Bullish dollar signals push Bitcoin further into a bear trap

dollar, Bullish dollar signals push Bitcoin further into a bear trap
Bullish dollar signals push Bitcoin further into a bear trap

Key Takeaways:

  • Despite the growing inflation, the US dollar got a positive 2022 outlook from Julia Wang, JPMorgan’s Private Bank Global Market Strategist.
  • Bitcoin struggled to stay bove $42,000 amid Omicron FUD and Fed tapering.

YEREVAN (CoinChapter.com) – According to the US Bureau of Labor Statistics’ December report, the consumer price index (CPI) came in at 7%, a four-decade high for the US economy. However, the greenback could rise against global currency debasement and the decline of emerging markets.

“We do expect the dollar to stay stronger this year”, – said Julia Wang, JPMorgan’s Private Bank Global Market Strategist. Additionally, she asserted the reasons behind her outlook, commenting on many weakening domestic markets (DMs) due to the pandemic.

Typically, when you have a more volatile market and a less positive risk outlook, the dollar tends to get bolstered.

said the expert.
Also read: Bitcoin drop stalls near $40K as Congress examines another Covid-19 relief package.

Meanwhile, the US dollar index (broad dollar) chart (DXY) supported the claim. It showed a 1.0% uptrend since bottoming on Jan 13 and stood at 95.5 on Jan 20. In hindsight, DXY reflects the strength of the US dollar against the basket of leading currencies worldwide: Euro, Swiss Franc, Japanese Yen, Canadian dollar, British pound, and Swedish Krona.

US dollar index (DXY). Source: DXY on TradingView.com
US dollar index (DXY). Source: DXY on TradingView.com

Ms. Wang also pointed out that JPMorgan sees an uptrend for the DXY in 2022.

Our range for the board dollar is between 95 and 98. So it is slowly creeping up towards to top end of our range. But we do think the dollar strength, broadly supported by the prospect of more Fed normalization, had a relatively stronger US economy, especially compared with a few other DMs and most emerging markets.

commented the Strategist.

Bitcoin in the bear trap

DXY and Bitcoin (BTC) charts have displayed an erratic inverse correlation in the past. As a hedge against inflation, Bitcoin has risen against the dropping DXY before. Thus, the strengthening greenback could reinforce Bitcoin’s bearish prospects. On Jan 20, the flagship cryptocurrency traded at $42.090.

Bitcoin holding above 42K. Source: CoinMarketCap.com
Bitcoin holding above 42K. Source: CoinMarketCap.com
Also read: 4 Bitcoin indicators that show why BTC price won't go back to $69K in 2022. 

Moreover, Bitcoin’s monthly chart revealed a bearish pattern dubbed the “Double Top.” The latter features two consecutive highs at a relatively equal level and a decline between them. Once the price action revisits that low point, it drops further, confirming the setup.

Bitcoin (BTC) in a possible double top. Source: BTCUSD on TradingView.com
Bitcoin (BTC) in a possible double top. Source: BTCUSD on TradingView.com

Thus, if Bitcoin doesn’t hold the $40,000 support and plunges to $35,000 (the low point between two highs), it could confirm the double top. In that case, Bitcoin bears could see BTC as low as $30,000.

Considering the strengthening dollar, macroeconomic factors around the pandemic and the Fed’s actions against the rising inflation, Bitcoin’s bearish forecast could play out in 2022.

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dollar, Bullish dollar signals push Bitcoin further into a bear trap

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