Stronger dollar prospects risk pushing down Bitcoin price to $32K

2 years ago

The U.S. dollar's quality to proceed its rally successful Q2 could beryllium fatal for Bitcoin (BTC), which has demonstrated inverse correlation with the dollar since January 2022.

Dollar paints "bull flag"

The U.S. dollar index (DXY), which measures the greenback's spot against a handbasket of overseas currencies, reached its 21-month trading precocious of 99.82 connected April 7, the highest level since May 2020.

The scale present looks poised to proceed its upside determination further arsenic it breaks retired of a classical bullish continuation signifier — called a "bull flag."

In detail, bull flags look erstwhile the terms consolidates little wrong a parallel descending transmission aft undergoing a beardown uptrend (called flagpole). In theory, the signifier is resolved aft the terms breaks retired of their scope to the upside to scope the level located astatine a magnitude adjacent to the flagpole erstwhile measured from the breakout point.

The bull emblem setup truthful puts the adjacent upside people for DXY astatine 101.

Golden transverse connected the play chart

The DXY scale is besides forming a bullish golden cross for the archetypal clip since April 2019.

Golden crosses hap erstwhile an asset's short-term moving mean rises supra its semipermanent moving average. Many analysts consider the crossover arsenic a bullish method awesome owed to its past of preceding beardown uptrends.

DXY's past aureate transverse betwixt its 50-week and 200-week exponential moving averages (EMA) had travel earlier a 4% upside move.

A akin bullish setup present nears for a 50-200 EMA crossover successful April, notes Alexander Mamasidikov, co-founder of crypto wallet work MinePlex.

"The enactment of the Golden Cross connected the U.S. dollar scale marks a play of impermanent spot for the greenback with an anticipation for it to tick stronger maturation potentials against different currencies," helium explained, adding:

"The ensuing spot of the U.S. dollar pursuing the aureate transverse enactment volition assistance to stump the interaction of ostentation arsenic the greenback's purchasing powerfulness is boosted."

Where does it permission Bitcoin?

Interestingly, Bitcoin has been forming the other setup to the dollar dubbed a bear flag — suggesting much symptom up for the BTC/USD pair.

Bear flags look erstwhile the terms consolidates higher wrong a parallel ascending transmission and resoluteness aft it breaks beneath the channel's little trendline with convincing volumes. In a "perfect" scenario, a carnivore emblem breakout results successful the terms falling arsenic debased arsenic the tallness of the erstwhile downtrend.

Thus, Bitcoin could spot a driblet to the flag's little trendline astir $40,000, opening the doorway for a driblet toward $32,000.

— Jesse Olson (@JesseOlson) April 7, 2022

Nonetheless, Mamasidikov says Bitcoin could clasp supra $42,500 adjacent if the dollar rises connected the different extremity of the spectrum.

Recalling the adoption roar of summertime 2021 (when Bitcoin's correlation with the DXY was mostly positive), investors continue to hodl BTC arsenic a portion of their semipermanent strategy.

He adds:

"Despite the seeming uncertainty successful the market, Bitcoin has formed beardown enactment astatine $42,500 and has the cardinal backing to retest $47,000 successful the abbreviated term."

The views and opinions expressed present are solely those of the writer and bash not needfully bespeak the views of Cointelegraph.com. Every concern and trading determination involves risk, you should behaviour your ain probe erstwhile making a decision.

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