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Technical Analysis for Bitcoin, Euro vs U.S. dollar, and Gold for 20th May 2021

The Daily Cryptomenon

This analysis was written at 9:00 am GMT +3, on 20.05.2021

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The FED Minutes had expressed that some policymakers are willing to start their discussion on tapering, which turned out to be extremely hawkish and pushed many instruments lower, while pushing the USD higher. The effect on the EURUSD and Gold are quite obvious as the markets try to adjust how they take the new information.

Bitcoin, on the other hand, has been facing extreme volatility as it continues the movement lower with the Bears’ eyes set on $30,000. However, the extreme movements have reshuffled the playing deck and we could be seeing some change in the way the instrument is trading.

With that said, let’s find out how the markets are doing on May 20th, 2021.


Bitcoin Touches Upon $30,000 

Volatility is the name of the game on bitcoin after the 31% drop followed by a 33% increase. Bitcoin Bears had continued with their attack and display of muscle which led to losses reaching below the $35,000 level. The instrument had reached a low of $30,000 before the Bulls were able to hold off the negative momentum and drive the instrument back higher towards the $43,000 resistance. However, the losses were not focused solely on bitcoin, instead, almost all the entire crypto market was affected. Over $500 billion was wiped off the cryptocurrency market led by altcoins such as Ethereum, Dogecoin, Binance Coin Polkadot, and Bitcoin Cash.

With that said, there are some bullish signs peaking through, especially when the RSI (Relative Strength Index) and MACD (Moving Average Convergence Divergence) are concerned. The RSI had been able to kick the oversold territory and seems to be heading in an upward trajectory, in an attempt to break above the Midline. This shows that buying activity is taking place, as investors seem to be convinced that there’s going to be an extension to higher levels. The MACD is also showing the same bullish momentum, despite the current location of the MAs. The histogram also shows a decrease in the bearish momentum which could prove useful for the Bulls.



We’ve expressed how the instrument had managed to reach the $43,000 resistance level, in a clear sign of bullish behaviour, however, since then there had been some movement lower. Despite that, a recovery is underway, but bitcoin needs to confirm a break above $40,000. Most investors remain skeptical of the recovery, afraid to end up in a Bull trap. Price action past $43,000 will ensure that attention shifts from seeking support to gaining traction toward $50,000.

Current Market Sentiment:Bearish


EURUSD Faces Bearish Correction

The Fed Minutes had a great negative impact on the instrument. The minutes had shown that some policymakers were willing to begin the discussion of tapering in the next few meetings, as well as how reflation risks have returned to the table, all of which put further demand on the USD safe-haven and allowed it to move higher. This forced the EURUSD to fall heavily, but the supports around 1.2160 are keeping things in check with some bullish presence to push the instrument back above 1.2200.

It should be noted that a lack of a risk-on mood in the market is going to be a strong headwind for the instrument which might cause it to experience some consolidation, or even a further pullback. The risk-off mood also took clues from St. Louis Fed President James Bullard’s comments who cited the need to talk over the Fed’s next move. Some sentiment-related headlines that couldn’t direct markets include the European Union’s (EU) new VAT rules for Aussie-China tussles and increasing odds of a ceasefire in Gaza.


EURUSD traders will be mostly interested in hearing more about tapering and COVID-19 vaccine from the US and EU respectively. Given the recently hawkish FOMC minutes, Fedspeak will be closely observed before targeting any further USD strength. Though, the US Treasury yields may help the pair to test the immediate hurdle.

Current Market Sentiment:Neutral with Bearish Bias


Gold Seeks $1,890 After FED Induced Pullback

Gold price is edging higher above $1,870, looking to extend its post-FOMC minutes led slide to $1,863 levels. The renewed weakness in the US Treasury yields offers a fresh boost to gold price. Furthermore, the FOMC April meeting’s minutes revealed that a debate on tapering of the bond-buying programme could be on the table “at some point.” This has put pressure on the yellow metal which forced it to drop.

Additionally, gold prices came under additional downside pressure after China’s State Council said that they will crack down on malicious trading and investigate behavior in commodities that bids up prices. Attention now turns towards the US weekly jobless claims data for fresh trading incentives. With that said, it would seem that traders are buying the mantra and gold prices are enjoying the Goldilocks environment with ultra-loose monetary policy and a softer dollar which are a cocktail for higher inflation.

 


The technicals, however, tell a bit of a different story especially with how the RSI is printing. The instrument is showing more signs of bullish behaviour, but the RSI is not on board at all, as divergence can be seen happening. The price action is showing an upward trend, while the RSI is not duplicating that trend. This divergence will lead to some correction or consolidation on the price actions side in order for the RSI to catch up to how the instrument is moving.

Current Market Sentiment:Neutral - Bullish Bias


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