In a striking dual analysis, financial charts show contrasting futures for the US Dollar Index (DXY) and bitcoin (btc). Gert van Lagen, a technical analyst, has provided a bearish forecast for DXY, while highlighting a bullish setup for bitcoin that could see it aiming for a target of $46,000.
DXY receives the kiss of death
The DXY has maintained an upward trend since July, as shown by the blue ascending trend line on the daily chart. However, this line was broken down on October 9, indicating a change in market sentiment. Van Lagen Explain, “The blue bullish trend since July has also been broken. It’s time to keep going down.”
This sentiment is reinforced by the price action within the black channel from early October until recently, where a period of consolidation is visible, followed by a strong move lower. The DXY fell 1.2% last Friday, November 3 to 104.92 and is currently undergoing a retest of the channel, a common technical pattern in which the price returns to the breakout point before continuing in the initial direction .
A third bearish argument for DXY is the rejection in the red zone highlighted on the chart, which signifies a high-term Fibonacci resistance area. The Fibonacci retracement is a popular tool among traders to identify possible reversal levels. The DXY price action shows a “clear rejection” at this level, where the index attempted to rise but was pushed back down, reinforcing the bearish stance.
bitcoin Price Targets $46,000
Amid DXY weakness, inverse correlation with bitcoin becomes a focal point for cryptocurrency investors. Gert van Lagen provides information on bitcoin‘s potential trajectory, noting a bullish pattern emerging on its 6-hour chart.
“btc (6h) – Bullish pennant in play with a target of $46,000. The pennant is part of the ascending channel shown,” van Lagen commented. The chart shows the price of bitcoin consolidating into a pennant structure, a continuation pattern that indicates a pause in a strong bullish or bearish trend before the next move.
The pennant is outlined by converging trend lines that have formed connecting the sequential highs and lows of the price action, converging to a point indicative of an imminent breakout.
In this case, the pennant is following a significant uptrend, suggesting that the breakout is likely to continue in an upward direction. The ascending channel, highlighted by two parallel upward-sloping lines, encompasses the entire bitcoin bullish movement on the chart, including the formation of the pennant. This channel serves as a guide to the price trend, indicating where support and resistance levels are anticipated at the moment.
Van Lagen’s analysis posits a price target of $46,000 upon resolution of the pennant, a level that is determined by the height of the previous move preceding the pennant, projected upward from the breakout point. The dashed lines on the chart illustrate the potential path bitcoin price could take after the breakout.
An important detail in van Lagen’s chart is the “Invalidation” level marked below the pennant. This $34,103 level is critical as it indicates where the bullish assumption would be considered incorrect, and serves as a stop-loss point for traders trading this pattern.
At the time of publication, btc was trading at $34,625.
Featured image by Dmytro Demidko / Unsplash, chart by TradingView.com
