BTCUSD seems tired from its strong climb in the past few months, as price failed in its attempts to break past $740. Price has formed a double top and is testing the neckline at $680. A break below this level could push bitcoin down by $60 or the same height as the chart pattern.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside, which means that BTCUSD could make another test of the $740 area. However, price already broke below the 100 SMA, which is an early signal of a reversal. A move below the 200 SMA could confirm that sellers are gaining traction.
RSI is on the move up with a bit of bullish divergence since November 4, indicating that bulls could still put up a fight. Stochastic is also heading north so BTCUSD could follow suit. A small rally could find resistance at the $700 area of interest, which has held as support and resistance in the past. This means that sellers could be waiting for a pullback to this area to short at better prices.
Zooming in to the 1-hour time frame shows a descending trend line connecting the latest highs of price action since November 9. Applying the Fib tool indicates that BTCUSD is already testing resistance at the 61.8% level, which might be enough to keep gains in check.
Dollar strength has been the name of the game recently as US stock markets closed higher for most of the previous week on renewed optimism after Trump’s election victory. Investors previously thought that this scenario would be extremely bearish for the markets but it looks like risk appetite is prevailing in anticipation of economic plans that would benefit US firms.
Also, traders are turning their attention to the upcoming FOMC statement, which would likely include a rate hike. If so, this would restore stronger demand for US assets and the dollar versus bitcoin. Event risks for the week include the release of US retail sales, CPI, PPI, and a speech by Fed Chairperson Yellen.
Any boost to rate hike expectations could further increase USD gains against bitcoin, particularly if data comes in strong and Yellen stays hawkish in addressing post-election plans. However, if she emphasizes the uncertainty that Trump brings, US stocks and the dollar could return their recent gains, thereby benefitting risk-off assets like bitcoin and gold.
Apart from that, any updates on the Chinese government’s plans to curb bitcoin trading in the mainland could also contribute to BTCUSD action. After all, China represents a bulk of the market for bitcoin investors so any restrictions in the country could dampen demand and liquidity. Still, analysts have reminded that it will be nearly impossible for monetary authorities to interfere in the bitcoin network.
Looking further out to the daily time frame of BTCUSD shows that the longer-term uptrend is very much intact and that a sharp selloff could merely result to a correction that would draw more buyers in. The 100 SMA is safely above the 200 SMA on this perspective and the gap is being maintained, although narrowly avoiding a downward crossover recently.
Stochastic and RSI are heading south on the daily time frame, though, so selling pressure could still be in play for now. The next area of interest on this perspective is located around $650, as this was a former resistance and support zone.