BTCUSD has been on a tear recently, setting its sights on the yearly highs at $780. For now, price is encountering near-term resistance at the October peak around $750 and might be due for a pullback before more bulls join in.
The 100 SMA is above the longer-term 200 SMA, which means that the path of least resistance is still to the upside. The gap has narrowed between the two moving averages but a crossover seems to have been avoided, confirming that buyers are putting up a strong fight. In that case, BTCUSD could have enough bullish momentum for a break past the nearby ceiling and a move towards the next resistance.
RSI is turning higher after cruising around middle ground, barely even making it halfway into the oversold region. Stochastic is also heading north to show that bullish pressure is returning. However, once these oscillators reach the overbought zones and turn lower, selling momentum could return. If that happens, BTCUSD could retreat to the nearby support zones, possibly around the $720 area of interest or down to $680-700.
The latest surge in bitcoin price was seen to be a result of another wave of investments from China, as the government’s efforts to weaken the yuan are dampening their portfolio returns. With that, investors are seeking higher returns in other markets while also hedging against their yuan-denominated holdings. Prior to this, monetary authorities were rumored to have threatened to restrict bitcoin trading in the mainland but analysts have dismissed these as nearly impossible to implement.
Apart from that, a bit of profit-taking against the dollar has also boosted BTCUSD. PPI and industrial production data from the US have been below expectations this week and traders are anticipating disappointments from the CPI reports as well. Also, Fed Chairperson Yellen has a testimony lined up and traders likely booked profits off their dollar positions in anticipation of additional volatility and potential reversals from this high-risk event.
The dollar has retreated off its 13 1/2-year highs against a basket of currencies, signaling that the rallies may have already topped out. US equities have closed mostly lower as risk-on flows subsided, drawing investors back to alternative assets such as bitcoin once more.
Moving forward, hawkish remarks from FOMC head Yellen could reassure traders that a rate hike is on the table for December, thereby restoring demand for the Greenback across the board. If she also expresses optimism about the Trump presidency, funds could flow back into the US economy and the dollar, possibly weighing on bitcoin price.
Meanwhile, a break past the $780-800 highs could take BTCUSD price up to the next ceiling at $900 but it would likely take a very strong catalyst to sustain such a climb. One possibility might be Yellen’s admitting that they might need to delay a Fed rate hike in order to make room for political adjustments in the US, but this seems like an unlikely scenario.
Of course, more moves from the Chinese government to weaken the yuan could draw more investors towards the cryptocurrency, which has been banking on Chinese investment activity in the past few months. More talks about restricting bitcoin trading in the mainland could spur quick dips or opportunities to catch the climb at cheaper levels.