Ethereum Price Outlook as the DXY Index Crash Continues

Cryptocurrency prices remained in an upbeat tone on Thursday as the US dollar index continued its bearish move. Bitcoin, the biggest cryptocurrency in the world, rose to $23,165, the highest level in months. Similarly, Ethereum has risen by more than 4% in the past 24 hours while BNB Coin and XRP surged to $307 and $0.41, respectively. 

US dollar index retreats

Cryptocurrencies have an inverse relationship with the US dollar index. For example, the DXY, which looks at the performance of the greenback vs other currencies, soared to a 20-year high of $115 in 2022. As that happened, cryptocurrencies like Bitcoin plunged during the year.

The foundation of this relationship is the Federal Reserve. In most periods, the US dollar index tends to rise when the Fed is extremely hawkish and vice versa. And it was extremely hawkish in 2022 as it hiked interest rates by more than 400 basis points. 

Therefore, while the Fed has remained hawkish recently, the US dollar has dropped because of what the data is saying. Data published recently showed that America’s inflation is easing. The closely watched consumer price index dropped to 6.5% in December while core inflation fell to 5.7%. 

At the same time, other parts of the economy are showing that the American economy is indeed recoiling. Retail sales dropped sharply in December while many large companies like 3M, Goldman Sachs, Microsoft, Salesforce, and Alphabet have laid off thousands of jobs.

Therefore, with inflation falling and with layoffs rising, analysts believe that the Fed will pivot this year. Some analysts, especially those from ING have warned that the bank will even star cutting rates either in Q4 of this year or in 2023.

The next key catalyst to watch will be America’s PCE data scheduled for Friday. PCE is an important number because it is the Feds’s most important inflation gauge.

Ethereum price prediction

Turning to the daily chart, we see that the ETH price has been in a slow bullish trend in the past few days. This rebound saw the coin rise to a high of $1,792, which was the highest point on November 3. The coin has surged above the 25-day and 50-day moving averages. It has also moved above the ascending trendline shown in red. 

Therefore, I suspect that the coin will have a bullish breakout as buyers target the key resistance level at $2,000. This rebound will happen if the DXY index plunges to below $100.