Carnage across markets today, what happened?
Crypto markets were a bloodbath as a report from Reuters that China is banning financial services companies from providing cryptocurrency services and warned about speculative behaviour in the crypto space spooked markets dramatically. This spilled over into multiple asset classes such as equities and commodities. The dollar and gold particularly are up for the day. It looks like a classic liquidation risk-off move with the VIX also snapping higher. Currency traders will be keeping an eye out for the minutes from the Fed’s last policy meeting, trying to pick up on any clues around the tapering discussion. Let’s take a look below at some of the key assets in global markets, which are at important levels.
Price has now sliced through the key 90 psychological level and is hovering awfully close to the February 25 low of 89.6. The shorter term moving averages are both pointing downwards as well as the 200-day SMA. However some divergence looks to be taking place between the RSI and price with the RSI making higher lows while price makes lower lows. This could be a sign that selling momentum is waning and a bottom could be put in with a recovery back above the 90 level. For now it looks like rallies are being sold and the dollar has struggled to find an upside catalyst. Historically, seasonality in May points to strength, but so far this has not been the case. To the upside resistance would come in around the round number of 90.5, just below the 21-day EMA. If price slides further then the obvious target would be the January 6 lows of 89.
The yellow metal has been on an absolute tear, now breaching the descending channel to the upside as well as comfortably sitting above its longer term moving average of the 200-day SMA. The double bottom pattern we saw in March/April has played out. Price got close to the $1895 resistance, but has pulled back slightly. The RSI has crossed overbought territory at 73. For now it seems like a buy the dips mentality is locked in for gold, with dips back down to the trend line/200-day SMA being a potential zone for longs to be initiated. Just below that you have the $1825 support as well as the 21-day EMA. There is also chatter that there is currently a rotation underway from Bitcoin to Gold, which will be another tailwind for the shiny metal.
Bitcoin has really been in the doldrums. It’s been under pressure ever since the Technoking aka Elon Musk’s tweets about stopping bitcoin transactions at Tesla over climate concerns. Then the report out from China today caused absolute carnage. The chart reflects this too. With price falling all the way down to 30k at one stage, which also happened to be the 61.8% Fibonacci retracement level. It looks like we’ve got a bit of an oversold bounce playing out now, whether it can be sustained is anyone’s guess. The RSI is in deep oversold territory, but is still pointing south. Bulls will be nervous unless we can see price close back above the 200-day SMA around 40k. If we see a continued push higher the first test of major resistance would come in around 45k.