The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 28.01.2021
The entire market atmosphere seems to have turned into a bearish territory. The FOMC’s decision yesterday has pushed the market deeper into the negative zone. Bitcoin has continued to experience the bearish pressure, but there seems to be enough support to push the market back higher. EURUSD and Gold are both turning defensive after the FOMC announcement yesterday, the support levels will have a tough time keeping things in check with USD strength.
With that said, let’s find out how the markets are doing on January 28th, 2021.
The bearish pressure that we’ve witnessed on Bitcoin for the past couple of days, has made its intention known as it drove the Cryptocurrency lower breaking through the $30,600 support and even through the $30,000, before settling around the $29,000. From that level on, the instrument was able to bounce back higher as it traded near the $32,000. The RSI (Relative Strength Index), on the 4-hour chart, is showing increased bearish momentum, but it does seem to be decreasing as of this writing.
The bearish momentum on EURUSD continued after yesterday’s FOMC release. The announcement came in as expected with rates on hold as the committee decided to take a wait-and-see approach to what is happening in the U.S. economy. The result was the heavy fall of EURUSD, below the 1.2080 support, making the instrument reach a low of 1.2060 before rising back towards 1.2130, however the Bears still held everything in their hands.
Consolidation turned into bearish pressure as we’ve been saying for sometime now. Gold had succumbed to the Bears as the FOMC announcement didn’t help much in that regard. The instrument continued to move lower as it currently trades at the support of $1,835. It broke below it yesterday, but only slightly before climbing back up, but the damage had already been done. The RSI on the 4-hour chart, shows that Gold is on the verge of becoming oversold and has some more space to continue moving lower, as the $1,800 looks like the line in the sand for the time being.
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Bitcoin’s Hunt for Launchpad
Bitcoin continued with the foreseen breakdown after losing support at $31,000. The bearish leg explored levels slightly under $30,000 but buyers were very keen on limiting the downward movements. Meanwhile, the flagship Cryptocurrency is trading above $30,000 amid the push by the Bulls for gains heading back to $40,000. However, Bitcoin is also facing a critical resistance brought about by the ascending parallel channel’s middle boundary. Confirmed price action above this zone is likely to add credibility to the bullish outlook.
Simultaneously, the gap made by the 50 SMA (Simple Moving Average), on the daily chart, above the 100 SMA and 200 SMA, on the same chart, suggests that buyers have the upper hand. A couple of key levels must come down for BTC to jumpstart the rally back towards $40,000, the channel’s upper boundary and seller congestion at $32,000.
On breaking above $32,000, more investors will be attracted to the market and are likely to respond by increasing their positions in BTC. This will create a strong tailwind behind Bitcoin, perhaps enough to shatter the hurdle at $36,000. On the other hand, it is worth noticing that the RSI still reinforces the downtrend. For now, the RSI line is still below the 40 and 50 line which suggests that Bears are in control for the time being, meaning a recovery may take a while to happen.
Current Market Sentiment:Bearish Turning Bullish.
EURUSD Turns Defensive
EUR/USD suffers losses as risk aversion in stock markets overshadows the dovish Federal Reserve (Fed) and keeps the safe-haven US dollar bid. The pair is trading near 1.2092 at press time, representing marginal losses on the day, and appears set to challenge the daily chart head-and-shoulders neckline support at 1.2052. The Asian stocks are tracking Wall Street lower. Major US indices fell by 2% on Wednesday on fears hedge funds may liquidate other investments to make up for losses registered in short positions in stocks such GameStop.
The US Federal Reserve kept its bond purchase program and benchmark interest rate unchanged Wednesday and delivered a slightly more dovish message by acknowledging recent moderation in the economic activity and calling for higher inflation. “The Fed is still a long way from meeting inflation and employment goals,” Powell said, adding that the bank will reveal its plans to taper well in advance. Even so, the dollar gained ground on Wednesday and is pushing higher at press time. The greenback's resilience to the dovish Fed is likely due to stock market’s instability.
Should the risk aversion worsen, the dollar will likely see stronger across-the-board gains, pushing EUR/USD lower to support at 1.2052. The futures tied to the S&P 500 have erased early gains to trade flat to negative. Data-wise, the focus would be on the preliminary German Consumer Price Index for January, scheduled at 13:00 GMT. A big beat on expectations is needed to help the euro score gains amid continued risk aversion. Also, the US Q4 Gross Domestic Product due at 13:30 GMT may inject volatility into markets.
Current Market Sentiment: Bearish.
Gold at Mercy of Risk Trend
Despite aggressive risk aversion on Wall Street, sending the S&P 500 to its worst single-day performance in about 3 months. Gold seemed to be in the same boat as the S&P index, but it didn’t fare just as bad as them. Anti-fiat gold prices weakened as a strengthening haven-linked US Dollar capitalized on investors fleeing for safety in Treasuries. That in-turn pushed yields lower in government bonds, a dynamic that can at times bode well for XAU/USD. Thus, falling Treasury rates in some ways cooled downside potential for the yellow metal.
Gold prices are attempting to break under the longer-term 200 SMA on the daily chart. With confirmation, that could spell a rough road ahead for XAU/USD. However, a rising range of support from March 2020 seems to be keeping the focus tilted to the upside. A bounce off immediate support (1802 – 1822) may place the focus on the January 20th, 2021 high at 1875.
The current technical background suggests that the precious metal will be facing increased bearish pressure as the RSI prints close to the 30 level (33.61 to be exact). While this doesn’t suggest oversoldness per se, it does give the impression that there is going to be a test of that area soon enough. We believe that the current support at $1,835 will be acting as the barrier for any downward movements, breaking below will trigger the oversold scenario we mentioned.
Current Market Sentiment: Bearish.
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