Welcome to this week's edition of "Saturday Sitdown". Rather than start with traditional markets as we usually do, we will start with the world of digital assets. Given the recent price action and volatility in cryptocurrency, we decided this market was worth covering first and foremost.
Taking a look at Bitcoin, we can see that volume continues to surge in the spot and derivatives market after Bitcoin broke out from the $9,000 range. Futures exchanges such as Bakkt and the Chicago Mercantile Exchange have reported record volume in recent days, which points to the notion that institutional traders and investors are in on this high-volatility price action. Currently, the Bitcoin price sits at $11,034, which is the highest BTCUSD has been since 2019 August. As always, the level to watch will be the $10,000 mark for Bitcoin. Since the cryptocurrency crash in 2017 December, this level has played a crucial role in Bitcoin's price action. Traders should be careful and watch price action around this level because if it fails, this rally could end up trapping and or liquidating a number of longs. On a macro scale, however, Bitcoin's fundamentals seem stronger than ever, especially given the current global landscape regarding international tensions and monetary policy. Nigel Green, the CEO, and founder of financial consultancy firm deVere Group, echoes this notion. Green believes that Bitcoin could replace gold as the ultimate safe haven asset as "the world becomes more tech-driven." The escalating tension between the US and China could act as one of the triggers for investors to shift from traditional markets to "decentralized, non-sovereign, secure digital currencies."
Pivoting to Ethereum, we can see similar price action to Bitcoin. ETHUSD currently sits in a consolidation period after the blistering week-long rally, which eventually topped out at $332.931 on 27 July 2019. The pair has only corrected a few percentage points since, not even reaching the .382 Fibonacci retracement level. This weak dip, accompanied by the contracting volume profile, suggests the bulls will soon resume their uptrend and test the local high at $332.
If this level is broken, potential targets go from $366 all the way to $480. Although this current consolidation appears bullish for the above reasons, it's always important to consider the flipside. If bulls cannot reclaim $332.931 as support, a significant retracement may be on the horizon. ETHUSD could see a decline in the $288.599–$284.261 support zone, where bulls are likely to defend this zone aggressively. On a fundamental level, Ethereum 2.0 is expected to have several updates in August, including a live testnest. This upgrade, in which the Ethereum chain will move to Proof-of-Stake from Proof-of-Work, has been long-awaited and highly-debated, so all eyes will be on any releases. Traders and investors should keep a close eye on any price action catalysts from the development side in the coming months.
Heading right into the traditional finance world, and more specifically the GBP/USD pair, we can see the pair has lost some of its luster after recent comments by the Federal Reserve chairman Powell. GBP is up nearly 0.3% after recent pair weakness, and Powell suggested that global recovery could be fragile, so the Federal Reserve will maintain its current asset purchase pace and will not cut back on emergency actions for a long time. We could see the first sell-off zone around the 1.30 point, because of the last time there was substantial consolidation in that area. The dollar has continued to act as a safe-haven asset when global COVID recovery is threatened, and after Powell's most recent comments, it seems like it is indeed threatened, yet once again.
Continuing with the general theme of Powell's worrisome message, the EUR/USD pair was rejected fiercely at its 2018 September highs, the 1.18 level. The pair fell all the way down to 1.17, where it met a high level of buying interest. Looking at technical levels, there seems to be a cluster of key indicators between 1.17 and 1.18, such as Bollinger Bands, important SMAs, and certain Fibonacci levels and pivot points. Going forward, it will be essential to watch how EUR/USD responds to these levels on the way back up. On a fundamental level, eyes should be on the United States and the Federal Reserve. Much of this pair's uncertainty lies on the American side, so any price action catalysts should come from this front.
Closing out this week's edition up with the USD/JPY pair, the pair continues to appear anemic. We can see lower lows on a daily basis, suggesting possible further drops from here. With the massive USD sell-off continuing, it's not surprising to see this bearish price action. Price did manage to stabilize in the 105 regions after the US's monetary policy. Both countries are expected to release Q2 GDP data in the coming weeks, which should provide more than enough of a catalyst for USDJPY to break out of its range.