BTCCNY staged a very strong rally recently but it looks like the climb is stalling at the 38.2% Fibonacci retracement level on the weekly time frame. If this area holds as resistance, BTCCNY could resume its drop to the lows at 1500.00.
A higher correction, meanwhile, could last until the 50% Fib level at 4500.00 or the 61.8% Fibonacci retracement level at 5000.00. However, stochastic is already indicating overbought conditions and is starting to turn lower, hinting that sellers could regain control.
RSI is also starting to turn lower from the overbought area, indicating a potential return in long-term bearish momentum. The 100 SMA is above the 200 SMA for now so the path of least resistance is to the upside but the gap between the moving averages is narrowing so a downward crossover could take place. In that case, selling pressure could return.
Profit-taking ahead of the weekend could lead to a sharp price decline, especially since the sudden rally took place a week ago and Chinese investors could be eager to book profits off the recent climb. Then again, it’s also possible that traders could take this as an opportunity to load up on their bullish positions.
Recall that traders put money on bitcoin after it was reported that the government is making an effort to weaken the Chinese yuan and impose capital controls. Chinese investors are known to move their funds to a variety of assets such as real estate, gold, and now cryptocurrencies to chase capital gains.
However, recent reports from China suggest that the economic slowdown may be over, thereby restoring demand and value of Chinese equities and assets. The official manufacturing PMI held steady at 50.1 instead of declining, suggesting that the industry and overall economic performance might be in for a recovery.
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