Bitcoin may see relief rally to $11K after Dollar Strength Index soars

Bitcoin (BTC) price has stagnated for the past few weeks as it failed to break above $ 11,000 or fall below $ 10,000, which is the ultimate sign of continued divisional structure.

Such a sector-bound and sideways-looking structure could take some of the pressure off the markets, as the altcoins – especially the DeFi sector – have seen massive sell-offs in recent weeks.

However, what's next for Bitcoin since the day of the futures expiration is tomorrow, which will most likely result in short-term volatility?

Bitcoin is still waiting to close the CME gap while the downtrend continues

BTC / USD 1-day chart

BTC / USD 1-day chart. Source: TradingView

The daily chart has shown a significant downtrend since USD 12,400. The $ 12,000 fake marked the end of an uptrend with a clear rejection of the $ 12,000 level as confirmation.

As the graph shows, lower highs are consistently being made, which means the price has been in bearish mode since that high. Initially the USD 12,000 level was confirmed for resistance and thereafter the USD 11,100 area switched from support to resistance.

Given that the current trend is bearish, after $ 10,000 it is more likely that another decline will hit another lower low. The next level of support may then be the CME gap at USD 9,600, which is not yet filled.

BTC / USD CME 1-day chart

BTC / USD CME 1-day chart. Source: TradingView

The CME diagram shows the gap that has not yet been filled. Since most of the CME gaps will be closed, this gap can also be expected to close in the future.

Will the US Dollar Currency Index Consolidate Now?

DXY Index 1-Day Chart

DXY Index 1-Day Chart. Source: TradingView

The primary scenario for asset weakness is the strengthening of the US dollar. Concerns and fears of another round of lockdowns due to the coronavirus caused markets to retreat around the world.

The commodity, crypto and equity markets have shown weakness in the past few weeks, with investors pouring into “safe havens”, namely the US dollar.

However, with the USD battling a potential level of resistance, a correction is likely now. Bitcoin and other assets could see a relief rally if the USD corrects.

Possible scenario for Bitcoin

BTC / USD 1-day chart

BTC / USD 1-day chart. Source: TradingView

With the price of Bitcoin now resting at a support level and the US dollar possibly trending higher, a relief rally can be expected. One bearish factor, however, is the recent negative market sentiment, which is a strong argument against a short-term relief rally.

However, the critical level to break up is the resistance zone around USD 11,000, which most likely will not break all at once. Bitcoin's price has shifted into a downtrend since $ 12,400, in which a clear basic structure should be defined before further upward momentum can be expected.

Either way, a rally towards $ 10,700 to $ 11,000 is on the table, as the 2-hour graph shows.

BTC / USD 2 hour chart

BTC / USD 2 hour chart. Source: TradingView

In addition, the chart shows a possible bullish divergence. This bullish divergence will be confirmed once the price of Bitcoin hits a higher low of $ 10,350-10,400. If so, a possible relief rally towards the upper resistance areas is likely.

This relief rally, however, cannot be given as a potential basic structure in the markets in general. After a large impulse movement, consolidation and accumulation take a long time before a new impulse movement can begin.

With the most recent being in August (from $ 10,000 to $ 12,400), expect a sideways consolidation of several months before new fireworks can appear.

The views and opinions expressed here are solely those of author and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.

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