A close above $11,900 in the Bitcoin market on Tuesday met with resistance, causing the cryptocurrency to flip lower.
The price action reminded of a higher selling sentiment inside $12,000-12,500, an area that this year has capped Bitcoin from establishing a long-term bullish bias. The range once again came into the picture a day after Bitcoin experienced a $250-jump on supportive macro fundamentals.
Powell Speech, Stimulus
In retrospect, traders increased their exposure in the Bitcoin market after speculating on the Federal Reserve Chairman Jerome Powell’s speech on the central bank digital currencies on Monday.
The cryptocurrency started rallying aggressively an hour before the speech, neutralized itself after Mr. Powell started speaking, and resumed its uptrend after he concluded.
The momentum sustained on Tuesday on other macro catalysts.
First, a depreciating US dollar allowed Bitcoin to hold its gains despite repeated attempts of a sell-off near $11,800. Second, the cryptocurrency rose alongside the US futures on hopes that Congress would reach an agreement on the coronavirus stimulus package.
House Speaker Nancy Pelosi gave the White House a deadline until Tuesday to negotiate the deal. Otherwise, she warned, there will not be a stimulus package until the November 3 US Presidential Election. As a result, the risky markets swung to the upside, hoping that lawmakers would finalize a package by the end of Tuesday.
Conflicting Technicals
Bitcoin rose by more than 200 percent across the second and third quarters this year after the US government passed a $2 trillion coronavirus relief aid. That allowed traders to anticipate another bull run should the White House agree on a similar stimulus package.
But despite the solid upside fundamentals, Bitcoin risked trading lower based on its technical parameters. For instance, the cryptocurrency’s daily Relative Strength Indicator (RSI) was near 69, just a point below it earns the tag of “overbought.” When the RSI jumps above 70, traders typically sell the asset to neutralize its market sentiment.
Other technical indicators, including the Stochastic Oscillator, were also signaling a neutral sentiment, with an inclination towards bears.
Bitcoin also risked a downside correction after it tested the upper trendline of its Ascending Channel pattern. The cryptocurrency typically pulls back after touching the level. In case BTC/USD breaks above it, the pair’s uptrend exhaust inside the pink resistance bar above the trendline.
Therefore, a retest of the upper trendline could send the Bitcoin price lower towards the lower trendline support. That is near $10,550 for now.