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The direction of the US dollar (DXY) is a core macro driver at present and critical to crypto. Last week’s soft US CPI print saw DXY break down through our target zone. However, a cycle trough could now be at hand. The question is what is the magnitude of this bottom zone?
There are two interpretations: the preferred view is that we are in an 18-month cycle trough zone (longer term bullish); the alternate view is that it is a 40 day cycle trough, which implies a much shorter advance and then down again. The former case (18-month low) implies big upside, the latter small and then fade. We will be able to confirm as price unfolds near term, but in either case an upside reversal is due.
Analysis: The analysis strongly suggests that a cycle trough is at hand and we believe it is that of the 18 month cycle. If correct, then the implication is that a strong and sustained advance is coming. The trough is due potentially this week and once confirmed, we will be tracking an initial advance into the first 40 day cycle peak due towards the end of November.
If the coming price low is indeed that of an 18 month cycle, then once the cycle gets underway, a reset out of the 40 day cycle peak should be shallow.
Key level to watch: There is a cluster of projections that suggest that the 105 handle offers potential support. We will be watching this level closely over the course of the week.