BTCCNY confirmed that it’s in for another bullish run after breaking above a flag formation on its 1-hour time frame. The mast of the formation spans 3800.00 to 4800.00 so the next rally could be of the same size. The 100 SMA is above the 200 SMA so the path of least resistance is to the upside. To top it off, the gap between the moving averages is widening, reflecting stronger bullish pressure. However, stochastic and RSI are both indicating overbought conditions, which means that buyers are getting exhausted.
These oscillators are turning down from the overbought zones, suggesting that sellers may be starting to take control of price action. In that case, a pullback to the broken flag resistance around 4600.00 could be seen. Also, a bearish divergence has materialized with the oscillators making lower highs while BTCCNY price made higher highs.
Even so, bitcoin demand remains strong in China as investors are rushing to dump their Chinese assets and yuan in anticipation of further price declines. Data from China has been mostly weaker than expected, particularly when it comes to fixed asset investment and retail sales, so central bank easing might be in the cards.
Apart from that, the uncertainty surrounding the Brexit is also supporting bitcoin across most asset classes, adding to further upside momentum for BTCCNY. However, profit-taking after this event takes place could be similarly large, triggering a sharp selloff for bitcoin later on.
Zooming out to the longer-term time frames shows that the next resistance is around 5000.00 then at 6000.00, which might be reasonable targets moving into the weekend and closer to the EU referendum. As for support areas, the 4000.00 area looks like a strong floor which might keep potential losses in check.
To contact the reporter of the story: Samuel Rae at samuel@forexminute.com
