Bearish view

• Sell the BTC/USD pair and set a take-profit at 49,000.
• Add a stop-loss at 60,000.
• Timeline: 1-2 days.

Bullish view

• Set a buy-stop at 56,500 and a take-profit at 58,500.
• Add a stop-loss at 53,000.

(Click on image to enlarge)

Bitcoin price lost momentum in the overnight session as analysts cautioned that the unwinding of the Japanese yen trade could take time and that it still threatens the market. The BTC/USD pair retreated to 54,865, down from Wednesday’s high of over 57,000.

Bitcoin’s retreat coincided with that of US stocks as the Dow Jones, S&P 500, and Nasdaq 100 indices erased their initial gains and dropped by over 60 basis points. It also happened as the VIX index rose by 5% and the US dollar index spiked by 0.25%.

Some analysts warn that the size of the Japanese yen carry trade means that the process of unwinding it will take time. That’s because the cheap Japanese yen flowed to many emerging market economies and other global stocks. As such, their view is that unwinding that trade will take a few months to complete since estimates place the trade at over $500 billion.

Bitcoin is exposed to the carry trade because some of the cheap Japanese money was used to invest in some riskier assets like Bitcoin and Ether.

Still, Bitcoin faces a major catalyst in that the Federal Reserve has committed to be supportive of the economy, a move that could see interest rate cuts in the coming meeting or even earlier if the situation worsens.
 

BTC/USD technical analysis

Bitcoin’s daily chart is sending mixed signals. On the positive side, it has formed a falling broadening wedge chart pattern shown in green. In technical analysis, this is one of the most popular chart patterns in the market. When it forms, an asset usually forms a bullish breakout when it moves above its upper side, in this case 70,000.

Bitcoin has also formed a hammer candlestick pattern whose lower side was Monday’s low of 49,000. A hammer is one of the top reversal signs in the financial market. Therefore, these patterns point to more upside in the next few weeks.

On the negative side, Bitcoin has formed a series of lower lows and lower highs, meaning that it is in a bearish trend. It is also about to form a death cross pattern as the 200-day and 50-day simple moving average is about to form a bearish crossover.

Therefore, the pair will likely be volatile in the next few days. A break below this week’s low at 49,000 will invalidate the bullish patterns and point to more downside.

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