Bullish Flag Formation Suggests Further Upside for BTC/USD Maybe A Potential Rally on the Horizon for Bitcoin

Traders' Opinions

Cryptocurrency

Summary:

A bullish flag signals potential gains for BTC/USD. Consider a buy at 53,000 with a stop-loss at 50,000. Alternatively, set a sell-stop at 51,000, aiming for take-profit at 50,000 and a stop-loss at 52,000.

Fundamental Analysis

In the ever-evolving world of cryptocurrency, the BTC/USD pair took a breather on Monday, treading water at $52,000, just a stone's throw away from its year-to-date peak at $53,000. It's a familiar pause in the action, a cool-down session following Bitcoin's recent sprint from $38,500 to its current heights.

Even with the financial markets buzzing with enthusiasm, as indicated by the fear and greed index catapulting into extreme greed territory, Bitcoin chose a moment of tranquility. Remarkably, major global stock indices like Japan's Nikkei 225 and Topix, Europe's Stoxx 50, and the US's Nasdaq 100 and S&P 500 all hit record highs. A collective cheer echoed through the markets, largely fueled by the stellar performance of Nvidia, showcasing robust demand for artificial intelligence.

Yet, amidst this financial fiesta, Bitcoin showcased a rebellious streak by decoupling from its historical correlation with American equities. Traditionally, these two assets danced to the same tune, moving in sync. Now, Bitcoin seems to have a rhythm of its own, swaying to a different beat.

Zooming into Bitcoin's microcosm, attention turns to the dwindling inflows in Bitcoin ETFs, the financial instruments that have become a gateway for traditional investors to dip their toes into the crypto waters. Notable players in this space, like the iShares Bitcoin Trust (IBIT) ETF with a hefty $6.4 billion in assets and Fidelity's FBTC boasting about $2.3 billion, showcase encouraging figures. Yet, there's a whisper in the market that these inflows are tapering off, hinting at a potential return of investors to the traditional allure of stocks.

Bitcoin's mood swing also corresponds with the reflections on the stage set by the Federal Reserve. The released minutes from last week's meeting revealed that most officials anticipate the central bank will keep interest rates on a steady course, a decision grounded in growing concerns about rising inflation. The Fed's narrative has played a pivotal role in Bitcoin's recent comeback, becoming a driving force during its resurgence over the past few months.

As the dust settles and Bitcoin takes its moment in the spotlight, the narrative unfolds as a tale of resilience and independence. No longer just a sidekick to the stock market's leading characters, Bitcoin stands on its own stage, driven by its unique dynamics and the changing winds of investor sentiment.

In the grand scheme of this financial theater, Bitcoin's pause may be strategic. It's a moment of reflection amid a cacophony of market movements, a breather before the next act unfolds. As we watch this drama play out, the only certainty is the uncertainty that comes with the ever-shifting tides of the financial world. So, whether Bitcoin resumes its bullish sprint or takes a detour, the story continues to captivate and intrigue, leaving market participants eagerly anticipating the next twist in the plot.

Technical analysis

Looking at the 4-hour chart, BTC/USD seems to be in a bit of a tight spot lately, comfortably nestled within a descending channel outlined in black. If charts could talk, they'd tell you the pair's been hanging out with the 50-period and 25-period moving averages, just having a good old consolidation party.

Now, here's where it gets interesting – there's this thing called a bullish flag pattern, like a secret handshake among traders. It's basically a sign that the pair might be gearing up for a continuation of its recent moves. And guess what? The MACD is in the mix, slightly above the neutral level, giving that extra nudge for potential bullish vibes.

What's on the horizon? Well, the crystal ball—or in this case, the chart—hints at a possible bullish breakout on the horizon. If the stars align, or should I say, if the charts align, we might witness the pair making a dash for 53,000 – the peak for this month. But hey, before that, a little retest of the lower end of the descending channel might be on the agenda.

In the dynamic world of crypto, where charts are the storytellers, it's like BTC/USD is getting ready to unfold its next chapter. Will it break free from the descending channel and make a triumphant run towards 56,000? Only time, and the charts, will tell. So, buckle up, keep those eyes on the chart, and get ready for the crypto rollercoaster! Bullish Flag Formation Suggests Further Upside for BTC/USD Maybe A Potential Rally on the Horizon for Bitcoin_1

Bullish Flag Formation Suggests Further Upside for BTC/USD Maybe A Potential Rally on the Horizon for Bitcoin_1

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Chandan Gupta

Traders' Opinions

Economic

Forex

Fundamental Analysis

The Sterling is proving itself as a sturdy contender in the face of the US dollar's recent dominance against other major currencies. In the latest trading sessions, the bulls steered the GBP/USD pair toward the 1.2710 resistance level, settling around 1.2670 by the week's close—a testament to a weekly bullish performance.

Amid generally favorable risk conditions, the pound found support against other major currencies. According to insights from ING Bank, expectations for limited net gains in the GBP/EUR pair hinge on interest rate considerations. The bank expressed skepticism about the Euro to Pound (EUR/GBP) rise, citing a potential preference among markets to lean towards a less dovish outlook from the European Central Bank (ECB) compared to pricing in three full rate cuts in Britain.

Adding to the positive sentiment, Economic Calendar data revealed that the PMI data for business confidence in the UK surpassed expectations, signaling an overall strengthening of economic prospects. MUFG Bank pointed out that the technical slump experienced in the latter part of the previous year seems to be subsiding, and there are indications of improving prospects for the UK.

While optimism about personal financial situations in the next 12 months remained steady, the UK Consumer Confidence Index (GfK) for February saw a slight dip to -19 from the previous month's reading of -19, contrary to expectations for a marginal improvement. Joe Staton, a director at GfK, commented on the mixed signals, calling it "a mixture of bad news and good news." He noted a pause in the overall index improvement for February due to declines in most measures but highlighted the persistent optimism about personal financial situations as a positive aspect.

Staton emphasized the normalcy of monthly fluctuations and expressed hope that measures aimed at creating a more economically stable environment would boost consumer confidence over time. He urged patience, noting that as long as the underlying positive trend doesn't suddenly reverse, it will eventually pay off.

However, amid the positive data, concerns about growth still linger, potentially acting as a damper on the pound's performance. MUFG Bank highlighted the potential hindrance to the pound's upward trajectory due to lingering growth concerns, despite better-than-expected data in the UK and strong risk appetite. The bank also raised awareness about moderately higher mortgage rates, which could amplify these growth-related concerns.

In summary, the Sterling is navigating the complex landscape of economic indicators, risk sentiment, and global economic conditions. While displaying resilience and benefiting from positive data, challenges and uncertainties persist. The intricate dance between economic indicators and market sentiment will likely continue to shape the fate of the British pound in the coming weeks.

Technical Analysis

Looking at the daily chart, the GBP/USD currency pair is in the groove of an ascending channel, a technical dance that traders are closely monitoring. The key move here is if the pair can shimmy past the 1.2775 resistance level, opening the door for more bullish control. The real spotlight, though, is on the psychological resistance level of 1.3000 – a level that could be the currency pair's dance floor if things align favorably.

Now, the plot thickens with this week's US inflation reading. Picture this: If the inflation numbers come in shy of expectations and US economic growth taps the brakes, it's like the GBP/USD pair being handed the perfect dance partner. The crowd cheers as it inches closer to that coveted 1.3000 level. On the flip side, if the figures come in stronger than expected, imagine the record scratching, and the current bullish vibes may take a backseat. Suddenly, the pair might find itself grooving back to the 1.2600 support level.

Here's where it gets interesting – the rhythm of the market is not just about economic data. It's a symphony of global financial markets and investor sentiment. Imagine the market as a massive dance floor where the British pound is just one dancer in a sea of moves. So, as we keep an eye on the US economic data doing the cha-cha this week, we can't forget to scan the crowd – the global financial markets and investor sentiment. Their cheers or jeers can send the GBP/USD pair spinning in unexpected directions. GBP/USD Bulls Anticipate Boost from Stimulus Measures_1

GBP/USD Bulls Anticipate Boost from Stimulus Measures_1

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Goldman Sachs

Commodity

The yellow metal is forecast to climb about 6% in the next 12 months to $2,175 a troy ounce, Nicholas Snowdon, head of metals in Commodities Research, and analyst Lavinia Forcellese write in the team’s report. They point out gold prices may trade in a range in the near term amid uncertainty about Federal Reserve interest-rate policy. (Gold, which doesn’t offer yield, tends to be less attractive to investors when interest rates are higher.) The downside risks to gold prices, meanwhile, are expected to be limited by several key factors.

Central bank purchases are strong and geopolitical tensions are high. Gold buying by central banks — particularly from China and India — have helped offset money flowing out of gold exchange-traded funds. Those purchases have been driven in part by geopolitical tensions, such as Russia’s invasion of Ukraine, and the Covid pandemic. Gold Prices Are Forecast To Rise 6% In The Next 12 Months_1

Gold Prices Are Forecast To Rise 6% In The Next 12 Months_1

Central banks bought an average of 1,060 tonnes from 2022 to 2023, compared with 509 tonnes bought between 2016 to 2019. The increase comes as China shifts reserves away from US dollars and countries such as Poland also ramp up their gold reserves.

“We expect central bank purchases will remain strong on the back of reserve diversification by EM countries and elevated geopolitical tensions,” our analysts write.

China's central bank purchases have steadily shifted reserves away from the US dollar

Investment demand for gold is yet to rebound. The recent lack of ETF purchases is probably because gold-ETF holdings were already high, particularly compared with the level of real (inflation-adjusted) interest rates. Major disruptions, like the Russia-Ukraine conflict and the Silicon Valley Bank crisis in the US, sparked purchases of gold in recent years, and holdings have stayed elevated despite the rise in long-term US yields.

Recently, speculative positioning in gold by the likes of hedge funds has tracked the shift in long-term yields, according to Goldman Sachs Research. This suggests there’s more sensitivity to shifts in macroeconomic policy than to ETF holdings, which have continued to have outflows.

Despite strengthening gold fundamentals, ETF holdings have continued to fall

Historically, changes in gold ETF holdings have often been triggered by major risk-off events (when the appetite for risk declines) and by cycles of easier monetary policy. Our analysts expect ETF holdings to climb once the Fed starts cutting rates, which our economists think could begin as early as May.

Strong retail demand for gold could propel the metal’s price higher. Meanwhile, the “wealth effect” of rising incomes in emerging markets is driving consumer demand for gold, especially in jewelry.

“The rapidly growing cohort of ‘affluent’ consumers in India … will drive growth in jewelry consumption,” our analysts write. “Moreover, gold consumption has also been supported by a lack of alternative investments in some countries which saw big policy shifts (Turkey, China) in the past few years.”

Gold has benefitted from weakness in Chinese equities

In China, gold was one of the best-performing assets in 2023, driven by weak consumer confidence and concerns about growth that raised demand for gold’s “safe haven” status. About 40% of survey participants at the Goldman Sachs Global Macro Conference in Hong Kong thought gold would rise above $2,200/troy ounce by year-end. “We expect the property slowdown and investor concerns around the Chinese equity market to drive strong China retail demand over the coming year,” Goldman Sachs Research analysts write.

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Ukadike Micheal

Economic

Forex

In January, the US experienced a modest uptick in new-home sales, registering a 1.5% increase to an annual pace of 661,000. This growth was propelled by the collaboration of builders and buyers who took advantage of lower mortgage rates at the onset of the year. However, the enthusiasm is tempered by the Federal Reserve's cautious stance on interest rate adjustments, contributing to uncertainties about the housing market's sustained momentum.

The initial positive response to lower mortgage rates and improved homebuilder sentiment at the beginning of 2024 set a promising tone for the housing sector. Nevertheless, the Federal Reserve's reluctance to swiftly lower borrowing costs introduces an element of unpredictability. As interest rates begin to rise again, questions arise regarding the potential longevity of the positive momentum observed in the housing market.

Despite the overall increase in new-home sales, the figures for the previous three months underwent downward revisions. This adjustment, coupled with the January data falling below economists' median forecast, raises considerations about the sector's resilience in the face of changing economic conditions. The delicate balance between supply and demand, influenced by fluctuating mortgage rates, adds complexity to the housing market's trajectory.

An essential aspect contributing to the market dynamics is the median sales price of homes, which decreased to $420,700 in January compared to the previous year. This marks the fifth consecutive decline, showcasing a trend that is attributed to an increase in the supply of new homes available for sale. The elevated supply, reaching 456,000 units, is the highest recorded in over a year. The technical viewpoint underscores the intricate interplay between demand, pricing, and inventory levels in shaping the housing market landscape.

From a technical standpoint, the 1.5% rise in new-home sales to an annual pace of 661,000 units highlights a measured growth trajectory. The nuanced response of the housing market to fluctuating mortgage rates and increased supply underscores the delicate balance between consumer demand and inventory dynamics. Investors and analysts closely monitor these technical indicators to gauge the sector's health and resilience amid evolving economic conditions.

As the Federal Reserve takes a cautious approach to interest rate adjustments, the potential impact of rising rates on the housing market becomes a critical consideration. The sector's ability to navigate these challenges will be pivotal for sustained growth and stability. This nuanced analysis delves into the multifaceted factors influencing the US housing market in 2024, providing insights for stakeholders and offering a comprehensive understanding of the forces shaping the sector's trajectory.

The intricate dynamics of the US housing market, influenced by mortgage rate fluctuations, supply-demand dynamics, and Federal Reserve policies, set the tone for the sector in 2024. The initial positive response reflects resilience, but challenges lie ahead as interest rates become a focal point. This in-depth exploration aims to provide a comprehensive perspective on the housing market, acknowledging both its strengths and vulnerabilities in the current economic landscape.

Source: US Census Bureau

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Ukadike Micheal

Commodity

Economic

Oil experienced fluctuations on Monday as traders awaited crucial insights into global supply and demand dynamics. Brent traded above $81 per barrel after a weekly decline of more than 2%, with West Texas Intermediate hovering around $76. Market participants at the International Energy Week in London, a prominent industry event, are expected to assess the oil outlook, while US inflation data will influence expectations regarding potential Federal Reserve interest rate cuts.

Despite geopolitical tensions in the Middle East and OPEC+ supply constraints, which have kept oil prices in a relatively narrow range over the past two weeks, the impact of increased production from non-OPEC+ sources, including the US, has played a balancing role. Bank of America Corp.'s commodity strategist, Francisco Blanch, anticipates near-term stability in oil prices due to substantial non-OPEC+ supply growth in the coming years. OPEC+ is likely to extend current production cuts into the next quarter, as widely expected, with discussions set for the early weeks of the upcoming month.

Goldman Sachs Group Inc. analysts, including Daan Struyven, foresee an extension of OPEC+ cuts through the second quarter of 2024, gradually and partially phasing out the latest package starting in the third quarter. The bank expects oil prices to maintain a range of $70 to $90 for the time being.

Positive signals emerge from China, where robust travel activity during the Lunar New Year holidays raises hopes for a sustained consumption recovery. Chinese refiners have increased purchases globally since mid-February, and additional term supplies from Saudi Arabia for March indicate a positive trend in demand.

Market metrics, such as timespreads maintaining a bullish backwardated pattern, and strengthening prices of physical crude in the US, reveal ongoing strength in the oil market. Buyers turning to American grades to circumvent Red Sea shipping disruptions contribute to the overall positive sentiment.

From a technical viewpoint, the oil market's resilience amid geopolitical uncertainties and supply dynamics underscores the complex interplay of factors influencing prices. The stability in timespreads and physical crude prices indicates market participants' confidence in the ongoing strength of demand and supply fundamentals.

The oil market's ebb and flow reflect the delicate balance between geopolitical tensions, supply constraints, and demand dynamics. As industry leaders convene in London for the International Energy Week, the discussions and assessments are likely to shape market expectations. The positive signals from China and the overall resilience in market metrics contribute to a cautiously optimistic outlook for the oil market, with ongoing attention to geopolitical developments and global economic indicators.

Source: Bloomberg

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Ukadike Micheal

Economic

Stocks

Global shares experienced a temporary halt just below record levels on Monday, with investors eagerly awaiting key inflation data from the United States and the euro zone. This data is seen as a crucial factor in shaping expectations regarding interest rates, as recent surprises in strong U.S. job growth and inflation have led investors to reevaluate their bets on central bank rate cuts.

The MSCI global equity index, having reached a record high last week with significant gains in U.S. stocks driven by AI company Nvidia, remained flat on Monday. U.S. stock futures also indicated minimal changes, hinting at a potential pause for Wall Street following the previous week's tech-driven rally. Meanwhile, in Europe, the STOXX 600 index dipped by a quarter of a percent, holding just below the record highs achieved last week.

Despite this, Japan's Nikkei continued its ascent, marking record highs for the second consecutive trading session, supported by positive performances in the pharmaceutical sector. Attention now turned to upcoming inflation data, particularly the U.S. Federal Reserve's core personal consumption expenditures (PCE) price index, scheduled for Thursday. Market expectations, as per a Reuters poll, anticipate a 0.4% rise, up from December's 0.2%.

The shifting sentiment regarding central bank actions is reflected in market pricing. Investors have extended the expected timing of the first Fed easing to June, compared to the previous estimate of May in early February. Futures now imply slightly more than three quarter-point cuts this year, down from the initial five at the beginning of the month.

Euro zone inflation data, set to follow on Friday, adds another layer of complexity. The core figure is anticipated to slow to 2.9%, nearing the European Central Bank's (ECB) 2% overall inflation target. Traders have adjusted their predictions for the ECB's rate-cutting timeline, now projecting a potential start in June rather than the initial April estimate after the January meeting.

While the U.S. inflation data is expected to have limited implications on the Fed's policy outlook, the euro zone figures hold more significance. A core inflation reading below 3% could prompt a dovish repricing, creating a potential impact on the ongoing global equity rally.

Optimism over rate cuts was fueled by comments from ECB policymakers on Friday, contributing to a broader bond market rally. On Monday, global bond yields saw minimal movement, with the 10-year U.S. Treasury yield down slightly to 4.24%. The market faces a significant challenge with the Treasury selling $127 billion of two and five-year notes on Monday, followed by another $42 billion in seven-year paper on Tuesday.

Investors are also closely monitoring the risk of a U.S. government shutdown if Congress fails to agree on a borrowing extension by Friday, adding an additional layer of uncertainty to the market landscape.

From a technical standpoint, the market's response to inflation data and bond sales indicates the delicate balancing act between economic indicators and monetary policy expectations. The nuanced reactions of global equities and bond yields underscore the complex interplay of factors influencing investor sentiment, from central bank decisions to geopolitical developments.

As markets navigate through a week filled with crucial economic data and central bank communications, the delicate equilibrium is evident. The outcomes of inflation reports and bond auctions will likely shape the trajectory of monetary policy expectations, influencing investment decisions and market trends. The potential for a U.S. government shutdown adds an element of geopolitical risk, further emphasizing the need for investors to remain vigilant in a dynamic and interconnected financial landscape.

Source: Reuters

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Warren Takunda

Economic

Central Bank

Forex

Last week, the Euro-Dollar exchange rate experienced a notable uptick, aligning with the forecast outlined in the preceding Monday's Week Ahead edition. The analysis accurately predicted a potential pullback in the strength of the U.S. Dollar observed throughout 2024.

This anticipation stemmed from the recognition that while the dollar remained a favored currency, a period of consolidation seemed imminent, creating conditions conducive for an increase in the euro-dollar exchange rate.

Indeed, this projection materialized, setting the stage for a continuation of similar dynamics in the week ahead. The U.S. dollar index, a key gauge of the currency's strength, struggled to surpass the 105 threshold, indicating the possibility of incremental gains in the short term but also suggesting limitations to further appreciation.

Looking ahead to March 01, which coincides with the end of February, market participants anticipate potential movements in the Euro to Dollar exchange rate due to month-end rebalancing activities. Real money investors, engaged in the rebalancing of their global equity portfolios, often adjust their FX exposure during months marked by rallies in global stock markets. This adjustment typically involves USD-selling, driven by hedging flows, and has historically exerted pressure on the USD.

With U.S. markets reaching record highs, fueled by the strength of technology stocks and leading companies such as Nvidia, the potential for significant USD selling into month-end looms large as portfolio managers seek to realign their FX exposure accordingly.

In the currency markets, attention is also focused on upcoming Eurozone inflation data, particularly Germany's inflation figures scheduled for release on Thursday. Any surprises in these figures could potentially impact the Euro's performance, with implications for market sentiment regarding European Central Bank (ECB) rate cut expectations.

On Friday, market participants will eagerly await the Eurozone inflation rate for February. Deviations from consensus expectations could influence ECB rate cut bets, thereby affecting the Euro's relative strength against both the Pound and the Dollar.

Additionally, Monday will see investors eagerly await President Lagarde's comments on the ECB's Annual Report, which are expected to provide insights into the central bank's thinking and potential monetary policy implications for the Eurozone.

Shifting focus to the Dollar Week Ahead, market attention centers on incoming data releases, including preliminary U.S. GDP figures for the final quarter of 2023 and weekly job claims data scheduled for Thursday. Of particular interest are the Personal Consumption Expenditures (PCE) inflation figures, a key metric closely monitored by the Federal Reserve.

Can Euro's Resilience Hold Against Dollar's Year-long Dominance?_1

Technical analysis of the EURUSD pair suggests the presence of solid resistance around the 1.0860 level, representing the previously broken neckline of a head and shoulders pattern visible on the chart. Despite attempts to breach this level, the pair encountered staunch resistance, prompting negative trades. Currently, the pair appears to be testing the support line of an intraday bullish channel.

Indicators provide mixed signals, complicating the outlook and suggesting potential for both bullish and bearish movements. As such, market participants await clearer signals, with support identified at 1.0730 and resistance at 1.0900 guiding near-term trading ranges.

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