Bitcoin Faces Downside Risks Amid Dollar Index Decline

Daily Technical Insights by CoinDesk Analyst Omkar Godbole

The Dollar Index (DXY), which measures the value of the U.S. dollar against a basket of major currencies, has experienced a significant downturn in the first half of the year. Despite this, the technical indicators for Bitcoin suggest potential immediate risks for further declines.

The DXY has plummeted over 10% in the first six months, marking its worst performance since the third quarter of 1991, as reported by TradingView. Factors contributing to this decline include the trade tensions initiated during Donald Trump’s presidency and ongoing expectations for interest rate cuts from the Federal Reserve.

This sharp drop has resulted in a breach of a long-standing ascending trendline, with the MACD histogram now falling below zero on the half-yearly chart. Such a trendline breakdown, combined with the negative MACD, indicates a strengthening bearish momentum, suggesting further losses may be on the horizon.

Dan Tapiero, CEO of DTAP Capital, expressed on social media that the dollar could easily drop another 10% or more in the next 12 to 24 months, which could serve as a bullish catalyst for Bitcoin.

Bitcoin’s Technical Outlook: Sell-Off Risks Loom

In the short term, Bitcoin’s technical indicators, particularly its interaction with the stochastic oscillator, present a concerning outlook. On Monday, Bitcoin saw a 1% decline, retreating from the upper boundary of a bull flag pattern that has developed over the past six weeks.

In such scenarios, traders often rely on oscillators like the stochastic to validate whether the recent rejection at the upper limit of the consolidation phase signals a potential decline back to the lower boundary.

The current readings from the 14-day stochastic suggest a similar pattern to what was observed in early June. The oscillator is nearing a downward crossover below the 80 mark, indicating a possible retreat from the overbought territory and hinting at renewed selling pressure within the broader price range.

This suggests that Bitcoin could potentially revisit levels below $100,000 in the near term. However, a decisive move above the upper limit of the current consolidation could invalidate this bearish outlook, paving the way for a rally towards $140,000.

Read more: Bitcoin’s Bullish Case Strengthens as Dollar Index Declines, Nvidia Hits Record High Amid Economic Concerns

Disclaimer: This article is provided for informational purposes only and does not constitute financial advice. Readers are encouraged to conduct their own research before making any investment decisions.