KVB Market Analysis | 23 September: Bitcoin's Bullish Breakout Driven by Key RSI Patterns

Product: XAU/USD

Prediction: Increase

Fundamental Analysis:

XAUUSD have hit a record high, surpassing $2,600, driven by the Federal Reserve's rate cuts and Middle East tensions. Last week, the Fed lowered rates by 50 basis points, beginning a monetary easing cycle, which boosted gold's appeal as a non-yielding asset. Investors are also turning to gold to hedge against uncertainties caused by prolonged conflicts in the Middle East and elsewhere. Gold's rise may indicate that the economy is bracing for major events, like a possible recession, debt crisis, or a crash in other assets like cryptocurrencies. Some warn a recession may have already started.

Technical Analysis:

In the short term, from a technical perspective, the 60-minute chart shows that gold is trading in an upward channel. The 14-hour Relative Strength Index (RSI) supports a short-term bullish trend, as the indicator is near overbought levels. This means that gold buyers will aim to push the price higher toward $2,654, or even $2,691. On the other hand, sellers might look to take profits if the price falls back to around $2,587 or lower to $2,551. On the daily chart, gold is also trading in an upward channel, with the 14-day RSI indicating a bullish trend near overbought territory.

Product: EUR/USD

Prediction:Decrease

Fundamental Analysis:

The European Central Bank (ECB) cut interest rates for the second time in September but didnt provide details on future easing steps. After a slight recovery in the spring, the eurozone economy seems to be losing momentum again. The main source of weakness comes from Germany, the eurozone's largest economy, but other countries are not seeing as much slowdown. The good news is that inflation is almost under control, so the ECB can respond to further economic deterioration. In August, the composite PMI rose slightly, mainly due to a rebound in services, while manufacturing PMI stayed in the contraction zone. In the UK, all three PMI indices increased for the second month in a row, suggesting a brighter economic outlook for 2024. If the situation improves further in September, the Bank of England may feel less urgency to cut rates, which could support the pound.

Technical Analysis:

The Relative Strength Index (RSI) on the 4-hour chart is close to 70, indicating that EUR/USD's bullish trend remains strong, though a short-term correction could happen. The first resistance level is at $1.1200 (a key level and 2024 high), followed by $1.1275 (high from July 18, 2023) and $1.1300 (a round number). On the downside, $1.1135 (20-period Simple Moving Average) acts as temporary support, with further support at $1.1100 (Fibonacci 23.6% retracement) and $1.1080 (100-period Simple Moving Average).

Product: BTC/USD

Prediction: Increase

Fundamental Analysis:

After a consolidation period, Bitcoin has been forming a bullish pattern. The first notable bullish signal appeared in 2015 when the RSI reached oversold levels, triggering a strong buy signal. Similar strong buy signals were observed in 2018 and 2020 as the RSI entered oversold territory again. The latest buy signal occurred during the consolidation period between the last quarter of 2022 and the first quarter of 2023, forming a clear inverse head-and-shoulders pattern. This pattern led to a strong upward rebound. After breaking the neckline of the pattern, Bitcoin's price surged and reached overbought levels in the first quarter of 2024, as indicated by the RSI.

Technical Analysis:

From a technical perspective, the line chart also shows strong market volatility. Bitcoin's price forms highly volatile patterns before shifting direction. The double top pattern in 2021 led to a significant price drop, which is clearly visible on the chart. After that, a symmetrical expanding wedge pattern pushed the price higher. Currently, the price is forming a descending expanding pattern, and a breakout above $72,000 would be seen as a bullish development. However, until the price breaks above $72,000, there is still considerable risk in the Bitcoin market. Bitcoin's price is closely linked to changes in the Federal Reserves interest rates. When rates are lowered, increased liquidity and lower borrowing costs boost Bitcoin, as investors seek alternative assets amid concerns about inflation and currency devaluation. Still, Bitcoin remains highly volatile and speculative, with sharp price drops possible when economic conditions change.