BTCCNY is still on a strong climb, as the upbeat reports from China last week didn’t seem to be enough to shore up the yuan. Chinese PMI readings from both manufacturing and non-manufacturing sectors indicated a faster pace of growth, supported mostly by rising domestic consumption.
Even so, the threat of yuan devaluation continued to discourage investors from putting money in Chinese markets, moving their funds onto higher-yielding holdings like bitcoin instead. This contributed to bitcoin price gains across the board, even against the US dollar.
BTCCNY is approaching the next major resistance level at the 5000.00 handle at which profit-taking is likely. Technical indicators are showing that bulls are running out of steam, which suggests a potential selloff back to the nearby support zones. 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 to suggest a possible downward crossover.
Also, RSI has been in the overbought territory for quite some time, which means that bullish momentum is exhausted and sellers could take over. Once the oscillator makes it below the 80.00 level, bearish pressure could take hold and push BTCCNY to the next area of interest around 4750.00 or onto 4500.00. A break below these levels could take it down to the next support around 4000.00 or the 100 SMA.
Stochastic is also indicating overbought conditions but hasn’t turned down from the overbought zone yet, which means that there’s some bullish pressure left. In the event of an upside break past 5000.00, BTCCNY could target the 5500.00 level next.
A short-term rising trend line can be drawn to connect the recent lows of price action on the 1-hour time frame. Using the Fib tool on the latest swing high and low shows that the potential correction levels are from 4800.00 to 4900.00, with the 100 SMA lining up with the 38.2% Fib level and the 200 SMA closer to the 61.8% Fib level and the trend line.
RSI and stochastic are heading south on the 1-hour time frame, indicating that a quick correction from the recent bullish run is due. If you’re looking to buy BTCCNY, you could wait for this pullback before going long and aiming for the 5000.00 area. If you’re bearish on BTCCNY, you could wait for a test of the 5000.00 resistance and for reversal candlesticks to form before shorting.
There’s not much in the way of top-tier reports from China this week but it seems that the path of least resistance is to the upside for BTCCNY, given the recent surge in buying pressure for bitcoin. It would take a strong catalyst to trigger a long-term reversal so a dip from the 5000.00 level could be temporary, offering buyers a chance to hop in the climb at a better price and have enough momentum to break the ceiling.
Other market event risks include the US elections, FOMC statement, and NFP report – all of which could affect overall sentiment in the financial arena. A return in risk aversion could favor fiat currencies, although the odds favor a dollar selloff if these US events don’t meet expectations. With that, bitcoin should prove a rewarding alternative, along with precious metals such as gold and silver in an adverse scenario. On the other hand, a Clinton victory and Fed tightening could lead BTCUSD to retreat sharply and impact price action for BTCCNY as well.