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The U.S. dollar is showing signs of renewed strength, creating a challenging environment for Bitcoin and other risk assets. Despite the Federal Reserve’s recent interest rate cut, the dollar index (DXY), which measures the greenback against a basket of currencies, ended last week with a dragonfly doji on the weekly chart—a technical pattern that often points to a potential bullish reversal.
This comes as Bitcoin sits at a crucial resistance level, displaying hesitation among buyers and raising the possibility of further declines. Analysts warn that if the dollar gains momentum, it could place additional pressure on cryptocurrencies in the days ahead.
How the DXY is shaping market sentiment
The dragonfly doji seen on the DXY chart is notable because it appeared after a prolonged downtrend and right at key support levels. In technical analysis, this candlestick formation often signals that sellers have lost control, allowing buyers to step in with strength.
Last week, the DXY briefly dipped below the July low of 96.37 following the Fed’s rate cut but quickly recovered, closing at 97.65. The rebound was supported by steady U.S. Treasury yields, reinforcing the view that the dollar is preparing for another upward move.
If the dollar strengthens, it usually weighs on dollar-denominated assets such as Bitcoin. For traders, this sets up a critical test: whether Bitcoin can hold above important support levels even as the greenback gathers momentum.
Bitcoin shows weakness at major resistance
Bitcoin closed last week with a doji candle of its own, but this one formed at a long-term resistance trendline drawn from the 2017 and 2021 bull market peaks. In this context, the doji reflects indecision among buyers and reluctance to push the price higher, while sellers are regaining confidence.
On the daily chart, Bitcoin is now flirting with a move below the Ichimoku cloud, a sign that the bullish structure may be breaking down. A trendline connecting September 1 lows has already been breached, which adds to the bearish case.
Support is currently seen at $114,473, marked by the 50-day simple moving average. Below that, the September 1 low near $107,300 represents the next critical level. On the upside, Bitcoin needs to reclaim last week’s high of $118,000 to weaken the bearish outlook.
If bears remain in control, traders could see a test of the $107,000 region in the coming sessions.
Ether’s bearish breakdown
Ether, the second-largest cryptocurrency, is also showing troubling signs on its chart. After trading within a contracting triangle pattern for several weeks, ETH has broken below the lower boundary of the formation. This breakdown signals renewed dominance by sellers and suggests the potential for further downside.
The immediate focus is on the August 20 low of $4,062, followed closely by the psychological round number of $4,000. Bulls would need to push the price back above $4,458 to re-establish momentum and counter the bearish breakdown. Until that happens, the path of least resistance appears to be downward.
XRP’s momentum weakens despite ETF debut
XRP investors are facing disappointment as the token struggles to build on recent optimism following the debut of an XRP exchange-traded fund in the U.S. Instead of gaining strength, XRP’s weekly MACD—a key momentum indicator—has turned bearish.
This development suggests that the token may slip further, especially as it retests the upper boundary of a descending triangle pattern on the daily chart. Although there was a tentative breakout last week, it failed to gather steam, leaving traders cautious and unwilling to commit to long positions.
The failure to capitalize on the ETF news underscores how technical signals remain dominant in shaping XRP’s near-term direction.
All eyes on the Federal Reserve and PCE inflation data
The coming week could prove decisive for both the dollar and cryptocurrencies, with several key events on the calendar. Federal Reserve Chair Jerome Powell, along with nine other officials, is scheduled to deliver speeches. Markets will be paying close attention to their comments for any clues about the path of interest rates.
While the Fed recently cut rates for the first time since December, Powell emphasized that future decisions would remain data-dependent. This cautious stance tempered enthusiasm about an extended easing cycle.
Adding to the mix, Stephen Miran—a Trump-era appointee who dissented in favor of a larger 50 basis point cut—will also speak, highlighting the diversity of views within the central bank.
The week culminates with the release of the core Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge. Data provider Amberdata projects that the report will show inflation rising 2.7% year-over-year, with core inflation climbing to 2.9% in August, slightly higher than the previous month.
What this means for crypto traders
The combination of a stronger dollar, weakening crypto charts, and looming macroeconomic events paints a cautious picture for digital asset markets. Bitcoin’s struggle at key resistance, Ether’s bearish triangle breakdown, and XRP’s fading momentum all point to potential downside risks.
At the same time, the dollar’s technical setup suggests it could strengthen further, particularly if Fed officials signal that the rate cut cycle will proceed more slowly than markets expect. Inflation data later this week could reinforce this outlook if it comes in hotter than projected.
For traders, the message is clear: volatility is likely to rise, and risk management will be essential. While long-term bulls may view any dip as a buying opportunity, the short-term picture favors caution until technical signals begin to improve.
