The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 11.02.2021
The markets have had an impressive run so far as almost all markets, with a few exceptions, experienced bullish momentum, however it seems that the momentum is fading out for the time being as we see them consolidating at their respective levels. Bitcoin consolidated below the major resistance level and just above the support as the risk of a fall downward increases. EURUSD consolidated as well just below 1.2150 despite Jerome Powell coming out with some rather dovish comments. Gold is caught in the consolidation zone between $1,850 and $1,830 as it contemplates its next move.
With that said, let’s find out how the markets are doing on February 11th, 2021.
Bitcoin seems to be under some bearish pressure, this comes after the instrument attempted to reach $50,000 but was blocked by $48,200. The aftermath was a sharp decline towards $44,000 which seems to be acting as a major support for the time being. Bulls were able to keep that level in check as there seems to be a minor bounce towards $44,800. The RSI (Relative Strength Index) also gives much strength to the $44,000 level as the indicator is showing consolidation at the 60 level indicating that the bullish scenario still holds water.
EURUSD’s bullish momentum that we’ve seen in the last couple of days reached the 1.2150 critical level, however it seems that the momentum wasn’t enough to break above the mentioned level. The instrument is currently trading around 1.2130 as consolidation takes hold. This was to be expected as the RSI was printing well above the 70 level and into overbought conditions, so a correction or consolidation is quite normal at this juncture.
Gold hasn’t been enjoying the bullish momentum that other instruments have been displaying, instead it seems content with consolidating between $1,835 and $1,850. The precious metal failed to rally above $1,850, even though it managed to break it, only to fall right back towards the mentioned support. The overall risk sentiment in the market is leaning towards risk-on and that puts downward pressure on the yellow metal as we’ve seen in its inability to properly break above the $1,850 resistance.
What’s the strategy you’re going to use when it comes to trading these markets? Will consolidation take hold of the markets? Or will there be a dedicated move in a single direction?
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Bitcoin Risks Fall to $38,000
Bitcoin surprised many traders after the recent spike which reached a new record high at $48,000. The flagship Cryptocurrency rallied as Tesla, the world’s largest electric vehicle manufacturer, bought BTC. The Elon Musk founded company also committed to letting customers pay for the vehicles with this Cryptocurrency. Meanwhile, Bitcoin has retreated from the all-time high and is currently exchanging hands at $44,770. If higher support above $40,000 becomes challenging to secure, the bellwether Cryptocurrency may explore lower levels.
The region at $38,000 was a critical barrier during the recent run-up from $30,000. However, it has flipped into a formidable support area likely to absorb the selling pressure and stop the declines. Examining the RSI closely, we can see that it suggests that the path of least resistance is to the downside. When used correctly, the RSI can identify exit positions and buy the bottom entry points. For now, the RSI is printing right at the 60 level which still shows some bullish behaviour, but the risk of more downside is mounting.
Bitcoin’s downtrend is likely to continue in the near term. However, we can not say for sure how far it will go. Note that the 100-SMA (Simple Moving Average) has crossed above the 200-SMA on the 4-hour chart, forming a golden cross. This bullish signal could see BTC ignore the bearish call and resume the uptrend toward $51,000.
Current Market Sentiment:Cautious with Consolidation.
EURUSD Pauses Despite Dovish Powell
EUR/USD struggles to extend recent gains in the wake of dovish comments by Federal Reserve chairman Jerome Powell. In prepared remarks for a webcast to the Economic Club of New York on Wednesday, Powell said that the job market is far from fully recovered and that the Fed isn't considering raising interest rates from the current near-zero levels. Such comments typically attract offers for the US dollar. However, this time, the dollar bears have remained on the sidelines (at least till now).
Indeed, the recovery rally from Friday's multi-week low of 1.1952 looks to have stalled. Likely playing the spoilsport is the European Central Bank Governor Christine Lagarde's take on inflation. On Wednesday, Lagarde said that inflation is unlikely to move toward the bank's 2% target over the medium term, indirectly hinting at a prolonged monetary easing.
Looking forward, a continued rally signaled by technical indicators could remain elusive courtesy of Eurozone's slow vaccine delivery and potential risk-off due to rising bond yields. The data calendar is light on Thursday, with just US weekly jobless claims scheduled for release at 13:30 GMT.
Current Market Sentiment: Consolidation.
Gold Between $1,830 and $1,850
Spot gold prices were choppy on Wednesday, swinging between a roughly $20 range between the $1830 and $1850 levels, but still managed to close Wednesday’s session with gains of around 0.3%. Looking at the spot price over a short time horizon, XAU/USD has respected an uptrend from the Monday Asia Pacific session open low at just under $1830.
Meanwhile, XAU/USD’s 200-day moving average (DMA) at $1854 provided tough resistance on Wednesday. This implies that as long as the precious metal continues to respect this week’s uptrend support and 200DMA resistance, prices should continue to squeeze in the hours/days ahead, forming an ascending triangle that would theoretically be subject to a break out to the upside.
Conversely, failure to break above the tough area of resistance in the $1,850s and a subsequent break below the uptrend that has offered support to the price action this far this week would open the door to a test of support in the $1,830-$1,835 area. A break below this level could open the door to a collapse back down towards this month’s low in the $1,780s, ahead of lows set last November in the $1,760s.
Current Market Sentiment: Consolidation.
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