Bitcoin faces 50-day EMA resistance after rising above $ 51,000
Bitcoin bulls regained strength after breaking the $ 50,000 mark last week and continued to hold that psychological level as support on December 27th. Meanwhile, the in-line safe store rival, its flagship US dollar, also bounced off an important price floor. This means it will continue to consolidate to establish an upward trend through 2022.
Break out of a symmetrical triangle
The US Dollar Index (DXY), which measures the strength of the US dollar against a basket of major currencies, is trending toward the apex of a “symmetrical triangle” pattern on the daily chart.
Once there, DXY viewed the structure’s lower trendline as solid support, suggesting a bullish breakout.
Daily DXY chart with symmetrical triangle setup | Source: TradingView
When the DXY breaks out of the symmetrical triangle, the bulls technical profit target is as high as the maximum distance between the top and bottom trend lines of the structure, measured from the breakout point. Therefore, the US dollar could head towards the 97.8 level in the coming sessions.
US dollar outperforms euro
The bullish outlook for the US dollar contrasts with the Fed’s plan to cut bond purchases. In particular, the US Federal Reserve signaled in early December that it was ready to tighten monetary policy, which came faster than expected, in addition to three rate hikes in 2022.
Meanwhile, some of DXY’s recent strength comes from the ongoing euro area cash glut.
“A wave of economic stimulus programs launched by the European Central Bank (ECB) in the wake of the Covid-19 pandemic has left banks in the euro area with excess liquidity,” said FactSet’s financial researcher notice.
EUR / USD daily frame chart shows a bearish trend since May 2021 | Source: TradingView
As a result, these banks have now increased their euros through the repo facility to US dollars
The Fed’s inversion, which gives them a 0.05% interest rate, is better than short-term European government bonds, which come with negative yields.
On December 20, nearly $ 1.7 trillion flowed into the Fed’s repo facility, the highest single-day injection ever. Bitcoin rises above USD 51,000 as the dollar signals superior strength against the euro Daily inflows into the Fed’s reverse repo facility have been increasing since May 2021
| Source: Fed
Fractal predicts a rally for
Bitcoin’s recent rally above $ 51,000 came as the price tested a multi-month upward sloping trendline for support, as shown in the chart below. Bitcoin rises above USD 51,000 as the dollar signals superior strength against the euro BTC / USD daily frame price chart appears ascending trend line
Source: TradingView However, Bitcoin price is currently encountering resistance within the 50-day exponential moving average (50-day EMA) – an instrument that is limiting Bitcoin’s attempt to recover in November, so the bulls are likely to be very tightly controlled under its pressure. But for longer periods of time, Bitcoin is likely to continue its momentum into 2022. For example, the independent market analyst Rekt Capital
that Bitcoin repeated a trend from the May-July trading session that then rocketed the price to an all-time high (ATH) of $ 69,000.
“Bitcoin formed a similar range within these two EMAs in May (orange circle).” Bitcoin rises above USD 51,000 as the dollar signals superior strength against the euro Weekly BTC / USD frame price chart including fractal “Bull Market EMAs”
Conversely, if Bitcoin falls below the 50-week EMA, the likelihood of testing its orange 200-week EMA based on the same fractal becomes higher. Bitcoin rises above USD 51,000 as the dollar signals superior strength against the euro Weekly BTC / USD price chart with 200 week EMA support line