Dollar (DXY) Reaches Inflection Point, Critical Level For Crypto Continuation
The almighty dollar and the once trending DXY are at a major inflection point, with the potential to either hurt the burgeoning bull market for Bitcoin and the rest of cryptocurrencies, or propel it to new heights.
The devastating impact of dollar dominance
2022 has devastated cryptocurrencies and other risk assets due to the dollar’s seemingly unending dominance. The DXY Dollar Currency Index has risen to the highest levels since the inception of Bitcoin.
As the USD is one half of most cryptocurrency trading pairs due to the USD being the global reserve currency, when the USD is strong, the other side of the pair weakens.
When momentum started to decline in DXY, it started to increase in cryptocurrencies. The past few months have provided a much-needed recovery across the asset class, thanks to the falling dollar.
After returning to COVID levels, DXY is trying to find support. But according to the MACD, momentum could be too heavy for the dollar to defend itself, leading to a bearish crossover on the one-month chart.
Dollar momentum on the cusp of crossover, BTC in orange | DXY at TradingView.com
Bearish DXY Crossover May Lead to Crypto Continuation
DXY is a weighted basket of trading USD against GBP, JPY and other currencies. The monthly DXY chart shows what could be an ongoing recovery that the cryptocurrency market must be prepared for. However, if the MACD crosses lower and confirms later in the month, it could cause the bearish momentum to strengthen and create a dramatic decline in the Dollar Index.
This is especially important for Bitcoin, Ethereum and the rest of the crypto market, as the bullish DXY cross in the monthly MACD is what led to the recent crypto winter. If the MACD fails to confirm a bearish crossover and instead diverges upwards, it could cause further collapse in cryptocurrencies and other assets.
Bitcoin is up over 40% to start 2023, and many cryptocurrencies have seen rallies of several hundred percent. A bearish crossover on the DXY could signify the continuation of the cryptocurrency’s recent bullish trend.
All eyes in the world of finance should be on this important turning point. What happens next with the dollar and cryptocurrencies?