A widely followed crypto trader says he feels the markets are facing a “significant” moment with the US dollar signaling weakness.
Crypto strategist Justin Bennett tells his 111,700 Twitter followers that the US dollar index (DXY) is testing its May 2021 trend line, which if it breaks could signal bullishness for crypto markets.
“DXY tested its May 2021 trend line today. Feels like a significant moment for markets.”
Traders closely watch the DXY for signs of weakening, which indicates investors are moving their capital away from the US dollar and into risk-on assets like crypto and stocks. The DXY has moved on an upward channel since May 2021, but in recent months has started to come down.
At time of writing the DXY is at 102.31, down from its previous close of 103.19.
Bennett also says that Bitcoin (BTC) is off to a strong start in 2023 with the king crypto showing an upward stair-step pattern, which is formed when there are abrupt moves up followed by periods of correction. The pattern creates new price levels of support and resistance.
“What a start to the year for Bitcoin. The stair-step price action has been exceptional from the start. Lots of opportunities. I still have my $16,722 long but have trimmed it to half ahead of today’s CPI (Consumer Price Index data).”
The US federal CPI numbers released on January 12th showed inflation down slightly. He says since the CPI data met expectations those betting on a miss in either direction were not rewarded.
“YoY (year-over-year) and MoM (month-over-month) CPI came in right at the forecast numbers. Forecast and actual:
0.3% MoM
6.5% YoY
Hence the flush of both longs and shorts.”
In his newsletter Daily Price Action, Bennett said the day before the CPI numbers were released that a CPI miss would significantly move the markets.
“The year-over-year CPI forecast is 6.5%. Anything below that would likely be bullish for risk assets, while above would be bearish.”
At time of writing, Bitcoin is changing hands at $18,635, extending its recent rally and up 12.6% from its low on January 1.
Don't Miss a Beat – Subscribe to get email alerts delivered directly to your inboxGenerated Image: Midjourney