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Bitcoin Versus DXY and the Dangerous TD9 Setup: VIDEO

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In this episode of NewsBTC’s all-new daily technical analysis videos, we take a look at the monthly Bitcoin price chart and the DXY Dollar Currency Index ahead of the monthly close.

Watch the video below.

VIDEO: Bitcoin (BTCUSD) Price Analysis: August 30, 2022

We are coming to the wire here in August, with less than 48 hours remaining until the monthly close of the candle. The month is particularly critical for a number of key reasons which we will examine in the video and in the text and graphics below.

The Terrifying TD9 Buy Setup on Monthly Timeframes

The first and most important factor weighing over the next few days in the crypto market is an impending TD9 buy setup. The TD Sequential is a market timing indicator. Simply hitting a 9 count is enough for a buy setup. However, the signal is much stronger when the series is perfected.

This can only happen with a sweep of the current low below around $17,500. This would also require a breakdown of historical high resistance turned support and a breakdown of a decade-long monthly trendline.

A perfected TD9 setup would result in losing this trend line | Source: BTCUSD on TradingView.com

Could a hidden bullish divergence save the day?

Bitcoin price continues to rest on the lower Bollinger Band – a first for the first-ever cryptocurrency on the high-maturity chart. What we don’t want to see is price action closing outside the lower band, which could lead to an explosive decline.

Despite this risk, several signs indicate that a bottom could also be found. The monthly momentum on the LMACD Histogram and Relative Strength Index could signal hidden bullish divergence. Stochastic is also approaching a turning point after hitting oversold conditions – another recurring bottom setup, especially when combined with a breakout of a downtrend resistance line.

Is this enough for a bottom? | Source: LTCBTC on TradingView.com

Or will the DXY defeat the BTC bulls yet again?

Remember that half of the BTCUSD trading pair is the dollar. This means that when the dollar is strong, the BTC side of the trading pair takes a beating.

The best way to gauge the strength of the dollar is to use the DXY – the Dollar Currency Index – which is a weighted basket of major world currencies traded against the dollar. Just as Bitcoin price action reaches oversold conditions with a possible hidden bullish divergence, the DXY is overbought and potentially forms a bearish divergence on each of the same indicators: RSI, LMACD, and Stoch.

Are dollar bears waiting for a chance to strike? | Source: LTCETH on TradingView.com

Currency comparison: Bitcoin versus the dollar

The similarities between the bear market of 2014 and 2015 and the most recent bear market in 2018 appear to be due to the strength of the dollar. The last time the DXY was this overbought was during what is being called the worst crypto bear market.

By plotting BTCUSD behind DXY, we can take a closer look at possible correlation – or anti-correlation. The latest extended upward move in the DXY is what led to such a long bear phase in crypto. Interestingly, the Bitcoin plot at times appears to act as dynamic support and resistance for the DXY, perhaps showing an anti-correlated relationship across the trading pair.

Bitcoin bottomed every time the DXY pushed above the BTCUSD plot line. Bear markets come during DXY’s upside moves, and Bitcoin performs best when DXY is moving sideways, and best when DXY is down. With the DXY potentially in oversold conditions on the monthly timeframe, a pullback could be near or even a complete trend change that would eventually pull Bitcoin out of its bear market.

Bitcoin has worked as dynamic support and resistance for the DXY chart | Source: BTCUSD on TradingView.com

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Follow @TonySpilotroBTC on Twitter or join TonyTradesBTC telegram for exclusive daily market insights and technical analysis training. Note: Content is educational and should not be considered investment advice.

Featured image from iStockPhoto, Charts from TradingView.com


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