Bitcoin (BTC) seems to all set to start with the start of the new year but there is one small catch. Bitcoin (BTC) price action depends to a large extent on the future horizon of EUR / USD. In times of uncertainty, that's exactly what happens. Bitcoin (BTC) is still a very speculative asset in an evolving market. Its movement during critical points is usually a response of the price of EUR / USD. We have seen this correlation for a long time in the past and it is quite natural to expect. The price of Bitcoin (BTC) is paired to the US dollar (USD) on a lot of large exchanges so it makes sense to see Bitcoin (BTC) go up as the dollar (USD) goes down.
The outlook for the euro in the coming weeks is not a promising one. In fact, as a daily chart for EUR / USD shows, the price is currently trading a triangle and a wedge wedge at the same time. It also touched the top of the triangle as well as the falling wedge at the point of their node in line with the 38.2% fib level. This further made it difficult for EUR / USD to break through this meeting of strong resistance levels. The more likely result at this point seems to be an impending retreat back to the 21 day EMA which will give the price a little power to rally a successful rally to break this resistance. However, if the EUR / USD makes a break and closes below the 21 day EMA, we can expect to see an additional downside.
In the case of a break below the triangle, it seems the price settle down at the bottom of the falling wedge. Both EUR / USD and Bitcoin (BTC) are now approaching oversold territory over the daily timeframe. This is an alarming sign which further decreases the chances of a successful break out of the resistance. However, the consumer price index is the result of price action and not vice versa. Therefore, it would not be surprising to see both the EUR / USD and Bitcoin (BTC) rally even underbought conditions. It is important to note that any such rally will be followed by a significant correction disadvantage before the price can resume the rise.
The weekly forecast for EUR / USD may not look positive but the 4H chart for BTC / USD tells a different story. Now we see the inverse head and shoulders formation in creation. We have seen such a bullish result breakout formation at BTC / USD a long time ago. If this IH & S comes to fruition, we are likely to see the price of the Bitcoin (BTC) rally to $ 5,200 to say the least. The price currently oversold for the short term definitely has a breakout place in the coming days. However, investors should not rely on anything crucial before we have a clear EUR / USD direction.