The FX market was drifting this past week as major currency pairs were stuck in tight ranges. However, interesting events happened in other asset classes in the financial markets. U.S. equities have reached all-time highs again, getting background for the historical breakout. The tech-heavy NASDAQ charted the highest weekly close on record – 8018.8 points. U.S. 10-year Treasury yields kept edging higher, underlining the overall risk-on sentiment despite all of the geopolitical and macroeconomic concerns. The greed-fear balance shifted on the left side for most cryptocurrencies as well. According to Investing.com, crypto-market capitalization jumped to $254 billion from $210 billion (+21%) in one single day. Daily trading volume also soared to $99 billion from $60 billion a day earlier. As a result, Bitcoin price gained more than 15% last Friday and kept surging early Saturday. This post is about Bitcoin’s potential to rally considering a technical analysis point of view.
Before looking at the wider picture, I’d like to show the daily chart in the scope of a sudden jump of the exchange rate. After the crash at the end of September, BTC/USD was South but the pace of the decline slowed. MACD and RSI were both diverging as, despite the lower lows on the chart, indicators were pointing to higher lows. That bullish divergence had finally started to work out this past Friday. The price of Bitcoin breached the 144-days exponential moving average for the first time since the sell-off on September 24th. Nevertheless, Bitcoin has even more room to go North, according to MACD and RSI. So my point is that the rally was rather predictable, the only question was when it is going to commence.
The weekly chart below shows that the uptrend that started this Spring is still in play. The Fibonacci Retracement level connects the lowest and highest weekly close rates (but not whipsaws!). The last weekly candlestick has a tail thrown towards a double support level: 50% Fibo and 89-week EMA. Both support levels held the price from further sliding thus buyers were waiting for such a scenario to step in. As a result, the price jumped back above 61.8% Fibo and tested 78.6% Fibo resistance. If the last level of 9574.77 was breached by the weekly close, then the road to this year’s high will be open.
Another weekly chart setup has the Ichimoku Cloud trend indicator with modified settings (13, 21, 55, 21). Two notable observations are eye-catching here. First, the leading span remained bullish without even an attempt to approach the bearish crossover despite the pullback in prices. Second, the upper shadow of the current weekly candle exactly matches the Base Line, which acts as resistance since it crossed the Conversion Line. In other words, the sellers are still interested to sell on bullish rallies, while the buyers were not able to absorb all of the selling pressure yet. What the bulls need to continue the long-term uptrend is to close the current week above Ichimoku Conversion Line (9808.42) at least. The best-case scenario suggests a weekly close above 10582.44, which will signal that the bearish retracement is over.
If the bulls fail to break through both resistances, a pullback might take place with the nearest support level at 8498.67. However, given the pace of the recent rally, it would be hard to believe in such a deep pullback. The buy-lows intraday strategy is preferable, in my view and I look for it to be a profitable one!
Best wishes this week traders!
This post is contributed by MyFxLab. MyFXLab provides daily technical analysis written by professional traders. The site was founded by former Goldman Sachs FX traders and executives from some of the world’s largest brokers.
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