The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 01.02.2021
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A new month starts which might mean new beginnings for the markets. The overarching sentiment in the market still points to the downside, but there are signs of a reversal in the air. Bitcoin seems to be moving higher as the momentum is pushing it higher towards $34,000, and breaking higher could signal additional gains. EURUSD seems to be in stasis mode as ECB downplays the chances of additional rate cuts, as it looks ahead to a choppy February. Gold seems to be gaining some momentum and Retail Traders decided to look into the Silver Market after beating the Stock Market.
With that said, let’s find out how the markets are doing on February 1st, 2021.
Market Recap
Friday was a cause for much amazement in the Bitcoin market, as Elon Musk, CEO and Founder of Tesla, has updated his Twitter About section with “#bitcoin.” This caused the instrument to rally from the support level around $32,000 all the way towards the important resistance of $38,000. However, the excitement was short-lived as the instrument found itself staring bearish pressure in the face with nothing to defend itself. The result was a fall back below $34,800 as the instrument trades at the 100-SMA (Simple Moving Average) on the 4-hour chart, as of this writing.
EURUSD ended the Month, Week, and Day on the backfoot as it seemed that the overarching sentiment of the market still points downwards. On Friday, the common currency attempted to rally as it managed to reach the 1.2150 resistance level, unfortunately, that also meant it was facing the 100-SMA on the 4-hour chart. Failing to move above the mentioned moving average, the instrument fell back towards the 1.2130 where it’s currently trading, as of this writing. Looking into the RSI (Relative Strength Index), we can see that the indicator is printing at the 50 level which signals indecision and consolidation
Gold had been facing some volatility towards the end of the day after the precious instrument attempted to break above $1,870. However, with the current bearish pressure, the instrument failed to close above the mentioned level and proceeded to fall back below the 100-SMA on the 4-hour chart. But Bulls were not to be defeated so easily as the start of the trading day saw XAUUSD climbing back above the moving average as it trades around $1,860 as of this writing.
What’s the strategy you’re going to use when it comes to trading these markets? Will the new month prove a new beginning to the markets? Or will there be more of the same?
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Bitcoin Faces Against $34,000
Bitcoin had been feeling the effects of the downward pressure, enough that it broke below the $33,200 support. The instrument didn’t stop there as it broke the $32,500 support level and the 100-SMA on the 4-hour chart. However, Bulls were able to protect the $32,000 support zone. A low is formed near $32,178 and the price is currently rising, as the current bullish momentum allows it to move higher as it broke the $32,500 and $33,000 resistance levels.
Bitcoin is now trading above the $33,500 level and the mentioned moving average. It’s currently testing the key $34,000 resistance zone. To put things in perspective, there’s a major declining channel forming with resistance near $34,000 on the hourly chart, giving the mentioned level a sense of importance, as breaking above it could mean a new leg higher for Bitcoin. A successful break above the $34,000 resistance level could open the doors for a larger increase in the coming sessions. The next major resistance sits at $35,400, followed by $36,200.
If the Cryptocurrency fails to clear the $34,000 resistance zone, the risk for fresh declines would increase. An initial support is near the $33,000 level. The next major support is near the $32,200 level. Any more losses could lead the price towards the channel lower trend line at $31,500. If the price fails to stay inside the channel, it could easily dive towards the $30,000 support zone.
Current Market Sentiment:Cautiously Bullish.
ECB Downplays Rate Cut, EURUSD in Stasis
EUR/USD struggles to gather upside traction despite the European Central Bank (ECB) walking back on its recent attempts to jawbone the single currency. On Friday, Reuters quoted five sources as saying that the central bank is unlikely to reduce its already-record low policy rate to counter the coronavirus-induced slowdown, as it would have a limited impact on the economy. Besides, the euro's exchange rate is still within its historical range, despite having rallied by 14% against the dollar since March.
The markets were caught off guard last week after Dutch central bank's governor Klaas Knot signaled scope for a deeper cut in the Deposit Facility Rate, currently at minus 0.5%. However, while the central bank seems to have backed off from its dovish messaging, the EUR Bulls remain elusive. EUR/USD is trading largely unchanged on the day near 1.2130, having faced rejection above 1.2150 on Friday.
Seasonality also favors a pullback in EUR/USD. According to Credit Agricole CIB Research, the USD tends to do well on average in February, with historic gains particularly pronounced when they followed broad losses in January. Data-wise, the focus today is on the German Retail Sales, Manufacturing PMI, and the US ISM Non-Manufacturing figure.
Current Market Sentiment: Neutral to Bearish.
Gold Eyes $1,880
Gold (XAU/USD) is set to retest daily highs at $1867, having found strong bids around $1850 levels amid a revival of hopes on a likely US fiscal stimulus. The risk sentiment received a fresh boost alongside gold prices, as the US dollar eased across the board after reports that US President Joe Biden is expected to meet a group of republican senators later on Monday to discuss the COVID-19 relief package. The republicans have trimmed down the stimulus package to $600 million.
The Wall Street retail-trade frenzy and the ongoing rally in silver prices also keep the sentiment around gold underpinned. Although, the vaccine optimism in the Euro area could limit the gains in the bright metal.
The RSI holds steady above the midline, suggesting that there is additional room to the upside. The spot trades above all the major averages on the given timeframe, having witnessed a bullish crossover earlier in the Asian session. The 21-simple moving average (SMA) cut the 50-HMA from below represents a bull cross. A break below the falling trendline support at $1858 could invalidate the pattern, opening floors for a test of the 50-SMA at $1855.
Current Market Sentiment: Bullish.
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