The Daily Cryptomenon
This analysis was written at 9:00 am GMT +3, on 24.05.2021
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The start of the week brings with it talks of tapering making its rounds in the Fed. This has caused the markets to become extremely agitated and very volatile, as the tiniest bit of information that more tapering talks are expected to happen, might set off fireworks in the markets. That being said, the EURUSD had fallen due to the risk-off mood concerning the tapering talks as investors wait for fresh input on what’s the next course of action. However, Gold maintained its current strength despite the increasing strength coming from the USD.
Bitcoin has fallen heavily, below the $36,000 support level, which should have kept things afloat. Now traders are looking forward to new input to decide which way to continue as a break below $30,000 would lead the way to more downside towards $20,000.
With that said, let’s find out how the markets are doing on May 24th, 2021.
Bitcoin Continues Downward Movement
Bitcoin once again approached the $30,000 psychological support, after it wasn’t able to break above $40,000. The weekend meeting was another carnage in the cryptocurrency market, raising questions about how far the correction will go and whether a recovery is possible. But BTC held its position within the relatively sharply descending parallel channel. Its floor has continued to play a key role in controlling the Bears, however, the top of the channel limits the recovery action.
At the time of writing, BTC is trading slightly above $35,000 amid what appears to be a sharp move higher towards $ 40,000, yet the priority for the Bulls is to get a real breakout above $35,000. This will shift focus to $40,000, which is likely to trigger massive buy orders towards the final rally to $50,000. The chart shows the gradually improving technical picture. The representation was highlighted by the RSI (Relative Strength Index) after a rebound out of the oversold region.
Bitcoin is dancing in the top column of the descending channel. The middle limit is a critical support that needs to be defended in order to determine the developing uptrend. Otherwise, bitcoin is not out of the woods, as investors could continue to sell for a profit at the slightest hint of market instability. Note that the $30,500 support is also vital as bitcoin can freely fall to $20,000 if lost.
Current Market Sentiment:Cautiously Bearish
EURUSD Falls to 1.2160
The EURUSD is looking for fresh impetus as it fell towards the 1.2160 support level just before Monday's European session. The major currency pairs fell yesterday because the market’s concerns about deflation pushed the pair lower. Against the background of calm Asian markets, traders remain worried especially with the current divide in the FED. The bullish PMI data released last Friday may raise concerns about price increases.
That has prompted other Fed policymakers, namely Atlanta Federal Reserve President Raphael Bostic and Philadelphia Fed President Patrick Harker, to join Chairman of the Federal Reserve Bank of Dallas, Robert Kaplan, in support of tapering dialogue. That said, there are still concerns about the Indian COVID-19 strain, as well as another COVID-19 outbreak from the Wuhan laboratory. Let’s not forget the plane hijacking in Belarus, all of which are putting pressure on the EURUSD. However, better economic figures and an acceleration in vaccination is putting a lid on any bearish pressure.
Given the uncertainty of what the Fed will do next, any incoming data is vital to the EURUSD traders, which is most likely to come from comments of Fed leaders. That’s why today’s speech from Fed’s Lyle Brainard and as well as the figure from the Chicago Fed’s National Activity Index are important to identify short-term movements in the common currency. If more Fed policymakers try to enter into taper negotiations, the enthusiasm for security may cause the EURUSD to drop.
Current Market Sentiment:Cautiously Bearish
Gold Continues to Move Higher
Gold has rebounded from its highs, but is still above the $1,880 level, as the Bulls are still expected to break through the key $1,900 mark. Mechanisms to mitigate risks in Asian stock markets and lower US Treasury yields are supporting gold prices. However, due to the lack of a strong catalyst, trading slowed down due to increased inflation concerns about the prospect of global economic recovery, which made investors adopt a wait-and-see approach. Not to mention the recent cryptocurrency plunge over the weekend continued to support the rise of traditional port gold.
Now the focus shifts towards a series of Fed speeches as more talks of tapering fill the space. The price of gold remained unchanged at the beginning of the week after being slightly bullish and falling prices last weekend. XAU/USD rose from a low of $1,870.30 to a high of $1,889.42, despite high demand for the USD. Gold rose for the third time in a week, as investors measured signs of rising inflation. Lower bond yields have also increased investor appetite.
Rumors about existing bond purchases aren’t particularly worrying, however, after the weak employment data was released, the dollar was still under pressure and continued to fall within a week, as traders worried about the possibility that the Fed’s meeting minutes would cut negotiations. As investors raise an inflation alert, institutional interest in the precious metals complex may continue to grow a few months after exiting the market to ease people’s concerns.
Current Market Sentiment:Neutral - Bullish Bias
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