Bitcoin appears to have tried to reclaim $45,000 on October 1, 2021, as the US dollar retreated after reaching its one-year high. BTC’s tight inverse correlation with the US dollar in the last month indicates that a weakening dollar may push the price of bitcoin even higher in the coming days.
Rising jobless claims in the United States sparked selloffs in the dollar market. On the flip side, Bitcoin held onto its intraday gains.
Dollar Drops After Labor Market Shock
The U.S. Dollar Index (DXY), in detail, measures the greenback’s strength against a basket of six foreign currencies, including euro and sterling, that hit $94.50 Thursday for the first time since September 28, 2021. However, it retreated on the news of rising United States jobless claims against the projections of a drop.
The labor data released on September 30 indicated that the number of jobless claims surged to 362,000 in the past week against 351,000 a week before and against the economists’ forecast of 333,000. As a result, the total number of reapplications got stuck at about 2.8 million for five consecutive weeks.
For the global markets, this might be the news that the Federal Reserve might delay tapering its $120 billion asset purchasing program that was scheduled for November to a later month. Hence, it will keep interest rates lower and the dollar’s renewed strength becomes temporary.
The index was trading at 94.263 at the time of this publication.
Technical Analysis Places Bitcoin Higher And Dollar Lower
Technical indicators also showed that the greenback is facing the prospect of a correlation in the months ahead. For instance, one independent market analyst TradingShot spotted the US dollar index inside a Megaphone pattern, nearly getting topped out to pursue a significant correction in the coming sessions, as shown in the market charts.
TradingShot wrote:
“Based on the 1D relative strength index (RSI), it appears that DXY is right at the top of the formation as [it was] on Aug 15, 2018. DXY is building up a strong pull-back to the bottom of the Megaphone.”
In the meantime, a recent bout of selling in the Bitcoin market in recent times had it paint a Falling Wedge pattern. In general, Falling Wedges comes up when the price trends lower inside a channel that consists of two diverging and descending trendlines.
The traditional analysts see the Falling Wedge pattern as a bullish reversal indicator, noting that a breach above its upper trendline moves the price significantly higher by the maximum distance between the Wedge’s trendlines.
Notably, the structure’s maximum height is about $10,000. In that context, the price of Bitcoin can at least rise towards $50,000 if the Wedge breakout plays out as intended.
A Weaker Dollar Strengthens Bitcoin
On the flip side, the underwhelming jobs report may boost investors’ interim appetite for Bitcoin.
The president of Matrix Exchange, Vasja Zupan, told reporters that the dollar’s weakness and devaluation against surging inflation may continue to make the investors put their excess cash in cryptocurrency markets. He stated:
“Bitcoin in its core proposition has an integrated hedge against inflation and therefore persistently higher inflation in the U.S. can only push it upwards. Therefore, in the long term, the dollar’s worth will continue to be lesser than Bitcoin.”
