Bitcoin’s daily range has narrowed massively, and this is giving us an indication that a massive capitulation is coming. We believe that this capitulation can be any day now as bitcoin has been trading in a narrow range for an extended period.
If we look at the fundamentals, two things are working in favour of bulls. First, it seems like Bitcoin has lost its strong correlation with the stock market. This is because, over the last week or so, we have seen a pretty intense sell-off for the US stock market as the Fed has confirmed that they are going to control inflation, and their monetary policy will remain on the hawkish path.
Secondly, we have seen a severe rout of the currency market, especially anything that is trading against the dollar, such as the EUR/USD or GBP/USD. The dollar index is very much moving in one direction and one direction only, and that is to the upside. Usually, when the dollar index picks up this much strength, we see the bitcoin price break down. So these two factors indicate that bulls are holding on to their ground very well, and they have not allowed the bitcoin price to get battered because of the two reasons we mentioned above.
On the flip side, if there is a capitulation to the downside, then the next move isn’t going to be about the 18K price level or 15K; the sell-off could be so intense that it could easily push the prices towards the 12K price mark.
In the currency market, it seems traders are losing faith in the Euro-dollar or Sterling-dollar. This is because bulls are nowhere to be seen. Both of these currencies are in free fall against the dollar. Bulls do not have the power to stand against the strength of the dollar index. The reason we see such a sell-off for the Euro and Sterling is not that the Fed will continue to increase the interest rate. There is a lot more to this.
Remember, the Bank of England started to raise the interest rate well before the Fed initiated the process. And the ECB is also aggressively talking about increasing the interest rate.
We believe that the actual reason that we are experiencing such an intense sell for the Euro and Sterling is that traders are worried that as winter is approaching, the situation with respect to energy resources is going to become a lot worse. This is despite lawmakers in the EU and the UK trying to assure everyone that they have the situation under control and Russia cannot dictate their future.
However, the reality is that a conflict with Russia has sent energy prices through the roof in Europe and the UK. Consumers are struggling every day and worried about their energy bills. There is no short fix for this, given the EU’s and UK’s economic health, and a major disaster could be on the horizon.
Apple is the stock to watch this week as traders and investors will eagerly watch the big event, which will take place on Wednesday. Apple is set to showcase its new iPhone 14; iPhones are still 50% of the company’s revenue. There is also a lot of hype about Apple’s new watch as it is increasingly taking the market share. In addition, traders will like to know what Apple has under its sleeves for the two most important markets: self-driving cars and virtual reality glasses. We expect the company to give highly calibrated answers to these two critical questions, especially after it hired another top executive from Hyundai who was heading the company’s self-driving unit.
In terms of the economic calendar, it is going to be mainly about the OPEC meeting, and it is a production cut. The event will bring higher volatility for the oil prices, which are failing to keep their bullish momentum. Later in the week, traders will focus on the BOC’s overnight rate and rate statement. The big event for this week remains the ECB meeting on Thursday, and it is widely anticipated that the Bank will increase the interest rate. Followed by that is Fed Chair Powell’s speech, and traders would like to assess the possibilities of the next interest rate.