BTCCNY is starting to trend lower, as a descending trend line can be drawn to connect the latest highs of price action since November 9. Price is pulling up to test the trend line resistance after its recent dive.
Applying the Fib tool on the latest swing high and low shows that BTCCNY is already at the 61.8% Fib level. If this holds as resistance, price could head back to the lows around 4685.00 or lower. This are already lines up with the dynamic resistance at the 200 SMA.
The 100 SMA is still above the longer-term 200 SMA so the path of least resistance could still be to the upside. A larger correction could last until the 4880 area, which lines up with the 100 SMA dynamic resistance and former support zone.
Stochastic is already indicating overbought conditions, which means that buyers are tired and that sellers could take over soon. A move lower could draw more bears to the game and give BTCCNY momentum to head back to the swing low. RSI is still on the move up so there may be some buying pressure left for a higher pullback.
Either way the line in the sand for this selloff is around 4880.00 so a move past that level could give bulls more ammunition and allow the longer-term climb to resume, possibly leading to a move up to the 5000.00 psychological level.
Zooming out to the 4-hour time frame shows a bit of a symmetrical triangle forming, as BTCCNY made higher lows and lower highs. It looks like risk sentiment and yuan sentiment are playing tug-of-war with bitcoin at the moment.
Recent rumors indicated that the Chinese government is mulling measures to curb bitcoin trading in the mainland, as investors have been using the cryptocurrency as a means to hedge their yuan holdings. Keep in mind that officials are keen to keep their domestic currency weak in order to retain their advantage in international trade.
Analysts say that the government can’t have a stronghold on bitcoin trading in China because of the nature of the bitcoin blockchain. Still, this wasn’t enough to assure most investors who have been liquidating their BTCCNY positions lately.
Apart from that, the return in risk appetite to financial markets has been negative for bitcoin since investors are flocking back to global equities on the strong rebound. Prior to the US elections, bitcoin has drawn a lot of interest when traders had been moving funds out of stocks in anticipation of more uncertainty. However, Trump’s victory seems to be treated favorably so far as the president-elect is seen to focus on an economic agenda that would benefit corporations.
Data from China has been mostly weaker this week, though, so there could be a yuan selloff in play once more. Retail sales was significantly lower, reflecting a slowdown in domestic demand, while industrial production was unchanged. Any action from the central bank could lead to significant action for BTCCNY but it seems as though market sentiment could continue to influence bitcoin action.
Event risks include any post-election updates and the behavior of stock markets, with risk appetite bearish for BTCCNY and risk aversion leading to bullish moves.