Two weeks ago after the market entered the low-support danger zone, with multiple gaps just below on multiple cryptocurrencies, I suggested we'd likely see a short-term rally before a capitulatory move lower. That rally, rather like the current global heatwave, has persisted longer than expected with the BTC price hovering persistently on the lower resistance level via a series of daily doji candles.
The action has finally consolidated into a clear bearish rising wedge on BTC and several other currencies. I think we're now on the final countdown to a move lower.
The only possible fly in the ointment of the technical picture is the US dollar itself, which is at an interesting juncture. Let's take a look.
Our slightly adjusted proposed trajectory is in turquoise.
The rally paused at the lower resistance line (dotted blue) via a series of dojis, then finally broke slightly north to top exactly on the 0.236 fib line (dotted red). Meanwhile RSI (first oscillator under the main chart) has snuck just above the 50 bull/bear line.
Both RSI 50 and the lower resistance line being slightly breached on decreasing volume is usually a sign we'll see a reversal back the other way - like elastic being pulled taut.
Zooming into a 4 hour chart we can see the ascending wedge more clearly (in purple here). BTC broke out of the bottom and retested the underside over the weekend. With the RSI and MACD divergences (arrows shown on the oscillators below the main chart) and the decreasing volume picture, this is classic topping action.
So why's the US dollar itself pertinent? Here's a weekly chart of the US Dollar index (the value of the dollar against a weighted basket of currencies). This shows the recent rally was actually a backtest of the 200 week moving average (red) in the context of a death cross (50 over 200 moving average) warning of lower prices ahead.
A weaker dollar was one of Trump's campaign pledges, to improve US export competitiveness; what we are witnessing here is the effect of the Fed raising rates to head off inflation (dollar bullish) battling that Trump policy (dollar bearish).
Should the dollar take a sudden lurch downwards it could put some lift under BTCUSD's wings. No sign of that yet on the BTC chart, but it could well become pertinent. It would be fairly poetic if the weakening of the dollar ended up being a material cause of the commencement of the next BTC bull run.
Little change in ETH - like BTC the volume has dropped as the rally has weakened. Our target remains $350, shown here in pink.
XRP is still sitting precariously just under last support. I'm expecting fireworks when this finally drops into the giant gap just below. Target still $0.27.
LTC has already given in and exactly hit our initial target of $74 before bouncing weakly.
There will be decent support here - if it gives then the next (very strong) support is at $55.
BCB Group has no position or opinion on the price of Bitcoin or any other cryptocurrency and this article should not be construed as analysis of or advice regarding the current or future market price of Bitcoin or any other cryptocurrency. No analysis of the price movements of BTC or any other cryptocurrency or any other asset provided by BCB Group should be construed as an invitation or inducement to buy, sell or otherwise to trade BTC or any other cryptocurrency.
Strategy and Execution Partner
Jon is MD of British music production company Poseidon. He began studying technical analysis in 2000 for use in managing his own investments and due to its overlap with behavioural economics – much used in Poseidon's international marketing work. This has seen the company achieve three iTunes US number one albums in as many years among other notable successes.
A Bitcoin investor since 2013, Jon and has been providing Technical Analysis (TA) commentary for a private community of Cryptocurrency investors since mid 2017.