The U.S. greenback’s means to proceed its rally in Q2 might show deadly for Bitcoin (BTC), which has demonstrated an inverse correlation with the greenback since January 2022.

Greenback paints “bull flag”

The U.S. greenback index (DXY), which measures the dollar’s power in opposition to a basket of foreign exchange, reached its 21-month buying and selling excessive of 99.82 on April 7, the very best degree since Might 2020.

The index now seems to be poised to proceed its upside transfer additional because it breaks out of a traditional bullish continuation sample — referred to as a “bull flag.”

Intimately, bull flags seem when the value consolidates decrease inside a parallel descending channel after present process a robust uptrend (referred to as flagpole). In concept, the sample is resolved after the value breaks out of their vary to the upside to succeed in the extent positioned at a size equal to the flagpole when measured from the breakout level.

The bull flag setup subsequently places the subsequent upside goal for DXY at 101.

Golden cross on the weekly chart

The DXY index can be forming a bullishgolden crossfor the first time since April 2019.

Golden crosses occur when an asset’s short-term moving average rises above its long-term moving average. Many analysts consider the crossover as a bullish technical signal due to its history of preceding strong uptrends.

DXY’s last golden cross between its 50-week and 200-week exponential moving averages (EMAs) came before a 4% upside move.

A similar bullish setup now nears for a 50-200 EMA crossover in April, notes Alexander Mamasidikov, co-founder of crypto wallet service MinePlex.

“The formation of the golden cross on the U.S. dollar index marks a period of temporary strength for the greenback with an expectation for it to tick stronger growth potentials against other currencies,” he explained, adding:

“The ensuing strength of the U.S. dollar following the golden cross formation will help to stump the impact of inflation as the greenback’s purchasing power is boosted.”

Where does it leave Bitcoin?

Interestingly, Bitcoin has been forming the opposite setup to the dollar, dubbed a bear flag— suggesting more pain ahead for the BTC/USD pair.

Bitcoin bulls may have to wait until 2024 for next BTC price ‘rocket stage’

Bear flags appear when the price consolidates higher inside a parallel ascending channel and resolve after it breaks below the channel’s lower trendline with convincing volumes. In a “perfect” scenario, a bear flag breakout results in the price falling as low as the height of the previous downtrend.

Thus, Bitcoin could see a drop to the flag’s lower trendline around $40,000, opening the door for a drop toward $32,000.

There it is, now we’ll check off the 2nd target box on $DXY drawn months in the past.
– Each day, Weekly, & Month-to-month RSI look bullish
– Each day, Weekly, & Month-to-month MACD look bullish
– Above 200 W MA since November
– Might 2020 final time it was this excessive

Threat off for #bitcoin, #crypto, $stocks? https://t.co/jzaCOb4fIk pic.twitter.com/hMEBrxHgW2

— Jesse Olson (@JesseOlson) April 7, 2022

Nonetheless,Mamasidikov says Bitcoin might maintain above $42,500 even when the greenback rises on the opposite finish of the spectrum.

Recalling the adoption growth of summer time 2021 (when Bitcoin’s correlation with the DXY was largely constructive), traders proceed to hodl BTC as part of their long-term technique.

He provides:

“Regardless of the seeming uncertainty available in the market, Bitcoin has fashioned robust help at $42,500 and has the basic backing to retest $47,000 within the quick time period.”

The views and opinions expressed listed here are solely these of the writer and don’t essentially replicate the views of Cointelegraph.com. Each funding and buying and selling transfer includes threat, it is best to conduct your individual analysis when making a choice.