by Jamie Holmes
BTC-USD managed to break the $500 psychological level and almost reached fractal resistance at $548, posting a fresh 21-month high of $540.00 on the BitStamp exchange. The price action has calmed since and has retreated lower with the price currently at $532.29, up 2.79 percent on Monday’s open. Increasing outflows from China are being precipitated by a turn in events in the Yuan’s strength relative to the US Dollar and its weakness with other trading partners.
A recent speech from Federal Reserve chair Janet Yellen highlighted that another interest rate rise would happen in “the coming months ” resulting in a decrease the Yuan’s strength versus the US Dollar — a trend that is likely to continue for some time to come. Furthermore, this drop will put pressure on the Chinese monetary authorities to ease further and devalue their currency to preserve favorable terms of trade with the US. Such moves seem to have led Chinese citizens to buy more Bitcoin, as it is probably the optimal way to get their savings out of the Yuan and get money out of the country.
In December, we highlighted the huge increase in volumes on the main Chinese exchange for BTC-CNY, OKCoin. The chart below shows the monthly price action and volume, up until the present. The price action has failed to break the 4000 Yuan level so far. Notice that over the past four months the increasing trend in volume has not been sustained and volumes traded have been falling; therefore, if we do not see an increase in volume through June compared to May we could see BTC-CNY fall back to around the 3000 Yuan level over the long term.
The long-term outlook for BTC-USD is illustrated below with the 4-hour price action on the BitStamp exchange. The key fractal support and resistance levels are indicated on the chart by yellow rays. If we see a 4-hour session close above the fractal resistance at $540, then the market will look to target fractal resistances at $548 and $597. Immediate resistance lies at $534.14. On the other hand, fractal support is found at $501 and a close below this level would likely see the market target the support area provided by the Ichimoku cloud, around $470-$490.
Notice that the conversion (blue) line is continuing to trend higher, suggesting the market momentum is bullish. The first bearish indication that we should be on the look-out for is a close below the conversion line, which is currently offering minor support at $520.50. As long as the market remains above the conversion line, the bullish outlook will remain intact.
The short-term outlook is displayed below with the hourly price action. The price ation is currently above the Ichimoku cloud, suggesting buyers are still in control. The most recent fractal levels are also highlighted on the graph with yellows rays and provide immediate support and resistance. The market needs an hourly close above $535 for bullish momentum to start picking up. A close above $535 on the 1-hour timeframe will give a bullish signal and see the market tend toward further fractal resistances at $540 and $548.
On the other hand, if there is an hourly close below the fractal support at $517.98 then bearish momentum will dominate over the short-term. The market will look to target fractal support levels at $510.01 and the psychological $500 handle. The Ichimoku cloud is currently providing support in the area around $510-$498. If there is a an hourly close below the Ichimoku cloud then this will validate a short-term bearish outlook and could see the market dip below $500 again to test support around $480.