Fed Chairman Jerome Powell made the remarks at a question-and-answer session hosted by the Cato Institute on September 8. He said the central bank will continue to raise interest rates until inflation is under control. However, these comments did not shake the markets as much as many expected. Meanwhile, Bitcoin has been strongly associated with the S&P 500 for the past few weeks. It traded inversely with the US Dollar Index (DXY). So what do stocks and some other metrics show for Bitcoin? Here are analyst Rakesh Upadhyay’s comments on BTC analysis and traditional financial instruments…
What is the latest situation in Bitcoin / USDT parity?
Bitcoin recovered strong support at $18,626 on September 7. It bounced back above the $19,520 breakout level on September 9. The relative strength index (RSI) has advanced into positive territory. The 20-day EMA is flattening. According to the analyst, this indicates that the bears may lose control. The 50-day simple moving average of $21,981 could act as a minor hurdle. However, if the bulls surpass this, the BTC/USDT pair could rise to the overhead resistance at $25,211. A break and close above this level could complete a double bottom pattern.
Such a move could mark the beginning of a new upward move. The analyst points out that if such a pattern is formed, the price is likely to see $31,796. Contrary to this assumption, if the price declines from the 50-day SMA or $25,211, the pair could consolidate for a few days. The 4-hour chart shows the pair gaining momentum after breaking above $19,520. Moving averages complete the bullish crossover, giving buyers an advantage. However, the RSI in the overbought zone suggests a minor consolidation or correction in the short term.
If the price breaks from the current level or the overhead resistance at $21,900 but fails to drop below $20,576, it means that sentiment has shifted from selling on rallies to buy on dips. This could increase the likelihood of a break above $21,900. The first sign of weakness would be a break and close below the moving averages. According to the analyst, this suggests that the current uptrend could be a rally for inexperienced people.
What does the US dollar index point to?
The US dollar index (DXY) is correcting in a strong uptrend. After hitting a multi-year high at 110.78, the index has dropped to the 20-day EMA, i.e. 108.64. This also witnessed profit booking. The rising moving averages showed advantage for buyers. However, the RSI has formed a negative divergence indicating that the bullish momentum may weaken. If the price stays below the 20-day EMA, the next stop could be the bullish line.
This is an important level to consider, as a break and close below it could signal a potential trend reversal. The index could drop to $104.63 later. A break below this level could indicate that the index may have peaked. Conversely, if the price rises strongly from the moving averages, the sentiment remains bullish. This will show that traders see the dips as a buying opportunity. If the bulls push the price above $110.78, the rally could extend to the 113.95 level.
If the price bounces back to the 108 level but fails to rise above the 20-EMA, this indicates that sentiment has shifted from buying on dips to selling on rallies. This could increase the likelihood of a break below $108. If this happens, the index may start a deeper correction. Contrary to this assumption, if the price rises from the current level and rises above the 20-EMA, the index could rise to 110.24 and then 110.78. Buyers will have to break through this hurdle to indicate the resumption of the uptrend.
S&P 500 lows attract buyers
The S&P 500 is forming a bottom and is trying to form a higher bottom around 3,900. The price has broken out of the bullish trendline, suggesting that lower levels are attracting buyers. “The 20-day EMA (4.050) is an important level to watch out for in the near term,” Upadhyay says. If the bulls push the price above this resistance, it would suggest that the last leg of the correction may have ended. The index risks trying to rise to $4,200 later. This level acts as a small obstacle. However, if the bulls surpass this, the recovery could reach the critical overhead resistance at $4,325.
This positive view may be invalidated in the short term if the price drops from the 20-day EMA. If this happens, the bears will try to push the price below the bullish line. If they succeed, the drop could reach major support at 3,700. The 4-hour chart shows that the recent correction has pushed the RSI into the oversold territory. This started a bounce that reached the bearish trend line. Buyers will have to push the price above this resistance to indicate a possible trend change. The index could then rise to the 50-SMA and later to $4,200. “Conversely, if the price drops from the downtrend line and sinks below the 20-EMA,” the bears continue to sell in the rallies. The bears will then try to push the price below $3,886 and continue the downside move.
What’s next for gold futures?
Gold futures (GC) are in a downtrend but attempting to form a lower level at $1,700. The price has reached the moving averages, which act as a strong resistance as seen from the long wick on the September 9 candlestick. If the price drops from the current level, it will indicate that the sentiment will remain negative and that traders are selling in rallies. The bears are likely to make another attempt to push the price below $1,700 later. It will push the crucial support at $1,675.
Conversely, if the price rises and rises above the moving averages, it suggests that the bears may be losing control. This pushes the price to the downtrend line. A break and close above this resistance indicates the end of the downtrend. This could start a rally to $1,825. The 4-hour chart shows the bears aggressively defending the overhead resistance at $1,737.40. If the price breaks below the moving averages, the drop is extended to $1,700. This would suggest a range-bound trade between $1,700 and $1,737.40 for a while.
Alternatively, if the price rises from the moving averages, it indicates that the bulls are buying on small dips. The bulls will then attempt to push the price above $1,741. If they succeed, a rally to $1,774.80 is possible.
Crude oil futures in downtrend
Crude oil futures (CL) have been in a downtrend for the past few weeks. Buyers tried to start a sustained recovery in August. However, the bears successfully maintained the 50-day SMA ($94) on August 30. The bulls tried to stop the decline near $85.73. However, the level cracked on September 7 and crude continued its downtrend. But the bulls are not letting the bearish momentum pick up. This indicates buying at lower levels. The bulls are attempting to push the price above the $85.73 breakout level.
This is an important level to consider because if the price stays above $85.73, it could catch a few traders off guard. This can cause a short squeeze and the price rises to the 50-day SMA. Conversely, if the price drops from $85.73, it will show that the bears have turned the level into resistance. Sellers will then try to continue the downtrend by pushing the price below $81.20. If they are successful, the drop extends to $70.
Bitcoin price recovery driven by DXY and SPX
Bitcoin’s recovery is largely driven by the pullback in DXY and the rally in SPX, as seen in the analysis above. The movement of these assets largely depends on the Fed’s action at the next meeting. According to the analyst, this could set Bitcoin’s direction in the near term. Upadhyay concludes his analysis by saying, “Bitcoin bulls should continue to watch DXY and SPX closely for confirmation of a bottom in Bitcoin.”
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