The DXY has turned bearish and that could prove to be a boon for SPX, cryptocurrency and Bitcoin.
The S&P 500 index (SPX) fell 19.4% and the Nasdaq nosedived 33.1% in 2022, recording the worst performance since 2008. The crypto markets also had a horrendous year with Bitcoin (BTC) falling roughly 65% in 2022. In comparison, the United States dollar, which is perceived to be a safe haven, rallied nearly 9%, its best year since 2015.
There are several green shoots visible for the cryptocurrency sector for 2023. The U.S. dollar index (DXY), which usually moves in inverse correlation with Bitcoin may have topped out. This increases the likelihood that select cryptocurrencies may be close to forming a bottom.
Several traders miss buying at lower levels because they attempt to catch the bottom. Instead, long-term investors who believe in the crypto story may consider building a portfolio or adding positions in batches. Thus, they will have some skin in the game and not repent when the next bull move begins.
Could the U.S. dollar index continue its correction and will that benefit risky assets? Let’s study the charts to find out.
SPX
The bears tried to extend the correction last week but the bulls managed to defend the 3,764 level. This indicates that the bulls are trying to form a higher low in the S&P 500 index.
The 20-day exponential moving average (3,880) is sloping down and the relative strength index is near 45, suggesting that bears have a slight edge. If bulls want to gain the upper hand, they will have to push the price above the moving averages.
That could open the doors for a possible recovery to the downtrend line where the bears may again mount a strong defense. Buyers will have to pierce this resistance to signal a potential trend change.
On the contrary, if the price turns down from the 20-day EMA and plummets below 3,764, the selling could intensify and the index may slide to 3,650.
DXY
Buyers tried to propel the U.S. dollar index above the 20-day EMA (104) on Dec. 28 but the bears held their ground. This indicates that the sentiment has turned negative and traders are selling on relief rallies.
The bears yanked the price below the immediate support of 103.44 on Dec. 30, indicating the resumption of the downtrend. The index could next drop to 102 and thereafter plunge to the psychologically important level of 100.
This negative view could invalidate in the near term if the price turns up from the current level and breaks above the 20-day EMA. The index could then rally to the 50-day simple moving average ($106).
BTC/USDT
Bitcoin has been oscillating between $16,256 and $17,061 for the past few days. This tight consolidation indicates indecision among the bulls and the bears.
The 20-day EMA ($16,777) is flattening out and the relative strength index (RSI) is just below the midpoint, suggesting a balance between supply and demand. The next trending move is likely to start after the price escapes the range.
If the price breaks below $16,256, the selling could accelerate and the BTC/USDT pair may retest the crucial support at $15,476.
Alternatively, if the price breaks above $17,061, the pair could pick up pace and climb to the overhead resistance at $18,388. This level may again witness a tough battle between the bulls and the bears.
ETH/USDT
The bulls have failed to drive Ether (ETH) above the moving averages in the past few days but an encouraging sign is that they have not ceded ground to the bears.
This suggests that the bulls will make one more attempt to propel the price above the moving averages. If they succeed, the ETH/USDT pair could rally to the stiff overhead resistance at $1,352. The bears are likely to protect this level with vigor.
If bulls fail to clear the overhead hurdle at the moving averages, the pair could dip to the immediate support at $1,150. This is an important level for the bulls to guard because a break below it will complete a head and shoulders pattern, which has a target objective of $948.
BNB/USDT
BNB (BNB) has been trading near the breakdown level of $250 for the past few days. This shows that the bears are trying to flip the level into resistance while the bulls are attempting to thrust the price back above it.
This tight-range trading is unlikely to continue for long. The longer the price remains inside the tight range, the stronger the eventual breakout.
If buyers kick the price above the $250 to $255 overhead resistance zone, the BNB/USDT pair could advance to the 50-day SMA ($270). This level may act as a minor hurdle but if surpassed, the pair may rise to $300.
The bears are likely to have other plans. They will try to shield the overhead zone and sink the price below…
cointelegraph.com