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There is a major connection between Bitcoin and the United States Dollar. For traders, the Dollar Index (DXY) has always had a complicated relationship with the digital gold. As global investors gravitate toward safer assets, Bitcoin has historically tended to decline when the dollar gains strength. This pattern may recur according to the most recent charts, with Bitcoin lingering at precarious support levels and the DXY possibly staging a recovery.
U.S. Dollar gaining strengh?
After months of consistent decline, the Dollar Index, or DXY, is currently trading close to 98.9 and is making an effort to recover. The index is getting closer to the 100-day EMA after testing the 50-day EMA recently. The recent rebound suggests that dollar strength may not yet be complete, even though the overall trend is still bearish and the 200-day EMA is still pointing downward.
Risky assets, especially Bitcoin, may be under pressure if DXY moves higher toward the psychological 100.0 level. Conversely, Bitcoin’s chart demonstrates glaring vulnerability. Between the 100-day and 200-day EMAs, Bitcoin is consolidating at about $112,000 at this time. Volume has been dropping since the peak above $128,000, and the mid-September bounce from the 200 EMA lacked conviction. At 49, the RSI is neutral and does not indicate an oversold situation that would lead to a significant reversal.
Bitcoin's retreat
Bitcoin could retreat back toward the $106,000 support zone, which is indicated by the 200 EMA, if DXY continues to rise. The main conclusion is that the inverse relationship is still present: weaker Bitcoin performance is frequently the result of a stronger dollar. Traders should keep an eye on DXY’s movements in the resistance zone between 100 and 101 points. The dollar may break through, causing increased selling pressure on Bitcoin and a test of lower support levels.
On the other hand, Bitcoin may regain breathing room for another upward push if DXY falters and returns to its wider downward trend. The Dollar Index is currently showing early indications of strength, which, if momentum continues, could be problematic for Bitcoin. It is possible that a DXY breakout will serve as the impetus for the next significant decline of Bitcoin.
Dan Burgin
Vladislav Sopov
U.Today Editorial Team