It was not the US dollar’s first attempt to break over the Channel resistance; the greenback has been seeking a bullish move since 1985. Nevertheless, it has failed every time, with a few successful breakouts turning out to be fake.
The same trend is brewing after this year’s COVID pandemic. As the economic recovery slows down to dangerous levels, the Federal Reserve has committed to maintain ultralow lending rates and raise their inflation targets beyond their 2 percent benchmark.
The fundamentals ensure the US dollar will find it difficult to break above its purple resistance trendline in the months ahead. Meanwhile, flight to safety into Bitcoin could help it continue its long-term uptrend.
A Bitcoin price chart (BTC/USD) looks an exact opposite of the one of the US dollar index.
BTCUSD looks prepared to continue its cyclical patterns upward. Source: TradingView.com
A monthly chart of the US dollar index (DXY), a barometer to gauge its performance against a basket of top foreign currencies, shows the greenback in a lifelong downtrend. So it appears, the index has been trending lower inside a Descending Channel, as confirmed by more than two lower highs and lower lows.
The technical fractals alone leave the US dollar in a very bearish state.
Bitcoin vs the US Dollar
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DXY pulled back by 2.38 percent so far into the September 2020 trading session. Nevertheless, the index showed signs of weakness near the Ascending Channel support, hinting that it could either consolidate ahead or move lower towards the ‘purple support’ as it has done in its 25 years of trading.
The US dollar is on track for its most significant monthly performance since July 2019. But it continues to feel the pressure from its all-time bearish outlook.
DXY pulls back after testing the upper trendline of the giant Descending Channel. Source: TradingView.com
The purpled area shows a retest of the upper trendline for a breakout in March 2020, followed by a strong rejection.
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