The Daily Cryptomenon
6th January 2021
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This analysis was written at 9:00 am GMT +3, on 6.1.2020
Bitcoin just cracked another All-Time high, while EUR and Gold are waiting for the results of the Georgia election run-off. EUR seems to be a bit volatile due to the election results while Gold remains confined to the top side.
With that said, let’s find out how the markets are doing on January 6th, 2021.
Market Recap
Bitcoin will not be held down by anyone. The latest bullish run, the instrument has been able to break above the $35,000 and even approached the $36,000 but was rejected just a couple of hundred dollars from it around the $35,870 mark. There doesn’t seem to be an end in sight for this instrument, as the Bulls keep on pushing the price higher and Bears can’t do a single thing about it. Sure, there are resistances which the Bears defend, however, if you’d look at the order chart it’s mostly Bulls cashing in, rather than Bears going on the offensive.
The Currency market as a whole and the EURUSD in particular is waiting for the Georgia election run off. This is basically a Congress election in Georgia that could shape Biden’s next 4 years as president. The markets are hoping for a ‘Blue Sweep’, as in Democrats winning the run-off elections. If that happens, the EURUSD could continue to move higher as it has already broken above the $1.2310 and reached just shy of $1.2330. The EURUSD is searching for a proper close above the $1.2310, as it would give it the needed momentum to continue higher.
EURUSD is not the only instrument in the markets that are looking at the Georgia Election Run-off, as Gold is surely going to be affected as well by the result. With that said, the yellow metal does look like it’s losing some bullish momentum. Just by looking at the order books, one can notice that 75% of retail investors are net long gold, however downside exposure has increased by 7.46% over a daily basis. So despite the fact that investors are net long, there could be a change in sentiment coming.
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Bitcoin Hits New All-Time High
Bitcoin’s immense bullish rally has yielded another all-time high around the $35,870 (35,868 to be exact but who’s counting). Currently, the instrument is trading around $35,040 after failing to break above the previously mentioned level, however, that still puts the Cryptocurrency with a market cap of around $657 billion.
Looking into the reasons and signs of why this rather historical bull run, we saw that participation in this market has grown, and not just from retail clients, in fact institutional investors have also gone up as more and more people are entering into this market. The reasons why institutions are participating is a bit vague as you can remember last month when Elon Musk was contemplating having a portion of Tesla’s balance sheet in Bitcoin. Could this be a trend in the making?
Looking at the Technical side of things, Bitcoin is poised for more upside. The RSI (Relative Strength Index) is showing more bullish signs as it sits right at the 70 level on the 2-hour chart. Now this might be extremely risky as we know that the 70 level usually means overbought, however, based on Bitcoin’s past performance, we can notice that even though the RSI was at 70, the momentum was too great to stay down.
Current Market Sentiment:Bullish.
EURUSD Waits for Georgia Run-off
Warning: Extreme Volatility on EURUSD as results are announced
EUR/USD gaining ground, with the risk sentiment strengthening on increased expectations for a Democrat-controlled US Senate. The currency pair is currently trading at 1.2315, having reached a high of 1.2327 early today. That was the highest level since April 2018. The pair has failed to keep gains above 1.23 in each of the previous four trading days, which is a very important factor to take note off.
The latest rejection above 1.23 is accompanied by losses in the Asian equities and the US stock futures. Major news agencies such as The New York Times are predicting a Democrat victory in Georgia elections. "Both Democrats remain heavily favored, despite their deficit in the tabulated vote. They're favored to win the vote left to be counted by 9 to 10 points," The New York Times' Nate Kohn tweeted a few minutes ago.
Upward momentum is beginning to improve and EUR appears poised to move above the 1.2330 peak seen earlier today. That said, 1.2330 is a very strong level and it still remains to be seen if EUR can move clearly above this level. Support is at 1.2275 but only a break of 1.2250 would indicate the current upward pressure has eased.
Current Market Sentiment: Cautious Tones Due to Elections.
Gold Shows Signs of Overboughtness
Gold witnessed a modest pullback from two-month tops and fell to an intraday low level of $1941 during the Asian session, albeit lacking any strong follow-through selling. The precious metal stalled its recent bullish momentum near the $1955 region as investors opted to take some profits off the table and wait for the results of a crucial US Senate runoff election in the state of Georgia. The outcome will determine the control of the Senate and also have a big impact on the incoming President Joe Biden's ability to pursue his preferred economic policies.
That said, the incoming updates have been indicating a Democrat victory. This, in turn, added to the likelihood of additional US fiscal stimulus measures, which extended some support to the non-yielding yellow metal. Apart from this, a softer tone around the equity markets might further help limit any deeper losses for the safe-haven XAU/USD, at least for the time being.
Looking at the RSI and Bollinger Bands on the 2-hour chart of XAUUSD, we can notice two things happening. The first is the decrease in volatility as the Bollinger Bands squeeze on each other indicating that the price has been stuck with not much volatility coming its way. The other is the RSI which has dropped below the 70 level as the overboughtness that it was projecting has faded away. It would seem that this is where gold will trade for the time being until the Georgia Election Run-off is finished.
Current Market Sentiment: Consolidating.
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