Highlights:
- Tesla decision and Bitcoin’s 15 percent decline has all eyes on cryptocurrencies
- With technology stocks remaining under pressure, investors are turning to value stocks
- Key theme in FX markets has been the renewed Dollar strength following higher than expected inflation data
- Commodity currencies come under pressure amid increased risk aversion
Bitcoin
All eyes are on cryptocurrencies at the moment, after Bitcoin declined more than 15 percent at one point. Some investors see it as opportunity to buy the dip, while others remain cautious. Tesla CEO Elon Musk´s u-turn on Bitcoin – with an announcement that the company will stop accepting BTC as a payment method due to "rapidly increasing use of fossil fuels for Bitcoin mining" – sent shockwaves through the crypto community, as many saw in him as one of Bitcoin´s biggest fans. Almost all major cryptocurrencies came under pressure following the announcement.
Looking at the charts, BTC/USD already broke below the $47k support level, but managed to recover some of its losses towards the end of the trading day. However, a daily close below this level would pave the way for a decline towards $43,976, which is the February low. Bitcoin bulls need this support level to hold, as a breakout would spell trouble and downside momentum could quickly accelerate. To the topside, stronger resistance should be expected at $52,332 and again at $53,446
Ethereum
Ethereum almost stole the spotlight from Bitcoin over the past few days, hitting a new record high on a daily basis. The cryptocurrency has been benefiting from increased interest by institutional investors as well as investors who see the cryptocurrency as more advanced than Bitcoin. At the same time, with Bitcoin starting to look more mature, investors chasing opportunities have been turning to other cryptocurrencies.
From a technical perspective, the short-term outlook for ETH/USD remains positive. The cryptocurrency bounced once again off the $3520 support level, and the H4 chart is showing positive RSI divergence. With the pressure mostly on Bitcoin, Ethereum should be able to recover from the recent sell-off fairly quickly. Bulls are eyeing the record high at $4379 as next target. On the other hand, a breakout below $3520 could lead to further momentum selling, but ETH/USD should find strong support ahead of the psychological support level at $3000.
US30
While technology stocks remain under pressure, investors are turning to value stocks, which helped the broader market to recover. The USTECH index is struggling to gain momentum, but the US30 staged an intraday comeback and is set to extend gains in the near-term. The index is approaching the 50% Fibonacci level of the recent sell-off and a breakout could pave the way for a rally towards the 34,720/40 resistance zone, and eventually the record high.
USDCAD
The FX market has not seen the kind of volatility that the crypto and stock market have been experiencing recently, but the key theme has been the renewed Dollar strength following higher than expected inflation data. Meanwhile, commodity currencies have come under pressure amid increased risk aversion.
We recently noted the risk of a short squeeze in USD/CAD amid heavily oversold conditions and with the Dollar having caught a bid and Oil prices slightly under pressure, this seems increasingly likely in the near-term. The currency pair is facing immediate resistance at 1.22. A clear breakout above this level should help it gain momentum and push price towards the key 1.2350 resistance level (which is also the 50% Fibonacci level of the April decline), where sellers are likely to return in greater numbers.
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