The U.S. Dollar has topped, and that is fueling the crypto rally.
The dollar Index ETF (UUP) is turning lower after hitting a major resistance. There is a five wave top in place in the dollar and very negative stochastics divergences on the three-day chart. This divergence in stochastics implies that the Dollar could drop very sharply (Figure 1).
From a fundamental point of view, this makes sense. After yesterday’s clumsy Fed rate hike, several things have become obvious. First, if the Fed continues to raise rates, there will be major problems in the institutional stock, bond, and credit markets. Second, Mr. Market is signaling that the Fed is going to eventually have to stop raising rates.
None of the outcomes highlighted above are bullish for the Dollar. This has resulted in a top in the U.S. Dollar. The top is being led by exchange rate for the Dollar vs. the Yen (USDJPY). Dollar-Yen (USDJPY) is being rejected at a key Fibonacci speed line on its weekly (Figure 2). Said plainly, people are selling the dollar and buying the Yen. Sometimes, the Yen can be considered a safe haven currency when the legacy financial system experiences a crisis.
The good news is that you know what the best haven is from problems in the legacy financial system: Bitcoin (BTC).
The Bitcoin (BTC) three-day chart is the mirror image of what is happening in the dollar Index (UUP). The three-day chart of Bitcoin (BTC) has a bullish divergence that is likely fueling this dramatic rally (Figure 3).
Bottom Line: We expect the dollar to fall and Bitcoin to rise. This is going to be a multi-month move. Trading the rally will be like riding a bucking bronco. Join me in the Crypto.IQ trading room as we hash out the tactics for profiting from this new uptrend in Bitcoin (BTC) and crypto in general.