Bitcoin and Euro are playing from the same team against the same opponent: the US dollar.
The two assets climbed in tandem this Thursday as the greenback weakened. While Bitcoin had little do with the depreciation, it was the European Central Bank that spoiled the dollar’s five-day winning streak with its latest policy decision.
In a news conference earlier today, ECB President Christine Lagarde committed to maintaining their interest rate at minus 0.5 percent, refinancing rate at 0 percent, and inflation target at 2 percent. She further refrained from interfering in the forex market, putting cold waters on the hopes that ECB would weaken the euro to boost exports.
As a result, the European buck remained stronger as it was. Meanwhile, the dollar lost a portion of its recent gains against a basket of foreign currencies. Bitcoin, which has lately benefited from a weaker greenback, too climbed modestly by 1.24 percent to $10,350 as of 1831 New York time.
Another reason why Bitcoin surged higher appeared more technical than fundamental. Konstantin Anissimov, Executive Director at CEX.IO, told FxDailyReport that the consolidation above $10,196 was keeping Bitcoin’s bullish hopes alive. He further added the cryptocurrency would likely trade inside the $10,000-10,400 area for a while.
“BTC/USD is likely to take another fluctuation in this range, slipping to the $10,000 handle with a subsequent rebound to $10,400. If that scenario works, a breakthrough above $10,400 is likely to follow because the sideways corridor that has been in place since 5th September indicates a high probability of the downtrend reversal.”
The Gold-Bitcoin Relation
The movements in the gold market also offered a longer-term outlook for Bitcoin.
Both the assets served as hedging destinations for investors that are looking to diversify from cash and cash-based investments. While an improving economic outlook last week unstressed the dollar, Naeem Aslam of AvaTrade doubted the sentiment would last any longer.
“Things are not improving and this is the reason that we are seeing improvement in the gold price,” the chief market analyst said. ‘It is likely that the bottom is in for the gold price and it is likely to continue to move higher.”
The same fundamentals put Bitcoin under a bullish spot, especially as investors are watching the cryptocurrency to rise higher against lower interest rates, open-ended quantitative easing, and higher inflation targets.
In the near-term, BTC/USD was now targeting a close above $10,400 to retest $10,500. If the pair manages that, then an extended rally towards $10,800 seems likely.
Meanwhile, a break below $10,000 would push bears towards $9,800, with a special downside bias for $9,600, a CME gap level.