August rains no help to Bitcoin

With my recent break on the beautiful Indonesian island of Nusa Lembongan at an end, it’s good to see that Sydney has received some much-needed August rain over its major dam’s catchment area as have some other areas of the drought-stricken state.

I also note that August has once again lived up to its reputation for delivering heightened volatility in markets. Key stock indices in the U.S. and here in Australia remain approximately 5% below recent highs, despite yesterday’s extraordinary reversal higher.

Yesterday’s turnaround sparked by claims from President Trump that representatives from China had called twice to restart trade talks - a relief that the two countries moved quickly to defuse tensions after Friday’s flair up.

However, the events of recent days also highlight that the leadership in both countries remain deeply divided between a desire to dig in and play trade war “hardball”, or to relent and end the dispute which has outlasted all expectations. All before the start of another historically volatile month, September.

Curiously while traditional safe havens such as gold, the Japanese yen and Swiss Franc have all found support during the volatility of August, the same cannot be said for Bitcoin.

The failure to break/close above trend channel resistance $12k in early August was a concern and a reason we suggested taking some profit on longs on the run-up to $12k. It was also the reason we suggested raising the stop loss on remaining longs to $10.7k, to ensure a profit on the trade opened at $9.7k. https://www.cityindex.com.au/market-analysis/a-forest-though-the-trees-bitcoin/

With the profit stop loss at $10.7k subsequently being triggered, I am currently square Bitcoin. I am waiting for a pullback to rebuy Bitcoin towards trend channel support and the 200-day moving average near $8k. Alternatively, should the pullback to $8k fail to eventuate, I will also consider buying a break/close in Bitcoin above trend channel resistance $11.5k.

In summary, in the medium term, I still favour the view that Bitcoin will trade higher towards $15k /17k. However, in the short term the failure to rally during the August rains when other safe have assets did, suggests lower prices may come first.

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