BTCCNY is slowly treading lower, moving inside a symmetrical triangle formation within an ascending channel on its 1-hour chart. Price is stuck at the mid-channel area of interest and might slide lower on speculations of Chinese government regulation on business investment overseas, which might cover bitcoin activity.
The 100 SMA is below the longer-term 200 SMA on this time frame, indicating that the path of least resistance is to the downside. In addition, the moving averages appear to be holding as dynamic resistance levels at the moment and might be enough to keep gains in check.
If so, BTCCNY could head back to the channel support at 5000.00 to 5100.00, at which some bulls might be waiting with entry orders. After all, this psychological level lines up with a former resistance, which could now function as support. On the other hand, a break above the moving averages around the 5200.00 area could lead to a climb to 5500.00 or the channel resistance.
RSI seems to be on the move up to show that bullish pressure is still present, but selling momentum could return once the oscillator reaches the overbought zone and turns lower. Stochastic is also heading north so BTCCNY might follow suit but this oscillator is also nearing overbought levels as well.
BTCCNY could be prime for a breakout depending on how these rumors of government regulation play out. Recall that bitcoin suffered a sharp drop earlier in the month when investors speculated about potential government restriction on bitcoin trading in the mainland in an effort to make their yuan devaluation efforts more effective.
Still, Chinese interest in bitcoin could win out as monetary authorities continue to set the yuan trading band lower and investors would like to hedge their eroding yuan-denominated gains with investments elsewhere. However, government efforts to clamp down on business investments abroad could include bitcoin trading, although this might be nearly impossible to implement.
For now, it is apparent that investors have been spooked by the news and that they are holding out for more confirmation on these reports. Depending on how those updates turn out, BTCCNY could pick a direction to break out. Consolidation could carry on as these uncertainties remain, possibly leading bitcoin to edge down to the channel support for the rest of the week.
Over the weekend, news sources also reported that the Chinese government is mulling additional fiscal stimulus, although no further details were disclosed. The Chinese State Journal indicated that the deficit as a % of GDP could increase next year, possibly as the government invests more into local infrastructure and businesses.
In the meantime, stay on the lookout for a break in either direction as these moves could still be limited by nearby support or resistance levels. Sellers are also likely waiting for a test of the yearly highs but any reports suggesting that the government won’t be pursuing bitcoin restrictions could lend tremendous upside for BTCCNY.