The DXY has turned bearish and that could be a boon for SPX, cryptocurrencies and Bitcoin.
The S&P 500 Index (SPX) fell 19.4% and the Nasdaq plunged 33.1% in 2022, posting the worst results since 2008.. Cryptocurrency markets also had a horrible year, with Bitcoin (BTC) plunging roughly 65% in 2022. By comparison, the perceived safe-haven US dollar was up nearly 9%, its best year ever. since 2015.
There are several green shoots visible for the cryptocurrency sector in 2023. The US Dollar Index (DXY), which typically moves in inverse correlation with Bitcoin, may have topped out. This increases the likelihood that certain cryptocurrencies are about to bottom out.
Many traders pass up the opportunity to buy at lower levels because they are trying to take advantage of the bottom. However, Long-term investors who believe in the cryptocurrency story may want to consider building a portfolio or adding positions in batches. Thus, they will have some skin in the game and will not regret it when the next move higher begins.
Could the US dollar index continue its correction and would that benefit risk assets? Let’s study the graphs 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 attempting to form a higher low in the S&P 500 Index.
The 20-day exponential moving average (3.880) is skewed lower and the Relative Strength Index is nearing 45, suggesting that the bears have a slight advantage. If the bulls want to prevail, they will have to push the price above the moving averages.
This could open the doors to a possible rally to the downtrend line, where the bears could once again mount a strong defense. Buyers will have to overcome this resistance for a change in trend to occur.
Conversely, if the price turns lower from the 20-day EMA and falls below 3,764, the selling could intensify and the index could drop to 3,650.
DXY
The buyers tried to push the US dollar index above the 20-day EMA (104) on December 28, but the bears held their ground. This indicates that sentiment has turned negative and traders are selling relief rallies.
The bears pulled the price below the immediate support of 103.44 on Dec 30, signaling the resumption of the downtrend. Then, the index could drop as low as 102 and subsequently crash as low as the 100 level, which is psychologically significant.
This negative view could be invalidated in the short term if the price rally from the current level and break above the 20 day EMA. The index could then rally to the 50-day SMA ($106).
BTC/USDT
Bitcoin has been oscillating between $16,256 and $17,061 for the past few days. This tight consolidation indicates indecision between the bulls and the bears.
The 20-day EMA ($16,777) is flattening out and the RSI is just below the midpoint, suggesting a balance between supply and demand. The next trend move is likely to start once the price breaks out of the range.
If the price breaks below $16,256, the selling could accelerate and the BTC/USDT pair could retest the crucial support at $15,476.
Alternatively, if the price breaks above $17,061, the pair could pick up the pace and rally to the resistance above $18,388. This level could witness a tough battle again. This level may once again witness a tough battle between the bulls and the bears.
ETH/USDT
The bulls have failed to push Ether (ETH) above the moving averages in recent days, but an encouraging sign is that they have not given up ground to the bears.
This suggests that the bulls will make one more attempt to push the price above the moving averages. If they get it, the ETH/USDT pair could rally to the resistance at $1,352. The bears are likely to protect this level hard.
If the bulls fail to clear the moving averages hurdle, the pair could drop to the immediate support of $1,150. This is an important level for bulls. This level is important for bulls, as a break below would complete a head and shoulders pattern, with a target of $948.
BNB/USDT
BNB (BNB) has been trading near the $250 breakout level for the past few days. This shows that the bears are trying to turn the level into resistance, while the bulls are trying to push the price back above it.
This trend is unlikely to continue for long. The longer the price stays within the tight range, the stronger the eventual breakout will be.
If the buyers break out of the $250 to $255 resistance zone, the BNB/USDT pair could rally to the 50-day SMA ($270). This level can act as a minor hurdle, but if broken, the pair can rally to $300.
The bears likely have other plans. They will try to shield the area above and sink the price below $236. If they do, the pair could drop to $220 and then $200.
XRP/USDT
XRP (XRP) broke below the support line of the symmetrical triangle and fell to the strong support of $0.30. The long tail of the candlestick shows that the bulls aggressively bought the dip to $0.30.
The XRP/USDT pair has re-entered the triangle and the bears are trying to build on the momentum by pushing the price above the 20-day EMA ($0.35).. If they do, the pair could reach the resistance line. If the bulls scale this level, the pair could reach $0.42.
Conversely, if the price fails to sustain above the 20 day EMA, it will suggest that the bears continue to sell on every rally. The bears will again try to sink the price below the support line of the triangle.
DOGE/USDT
Dogecoin (DOGE) broke out and closed below the $0.07 support on Dec. 30, but this turned out to be a bear trap. The bulls bought at lower levels and pushed the price back above $0.07 on Dec. 31.
The buying intensified on January 2 and the bulls try to reinforce their position by catapulting the price above the downtrend line. If they get it, The DOGE/USDT pair could challenge the resistance near $0.08. A break above this level could trigger stop losses from aggressive bears, resulting in a bearish contraction. The pair could rally towards $0.11.
This positive view could be nullified if the price turns lower from the current level and breaks below the intraday low reached on December 30. In that case, the pair could pull back to the fundamental support near $0.05.
ADA/USDT
Cardano (ADA) has started a rally and the price is approaching the 20-day EMA ($0.26). The positive divergence on the RSI suggests that selling pressure may be easing.
The 20 day EMA is an important level to watch. If the buyers clear this hurdle, the ADA/USDT pair could reach towards the breakout level of $0.29. If this level is also breached, the pair could touch the downtrend line.
Conversely, if the price turns back from the 20-day EMA again, it will suggest that the bears are active at higher levels. Then the pair could drop to the support line, where buyers could step in to stop the decline.
MATIC/USDT
Polygon (MATIC) dipped below $0.75 on Dec. 30, but the bears were unable to take advantage and pull the price down to the critical support of $0.69.
The bulls are trying to initiate a relief rally, which could face selling at the moving averages.. If the price turns down from this resistance, it will suggest that the higher levels are attracting selling by the bears. This could increase the probability of a drop to $0.69.
On the other hand, if the bulls push the price above the moving averages, the MATIC/USDT pair could rally to $0.97. This level can again act as a strong barrier, but if the bulls break above it, the next stop will probably be $1.05.
USDT/LTC
Litecoin (LTC) soared above the moving averages and the overhead resistance of $75 on Jan. 3, indicating that the buyers are trying to take control.
If the price sustains above $75, the LTC/USDT pair could rally as high as $85. This level may act as a minor hurdle, but if crossed, the pair could pick up the pace and shoot up to the psychologically vital $100 level.
If the bulls fail to hold above $75, the pair could drop to the moving averages. If the bulls fail to hold the pair above $75, the pair could drop to the moving averages. The bears will have an advantage if the pair falls below the moving averages.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
Market data is provided by the HitBTC exchange.