The US, and by extension the global economy are under strain as government bond yields continue to rise. The US 10 year bond yield surged above 5% on Tuesday and this has impacted the crypto market, with Bitcoin sliding down to important support at $76K. If this support fails, the $BTC price could fall quickly to the low $70K area.
US 10 year bond yield breaks 19 year trend
Source: TradingView
The above is a view of the weekly chart for the US 10 year bond yield. Having escaped the wedge pattern, the yield continued to rise until it hit a slightly descending trendline that began back in June 2007, a 19-year trend that was hit on Monday, with the yield breaking through the line and getting above 5% on Tuesday.
However, hope is not lost yet. From a technical analysis perspective, a double top has just been made, and looking at the Stochastic RSI indicators, it can be seen that they have reached their top limit. Therefore the yield could begin to soften over the next few days and weeks, that is as long as there is not a breakout beyond that double top. That’s the technical analysis side of things. Obviously, the market and the US government are going to have their own say on what eventually happens.
Breakdown to $73K if support does not hold
Source: TradingView
As can be seen in the 4-hour chart above, the $BTC price did reach $79,600 before falling back down again. This was a lower high into the bargain so we now wait and see if a lower low is coming. The price has fallen back below the descending trendline and also below the $77K support level. It’s really only now the bottom of the parallel channel, and the horizontal support at $76K which remain between the $BTC price and what could be a sharp fall down to $73K and below.
Head and shoulders pattern completes
Source: TradingView
The daily chart reveals that what was a potential head and shoulders pattern has so far come to fruition. With the rise in the $BTC price to $79,600, this enabled the right shoulder to form. It now just remains for a breakdown to occur for the pattern to be fully in force.
The arrow coming down from the bottom of the channel and the neckline of the pattern is the full measured move to the downside. It does seem rather opportune that this is more or less exactly where the 200-day simple moving average is. $69K - $70K is also a strong support level.
Likely US interest rate hike could have a say
Source: TradingView
The weekly chart gives us further insight into what could occur over the longer time frame. It can be seen that the flag at the top of the massive green breakout candle has become a big battleground for the bulls and the bears. Given that it’s not a classic bull flag, e.g. it doesn’t tilt downward, means that the bulls do not have what would be a very bullish setup. Be that as it may, the channel is still acting as a consolidation pattern, and if it carries on long enough without breaking down, the setup does edge more towards the bulls.
The RSI supports a bullish move, given that the indicator line broke up out of a huge descending trendline that is 2.5 years in the making. If the indicator line can confirm the trendline as new support, this will go a very long way towards the bullish case.
Finally, the MACD illustrates that the blue line and the red signal line are still heading upward, although a fly in the ointment is that the green histogram bars are starting to get smaller. Generally though, the trend is up here as well.
Nevertheless, we also need to take the economy into account. As already mentioned, bond yields have spiked upward. Add to this the FOMC meeting on Wednesday, where a 25 basis point hike is pretty much a foregone conclusion, some bearish pressure is probably going to be applied, at least into the short and medium term.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
Source: Crypto Daily