I think it is far too early to think that Bitcoin is going to turn around, and central banks around the world continue to tighten monetary policy.

The BTC/USD has bounced ever so slightly during the trading session on Monday to continue to test the $20,000 region. This is an area that obviously has a lot of psychology attached to it, but the reality is that the market will more likely than not continue to mess around in this area until we get some type of resolution.

If we break down below the last couple of days, then it’s possible that we could break down rather significantly. The market breaking down below that area opens to the possibility of a drop-down to the $15,000 level, and then eventually the $12,000 level. The $12,000 level is where the entire rally kicked off from, so would be a 100% retracement. You see that a lot in crypto it seems, so at this point, I still believe that is a very real threat, especially if risk appetite continues to be so poor.

At this point, we are testing the $20,000 level to see if it will hold as support. We have bounced all the way to roughly $24,000, before pulling back to this area. The 50-Day EMA sits below the $24,000 level and is dropping, so I think that will offer a little bit of dynamic resistance.

Monetary Policy Likely to Hinder Bitcoin

• I think it is far too early to think that Bitcoin is going to turn around, and central banks around the world continue to tighten monetary policy.
• It’s a bit ironic because I’m old enough to remember when Bitcoin was supposed to be completely independent of central banks, but that illusion has been shattered.
• If the US dollar strengthens and interest rates rise, that is horrible for Bitcoin.

In a word, Bitcoin is nothing special, it’s simply another commodity as far as traders are concerned. In fact, it has a very similar profile to other commodities, so you must trade it as such.

I think we do break down, especially as the US dollar has been like a wrecking ball. The US dollar is a little overextended so a little bit of a relief rally would not be completely out of the question. However, at the first signs of exhaustion, I suspect that I will be on my CFD platform looking to short this market. I would not get bullish until we broke over the $25,000 level at the very minimum.

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I believe this is a market that will continue to struggle in the face of higher interest rates, and of course, the fact that there are a lot of concerns out there when it comes to global growth in general. 

Gold markets have been relatively quiet as we awaited the Federal Reserve meeting on Wednesday. That being said, we have seen a lot of noise in the general vicinity, and now it’s a question as to whether or not we can get some type of clarity for a longer-term outlook before gold can settle everything out. After all, the Federal Reserve continues to be very tight with its monetary policy and did in fact raise interest rates by 75 basis points as anticipated.

When you look at the charts, it’s easy to see that the $1700 level has been important over the last couple of years, so the fact that we have bounced from there should not be a huge surprise. The question now is whether or not we can break it back down below it? If we do, then the gold market will be more likely than not to drop all the way down to the $1500 level over the next several months. That being said, we have some work to do before that happens. In fact, we need to break it down through the $1680 level, as the $1700 support level is basically “$20 thick.”

Rallies at this point will have to deal with the $1750 level, an area that I think is going to be a bit difficult to overcome. At this point, even if we broke above there, I think it’s likely that we would see this market struggle to go much higher, with the $1800 level above being a major barrier that will be very difficult to get past. We have the large, round, psychological significance of the number, we have the major selling area there as well, as well as the previous trendline and the 50 Day EMA. With everything said, I believe this is a market that will continue to struggle in the face of higher interest rates, and of course, the fact that there are a lot of concerns out there when it comes to global growth in general. The US dollar has been like a wrecking ball over the last several months, and I think that will continue to be the main theme here, as this market will continue to pay close attention to the headwinds that the greenback causes this market.

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I like the idea of fading rallies as it gives a bit of value to what is the strongest currency right now.

The euro initially gapped higher to kick off the Monday session but has given back all of the gains to slam into the 1.05 level again. The 1.05 level is an area that should continue to attract a lot of attention because it is a large, round, psychologically significant figure, and the fact that it is an area where we have seen support and resistance in the past.

At this point, the euro is struggling due to a massive amount of problems in the European Union. The first thing would be that we could be looking at a serious lack of energy. That would destroy the European economy, and that could cause a significant amount of downward pressure on growth. The size of the candlestick is not necessarily crucial or impressive, but it does suggest that we still have quite a bit of negative pressure. Ultimately, I think that rallies will continue to be sold into as there seems to be no real hope of that situation sorting itself out.

The market rallying will offer a nice opportunity to pick up “cheap US dollars” at the first signs of exhaustion in this market. Ultimately, the market is in a very negative downtrend, and I do not think that is going to change anytime soon. That being said, you should keep in mind that the area below is going to be difficult to chew through, but as long as the Federal Reserve continues to be hawkish, it is difficult to bet against the US dollar. Furthermore, we have a Federal Reserve meeting coming out that people will be looking for a 50 bps rate hike at the least, and some are even starting to price in 75 bps. If the statement suggests that they are “on autopilot” to add 50 bps every meeting, that is going to continue to drive money into the greenback.

Economic numbers out of the European Union are very weak at the moment, and they do not look like they are improving. With all of that being said and the complete lack of risk appetite out there, I just do not see how this pair will change anything anytime soon. I like the idea of fading rallies as it gives a bit of value to what is the strongest currency right now.

Accept the fact that if you are going to buy Bitcoin, it could be rather dangerous.

Bitcoin has initially tried to rally during the trading session on Wednesday but gave back gains as we reached the 50 Day EMA. At this point, the market has shown its proclivity to pull back from that level, and I think that is going to continue to be the case. The 50 Day EMA is something that a lot of traders will pay attention to, and therefore it is worth watching. It is also worth noting that it continues to go lower and drift towards the $40,000 level.

Speaking of the $40,000 level, it is worth noting that the market continues to find it of importance, and a bit of a magnet for price. As long as that is going to be the case, then I think it is probably only a matter of time before we return here. It is worth also noting that we have been in a larger consolidation area for a while, and now it looks as if we will continue to see the $45,000 level above offer a significant amount of resistance, while the $35,000 level underneath continues to offer just as much support. We have essentially been going nowhere for a while now, and I do not necessarily believe that is going to change anytime soon.

With the Federal Reserve tightening monetary policy, this will work against high-risk assets, and Bitcoin most certainly is one of those. Because of this, I think we have a situation where you need to be cautious but accept the fact that if you are going to buy Bitcoin, it could be rather dangerous. After all, Bitcoin does have a history of being very volatile anyway, and the fact that we have so much going on in the world it is not a huge surprise to see a massive spike in one direction or the other at any given moment.

At best, I would say we are consolidating. However, it is also possible that we may be getting ready to plunge lower again, opening up the possibility of a move towards the $30,000 level. Breaking down below the $30,000 level opens up “crypto winter” when crypto does nothing and essentially goes to sleep. I am not quite ready to call for that yet, but it is obvious that crypto is on its back foot and is not attracting much in the way of attention.