The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 09.02.2021
All markets experienced a major move to the topside and the main factor could be attributed to a weakening USD. Bitcoin continues it’s previous trend of conquering new All-Time Highs as it breaks above the $47,550 and looks towards the $50,000. EURUSD is showing an increase as the USD weakens and looks to challenge the 1.2100 resistance level. Meanwhile, Gold seems to be also enjoying some bullish momentum, however, with the current risk atmosphere in the market, it’s not sure whether it will continue higher or not.
With that said, let’s find out how the markets are doing on February 9th, 2021.
Bitcoin spiked heavily yesterday after the market was abuzz with the news that Tesla has bought $1.5 billion in the Cryptocurrency. However, there are rumors floating around that Apple seems to be in talks to purchase $5 billion of Bitcoin. The effect was tremendous as the instrument reached a new All-Time high at $47,550 before dropping back towards $47,000. However, with the current volatility on this instrument, things will be very erratic. The RSI (Relative Strength Index) shows extreme overboughtness, so one might think there will be a correction in the short term.
After a brief consolidation around the 1.2050, EURUSD managed to find the needed bullish momentum to break above the mentioned resistance as it currently trades near 1.2080. With this move, an inverse head and shoulders formation has been created and it seems that there’s a big chance that the instrument might reach the 1.2130 should the formation hold true. The RSI also backs this scenario as it crosses above the 60 level indicating that there’s still room for the upside to continue.
Gold has also experienced a major move to the upside after it broke through the $1,830 resistance level. However, it’s currently attempting to break above the $1,840 and $1,845 resistance zone which is represented by the 100-SMA (Simple Moving Average) on the 4-hour chart. Breaking above that zone could cement the current bullish momentum, where the instrument does have the momentum to do so as the RSI is printing above the 60 level indicating bullish momentum. There’s also some more room for upside movement.
What’s the strategy you’re going to use when it comes to trading these markets? Have the markets begun a reversal? Or will they simply find the original trajectory again?
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Bitcoin Goes Ballistic
Bitcoin resumed the uptrend on Monday after confirming support at $38,000. Closing the day above $40,000 also encouraged more buyers to join the market. The flagship Cryptocurrency broke past the previous all-time high at $42,000, pushing the bullish leg above $45,000. The rally seems unstoppable as the instrument marches towards $50,000 and is currently trading around $47,800.
Short-term analysis on the 4-hour chart suggests that Bitcoin’s path of least resistance is still moving upwards. For instance, the upward trend has been reinforced by the Moving Average Convergence Divergence (MACD). The technical indicator is moving higher above the midline at the same time the MACD line shows that Bitcoin is still in a buy zone. However, with RSI printing at the 84 mark, it shows extreme overboughtness and that could spell some trouble for the Cryptocurrency.
As long as Bitcoin continues to trade above $45,000, investors will hold onto their bags while anticipating a breakout above $50,000. Moreover, it has been found that only 11% of the entire Bitcoin supply is available for trading. In other words, demand is currently high amid constricted supply. Thus, the pioneer Cryptocurrency could continue to rally in the near term.
Current Market Sentiment:Bullish.
EURUSD Looks to the North
EUR/USD looks north, as the USD extends the post-payrolls losses on stimulus expectations. The pair seems to be battling against the 100-SMA on the 4-hour chart and now trades near 1.2080, representing a nearly 0.30% gain on the day. The SMA is located at 1.2090 at press time. Since Friday's weak Nonfarm Payrolls data, the dollar has been losing ground. The dismal data pointed to slower-than-expected economic recovery crystallized support for President Joe Biden's fiscal stimulus plan worth $1.9 trillion.
Some analysts see that the House is likely to pass the stimulus plan over the next two weeks, and Biden is hoping to have Senate approval and final signing by March 15. There also seems to be some chatter in the markets that a $1,400 stimulus check appears to be a done deal. The impending stimulus is bearish for the dollar as it often leads to higher spending, boosting the deficit. The market looks to be pricing that in advance by selling the dollar.
However, the dollar may find bids if the stock markets witness a "sell the fact" trade. From a data viewpoint, the focus will be on the German Trade Balance and US JOLTS Job Openings, scheduled at 15:00 GMT. The pair could also take cues from ECB's Lane speech and the action in the Eurozone bond markets, where the spread between the 10-year Italian and German bond yields is falling on fading political uncertainty.
Current Market Sentiment: Bullish.
Gold Edging Higher
Gold has managed to advance for the third day against the backdrop of a weaker USD. Markets awaited a fresh $1.9 trillion U.S. COVID-relief package to be approved by Congress. The Dollar index (DXY) retreated to 90.74 from a two-month high of 91.55 as stimulus hopes were built against the backdrop of a much weaker-than-expected non-farm payrolls report.
While inflation expectations and gold prices appear to have diverged over the past few months, a rising inflation outlook may still provide longer-term support to precious metals. That is because they are perceived as inflation hedges and a store of value. Inflation could continue to rise should the economy bounce back strongly in the first quarter. Besides, relative underperformance of gold prices this year could be attributed to rising longer-dated US Treasury yields and an exuberant stock market rally. These have been making the yellow metal less appealing compared to riskier assets.
Technically, gold prices returned to ‘range-bound’ trading conditions after briefly dipping below it, with $1,810 and $1,870 serving as immediate support and resistance levels respectively. The overall trend remains bearish-biased as suggested by downward-sloped moving average lines. The RSI is showing some bullish momentum as suggested earlier as the indicator prints above the 60 level indicating that there’s still room for more upside movements, but gold would need to break above the $1,845 resistance level for that momentum to continue.
Current Market Sentiment: Cautious Bullishness.
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