The Bollinger Bands on the daily bitcoin chart are starting to squeeze (blue arrow). This compression is significant because Bollinger's theory suggests a squeeze is a proverbial calm before the storm. In other words, the low volatility cannot persist and will increase. This approach intuitively makes sense. As new fundamentals discount, prices will adjust.
Bollinger's theory makes provision for an expansion in volatility but says little with regards to the direction of the breakout. To this end, we need to consult other tools. For example, the daily stochastic is rolling over (black ellipse).
Given the strength of the dollar, the expectation of higher headline inflation tomorrow, and the aggressive Fed, there is a distinct chance of cryptocurrency weakness. If inflation moderates, crypto bulls will heave a collective sigh of relief. However, if the number is to the high end and the stochastic turns, heading towards the red rectangle, BTCUSD will be under renewed pressure. Things could get ugly.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.