Bitcoin (BTC): EUR/USD Correlation And The Beginning Of A New Cycle

Bitcoin (BTC) is close to completing its three bounces ever since its fall from previous all time high of $20,000. The odds are heavily in favor of a reversal despite what some traders and analysts may have you believe. The reason being that the correction has completed, the volume has dried up and the RSI has reached oversold levels. Short term, the price could still fall to $7,000 to complete the three bounces formation. This will most likely happen over the weekend, with next week being the beginning of a new Bitcoin (BTC) cycle. Currently, there are no clear signs of any bullish impetus but we can see a hidden bullish divergence. Smaller time frame charts for Bitcoin (BTC) do not look good but the big picture still remains intact. Apart from Bitcoin (BTC)’s own signs of a reversal, we can see a striking similarity between Bitcoin (BTC) and the EUR/USD pair. The price has continued to imitate the EUR/USD pattern in a lead/lag style for quite some time. The correlation between the two has been at its highest as interest in Bitcoin (BTC) faded over the past few weeks and the price has been influenced mostly by movements of the US Dollar (USD). The chart above shows clearly how Bitcoin (BTC) trades completely in sync with the EUR/USD pair. An interesting observation to take note off is how EUR/USD began its climb at the same time BTC/USD started rallying to $20,000 from $1,000. Currently, the EURO has found support at its trend line. EUR/USD seems to be bullish after the latest FED Minutes. It is oversold on both the daily and weekly time frames same as Bitcoin (BTC). However, we often lose sight of the broader picture when the bearish momentum is so prolonged and the market sentiment is equivocally negative. The fate of Bitcoin (BTC) is now linked to the performance of the US Dollar relative to the Euro. EUR/USD is at a strong support and Donald Trump does not want a strong dollar. The stock market has also had a major correction and if the EUR/USD pair breaks that support and continues lower, it will push the dollar up which means the stock market will crash heavily to formally enter a bear trend. This would put the United States in an extremely difficult situation despite all that is currently going on. Needless to say, that will drag Bitcoin (BTC) to lower levels like $3,000 or even lower. The US government does not want another crisis at hand, the stock market cannot afford a bear market at this stage, exchanges do not want Bitcoin (BTC) interest to vanish and China, a long term Euro investor wants a strong Euro currency. Considering the interests of all stake holders, the majority wants a strong Euro. This means the odds of Bitcoin (BTC) making a reversal at this point outweighs the odds of it going down further. To further clarify, there is no such thing as further. If it goes down, then it goes down hard to $3,000 or lower levels. That would have to do with EUR/USD not Bitcoin (BTC) itself. Currently, Bitcoin (BTC) has found support at the crtical 0.618 Fibonacci level whereas the EUR/USD pair has found support at the 0.786 Fibonacci level. In light of the above, there is a high likelihood that we begin a new rally in June 2018 for both BTC/USD and EUR/USD just like we did in June 2017.