Risk-off Sentiment Sees Sub-$400 Level Exposed
Risk-off sentiment dominated in Friday’s Asian trading session, with safe havens such as the Japanese Yen, Gold and the Swiss Franc. Riskier currencies such as the Australian Dollar saw sharp declines and bearish momentum has continued in BTC-USD with the sub-$400 level now exposed. Selling pressure has also been influenced by the departure of a core Bitcoin developer, Mike Hearn, who has stated he has sold all of his Bitcoin and claims the Bitcoin experiment has “failed”.
Utilising Fibonacci analysis, a possible region where the current downtrend could reverse is the $380.90 to $360.99 area, representing the 50% and 61.2% retracement levels respectively. If strong support is found in this area then the price is expected to reverse and push higher, with an initial target of $467.80. However, if the price maintains below $360.99 then we could see a return to $294.00 (November 2015 low).
On the daily timeframe, the price action has pierced below the Ichimoku cloud, suggesting a downward trend is starting. A daily close below $398.00 today will give strong confirmation of a downward starting. Also, the relative strength index has crossed below 50, indicating that bearish momentum is dominating.
The chart below shows the daily price action on the BitStamp exchange. Both the conversion line and base line are trending downwards and provide minor resistance going forward at $427.60. The next targets for sellers are indicated on the graph at $348.64 and $310.00 and are the key fractal supports. To the upside, the psychological $400 handle is now providing resistance as well as the fractal levels at $407.25 and $425.52.
The medium-term outlook is shown in the chart below, which illustrates the 4-hour price action. The current 4-hour candlestick looks to be forming a hammer variant, which suggests there could be a short-term change in direction. A bullish outlook is only validated if the price manages to close above the conversion line currently at $406.72. The relative strength index indicates the market is oversold and indicates a higher probability of a reversal. Immediate supports are found at $381.01 and $369.70, while resistance will be encountered at $399.85 and $403.00.
The Ichimoku cloud in the chart below is trending downwards and is very steep, indicating a strong downward move. Therefore, the risk is more weighted to the downside and a test of the critical support at $350.00 is looking very likely.