $152.68.

Liquidity Boost in China and Fed Rate Impact

Interestingly, this development is due to global market conditions showing signs of easing. Historically, such environments have benefited Solana’s price. For instance, SOL rallied following the 50 basis point (bps) rate cut in September 2024.

As previously stated, Chinese state media revealed that the country’s central bank is preparing to inject 1 trillion yuan (approximately $138 billion) in liquidity into the economy.

“Pan Gongsheng, governor of the People’s Bank of China, announced at a press conference that the reserve requirement ratio would be cut by 0.5 percentage points, providing the market with about 1 trillion yuan of long-term liquidity, and lowering the policy interest rate by 0.1 percentage points,” The report revealed .

However, for SOL to replicate its late-2024 performance, Wednesday’s FOMC meeting outcome would likely need to include a Fed rate cut. It could trigger renewed risk-on sentiment and demand for cryptos like SOL if this happens.

Despite the optimism fueled by Donald Trump’s recent remarks, the CME FedWatch Tool assigned a 3% probability to a rate cut at today’s meeting. Instead, market expectations suggest a 97% likelihood that the Fed will maintain interest rates in the current range of 4.25% to 4.50%.

Should Fed Chair Jerome Powell announce a rate cut, Solana’s price could surge toward the $200 mark. However, SOL may not face a sharp correction if rates remain unchanged.  Instead, it continues consolidating within its current bullish structure.

SOL Price Analysis: No Correction Expected

Looking at the technical perspective again, the 4-hour chart shows that the Relative Strength Index (RSI) has surged above the neutral line. This RSI reading indicates bullish momentum around SOL.

Like the RSI, the Chaikin Money Flow (CMF), in the same timeframe, broke above the zero signal line. This breakout indicates rising buying pressure in the short term.

If sustained, Solana’s price is likely to break the resistance at $152.53. Once validated, the cryptocurrency could rally toward $187.80 at the 0.382 Fibonacci level.

Alternatively, Solana’s price could face a notable correction if selling pressure rises and the FOMC unexpectedly opts for a rate hike.

The market value may decline toward the $127.30 support level in that scenario.