Bitcoin versus DXY and the Dangerous TD9 Setup: VIDEO
In this episode of NewsBTC’s brand new daily technical analysis videos, we look at the Bitcoin price monthly chart and the DXY Dollar Currency Index ahead of the monthly close.
Take a look at the video below.
VIDEO: Bitcoin (BTCUSD) Price Analysis: August 30, 2022
We’re getting down to the wire here in the month of August, with less than 48 hours left until the monthly candle closes. The month is particularly critical for a number of key reasons that we will look at in the video and in the text and charts below.
The Terrifying TD9 Buy Setup on Monthly Time Frames
The first and most important factor to consider over the next couple of days in the crypto market is a looming TD9 buy setup. TD Sequential is a market timing indicator. Just reaching a 9 count is enough for a buy setup. However, the signal is much stronger when the series is perfected.
This could only happen with a sweep of the current low below around $17,500. It would also require a breakdown of all-time high resistance support and a breakdown of a decade-long monthly trend line.
A perfected TD9 setup would result in losing this trend line | Source: BTCUSD on TradingView.com
Can a Hidden Bullish Divergence Save the Day?
Bitcoin price continues to rest on the lower Bollinger band – a first for the first ever cryptocurrency on the high timeframe chart. What we don’t want to see is price action close outside the lower band, which could lead to an explosive decline.
Despite this risk, there are several signs that a bottom may also be in. The monthly momentum on the LMACD histogram and the Relative Strength Index may signal a hidden bullish divergence. Stochastic is also approaching a reversal point after reaching oversold conditions – another recurring bottom setup, especially when combined with a breakout of a downtrend resistance line.
Is this enough for a bottom? | Source: LTCBTC on TradingView.com
Or will DXY defeat the BTC Bulls again?
Remember that half of the BTCUSD trading pair is the dollar. This means that when the dollar is strong, the BTC side of the trading pair takes a beating.
The best way to measure the strength of the dollar is through the DXY – the dollar currency index – which is a weighted basket of the world’s top currencies that trade against the dollar. Just as Bitcoin price action is reaching oversold conditions with a possible hidden bullish divergence, DXY is overbought and potentially forming a bearish divergence on each of the same indicators: RSI, LMACD and Stoch.
Are dollar bears waiting for a chance to strike? | Source: LTCETH on TradingView.com
Comparing currencies: Bitcoin versus the dollar
The similarities to the bear market of 2014 and 2015 versus the last bear market of 2018 appear to be due to the strength of the dollar. The last time DXY was overbought was during what is known as crypto’s worst bear market ever.
By plotting BTCUSD behind DXY, we can take a closer look at the possible correlation – or anti-correlation. The recent extended up move in DXY is what led to such a prolonged bear phase in crypto. Interestingly, the Bitcoin plot at some points appears to act as dynamic support and resistance for the DXY, perhaps exhibiting an anti-correlated relationship throughout the trading pair.
Bitcoin has bottomed every time the DXY pushed above the BTCUSD plot line. Bear markets arrive during DXY upmoves, and Bitcoin performs well when DXY moves sideways, and best when DXY falls. With the DXY potentially in oversold conditions on the monthly time frame, a pullback could be imminent or even a complete trend change that eventually lifts Bitcoin out of the bear market.
Bitcoin has worked as dynamic support and resistance for the DXY chart | Source: BTCUSD on TradingView.com
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Featured image from iStockPhoto, Charts from TradingView.com
