If the US dollar index is able to continue its rally by rising even higher in the coming weeks, the price of Bitcoin (BTC), which has been inversely correlated with the dollar since January 2022, could suffer major losses. As Kriptokoin.com, we convey the expected price movements and analyst views for Bitcoin
Dollar is ready to continue its uptrend
The US Dollar Index (DXY), which measures the strength of the dollar against a basket of foreign currencies, will be released on April 7 It hit a 21-month high of 99.82, the highest level since May 2020. The index looks set to continue its upward move, breaking a classic bullish continuation pattern called the bull flag. In detail, bullish flags appear when price consolidates lower within a parallel descending channel after undergoing a strong uptrend (called a flagpole). In theory, the pattern unravels after the price moves out of the range to reach the level that is equal in length to the flagpole when measured from the breakout point. The bull flag pattern therefore places the next upside target for DXY at 101.
DXY weekly price chart The DXY index is also forming a bullish golden cross for the first time since April 2019. A golden cross occurs when an asset’s short-term moving average rises above its long-term moving average. Many analysts view the crossover as a bullish technical signal due to the history of previous strong uptrends. The recent golden cross between DXY’s 50-week and 200-week exponential moving averages (EMA) preceded a 4 percent upward move. MinePlex co-founder Alexander Mamasidikov states that a similar bullish pattern is approaching the 50-200 EMA transition in April, saying:
Golden Cross formation in the US dollar index, a temporary strengthening in anticipation of the dollar marking stronger growth potentials against other currencies. marks the period. This will increase the purchasing power of the dollar and help reduce the effect of inflation.
Investors keep holding Bitcoin with long-term thinking
Interestingly, Bitcoin is forming what is called a bear flag, which indicates more losses for BTC. Bearish flags occur when price consolidates higher within a parallel ascending channel and after breaking below the lower trendline of the channel, it transforms with convincing volumes. In the best-case scenario, breaking a bear flag will cause the price to drop as low as the height of the previous downtrend.
so Bitcoin could see a drop to the lower trendline of the flag around $40,000 and it could resume a downtrend to $32,000. However, Alexander Mamasidikov says that even if the dollar rises on the other end of the spectrum, Bitcoin could hold above $42,500. Recalling the adoption boom of the summer of 2021 (when Bitcoin’s correlation with DXY is largely positive), Mamsidikov also said that investors continue to hold BTC as part of their long-term strategy. Despite the uncertainty, Bitcoin formed strong support at $42,500 and has key support to retest $47,000 in the short term.
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