The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 19.02.2021
Markets are continuing to trade in somewhat of a corrective manner, as most instruments have become a bit overextended. Bitcoin is one of these instruments as it seems to be moving lower after it hit its new all-time high at $52,640. EURUSD is struggling to break above 1.2100 despite the bullish pressure that was exhibited on the instrument after Bank of France Head Francois Villeroy de Galhau gave his speech. Gold continues to move lower as the USD takes priority as a hegde in these uncertain times.
With that said, let’s find out how the markets are doing on February 19th, 2021.
Bitcoin seems to be unable to garner enough momentum to move itself above the most recent resistance at $52,640. Ever since the instrument managed to reach the mentioned level, it has been consolidating below it as it currently tests the 50-SMA (Simple Moving Average) on the 4-hour chart. The consolidation is in place as many technical aspects are indicating that would be the case, chief among them is the RSI (Relative Strength Index), breaking below the 50-SMA and the $50,000, the instrument might be subject to extreme bearish pressure.
The EURUSD seems to be subject to an intense bout of volatility. After the drop from above the 1.2150 resistance level, the instrument found some consolidation around the 1.2040 as Bulls managed to step in and push the instrument back higher above the 100- and 50-SMA on the 4-hour chart. The next level to beat for the Bulls lies at the 1.2100 above which the convergence between the 200-SMA on 1.2125 will play a serious role in the next leg of the EURUSD.
While there was some positive pressure from the EURUSD, which should have helped Gold a bit, the precious metal continued to fall, breaking below the $1,770 support level. The Bears continued to push the instrument lower reaching the $1,760 support level before the Bulls managed to snap control out from underneath the Bears. Currently the instrument is back above $1,770 and seems to be targeting the $1,790 which lies above the 50-SMA, so a break above that could lead to some bullish pressure higher.
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Bitcoin Correcting Gains
The pioneer cryptocurrency set a new all-time high around the $52,640, however, there seems to be some bearish pressure mounting on this instrument. Bitcoin seems to be correcting the gains it made and has started to fall below $52,000. It’s currently trading just above the 50-SMA on the 4-hour chart, which has been a major asset for Bulls providing enough bounce to move higher. Bulls will be looking to benefit from that yet again as bounce here, when everything shows that Bitcoin has become quite overextended, would be a great boon.
If Bitcoin manages to remain stable above the $50,500 and $50,000 support levels, Bulls might be able to continue moving higher. An initial resistance on the upside is near the $52,000 level. Should that in turn break, the focus will then shift to the recent all-time high at $52,640. If the price was to continue moving higher, the chances of reaching or even breaking above the $53,500 level increase dramatically.
If we were to look at the RSI and MACD (Moving Average Convergence Divergence) we’d notice that there’s actually a disconnect between the price action and these two indicators. The RSI is printing lower highs ever since Bitcoin recorded it’s high at $47,500, since then the instrument was posting higher highs every other day, while the RSI has not. The same goes to MACD and this brings the point that there will need to be a serious movement in the price of Bitcoin in order for everything to reset. That move could either be a long-term consolidation or a steep downward move towards the $46,000 support level.
Current Market Sentiment:Bullish.
EURUSD Finds Some Bullish Pressure
Despite the recent move higher in the price of the single currency, the bullish pressure seems to be fading out after EURUSD reached the 1.2100 resistance level. Demand for the common currency fell as losses in the U.S. stock futures increased. The original cause of the move higher in EURUSD was due to speech by the ECB’s (European Central Bank) Governing Council member and Bank of France Head Francois Villeroy de Galhau. His rhetoric helped the instrument rally higher which allowed it to reach the 1.2100 level.
Investors will be looking at the European PMIs (Purchasing Managers Index), specifically for Germany since that seems to be the most at risk. Estimates are calling for a drop to 56.5 from 57.1 as signs of a slight slowdown in the pace of the economic recovery. The Eurozone PMI is also expected to be released today with a forecast of 54.4 lower from 54.8. Should these figures miss their estimates and indeed fall lower, the EURUSD will have a major ride downwards.
Furthermore, the common currency is likely to remain under bearish pressure as the market gets ready to digest the data. On the other hand, the U.S. Treasury Yield seems on track to extend recent gains which will prove positive for the USD and hence negative to the EUR, adding more negative pressure. The instrument will attempt to stay above the 50- and 100-SMA on the 4-hour chart, as staying above them could allow the Bulls to bounce higher despite worsening economic activity in Europe.
Current Market Sentiment: Bearish.
Gold's Stand Worsens
Gold has weakened, but that’s really not news anymore as the instrument has been moving persistently lower for some time now. The main reason for such a move lower can be attributed to the rise in the U.S. Treasury rates. As rates increase, meaning more return, Gold gets weaker and it gives no return. However, what’s interesting about this particular move lower, is that it happened despite the current weakness in the U.S. stock market with U.S. jobless-claims coming in higher than expected.
The instrument is currently tending to its wounds after hitting a fresh seven-month low at $1,760, basically earning it the worst start to a year in almost 3 decades. The demand for the USD safe haven is back as the market continues to sour its mood. As explained, Treasury Yields are affecting the market since equity valuations and making this much worse for the U.S. stock market. Furthermore, with the U.S. jobless claims coming weaker, alongside the mounting fears over the new COVID-19 strains, are casting a dark shadow on the prospects of global economic recovery, and that is boosting the USD on the expense of the yellow metal.
The most recent move lower as shown in the price action takes the instrument from a low of $1,770 and moves it to $1,760. That move is also represented in the RSI but in a different manner, true that the RSI has shown a double dip, but the second dip on the RSI is not as low as the first or even lower. This divergence between the price action and RSI on the 4-hour chart brings in many possible scenarios, chief among them is the probability of a move higher in order for everything to be on the same level once more. In order for that to happen, Gold would have to break above the 50-SMA on the 4-hour chart in order to reclaim any semblance of normality.
Current Market Sentiment: Corrective Move Higher.
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