The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 22.01.2021
The weekend has just started to loom upon us as the market tries to digest a week filled with ups and downs. Bitcoin is caught by the Bears for the time being as it continues to move lower. EURUSD, on the other hand, seems to be shrugging off all the rhetoric from Lagarde and continues to move higher. While Gold seems to be waiting on the USD to make its move before committing to one of its own.
With that said, let’s find out how the markets are doing on January 22nd, 2021.
The Bears have taken hold of Bitcoin as it broke through the $30,000 support level and there just might be enough bearish pressure to start a downward run. Bitcoin’s bearish pressure can be seen as a blessing in disguise as the instrument has continued to reach new highs without much pull back, which means the instrument has become rather overextended and a pull back can be helpful. Bitcoin reached a low of $28,730, but managed to eke out a bounce allowing it to climb back above the $31,500.
The bullish momentum that is exhibited on the EURUSD is allowing the common currency to reach back towards previous levels in an attempt to reclaim some positiveness. After struggling to break above the 1.2150, the instrument managed to pull back, gather enough momentum, and attempt again. It succeeded in breaking the mentioned resistance, but quickly encountered another level at 1.2180. It seems the Lagarde’s speech and rhetoric on a strong EUR didn’t do much to faze the common currency. The next target for the Bulls seems to be the 1.2180 followed by the 100-SMA (Simple Moving Average) on the 4-hour chart and the 1.2200.
Gold managed to break out of the consolidation that we spoke about in earlier briefs, however it seems that it has encountered heavy resistance at the 100-SMA on the 4-hour chart and has pulled back. The pullback shows that the instrument will be targeting to break below the $1,855. The RSI (Relative Strength Index) is currently printing around the 50 level indicating some consolidation, however the trend seems to be to the downside, so this pullback might extend and reach the $1,835 support.
What’s the strategy you’re going to use when it comes to trading these markets? Have the markets finished their corrective move? Or will this move take over and become the new trend?
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Bitcoin Extended Losses
We had indicated that Bitcoin is facing the risk of more downside movements as it broke through several supports reaching a low of $28,730. After the Cryptocurrency failed to recover above $34,500, it started a strong decline, breaking below support near $33,000 and $32,800. In turn, this opened the doors for more downside movements below $32,000 and even tumbled below the $30,000 level. After reaching even lower levels, Bitcoin was able to rebound slightly and is currently trading above the $31,500.
On the upside, with BTC able to break above the resistance levels at $30,000 and $31,000, it’s clear to see that the next level in question will probably be at $32,000. There is also a key bearish trend line forming with resistance near $32,700. However, Bitcoin is not out of the woods just yet as the price must clear $32,800 and $33,000 (support turned resistance).
If Bitcoin fails to recover above $31,800, there is a risk of another decline. An initial support on the downside is near the $30,000 level. The first major support is near the $28,800 and $28,500 levels. A close below the $28,000 support zone could open the doors for a drop towards the $25,000 support zone in the coming sessions.
Current Market Sentiment:Bearish.
EURUSD Remains Strong
EUR/USD is showing resilience to losses in stock markets, with investors eyeing key data releases, which are expected to show a continued expansion of the manufacturing sector in Germany and across the Eurozone. As of this writing, the pair has failed to break above the 1.2180 and is currently pulling back slightly around 1.2170, representing a 0.12% gain on the day. The anti-risk USD is struggling to draw bids, keeping the EURUSD bid despite the 0.37% decline in the S&P 500 futures and the pullback in the major Asian stock market indices.
The European Central Bank's (ECB) all talk and no walk approach on the exchange rate is another factor that favors a continued rise in the single currency. On Thursday, President Lagarde avoided any direct criticism of the currency, saying only that FX appreciation is a drag on inflation.
Looking ahead for the day, the PMI data, which are due for release at 08:30 GMT, is expected to show continued expansion in the activity despite the coronavirus-induced lockdown restrictions. The broader Eurozone PMI is forecast to paint a similar picture. EUR/USD will likely extend gains if the data prints in line with estimates or beats expectations.
Current Market Sentiment: Bullish.
Gold Looks for USD for Direction
Anti-fiat gold traded relatively flat on Thursday as equities performed mixed during the Wall Street session. However, heading into the remaining 24 hours, XAU/USD is facing cautious selling pressure which could persist into the weekend. Futures tracking the Dow Jones and S&P 500 are aiming lower before European and North American trading hours. This is pushing up the haven-linked USD, and subsequently pressuring the precious metal.
The mood soured as Hong Kong announced that it will place a lockdown in a district within Kowloon amid rising cases of the coronavirus. This is set to begin this weekend. Gold will also be eyeing key Markit manufacturing PMI readings from the Eurozone and United States.
While gold prices have been struggling to find a direction as of late, the broader view remains tilted to the upside. That is because an area of rising support from March is holding. A push above the 1863 – 1848 inflection zone exposes the December high.
Current Market Sentiment: Neutral.
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