The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 21.01.2021
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The overall scene in the markets does seem skewed to the upside. On one hand, Bitcoin seems to be favoring the downside with the Bulls unable to keep dishing out those All-Time Highs. On the other hand, the EUR will be facing it’s most dangerous adversary later on in the day, the ECB. Gold will also be facing some bearish challenges as the upside might be in trouble.
With that said, let’s find out how the markets are doing on January 21st, 2021.
Market Recap
Bitcoin continues to trade in the previously mentioned range between $38,000 and $33,850. The Cryptocurrency has continued to trade in consolidation without much movement beyond the mentioned levels. However, the downward pressure has mounted on the instrument as it attempts to break below the $33,850. The instrument has attempted to close below the mentioned level twice now, but the Bulls are not having any of it, as they fight to keep the what semblance of bullish pressure alive.
It seems that the bullish pressure on the EURUSD is increasing in presence. Yesterday we saw how the instrument was attempting to continue moving higher, it even managed to break above the 1.2160 level, but Bears quickly stepped in. That does not rule out that the Bears are still in control of this market, the Bulls have an uphill battle to fight if they wish to move the instrument back into the positive zone. The RSI (Relative Strength Index) is currently printing at the 60 level indicating that there is still enough room for further upside movement.
Breaking above the resistance at $1,865 is one way to say that the bullish pressure has found its way back into the yellow metal. However, the danger of a slide back down has still not been ruled out. The momentum to move higher seems to be waning and this might suggest that Bears are getting ready to make a move against the Bulls. The RSI indicator on Gold is slightly above the overbought level at 72 and it gives the idea that we might be seeing a pullback.
What’s the strategy you’re going to use when it comes to trading these markets? Will markets continue to move in their current direction? Or will the overall trend take over?
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Bitcoin Could Extend Losses
Yesterday, we addressed the possibility that Bitcoin might be facing extensive bearish pressure. The current path that BTC follows does seem to be towards the downside, as it battles against the $33,850 support zone. The Cryptocurrency managed to reach a low of $33,390, however it managed to climb back above the $34,000 and currently trades around $34,600.
As long as BTC remains below the $35,500 and the 100-SMA (Simple Moving Average) on the 2-hour chart, you can expect that the bearish pressure will continue to exert its full force on the instrument. Currently, it seems that the $34,500 is a support which Bears are looking to break, if that was to happen, the price might decline sharply below the $34,000 support. The next key support is near the $33,300 and $33,250 levels, below which the bears are likely to aim a test of the $32,000 level.
If Bitcoin is able to start a fresh upward move, an initial resistance is near the $35,200 level. The first major resistance is near the $35,800 level, but in order for the instrument to move into a positive zone, the price must clear the $35,800 and $36,000 resistance levels. A successful close above the $36,000 resistance, will have it facing the 100-SMA on the 2-hour chart at $36,300 which in turn could open the doors for a push towards the $37,500 level.
Current Market Sentiment:Bearish.
EURUSD Focuses on ECB
EUR/USD's rally has stalled over the past two weeks, and the pair could suffer deeper losses if the European Central Bank (ECB) expresses displeasure over the single currency's strength on Thursday. At press time, the currency pair is trading near 1.2135, representing a 0.3% gain on the day. While the pair has pulled back from multi-month highs near 1.2350 observed earlier this month, it is still up by at least 500 pips from early November lows near 1.16.
The stronger euro got attention from policymakers in December. “Concerns were voiced over risks related to developments in the exchange rate that might have negative consequences for the inflation outlook,” according to the ECB's December report. The minutes also took note of the euro's record nominal effective exchange rate and its disinflationary impact. Besides, the Eurozone economy is facing the risk of recession due to the worsening coronavirus situation and political tensions in Italy and other nations.
EUR/USD may probe the recent low of 1.2053 if the central bank uses strong words while noting the unwanted effects of the euro's strength. The strong euro is a problem, but keeping the door open to more asset purchases if there’s further economic weakness could in many ways achieve the same goal of easing demand for the currency.
Current Market Sentiment: Cautious.
Can Gold Continue Moving Higher?
Gold has surged this week as it looks to recover from losses suffered in early January. While the fundamental landscape and tailwinds for the precious metal have remained largely constant, a rise in treasury yields may have worked to erode gold’s standing as a safe haven. Either way, gold has moved off its monthly lows and toward its 200-day moving average which may provide early resistance to a continuation higher.
This push higher in precious metal prices looks set to endure in the near term, as President Joe Biden’s pick for Treasury Secretary Janet Yellen pushes for additional deficit spending to bolster the nation’s nascent economic recovery. The former Federal Reserve Chair stressed that “the most important thing we can do is to defeat the pandemic, to provide relief to American people and to make long-term investments that make the economy grow and benefit future generations”.
Resistance marked by the $1956 level may be important, as it coincides with the metal’s peaks in November and January. Thus, it can be argued it is the “line in the sand” that, if broken, could open the door to a longer-term continuation higher as it would curb the series of lower-highs that have been established. The presence of resistance overhead might pose a threat to such a continuation and, as a result, the technical case for longer-term bullishness is fragile at this time.
Current Market Sentiment: Neutral with bullish bias.
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