- Bitcoin diverges from the FX market and ignores the recent dollar’s strength
- Positive momentum builds up
- Possible pennant formation points to a move above $30k
The US dollar reacted to the recent monetary policy decision in the United States and the strong economic data for January. As such, it gained against its peers, with the best example being EUR/USD.
The exchange rate dropped from above 1.10 more than three big figures (i.e., three hundred pips). But Bitcoin ignored the dollar’s strength.
Indeed, the price action corrected a bit, but that was pretty much all. Instead of correlating with the FX market, Bitcoin diverges as bullish conditions remain. Moreover, momentum builds up, with another leg higher possible.
Possible pennant hints at a move above $30k
Bitcoin builds momentum just below the main resistance. Back in the summer of 2022, Bitcoin failed at $24k.
It tried its hand three times in a row, lost the momentum, and made a new lower low in the last months of the year. But the 2023 rally erased all that weakness.
The consolidation below the resistance looks like a triangular formation. More precisely, like a pennant.
A pennant’s measured move is equal to the distance prior to the pennant, projected from the pennant. In other words, it points to above $30k, should Bitcoin overcomes resistance.
If Bitcoin leads the way for the dollar, it should be used as a benchmark for the FX market. Therefore, one should not be surprised to see the EUR/USD making a new high for the year and erasing all the NFP losses.
For Bitcoin to trade above $30k the dollar should not diverge. Hence, the chances are high for the dollar’s strength in reaction to the January NFP report to be transitory.