Bitcoin has formed lower lows while oscillators made higher lows, signaling that bullish pressure could return soon. The 100 SMA is still below the longer-term 200 SMA, though, so the path of least resistance might be to the downside.
This suggests that the selloff is more likely to resume than to reverse. The 100 SMA is holding as dynamic resistance at the moment, and the gap between the moving averages is widening to reflect stronger selling pressure.
However, RSI is already on the move up to show that buyers are starting to gain the upper hand. Stochastic, on the other hand, has reached the overbought zone to reflect exhaustion among bulls. A break past the 100 SMA could lead to a test of the next inflection point at the 200 SMA, but holding as resistance could lead to another dip to $7,200.
Headlines are zooming in on the regulatory steps being taken in the cryptocurrency industry, particularly the press release of the CFTC on providing guidance for exchanges listing virtual currency derivatives and the criminal probe launched by the US Department of Justice to look into price manipulation.
Ultimately, these moves could prove positive for the industry, but wary investors are likely liquidating some positions recently. Then again, dollar weakness appears to be coming into play and bitcoin is able to take advantage.
Economic data from the US came in mostly weaker than expected yesterday, and Trump’s decision to withdraw from the meeting with North Korea has also weighed on the dollar. Although geopolitical tensions typically spur a flight to safety, the US economy seems most vulnerable at this point, particularly given other trade issues with NAFTA countries and China.
Looking ahead, traders could continue to hold out for positive developments in the bitcoin industry before reestablishing any long positions.