Summary
- Bitcoin's rebound looks to be driven more by lower Treasury yields, a weaker US dollar and position unwinding rather than improving fundamentals. A Democratic-controlled Congress could limit fiscal expansion, weighing on the growth outlook and risk sentiment, unless the US-Iran war ends.
Bitcoin whipsawed today as the Democrats’ victory of both the House and the Senate initially weighed on the cryptocurrency before rebounding strongly.
I’m not sure on the reasons for the rebound as the only thing that changes with a Democratic Congress is more fiscal restraint. It won’t limit Trump’s power to impose tariffs or continue the war with Iran.
This should be a net negative for the growth outlook and therefore for risk sentiment, unless the US-Iran war finally ends.
The market might be reacting to lower Treasury yields and US dollar, but this is mostly due to overcrowded positions getting unwound as the fiscal impulse becomes less favourable.
Looking ahead, the focus will remain on US-Iran negotiations. A breakthrough would be positive for Bitcoin on improving growth outlook and positive risk sentiment. An escalation, on the other hand, will likely trigger another selloff on increasing growth concerns and safe haven flows.
BITCOIN TECHNICAL ANALYSIS – DAILY TIMEFRAME
On the daily chart, we can see that Bitcoin is rebounding and approaching the downward trendline. If the price gets there, we can expect the sellers to lean on the trendline, with a defined risk above it, to position for a drop into the 75,000 level, targeting a breakout. The buyers, on the other hand, will want to see the price breaking above the trendline to pile in for a rally into the 98,000 level next, with the 85,000 level as the first target.
BITCOIN TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME
On the 4 hour chart, we have a resistance zone around the 78,600 level. The sellers might want to split their positions given the proximity to the downward trendline. We can expect the sellers to step in around the resistance, with a defined risk above it, to keep pushing into new lows. The buyers, on the other hand, will look for breakouts to pile in for new highs.
BITCOIN TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME
On the 1 hour chart, there’s not much we can add here as the sellers will have a better risk to reward setup around the resistance and the trendline, while the buyers will need a break above the trendline to open the door for new highs. The red lines define the average daily range for today.
UPCOMING CATALYSTS
Today we have the US ADP and the US ISM Services PMI. Tomorrow, we get the latest US Jobless Claims data. On Friday, we conclude the week with the US NFP report and the University of Michigan Consumer sentiment survey.
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