Analyst: US Dollar Index's Bearish Trend May Be a 'Bear Trap'

BlockBeats News, July 2nd, Coindesk analyst Omkar Godbole stated that Bitcoin bulls are eagerly awaiting a continued weakening of the US dollar to inject upward momentum into the cryptocurrency market. However, technical charts show a need to be cautious of a historical pattern reversal signal — the US Dollar Index weekly chart is about to form a "death cross," a traditional bearish formation that has often served as a temporary bottom signal for the dollar since 2009.

Omkar Godbole noted that although this ominously named formation is usually seen as a long-term bearish signal, historical data shows that it is often a "bear trap." Since 2009, each of the four appearances of this formation has marked a dollar bottom and trend reversal (as indicated by vertical lines on the chart). The most recent occurrence was in January 2021, when the US dollar index bottomed near 90 and then continued to rise, eventually reaching a high above 114 in September 2022. It is important to note that price patterns do not always develop as expected, and the impending death cross may not necessarily trap bears again. However, understanding this historical pattern can help traders more effectively manage their positions.