Bitcoin is looking to close the week at the same level it opened, leaving behind a so-called Doji candlestick.
The technical outlook, for many chart watchers, is a signal of a trend reversal. An asset typically reverses its bias after forming a Doji, which appears like a cross, plus sign, or an inverted cross. Therefore, a Doji candlestick followed by a downside trend means a bullish reversal – and vice versa.
A weekly BTC/USD chart shows the pair forming the same pattern. The pair this week opened at $11,650. It is now trading at near $11,616 that increases its likelihood to close near the opening rate.
The said Doji appears after Bitcoin’s two bearish weekly sessions in a row. Therefore, the cryptocurrency could rebound into the new week on technical factors alone. Meanwhile, it is also receiving bullish support from macro fundamentals.
A Weaker US Dollar
The next jump in BTC/USD could appear out of the US dollar’s pain. The greenback fell in the latter half of this week as the Federal Reserve’s new policy framework suggested that interest rate would remain low.
The US central bank’s chairman, Jerome Powell, said on Thursday that the Fed desires a period of consumer price inflation running near or above 2 percent, a level it has missed in the last eight years. Meanwhile, Powell said that his office would wait to rate interest rates until a tighter job market pushes inflation higher.
To investors, Fed’s latest dovish signals mean a continued injection of the US dollar into the economy to aid it through the aftermath of coronavirus pandemic.
The sentiment has so far strengthened Bitcoin’s foothold in traditional finance. The cryptocurrency rose by more than 200 percent from its mid-March nadir on the Fed’s stimulus policy and its negative impact on the US dollar. The greenback’s benchmark index, which pits it against a basket of foreign currencies, plunged to its 27-month low as of this August.
Fed’s commitment to keeping inflation higher has merely accelerated bearish sentiments for the US dollar. Conversely, the same fundamentals are pointing to a bullish Bitcoin in weeks, months, and years ahead.
A potential jump in BTC/USD this week could have bulls test $11,800-$12,000 as their primary upside target. Meanwhile, any failure to push beyond the current levels would put the pair at risk of breaking lower towards $11,400.
Even with the said price action, Bitcoin will not confirm a medium-bias until it breaks above $12,000-$12,500 and below $10,700-$10,500. Therefore, traders could expect the price to consolidate sideways.