The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 24.02.2021
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Powell’s comments have really moved the markets as the dovish comments really came out of left field on this one. Bitcoin fell heavily after it’s failure to continue the bullish momentum which led it towards the $45,000 support level, before moving higher. EURUSD and Gold both seem to be indecisive about their next leg of the journey, despite the dovish comments from Powell as other factors are coming into play.
With that said, let’s find out how the markets are doing on February 24th, 2021.
Market Recap
Bitcoin’s march higher has finally come to an inevitable end as the instrument fell well below the 100-SMA (Simple Moving Average). We had warned that breaking below said SMA could invoke a lot of downward pressure on the instrument. After breaking below the 100-SMA, Bitcoin fell below the $46,700 support level, however, the $45,000 was there to keep things in check, there was quite some volatility on that level, before the Bulls managed to find the momentum needed to break above the 100-SMA and seem on course to target the $52,500 resistance.
EURUSD was waiting on Powell’s testimony yesterday as it decided which way to trade. Well, the testimony was rather a dud in terms of volatility leaving the instrument trading where we left it around the 1.2150. The 1.2180 resistance level was too much for the Bulls to handle, and when combined with the rhetoric from Powell, which proved positive to the USD, EURUSD simply fell towards the first line of support at 1.2150 where it currently consolidates. The 50-SMA is there to keep an eye on things, but we doubt it will play a major role in case there was another attempt towards the downside.
After failing to break above the $1,820 and the 100-SMA, Gold simply consolidated its gains and started looking for the next bout of momentum to see which way is best to go. The instrument did suffer some losses during the Powell testimony as it dropped towards the $1,795, however, it was able to recover back above the $1,800 level. The 50-SMA is providing the needed support for any kind of bullish momentum, and if this is the case, we can expect a move towards that level before a move higher takes place.
What’s the strategy you’re going to use when it comes to trading these markets? Is consolidation the name of the game at this point? Or will the market quickly get over the current sentiment and move?
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Bitcoin Struggles to Break $52,500
Bitcoin experienced heavy losses which forced it to drop below the $50,000 support level and even continue its fall towards the $45,000. As mentioned earlier, the instrument did manage to find enough bullish momentum from that support and establish a decent push higher above the 100-SMA which it had broken earlier. The movement higher seems to be impeded by the 50-SMA as well as the $52,500 resistance level, and the current structure of the price action suggests that Bitcoin will have a hard time breaking above either level.
The RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) seem to show the same exact scenario. During Bitcoin’s fall to the $45,000 level, the RSI fell towards the 30-level indicating that the bullish momentum has all gone, or at the very least received a heavy blow, and the subsequent rise barely reached the above the 45-level and tells us that there’s still some bearish pressure around Bitcoin. MACD is also telling the same story as the Moving Averages have dropped below the midline and the histogram is seen as recovering from the negative move.
The current level to beat for Bulls is at $51,800. Failing to break above that level, the chances of another dip do increase exponentially, with the $48,000 acting as the first level of support, below which the $45,000 will be the target of Bears. Should Bears continue the pressure downwards and break the $45,000 level, you can expect a drop in the price by 8% to 10% in the near term, with the next major support sitting at $40,000.
Current Market Sentiment:Bearish.
EURUSD Consolidates with Indecisiveness
Powell’s testimony yesterday played a major role in the market. Powell struck a very dovish tone, that failed to entice the EURUSD Bulls to step in and move the instrument higher which left it to consolidate around the 1.2150 as it seems indecisive in which way to commit. Powell’s testimony said “The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain”, which contradicts the widespread positive tone that the markets seem to be enjoying and that shows a rapid growth in the economy.
Despite all the dovish rhetoric from Powell, the USD remained resilient to any bearish pressure and kept the instrument consolidating at the 1.2150 and within range of the Doji that EURUSD witnessed on Tuesday showing the inability to commit to a certain direction. The main reason for this indecisiveness comes from none other than Christine Lagarde, the ECB (European Central Bank) President, specifically when she talked about the rising bond yields. Her comments, plus Germany's slow roll-out of the vaccine, have put a damper on any bullish pressure from the EURUSD.
There’s not much to add to the current structure of the EURUSD as it trades just above the 50-SMA with both RSI and MACD showing signs of consolidation. Over the medium term, one can expect the EURUSD to trade between the 1.2050 and 1.2200, however, shorter-term upward momentum has increased. But for any kind of meaningful bullish momentum to take place, the instrument must be able to break above the 1.2190. While the prospects of this happening are low, it’s not out of question as long as EURUSD manages to stay above 1.2080.
Current Market Sentiment: Consolidating.
Gold Falters Despite Dovish Powell
The dovish comments from Powell have helped the precious metal gold to recover above $1,800 as it consolidates its movement there. In his testimony, Powell signaled that the economy is nowhere near full capacity, which comes in direct contradiction of the market, as they believe that this year will see massive growth. Add to that the current impeding House vote on Biden’s $1.9 trillion stimulus plan, which is expected to happen this Friday. So Bulls are now just weighing in on all this information and trying to decide which is the best move forward.
The RSI and MACD on the 4-hour chart are depicting this consolidation. RSI is showing signs of decreasing bullish pressure as the indicator prints around the 60-level which is not always the best sign when trying to move higher. The MACD is also showing a decrease in the bullish momentum as the moving averages seem to be leveling out as the histogram shows the same exact thing as it falls towards the midline.
With all that in mind, any further upside in Gold seems unlikely and could be facing quite a fierce battle should that come to pass. There are a lot of strong resistances in play that could put a serious dent in any bullish momentum with the first zone seen between $1,816 and $1,818. Should Gold find itself above that zone, the $1,827 will come into play above which the $1,840 will be the ultimate goal for Bulls. On the downside, Gold will be contesting against the support zone of $1,803 and $1,800. Breaking below said zone, will have Bears contending against the $1,796 which might test their commitments.
Current Market Sentiment: Consolidating.
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