Charts Of The Day: Cryptocurrencies show recovery signs

Market Analysis / 4 Min Read
Milan Cutkovic / 21 May 2021

Highlights:

  • Cryptocurrencies showed signs of recovery following Wednesday’s sharp sell-off
  • Short-term outlook for USD/JPY has turned dovish
  • JPY crosses are worth keeping an eye on
  • USD/MXN remains fairly weak with the broad downtrend intact, but potential remains for a short squeeze as the USD regains some ground

Bitcoin

Cryptocurrencies showed signs of recovery today, following a sharp sell-off on Wednesday. While some crypto investors certainly used the most recent crash as opportunity to buy the dip, many more prefer to stand on the sidelines amid a wave of negative news. Cryptocurrencies were always highly volatile, but investors will likely need some time to recover from this week´s dramatic price action.

Looking at the charts, $30,000 is the key support level BTC bulls will have to defend to prevent another round of panic selling. To the topside, imminent resistance is seen at $42,605, while the next major hurdle lies at $46,620.

USD/JPY

The short-term outlook for USD/JPY has turned dovish. The currency pair recently broke below the rising trendline from the April low and a test of 108.35 support appears increasingly likely. Should the currency pair fall below this line of support, the correction is set to extend to at least 107.50. The Japanese Yen has caught a bid this week amid rising risk aversion in global markets.

AUD/JPY

The JPY crosses are also worth keeping an eye on. AUD/JPY is often seen as a risk barometer, and should the sell-off in global equity markets resume, the currency pair could find itself under renewed pressure. Negative RSI divergence on the Daily chart could spell further trouble. Imminent support is seen at 82.80 – the 23.6% Fibonacci level of the November-April rally – followed by 81.95. AUD/JPY bulls will need the latter support level to hold as a breakout below could pave the way for a correction towards the psychologically important support level at 80.00.

USD/MXN

USD/MXN still looks fairly weak, with the broad downtrend intact. However, there is potential for a short squeeze as the US Dollar regains some ground. The Mexican central bank left rates unchanged last week and noted that the recent spike in inflation is temporary. The market was expecting a more hawkish Banxico, and the Peso came under pressure.

The positive RSI divergence on the Daily chart is hinting at a short-term recovery before the downtrend eventually resumes. Traders will be keeping an eye on the 20.32 resistance level, which has proven to be a major obstacle in the past. A clear breakout above this level would pave the way for a recovery rally towards the 200 DMA, which currently lies at 20.83.

The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. Readers should seek their own advice. Reproduction or redistribution of this information is not permitted.

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