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Technical Analysis for Bitcoin, Euro vs U.S. dollar, and Gold for 29th January 2021

The Daily Cryptomenon

This analysis was written at 9:00 am GMT +3, on 29.01.2021

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The current turmoil in the stock market is proving to have an adverse effect on the peripheral markets. With the current situation, it’s unclear whether or not things will continue to be turbulent or step down until the mess has been resolved. Bitcoin’s current trajectory shows downside pressure, however the Bulls are aiming for the $35,000. EURUSD remains in its current range as it waits for the German GDP data to pick a course. Gold has become desynced with its volatility index which proves that markets aren’t acting logically at the moment.

With that said, let’s find out how the markets are doing on January 29th, 2021.


Market Recap

There was enough bullish pressure on Bitcoin that it managed to climb from the support level of $30,000 and reach the 100-SMA (Simple Moving Average) on the 4-hour chart. However, that also meant that it reached the resistance level of $34,400. With its inability to properly break through that level, Bitcoin found itself on the backfoot once more falling as it trades around $32,650 as of this writing. The consolidation zone between $34,800 and $30,000 continues to be the range in which the instrument trades.

Despite the apparent bounce in the EURUSD, the Bears are still in control of the situation. The common currency managed to bounce from the 1.2080 support to reach the 1.2140 level. From that level on, Bears regained control of the currency and forced it lower but managed to remain above the 1.2100. Looking at the RSI (Relative Strength Index) on the 4-hour chart, we can notice that with the inability of the indicator to print above the 50-level, there might be additional downward pressure involved.

Once Gold reached the $1,835 support, Bulls started to get their act together and staged a comeback against the Bears. With a sudden increase in momentum, the precious metal increased to $1,860, however with that move, it also encountered heavy resistance at the 100-SMA on the 4-hour chart. With Gold’s inability to continue higher, the instrument soon fell back towards the mentioned support. As we start the day, there does seem to be some bullish momentum starting, but it’s too early to tell. 

What’s the strategy you’re going to use when it comes to trading these markets? Will the markets continue to trade in their respective ranges? Or will there be a breakout? 

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Bitcoin Faces $35,000 Barrier

After forming a support base around the $30,000, Bitcoin managed to initiate a strong increase. BTC broke above the $32,500 and $33,200 resistance levels to move into a short-term positive zone. During the increase, there was a break above a key bearish trend line with resistance near $31,550. The increase was such that the pair even cleared the $34,000 resistance, however, once it reached the 100-SMA on the 4-hour chart, the Bears took over once again.

With presence of the strong resistance at the mentioned moving average, the instrument has succumbed to the will of the Bears as it continues to trade lower currently battling against the $32,300 support level. This level coincides with the mean line of the 50 period Bollinger Bands, breaking below that level would signal even more downside pressure for the instrument, enough to send it back towards the $30,000. With the RSI unable to stay above the 60 level, the Bears can still be considered in control.

 


If Bitcoin fails to clear the $34,500 or $35,000 resistance levels in the near term, an extended period of decline can be expected. An initial support is near the trend line at $32,300. The main support is now forming near the $32,000 zone. Any more losses may possibly call for a test of $31,200.

Current Market Sentiment:Bearish.


EURUSD Eyes German GDP

Germany's preliminary gross domestic product (GDP) for the fourth quarter, scheduled for release at 07:00 GMT, is expected to show the old continent's biggest economy contracted 3.4% year-on-year, following the third quarter's 3.6% contraction. The quarter-on-quarter figure is seen coming in at 0% versus 8.5% in the third quarter.

Purchasing Managers' Index (PMI) for manufacturing, which accounts for about a fifth of the German economy, rose to 58.3 in December from 57.8 the previous month. An above-50 reading indicates expansion. A big beat on expectations may put a bid under the single currency, helping EUR/USD hold the key support at 1.2050. That level is currently housing the daily chart head-and-shoulders neckline support. At press time, the pair is trading near 1.2110, representing a 0.20% drop on the day. 



The pair will most likely chart a head-and-shoulders breakdown if the European stock markets remain risk-averse, drawing stronger haven bids for the dollar. Stocks markets in the US and across the globe faced selling pressure earlier this week on fears of social-media-driven hedge fund selling, and due to concerns, the US fiscal stimulus will be smaller than hoped. 

 

Current Market Sentiment: Bearish.


Gold Losing Momentum

Gold prices are simply along for the ride in broader markets right now, a mere footnote to the volatility encompassing equity markets and some single stocks involved in a tug-of-war between retail and institutional traders. Consistent selling across asset classes mid-week suggests dramatic repositioning and potential liquidation, and the jump in gold price volatility – even without the corresponding rally in gold prices – suggests greater uncertainty settling into financial markets.

Gold volatility has fallen in recent days, dragging down gold prices. Gold volatility (as measured by the Cboe’s gold volatility ETF, GVZ, which tracks the 1-month implied volatility of gold as derived from the GLD option chain) is trading at 19.51. The 5-day correlation between GVZ and gold prices is -0.51 while the 20-day correlation is +0.69; one week ago, on January 28, the 5-day correlation was -0.39 and the 20-day correlation was +0.63.

 


Gold prices remain below the August-November 2020 downtrend, continuing to aim towards a familiar support area, the 23.6% Fibonacci retracement of the 2015 low/2020 high range at 1832.48, as well as the 38.2% Fibonacci retracement of the 2020 low/high range at 1836.97. Failure below these levels opens up a quick drop back to the yearly low towards 1802.96. Gold prices are fully below their daily 5-, 8-, 13-, and 21-EMA envelope, which is now in bearish sequential order.

Current Market Sentiment: Neutral.


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