BTC has had an impressive week, making substantial strides since its trend line / symmetrical triangle breakout. However, BTC has seen resistance at the 0.618 Fibonacci retracement level. This has then seen BTC fall from $11700 USD towards $11350 USD.
The 0.618 is a crucial Fibonacci level. Its rejection will likely see BTC fall back towards $11190 USD. $11190 USD is the 0.5 Fibonacci level. During BTCs recent breakout, the surge past the 0.5 Fibonacci indicates that there is likely further price gains to be seen – BTC is favoured by the bulls more than the bears. The previous downwards trend will likely not be continued.
With regard to the 0.5 Fibonacci level, this is a major support area for BTC. As shown in the chart below, BTC has seen $11200 USD act as support five times (indicated with the red arrows). If BTC hits this level then we will very likely see $11200 USD support BTC, preventing the price from falling further.
BTC/USD support area
BTC breakout confirmed
There were some doubts from traders within the cryptocurrency community as to whether the recent breakout was fake.
This suspicion has now been somewhat brushed aside, with the numerous points of contact alongside matching EWs confirming that this breakout is real. The breakout has very much taken place.
BTC/USD – breakout
During the recent breakout with BTC increasing in price, BTC has been seen riding the wave. Riding the wave is when the breakout of a cryptocurrency sees the candles run along the upper or lower deviations of the BBs.
BTC/USD – BBs
BTC has recently come away from the upper deviation. This may prompt a retracement back towards the 20 day moving average. If this occurs BTC will still likely be bullish. However, the likelihood of this occurring is low due to the major support at $11200 USD.
BTC/USD – BBs
|Ichimoku||X||BTC has moved about the cloud. Rejected the push by the bears to send BTC below the red cloud.|
|SAR||X||Large gap between BTC and SAR. Very bullish.|
|MA ADX||X||Has recently switched from grey to green. Very bullish.|
|MACD||X||Showing slowdown signs indicating a move towards $11200 USD before using this level to bounce back towards $12000 USD.|
|KCs||X||BTC above the upper KC deviation. Very bullish. However may see a retracement towards the centre line.|
|BBs||X||In the upper regions of the BBs. Bullish.|
|PnF||X||Has recently switched from red to green, again another bullish indicator.|
|QQE MT4||X||Is still bullish with yellow above red. Although it indicates the possibility of a $11200 USD temporary pullback.|
|RSI||X||Over 50 currently sitting at 60. Indicating that buying is favoured, however is not overbought. Very bullish.|
|WWV||X||Green – bullish.|
|MA 20/6||X||6 SMA is above the 20 day SMA. Bullish.|
BTC/USD – KCs, MA ADX, SAR, Ichimoku, MACD, 200 SMA
The indicators clearly show a bullish bias, with every indicator currently bullish. This supports the suggestion that BTC will not fall below $11200 USD. Some indicators such as the MACD have shown some slight slowdown, although it is clear that the sentiment from the indicators is bullish.
BTC/USD – PnF, QQE MT4, RSI, WWV, Volume, MA 6/20
BTC appears as though a pullback towards $11200 USD is likely. But overall, the coin is still very bullish. The likelihood of BTC falling back towards $10000 USD now looks highly unlikely. The medium term target for BTC remains at $12000 USD with the EOY target remaining at $14000 USD.
XLM has recently seen a positive breakout from its descending wedge, as shown below.
XLM/USD – breakout
This descending wedge formed after the parallel channel was broken below. Before the descending wedge, XLM had seen great upwards movement since March. However, from the peak to the trough of the descending wedge XLM lost 40% of its value. This saw XLM fall from $0.12 USD down to around $0.65 USD.
XLM/USD – descending wedge
The breakout of this descending wedge saw XLM break above a very strong downwards resistance line. This line had numerous points of validation as exhibited below.
Broken trend line
XLM/USD – downwards resistance line breakthrough
The breakout from the downwards resistance line was not as strong as expected. The breakout saw XLM touch the 0.236 Fibonacci retracement level before rejecting it. Heading back down from $0.08 USD to $0.072 USD.
XLM/USD weak breakout
Nonetheless, XLM is not the only alt coin to see this happen. With ZRX (as shown below) we can see that this alt coin also had a weak breakout, failing to break above $0.42 USD.
ZRX/USD weak breakout
The same has also occurred with IOTA. A breakout of the descending wedge, before seeing IOTA reject the 0.236 Fibonacci level.
Finally, this also occurred with XRP. In a recent report it was stated that XRP will likely hit $0.30 USD due to the H&S formation. But XRP very unexpectedly rejected the $0.25 USD support and has subsequently fallen back down towards $0.24 USD.
Why have alt coins struggled to break higher?
When looking at the NASDAQ 100, the traditional markets are performing well, with the NDX up 12% from its September lows. So far, this year, alt coins have exaggerated or matched the NDX (are cryptocurrencies pulling away from the traditional markets?)
One of the reasons potentially behind the weak breakout may be down to the performance of the DXY.
The DXY is an index of the USD. It measures the strength of the USD against other major currencies such as the EUR and GBP.
The DXY has recently seen a positive breakout of the descending parallel channel within which it had been moving from mid-April to the start of September. During these months, the DXY fell substantially while most alt coins performed spectacularly.
The bullish breakout however may be bad news for alt coins. This is due to alt coins and the DXY having an inverse correlation. Since the DXY has gained traction and sustained itself, alt coins have lost mostly around 30/40% of their value. The loss of value is also down to the much needed retracement of the DeFi market.
DXY – bullish breakout
History may however be repeating itself. Below is a similar formation which formed from early to late 2017. Right after the 2016 presidential election.
As shown below, we can see that once Obama had left office the DXY entered a downwards parallel channel. This channel saw the DXY fall considerably from 102 points to 91 points. Then making a small break above before heading further down. In total, the DXY fell 13% over 392 days.
DXY – 2017
Presidential election potential
This then indicates how important the presidential election may be for the alt coin market and BTC. With the cryptocurrency market gaining from the US dollar’s relative weakness in 2020, how will the DXY react depending on the election result?
Trump win – DXY
If Donald Trump wins the US presidential election will history repeat itself? It seems likely. With Trump favouring further stimulus checks of around $1200 USD, this will undoubtedly weaken the USD. This is due to other major economies such as the UK beginning to wind down financial support (e.g. ending the furlough scheme) over rising debt to GDP concerns.
Therefore, if Donald Trump wins the 2020 election and sees a second term in office, expect the DXY to fall further. The fall would likely see the DXY hit 87 points again, back to the lows of 2018.
DXY – potential movement of a Donald Trump win
Joe Biden win – DXY
Joe Biden has suggested increasing the social security amount each month by $200 USD. He has also suggested removing parts of student loans. Joe Biden also stated that the HEROES stimulus checks were a good start, prompting suggestions that he may favour further stimulus checks. However, with there being no historical data for Joe Biden’s economic policies due to him never being president, I cannot make a suggestion as to which direction the DXY would head.
DXY – Biden win
DXY presidential conclusion
All in all, the presidential election will hugely shape BTCs performance over the rest of the COVID19 period. This is due to the high correlation between BTC and DXY.
BACK TO XLM
Looking back to XLM, it is very likely that we could see sideways movement from XLM until the 2020 US presidential election.
With the alt coins as a whole still following BTC, this sideways theory is still supported. BTC could very easily get stuck between a $11200 USD and $12000 USD trading range until the election takes place.
After the election, however, expect to see major volatility across the cryptocurrency market.
With the formations prior to the election being majorly bullish for XLM, yearly highs could well hit XLM by the EOY. However, if XLM breaks below $0.66 USD then the cryptocurrency could very much crash towards $0.59 USD.
|Fractal deviation bands||X||The fractal bands are bearish. However due to XLM being very close towards the support fractal, the fractal bands should provide support at $0.71 USD making the indicator neutral.|
|200 SMA||X||The 200 SMA is bearish due to XLM moving below the 200 day SMA.|
|SAR||X||The SAR is currently below the candle – bullish.|
|QQE MT4||X||Yellow is currently above red. Bullish.|
|WWV||X||Currently green. Bullish.|
|BBs||X||XLM is moving in and out. No clear direction from BBs. Neutral.|
|PPs||X||Currently below the centre PP. Bearish.|
|MACD||X||Green histogram. Positive crossover. Bullish.|
|Gann HL||X||Currently below the candles. Recent switch from blue to red. However the accuracy of the Gann HL currently for XLM is debatable.|
XLM/USD Fractal bands – support
In conclusion XLM is showing little signs of a mass breakout above the central PP. However alongside this XLM does not look bearish. Therefore the conclusion from the indicators is that sideways trading looks likely.
XLM/USD SAR, QQE MT4, MACD, WWV, PPs, BBs, Gann HL
This intelligence report is for marketing and educational purposes only. The views, analyses and projections are based on the independent research, but cannot be taken as a form of investment advice.