Last week marked a significant moment in monetary policy as the Federal Reserve (Fed) executed its first interest rate cut since December, indicating further easing may be on the horizon. Despite this dovish shift, the dollar index (DXY), which measures the greenback’s strength against a selection of major currencies, closed the week forming a dragonfly doji on its weekly chart. This specific candle pattern, resembling a “T” shape, is widely recognized as a bullish reversal indicator, suggesting that a rally in the U.S. dollar could be imminent.
The dragonfly doji pattern emerges when the opening, high, and closing prices are closely aligned, demonstrating a long lower shadow that indicates a rapid price drop rectified by robust buying pressure. Initially, the DXY did dip below the July low of 96.37 following the Fed rate cut announcement. However, it quickly bounced back and ended the week at 97.65, buoyed by the resilience in U.S. Treasury yields. The formation of this doji pattern after a pronounced downtrend and at a critical support level hints at a potential bullish trend reversal for the dollar.
In contrast, Bitcoin (BTC) reflected its own set of challenges for traders during the week ending September 21. The cryptocurrency established an indecisive doji candle at a significant resistance level, marked by trendlines tracing back to the 2017 and 2021 bull market peaks. The appearance of this doji raises concerns for bulls, highlighting a reluctance to push prices higher and the presence of selling pressure at these pivotal resistance levels.
On the daily chart, Bitcoin is on the cusp of potentially dropping below the Ichimoku cloud, with additional bearish signs emerging as a trendline drawn from the September 1 lows has been breached. Immediate support is set at $114,473, corresponding with the 50-day simple moving average, followed by September 1 lows that approximate $107,300. Conversely, the last week’s peak of $118,000 must be surpassed to alleviate the bearish outlook.
Ether (ETH) is also grappling with technical headwinds, currently sitting below the lower boundary of a contracting triangle on the daily chart. This suggests increased seller dominance and raises the possibility of more significant losses. Traders are eyeing the August 20 low of $4,062 as a key point of interest, with the psychological support level at $4,000 closely monitored. Bulls need to reclaim the 24-hour high of $4,458 for any signs of strength.
Meanwhile, XRP faces a testing narrative as well. Despite the recent approval and debut of an XRP ETF in the U.S., the MACD indicator is registering a bearish crossover on the weekly chart, signaling a renewed downside momentum. XRP’s pricing has reverted to the upper boundary of a descending triangle on the daily chart, and last week’s tentative breakout did not materialize into a sustained rally, keeping traders on alert.
Looking ahead, this week promises to be pivotal with Fed Chairman Jerome Powell and several officials addressing the market. Market participants will closely observe their comments for insights regarding the future trajectory of interest rates. Despite last week’s rate cut, Powell has tempered expectations by emphasizing the Fed’s data-driven approach. Additionally, Stephen Miran, appointed by former President Donald Trump, will discuss his independent stance as a policymaker, notably dissenting in favor of a more aggressive 50-basis point rate reduction last week.
On Friday, attention will shift to the U.S. core Personal Consumption Expenditures (PCE) index, the Fed’s favored inflation measure, with forecasts indicating a year-on-year increase of 2.7% and a core uptick to 2.9% in August, which would reflect a slight rise compared to the previous month. The outcomes of these developments could significantly influence market sentiment and trading strategies in the coming days.
