The recent price movement of Bitcoin indicates a significant technical development as it approaches critical resistance levels. Following a rally that began on Sunday, Bitcoin has touched the bottom of its established bear flag pattern. This situation raises a crucial question: Is the cryptocurrency poised for another substantial decline, or could a declining US dollar provide a supportive backdrop for Bitcoin?
The US Dollar Index (DXY) has recently fallen below a long-standing trendline established in 2008. If this breakdown is validated by the end of the week, analysts anticipate a potential target just under $90 for the DXY. Such a shift could ease the burden of US debt interest payments while simultaneously boosting asset prices, potentially benefiting Bitcoin.
Market expectations suggest that the Federal Reserve will keep interest rates steady during the upcoming Federal Open Market Committee (FOMC) meeting. As Jerome Powell is set to depart from his role in May, speculation surrounds the appointment of a successor who may favor accelerated rate cuts, creating a more favorable environment for Bitcoin and similar digital assets.
On the technical front, the 4-hour chart for BTC illustrates that the price has confirmed the bottom trendline of the bear flag. Unless it rebounds and re-enters the bear flag, the breakdown remains valid. Short-term momentum indicators suggest that a downward correction is likely. However, the recent breakout above a downtrend line offers some hope for bulls.
Investors are now closely watching for a potential breach of a firmer trendline, which could bolster bullish sentiment. That said, if the price dips below the recent local low of $86,000, it may lead to a swift decline towards $80,000.
As we shift to the daily chart, the bear flag pattern becomes clearer. The current trajectory reveals a classic breakdown, with the BTC price falling out of the flag and confirming this movement. The most probable next step appears to be a downward impulse, but the extent of this decline remains uncertain. Support at $86,000 could create a minor reversal, though such a scenario seems less likely.
If Powell adopts a particularly dovish tone in the FOMC meeting, market reactions could shift dramatically. A measured move out of the current channel could project Bitcoin prices down to approximately $80,000, potentially forming a double bottom or extending further to horizontal supports at $74,000 or $69,000, which represent the peak of the 2021 bull market.
Examining the weekly timeframe, the $86,000 support level stands out as particularly robust. Historical data shows numerous price interactions at this level, suggesting its importance. If buyers can maintain the price above this threshold by the week”s end, a rally may still be possible. Conversely, a breach of this support could trigger a rapid descent to the highs seen during the last bull market.
In conclusion, the Stochastic RSI indicators at the bottom of the chart currently show a favorable positioning for bulls, with the fast line above the slow line. If this trend continues, there may still be hope for a bullish reversal.
This analysis serves as informational content and should not be construed as legal, tax, or investment advice.
