Bitcoin Drifts Towards Crucial Resistance Line

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  • Bitcoin is drifting uncertainly towards a six-week resistance line
  • The strength of the U.S. Dollar Index could damage its attempt to break through
  • Only more coronavirus stimulus could undermine a dollar resurgence

Bitcoin has endured an uncertain September due to the performance of the U.S. Dollar Index – the former looks set to end the month over 10.5% down while the latter could end it 2.5% up. Since hitting $12,450 in mid-August, Bitcoin has been downtrending, collapsing in the early part of September and slowly recovering:

Bitcoin price chart 1

The month-long recovery sees Bitcoin drifting towards this trendline, and with the Bollinger Bands beginning to narrow we can expect a big move as it approaches this barrier:

Bitcoin price chart 2

When looking for clues as to how Bitcoin might behave as it approaches this resistance, we can look to the reason for its demise this month, the U.S. Dollar Index, for clues:

dollar index 3

Since breaking out from its bottoming candle on September 1, the U.S. Dollar Index has been putting in a stellar performance, breaking above all local resistances before dropping back and treating the 93.9 level as support.

This is not good news for Bitcoin going into October as all the momentum is behind the U.S. Dollar Index at the moment, and it has very little to stop it up to the 96.40 region:

dollar index 4

If the U.S. Dollar Index does kick up a head of steam again in the coming days then Bitcoin may not make it to the resistance line before falling further down, with the high $9,000s being the next stopping off point, perhaps going as low as the $8,800s.

Bitcoin Could Get Covid Handout Reprieve

It’s not impossible that the U.S. Dollar Index and Bitcoin both move up together, after all it happened for a short period in March, but those were unusual circumstances. Under more normal conditions a U.S. Dollar Index rise pushes Bitcoin down, and it is looking likely that such a scenario will play out again next month.

The only thing that can seemingly stop the dollar from making further gains is another stimulus bailout, but with no agreement seemingly likely, at least in the short term, Bitcoin seems set to suffer as the hands of the dollar once again.