The Daily Cryptomenon
8th January 2021
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This analysis was written at 9:00 am GMT +3, on 8.1.2020
Bitcoin was able to set yet another all-time high as it broke above the $40,000 for a brief moment before correcting back lower. On the other hand, EURUSD and XAUUSD have both been hammered by the increase in the U.S. Treasury Yields which increased the value of the USD. Now both instruments are waiting for the all-important NFP before they commit to a direction.
With that said, let’s find out how the markets are doing on January 8th, 2021.
Market Recap
Bitcoin couldn’t just let another day go by without recording another All-time high. The cryptocurrency reached, and broke above, the $40,000 level, that’s not all as it seems many traders were waiting for that level to be triggered as the instrument experienced a massive $4,000 drop towards the $36,200 before climbing higher. Currently the instrument is experiencing some downward movement, but we doubt this will last for long.
The EURUSD had a major downward move that forced it to break below the $1.2260 support and reached the $1.2240 before correcting back higher. The developments in the U.S. are said to be the main trigger for the sudden bullishness in the USD, as Donald Trump finally conceded after heavy pressure from everyone around him to give up his seat. This has given the dollar a major boost as a transition of power will happen at last.
Gold seemed to be consolidating the losses it made after it dropped around $60 from $1,960 to $1,900 in just a couple of hours. After bouncing from that support, the yellow metal began to feel some downward pressure which can be seen happening as the instrument is attempting to break below the 100-SMA (Simple Moving Average) on the 2-hour chart.
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Bitcoin Breaks $40,000
There was a strong upward move in Bitcoin that carried it over the $37,000 resistance level, not stopping until it broke the $38,000 and $38,500 resistance levels. However, the bullish momentum did not stop there as a spike above the $40,000 happened. The price traded to a new all-time high at $40,425 and settled well above the 100 hourly simple moving average. This positive momentum didn’t last long as a downside correction started which sent the instrument below the $38,000 level.
There was also a break below a key bullish trend line with support near $37,500 on the hourly chart of the BTC/USD pair. The pair is currently consolidating near the $37,000 level. The next major support is near the $36,500 level (a multi-touch zone). To start a fresh increase, the price must settle above the $39,000 level. The next key resistance is near $39,880, above which the price could revisit the $40,400 level.
If Bitcoin fails to clear the $38,800 and $39,000 levels, it could start another downward move. An initial support on the downside is near the $36,600 and $36,500 levels. The main support seems to be forming near the $35,200 level. The RSI (Relative Strength Index) is also showing signs of decreasing bullish momentum, however as long as it manages to remain above the 50 level, another leg higher could happen.
Current Market Sentiment:Bullish.
EURUSD Waits for NFP
EUR/USD has managed to jump from the lows of $1.2240, however remains under pressure near $1.2250, as the relentless rally in the Treasury yields give strength to the U.S. dollar ahead of the critical NFP release. The U.S. dollar index (DXY) retreated from session tops above 90.00 vs. its main peers on brief optimism sparked by encouraging news from Pfizer that its coronavirus vaccines appear effective against the new strains of the virus found in the UK and South Africa.
Despite the bounce in the currency, the risks remain tilted to the downside, as the Treasury yields will likely rally on U.S. stimulus hopes, lending support to the greenback. The 2-hour price chart also paints a bearish picture for the EURUSD, especially after the price confirmed a bear pennant breakdown early Friday. The instrument is currently battling against the 100-SMA on the 2-hour chart, if it manages to break above it some momentum can be established that reaches towards the $1.2280.
The RSI on the 2-hour chart trades flat below the midline, currently at 43.30, allowing room for more declines. Therefore, the sellers could challenge the daily lows of $1.2235 on a fresh supply-wave, below which the $1.2200 level could be put at risk. On the flip side, 100-SMA at $1.2268 could continue to offer stiff resistance. Acceptance above the latter could call for a test of the $1.2300 psychological magnate once again.
Current Market Sentiment: Neutral with Bearish Bias.
Gold Looks to the Downside
Gold (XAU/USD) continues to feel the pull of gravity and closes in on the critical $1,900 support. The narrative of reflation trades plays out, driving Treasury yields higher on expectations of higher fiscal stimulus by Biden’s administration. The Fed’s view on the rising inflation expectations also backs the upside in the U.S. rates, weighing on the yieldless gold. Higher yields could continue to support the US dollar’s rebound, as markets digest encouraging Pfizer’s coronavirus vaccine news.
All eyes now turn towards the US payrolls release for fresh direction on the yellow metal. This begs the question; how is gold positioned on the charts heading into the critical US jobs data? The technical viewpoint is showing that gold is on the verge of breaking lower towards the $1,900 which is a very important support, and breaking lower could create a long spell of downward pressure.
On the flip side, $1,911 poses an immediate resistance for gold, which is the pivot point one-week R1. The next relevant hurdle awaits around $1,916/17 region. The buyers will then target the pivot point one-week R2 at $1,920. Acceptance above the latter could bring the $1,925 back in play.
Current Market Sentiment: Neutral with Bearish Bias.
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