The Daily Cryptomenon
7th January 2021
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This analysis was written at 9:00 am GMT +3, on 7.1.2020
Bitcoin has reached $38,000 amid rising political tensions in the U.S. These tensions have also fueled additional volatility in the EURUSD and Gold as they battle out the increased tensions amid Wednesday’s riot in the U.S.
With that said, let’s find out how the markets are doing on January 7th, 2021.
Market Recap
Bitcoin would not settle for such measly gains. After all, this is Bitcoin we are talking about. The Cryptocurrency has once again reached a new all-time high at $37,820 just $80 shy from the $38,000. Bitcoin found resistance at that level and seems to be correcting for the time being, however, signs of divergence between the RSI and price action are beginning to form and that could spell trouble for this instrument.
We had expressed that there is some volatility brewing in EURUSD, and after yesterday’s events in the U.S. we can expect more volatility to stay in the markets. EURUSD did manage to rally higher during the Asian session yesterday, however it quickly encountered resistance at the $1.2350 which led to a steep downward move towards the $1.2270 and right back to the same resistance. Currently, the instrument is trading around the $1.2320 level as the events continue to unfold in the market.
With all this uncertainty in the market, one could have expected Gold to rise, however, the precious metal encountered extreme bearishness as it fell from the $1,955 resistance all the way towards the $1,900 support. The entire situation in the U.S. with rioters storming Capitol Hill and taking over Congress was out of control as the markets reacted in a different way as we saw U.S. yields surge.
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Have markets reached a pinnacle and now it’s time for an adjustment? Or will the market disregard the events in the real world and continue living in never-never land?
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Bitcoin Reaches $38,000
After a minor decline, Bitcoin was able to regain strength above the $34,000 level. BTC started another strong increase and it broke many hurdles near the $35,500 and $36,500 resistance levels. The price even spiked above the $37,000 level. It traded to a new all-time high close to $37,820 and it is currently consolidating gains. An initial support on the downside is near the $36,650 level.
There is also a major bullish trend line forming with support near $35,880 on the hourly chart of the BTC/USD pair. On the upside, the $37,400 and $37,800 levels are initial hurdles for the Bulls. A clear break above the $37,400 level will most likely open the doors for a larger increase. In the stated case, the price could even jump towards the $38,500 and $39,800 levels in the coming sessions.
If Bitcoin fails to clear the $37,250 and $37,400 levels, it could start a short-term downside correction. An initial support on the downside is near the $36,650 and $36,500 levels. The main support is now forming near the $35,800 level and the bullish trend line. Any more losses may possibly start a major downside correction towards the $33,000 level or the 100 hourly SMA.
Current Market Sentiment:Bullish.
EURUSD Could Rise on U.S. Stimulus Hopes
The EUR/USD pair shot to fresh 33-month tops on Wednesday amid sustained US dollar selling bias. The market started pricing in the possibility of a more expansive fiscal policy in the wake of a Democratic victory in the crucial US Senate runoff elections in the state of Georgia. A 'blue wave' will allow incoming President Joe Biden to pursue his preferred economic policies, which, in turn, was seen as a key factor that continued weighing on the greenback.
The attempted USD recovery quickly ran out of steam following the disappointing release of the ADP report, which showed that employment in the US private sector decreased by 123K in December. The reading was worse than November's 304K and also missed expectations by a big margin. On the other hand, the minutes from the Fed's meeting last month revealed unanimous support to keep the bond-buying program unchanged and that some members are in favour of expanding stimulus.
From a technical perspective, the overnight move beyond the previous double-top resistance near the 1.2310 region might have already set the stage for additional gains. However, any subsequent slide below the 1.2300 mark might now be seen as a buying opportunity and remain limited near the 1.2255-50 region. The latter marks a near three-week-old ascending trend-line and should now act as a key pivotal point for short-term traders.
Current Market Sentiment: Consolidating.
Gold Prices To Rise Despite Fall
Gold attempted a bounce after Wednesday’s 2% slide, fuelled by the rally in US Treasury yields and stocks. Prospects of additional US stimulus amid a likely Blue sweep in the Senate revived the reflationary trades and drove the US rates sharply higher while Wall Street to fresh record highs. Despite the sell-off in gold, the risks remain tilted to the upside amid expectations of more stimulus and growing US political tensions after the attack on Capitol Hill late Wednesday.
The psychological nature of the $1,900 level, as well as support in the form of 21, 28 and 31 December 2020 highs between $1,900-$1,906, is acting in support of the price action for now. Spot prices currently trade around $1,905 and with losses of over 2.0% or more than $40 on the day.
The gold buyers will then look to clear the $1,926 (SMA100 one-hour) resistance on its journey towards $1,937, which is the Fibonacci 61.8% one-day. Further north, the intersection of the pivot point one-week R3 and Bollinger Band one-day Upper at $1,942 could likely offer strong resistance. Alternatively, immediate support is seen at $1,915, which the Fibonacci 23.6% one-day. A break below which the sellers could probe the pivot point one-week R1 at $1910. The previous month high at $1,908 could challenge the bears’ commitment, as the next powerful support awaits at $1,902, the confluence of the previous week high and the previous day low.
Current Market Sentiment: Somewhat bullish.
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