BTCUSD has been climbing for most of October but seems to be unable to sustain its climb past the $740 mark. Another selloff occurred recently, leading price to start forming a double top pattern.
Price has yet to test and break below the neckline at the $680 level before confirming that a downtrend is underway. The 100 SMA is above the longer-term 200 SMA so the path of least resistance might still be to the upside. Also, the gap between the moving averages is widening, reflecting stronger bullish momentum.
In that case, BTCUSD could draw support from the 100 SMA dynamic inflection point near the $700 handle. If that happens, price could make another attempt at breaking past $740. On the other hand,a move below $680-700 could yield more declines for bitcoin, possibly until the 200 SMA at $660 or lower.
RSI is turning down to show that sellers are in control of BTCUSD movement while stochastic is also on the way down to reflect the presence of bearish pressure. Once these oscillators reach oversold levels though, buyers could regain control and allow any of the nearby support areas to hold.
Zooming in to the short-term time frames shows a bit of a rising trend line support that’s currently keeping losses in check. A bounce off the trend line could draw more buyers to the mix and revive bullish momentum while a break below the trend line could confirm that a selloff is in order.
The US dollar is regaining ground after sharply selling off when the US election results were coming in. Trump’s victory poses a lot of uncertainty but investors seem ready to give him the benefit of the doubt, especially some of his campaign promises could prove to be beneficial for businesses. For one, he promised sweeping tax reforms which would bring the corporate tax down to 15%, thereby allowing businesses to be more profitable. He also spoke of bank deregulation, repealing Obamacare, and increasing infrastructure spending.
US stock markets staged a decent rebound also, renewing demand for US assets after a brief period of panic and disappointment. Both Houses are under the control of Democrats, which should ease any gridlock when it comes to passing key reforms and fiscal policy changes. If this sentiment persists, the US dollar could be poised to advance across the board, especially if the central bank stays on track towards hiking rates.
Economic data from the US has been supportive of tightening, although it remains to be seen whether the Fed will decide to sit on its hands to give room for the change in US leadership or not. Should they stick to their hawkish stance, the dollar might be poised to rally against bitcoin for the rest of the year.
On the other hand, any signs of a return in risk aversion could still lead traders to run back to bitcoin, as this asset offers significant returns and is less vulnerable to sharp declines in the financial markets. Demand from China remains sufficiently supported despite rumors that the government is considering imposing restrictions on bitcoin trading in the mainland.