FX.co ★ US dollar index prepares for a bullish momentum: what to expect from Bitcoin and stock indices?

Over the weekend, changes in the price of Bitcoin were minimal due to a decrease in trading activity. The macroeconomic situation also remains tense; therefore, most financial instruments are moving in large groups.

Bitcoin after a month of consolidation

The new trading week does not promise significant changes in price for Bitcoin, as the asset remains locked inside the $18.6k–$19.8k area. The cryptocurrency unsuccessfully tried to go beyond this range, but even bursts of volatility did not allow it to radically change the situation.

However, after a month of boring consolidation, we can conclude that the $18.6k support level is the final one before updating the local bottom. The $19.8k–$20.4k zone is a key resistance area. With its bullish breakdown, the cryptocurrency has a chance to show local growth to $23k–$24k.

The question of whether we should expect a radical change in the situation this week rests on the lack of independence of Bitcoin. Attention to the digital asset has reached a local bottom, and trading volumes do not exceed $30 billion. The number of unique addresses also remains low, below 800,000.

At the same time, the level of correlation with stock indices and the S&P 500 has declined significantly in recent weeks. The fall in BTC volatility and movement within a narrow range increased the correlation of the cryptocurrency with gold.

However, reorienting investors' positions regarding Bitcoin has only just begun. This means that in the medium term, one should not expect an increase in BTC quotes due to the popularity of the asset amid a recession.

Bitcoin vs DXY

The inverse correlation between Bitcoin and the US dollar index persists, and despite market expectations, DXY continues to rise. Moreover, a bullish pattern is forming on the daily chart of the asset, which may soon provoke another bullish momentum of the index.

Technical indicators on the 1D point to the emergence of bullish signals. The relative strength index bounced off 50 and resumed its upward movement, which indicates an increase in buying interest. Stochastic has also resumed its upward movement and is preparing for the formation of a bullish crossover.

These factors point to a growing interest in DXY in the short term. Given the bullish signals, we should expect an upward breakdown of the "triangle" figure and the price movement to the levels of 118–120.

Results

Bitcoin and stock indices have a pronounced inverse correlation with the US dollar index. After recent statements by Fed officials to maintain the current monetary policy, the inverse codependency has only strengthened.

This means that in the short term, we should expect a decline in stock indices and cryptocurrencies. Bitcoin risks at least updating the $18.6k support area. If this level is successfully passed, the price will rush to $17.6k–$18.2k.

With large order volumes and liquidity below the local bottom ($17.6k), it is unlikely that market makers will hold the local bottom. This means that with a bearish breakdown of $18.6k, it is very likely that Bitcoin will update the local bottom near the $16k level.