Bitcoin leads crypto gains but faces technical challenges ahead

(AI video summary)

This video was created on 23 July for IG audiences by ausbiz.

Trade deal momentum reduces August deadline pressure

The market sentiment has improved following the announcement of a Japan-US trade agreement, marking the sixth trade deal to be completed. This agreement joins existing deals with the United Kingdom, Philippines, Indonesia, Vietnam, and now Japan, significantly reducing concerns around the August 1st tariff deadline.

The agreed tariff rate sits below the previously threatened 25%, providing positive momentum as negotiations continue. With Scott Morrison heading to China next week to extend the current trade deal, the Japan agreement helps diffuse much of the uncertainty that has been weighing on markets for the past three to four months.

The European Union remains the outstanding negotiation, but if resolved before August 1st, markets could focus on fundamental macroeconomic factors rather than trade volatility.

Australia 200 maintains breakout above key levels

The Australia 200 demonstrated resilience this morning following Friday's record high performance. Despite aggressive selling pressure early Monday - a phenomenon observed multiple times throughout 2024 when new highs were immediately met with heavy selling - the index has maintained its position above critical breakout levels.

The key support zone sits around 8600 to 8620, and while the index holds above this level, there remains potential for extension towards 8850. The selling pressure has been particularly concentrated in major banking stocks, though the broader index structure remains constructive.

US dollar weakness creates Aussie dollar opportunity

The US dollar continues to trade near recent lows, sitting precariously on important support levels. The US Dollar Index (DXY) shows significant weakness, though a complete breakdown hasn't occurred yet. This dollar weakness has created a favourable environment for the Australian dollar, which continues its sideways-to-higher consolidation pattern established over the past three months.

The Reserve Bank of Australia (RBA) minutes revealed a cautious approach to future interest rate cuts, with reductions likely in August and possibly once or twice more before year-end. However, the broader US dollar weakness, partly driven by concerns over Federal Reserve independence due to political pressure, suggests the Aussie dollar may be positioning for another move higher.

Commodity markets respond to trade optimism

Crude oil had been under pressure for three consecutive sessions, testing support around $64 to $65. However, following the Japan trade deal announcement, prices bounced from these levels. The key technical level to watch remains the $64-$65 support area - a break below this could signal further weakness, while holding above opens the path towards $70, which was tested early last week.

Gold continues to attract safe-haven demand amid ongoing trade uncertainty. The precious metal has been trading within a bullish trend channel, with recent tests of the lower bound met by strong demand. Currently trading not far from the $3500 record high, the next resistance level sits at $3450 from June, followed by the $3500 high. A break above could target $3750.

Bitcoin faces long-term resistance amid altcoin rotation

Bitcoin has posted strong monthly gains of approximately 12%, but now faces significant long-term resistance around 123,000 to 125,000. The monthly chart reveals this level represents trend line resistance dating back to 2018, creating a critical technical juncture.

Adding to caution, three large wallets have sold approximately $11 billion worth of bitcoin over the past week, potentially limiting further upside momentum. With bitcoin hitting this resistance and altcoins performing strongly, rotation into alternative cryptocurrencies appears likely.

US Tech 100 approaches key resistance ahead of earnings

The US Tech 100 faces a crucial test with major earnings reports from Tesla and Alphabet scheduled for tomorrow morning. While expectations suggest the earnings bar has been set relatively low, significant technical resistance emerges around 23,400 on the weekly chart.

Strong earnings results could propel the index towards this resistance level, though sustained breaks above may require additional positive catalysts. The ongoing political pressure on Federal Reserve independence remains a key wildcard factor affecting broader market sentiment and potential index performance.