A widely followed crypto trader says the US dollar index (DXY) is signaling weakness and that could mean a big breakout for Bitcoin (BTC).
In a new strategy session, crypto analyst Jason Pizzino tells his 278,000 YouTube subscribers that the DXY is showing multiple signs of bullish exhaustion after rallying over 16% this year.
“We had the lowest close in the last four weeks. So last week closed low, closed beneath the 50% mark. The key level here is going to be that 109 [points] on the DXY. Now we’re starting to see this on a macro play here. We’re looking at the weekly stuff. This is the first lower top that we have seen on the weekly chart for the US dollar [index] since a year ago…
For me, this is the second sign of weakness. We had that big blowoff in September. That was the news telling us everything was going to dump against the US dollar. The British pound was going to go to parity or below parity. The euro went below parity. Everyone’s freaking out. Everyone was piling into the US dollar. And now, we’re starting to see another sign of weakness, a lower top confirming over the weekend ‘collapse’ and the close below the 50% level as well.
I’m really looking for a close, a significant close here under the 109 [points] level to continue the confirmation of this topping pattern playing out for the US Dollar.”
Traders closely watch the DXY because if the index shows signs of weakening, it’s an indication investors are moving their capital away from the US dollar and allocating it to risk-on assets like crypto and stocks.
Looking at Bitcoin, Pizzino says BTC is still trapped within a tight range until it can take out its immediate resistance, which we notes could happen in the coming days.
“The plays that are underneath these levels (BTC at $20,700) are still essentially traps until we can cleanly get above that and then work our way above $21,400, which is the next key 50% level…
I’m still on alert in the short term… We’re trying to climb back above that, like I said, probably this week to next week.”
According to Pizzino, the breach of BTC’s diagonal resistance will likely draw in traders waiting on the sidelines and catapult Bitcoin toward his target of around $25,000.
“The emotional move from this period should we get a break above the swing tops is probably in the case of FOMO (fear of missing out). People are going to start to FOMO in thinking they missed out on a sub $20,000 Bitcoin if we get that little bit of a pump up. We’ve had a couple of good signals here so far just with the bottoms holding out at $18,000 and then the closes being above $19,000 as well.”
At time of writing, Bitcoin is trading hands at $19,315.