Bitcoin (BTC) is set to rebound $ 45,000 on Oct. 1 as the US dollar falls from a year-long high. Bitcoin’s close negative correlation with the greenback last month suggests that a weaker dollar could push BTC prices even higher in the coming sessions.
Dollar falls after labor market shock
Specifically, the US Dollar Index (DXY), which measures the strength of the greenback against a basket of six foreign currencies, including the euro and pound, hit $ 94.50 on Thursday for the first time since September 28, 2020. US jobless claims countered projections of a decline.
Labor data released Thursday showed that unemployment claims rose from 351,000 a week earlier to 362,000 last week, compared with economists’ expectations of 333,000. As a result, the number of requests stayed around 2.8 million for five consecutive weeks.
For the market, this could be news that the Federal Reserve could postpone the cut of its $ 120 billion asset purchase program from November to a month later, keeping interest rates low and temporarily holding the dollar’s new strength.
At the time of this writing, the index is trading at 94.263.
Technical outlook predicts Bitcoin higher, dollar lower
Technical indicators also suggest that the greenback is facing the prospect of an imminent correction. For example, independent market analyst TradingShot spotted the dollar index in a megaphone pattern that is about to break out in order to get a correction in the upcoming sessions, as shown in the chart below.
“Based on the 1D Relative Strength Index (RSI), it looks like DXY is at the top of the system, like [it was] on August 15, 2018, “TradingShot writes.
“DXY builds up strong traction to the bottom of the megaphone.”
Meanwhile, a recent sell-off in the Bitcoin market resulted in a falling wedge pattern. In particular, a falling wedge occurs when the price trend falls within a channel made up of two diverging, descending trend lines.
Traditional analysts view the falling wedge pattern as a bullish reversal indicator and note that a break above its upper trendline will move price past the maximum distance between the wedge’s trendlines.
The maximum height of the structure is about $ 10,000. Hence, Bitcoin price could retest at least $ 50,000 if the wedge breakout goes as intended.
Weaker dollar means stronger bitcoin
On the flip side, the low employment report could increase investors’ temporary appetite for bitcoin.
Related: Bitcoin Drops Sharply From $ 50,000 Related To Stronger US Dollar, Gold – Correlation Programs
Vasja Zupan, president of Matrix Exchange, told Cointelegraph that the weakening and depreciation of the dollar in the face of increased inflation will continue to push investors to put their excess money into the crypto market. He says:
“Bitcoin has built-in inflation hedge in its core offering, so persistently higher inflation in the US can only drive it up. Therefore, the value of the dollar will continue to be lower than that of Bitcoin in the long run.