First Crack Appears on Bitcoin Weekly Chart

Weekly

Below is the weekly bitcoin chart. We have added a triple moving average to gauge the longer-term trend. In this regard, the first crack has appeared. The fast green moving average has crossed below the slow red moving average (aqua ellipse). If the medium-paced orange moving average follows suit and crosses below the red moving average, the weekly chart's moving averages would be lined up in a bearish formation.

The cryptocurrency is currently trading near a support area around the 40, 000 level (blue shaded horizontal). If this level fails, the bearish formation scenario becomes more probable. One of the factors we are considering in this regard is the direction of the greenback. Since the pandemic period bitcoin has been inversely related to the dollar. A possible reason for this is the rotation out of dollars into bitcoin as QE was underway. Now that the Fed has signaled a normalisation of its balance sheet and tighter monetary policy, this may support the dollar. If the inverse correlation still holds, it may trigger a rotation out of the crypto and back into currency.


Past Performance: Past Performance is not an indicator of future results.

Daily and Hourly

The chart on the left is the bitcoin daily chart. It shows that the cryptocurrency is trading in its weak area. I.e., between the lower blue and red bands. The chart on the right is the bitcoin's hourly time frame. The trend-following indicators are showing weakness (blue ellipse), with the green EMA below the orange EMA. If the stochastic follows and crosses down, a short-term bearish momentum may be underlying. This will be aggravated if the stochastic moves towards 80 and maintains that position. Bitcoin's hourly price will likely come under pressure and this may filter up as bears attack the weekly support area.


Past Performance: Past Performance is not an indicator of future results.

Featured Image by Tamim Tarin from Pixabay

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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