This analysis was written at 9:20 am GMT +3, on 17.06.2021
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As we expressed yesterday, bitcoin was attempting to break above the $41,000 resistance level however, the bullish momentum wasn’t strong enough to actually break through that barrier. The instrument dropped heavily from the mentioned level, breaking below $40,000 before finding some support at $38,000. This support coincides with the 200-SMA on the 4-hour chart, which makes it a target for the Bears to break below, however, the proximity of the 100- and 50-SMAs on the same timeframe might make the Bears’ job a bit harder.
The FOMC event yesterday painted a great bullish picture for the USD, explaining how they might be increasing their rates much sooner than expected, as well as their optimism about the future of the US economy. This took out the EURUSD. The instrument was trading at a high of 1.2150 prior to the announcement, however, once the information was out, EURUSD fell heavily from the mentioned level towards the 1.2000 and is currently trading below that. The negative pressure is quite clear as traders are trying to adjust to the new narrative.
The narrative from the FOMC also affected XAUUSD, as the precious metal fell heavily after trading near the $1,860 resistance level. Gold has been trying to recapture the 200-SMA on the 4-hour chart, but simply didn’t have the momentum to do so. When the FOMC event came rolling up with its positive outlook on the US economy, there was no way for gold to trade except to the downside. The instrument fell from the mentioned resistance all the way to $1,800, but is currently trading a bit higher.
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Before the downward correction began, Bitcoin was close to the $41,350 mark. The instrument was consolidating just above $40,000, however, Bulls couldn’t maintain the proper momentum to defend the mentioned level. The price fell below the $40,000 and $39,500 support levels. The support of the triangle on the hourly chart of the BTC/USD currency pair is near $39,900. The currency pair even broke through the $38,500 support level and the 100-hour SMA.
However, the Bulls are defending the $38,000 support zone (which has been the last breakout zone). The price is now consolidating above the $38,000 mark. It’s also slightly below $39,000 and the 100-hour simple moving average. The 23.6% Fibonacci retracement level of the recent decline from a high of $41,350 to a low of $38,154 is also close to the 100-hour moving average.
The first major resistance is near the $39,750 level, which is about 50% of the Fibonacci retracement level that has recently fallen from a high of $41,350 to a low of $38,154. The initial downside support is near $38,150, with the first major support near the $38,000 mark. A break below the recent lows and the level of $38,000 may open the door for a further drop to $36,500.
Current Market Sentiment:Correcting Slightly
Both spirit animals of the market (Bulls and Bears) are battling around the 1.2000 level, just as the European session kicks off on Thursday. Asian traders reacted to the upward momentum of the Fed system, which forced major currency pairs to fall to their lowest levels since mid-April. However, the lack of significant strength to support the dollar’s surge seems to reflect the recent slowdown in price movements. At the highly anticipated monetary policy meeting on Wednesday, the Fed kept its key interest rates and bond purchases unchanged as expected.
The Fed’s economic revision and upward adjustment of forecasts triggered competition between bonds and the U.S. dollar the day before. Having said that, the US Federal Reserve System (FRS) now estimates that the PCE (the Federal Reserve's preferred inflation indicator) for the US is expected to be 3.4% in 2021 and 2.1% next year. According to the latest expectations of Fed officials on interest rate hikes, commonly referred to as a dot-plot chart, it is expected that there’s going to be hikes in 2022 and in 2023. Jerome Powell of the Federal Reserve admits that the acceleration in inflation may be more consistent than before.
However, the battle between the United States and China over the Covid Delta variant has tamed the Bulls. With this backdrop, the 10-year U.S. Treasury bond yield began trimming it’s heaviest rise since March, rounded to 1.57%. In the absence of data/major events and important Fed meetings, EUR/USD traders can lick their wounds and test the secondary catalysts for new directions.
Current Market Sentiment:Bearish
The price of gold fell sharply after the US 10- year Treasury started to rise. After Fed Chairman Jerome Powell gave a speech on inflation, the Fed’s dot chart and plans to reduce inflation on Wednesday, gold prices are under selling pressure. The change in the FOMC’s tone triggered a new round of precious metals selling. Gold prices reacted to rising US Treasury yields, which rose 1.58% on Wednesday, however it would seem that investors remain vigilant.
The central bank predicts that inflation expectations will be higher this year, and there is the possibility of two interest rate hikes by 2023. Higher interest rates reduce the brightness of non-performing assets because they cause higher opportunity costs. The dollar exchange rate jumped to the highest level in two months of 91.46, which made gold more expensive for holders of other currencies. Gold hovered around 1816-$17 after the Federal Reserve System (FRS) measures caused the biggest drop since January 8th, it fell 30% that day.
Despite this, gold traders are still rebounding from $1,803, approaching the psychological magnet of $1,800, even if U.S. Treasury yields remain unchanged. It is quieter during the news. Although the slow movement of the US dollar has pushed gold prices higher, the high yields of government bonds discouraged gold buyers. Even so, the price returned to the previous support structure around $1,845, which included the highs in early May and the lows on Monday. Gold traders should pay attention to market participants digesting the Fed's drama to find new impetus.
Current Market Sentiment:Bearish
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