Bitcoin is set to reclaim $ 45,000 today as the US dollar falls from a year-long high. Bitcoin’s close negative correlation with the greenback last month suggests that a weakening USD could push BTC prices even higher in the coming sessions.
BTC – USD Correlation on the Hourly Chart. Source: TradingView
USD falls after labor market shock
In particular, the US Dollar Index (DXY), which measures the strength of the greenback against a basket of six foreign currencies, hit $ 94.5 on Thursday for the first time since September 28, 2020. But she withdrew almost immediately when the news of unemployment in the United States increased.
Work data announced Thursday showed that the unemployment rate rose from 351,000 a week earlier to 362,000 last week, above economists’ forecast of 333,000. The number of new applications in five consecutive weeks is currently 2.8 million.
For the market, this could be why the Federal Reserve is delaying its $ 120 billion asset purchase program, which will keep interest rates lower and temporarily recover dollar strength.
Daily DXY chart. Source: TradingView
At the time of this writing, the index is trading at 94.263.
Technical outlook predicts Bitcoin to rise, USD to fall
Technical indicators also suggest that the greenback is facing a corrective scenario. For example, independent market analyst TradingShot notes that DXY is besieged by a megaphone pattern that is peaking locally and reversing in the upcoming sessions, as shown in the graphic below.
“Based on the 1D Relative Strength Index, it looks like DXY is nearing the top of a pattern similar to August 15, 2018. DXY is preparing for a strong pullback towards Megaphone’s bottom. “
Daily DXY diagram with technical setup for megaphones. Source: TradingShot
Meanwhile, a recent sell-off in the Bitcoin market has formed a falling wedge pattern. Specifically, a falling wedge occurs when price travels down within a channel made up of two diverging, descending trend lines.
Traditionally, analysts view the falling wedge pattern as a bullish reversal indicator and note that a break above the pattern’s top trendline will drive price up the maximum distance between the trendlines.
The daily BTC / USD chart has a falling wedge setup. Source: TradingView
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.
On the flip side, the low employment report could increase investors’ temporary appetite for bitcoin.
Vasja Zupan, President of Matrix Exchange, said the weakening and devaluation of the dollar in the face of increased inflation will continue to push investors to put their excess money into the crypto market.
“Bitcoin essentially has a hedge against inflation and therefore persistently higher inflation in the US can only drive up the price. As a result, the value of the dollar will continue to be lower than that of Bitcoin in the long run. “
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According to Cointelegraph