BTCCNY continues to move sideways on its short-term charts as traders are waiting for stronger market catalysts. Zooming out to the 4-hour time frame reveals that price is stuck inside a rising wedge formation and is approaching the peak of the pattern, which means that a breakout is bound to happen soon.
The 100 SMA is above the longer-term 200 SMA so the path of least resistance is to the upside. In addition, the 100 SMA is near the wedge support, acting as an additional floor in the event of larger dip down. A bounce off the support area could lead to another test of the resistance at the 5500.00 area or a break higher.
Note that the wedge spans 4700.00 to 5500.00 so the resulting uptrend could be of the same size. Similarly, a move lower could lead to a test of the 5200.00 dynamic support at the 200 SMA first and a drop to the lows at 4700.00.
RSI is heading south to show that sellers are in control of price action from here while stochastic is also moving lower, indicating that BTCCNY could follow suit. Traders could choose to book profits off the recent price gains as the end of the year approaches before reestablishing their long positions at the start of 2017.
So far, Chinese investors aren’t being pushed to ramp up their bitcoin holdings as the government has been less aggressive with yuan devaluation these days. Data from China has shown some improvements in trade, retail sales, industrial production, and fixed asset investment so authorities haven’t been rushing to discourage offshore investments for now. Besides, Chinese traders are also seeking to profit from the pickup in local assets while it lasts.
Bitcoin has also been weighed down by the Fed’s recent decision to hike interest rates and signal room for three more hikes in 2017. This is underscored by their slight upgrades to growth and labor estimates for next year, although they did leave room for adjustments to Trump’s fiscal policy changes. With that, traders are upping their dollar holdings instead of bitcoin for the time being.
Consolidation on BTCCNY could carry on for the remainder of this year unless any major news events take place or any big announcements are made by the Chinese government. It looks like there is no rush to put any stimulus in place for the meantime so price action could be subdued. There are also no other major events lined from the US economy, as the FOMC decision might be the last big catalyst for the year.
But with liquidity expected to be thinner in the next couple of weeks as Christmas and New Year are approaching, any significant positions could have the capacity to move the markets. Because of that, it might be prudent to start booking profits or adjusting stops if you are keeping positions open throughout the holidays.