The US dollar index jumped to the highest level in five months.
The rally happened as the US economic growth continued.
Cryptocurrencies like Litecoin have an inverse relationship with the USD.
Litecoin price remained under intense pressure on Tuesday as the US dollar index (DXY) surged to the highest level in over five months. LTC retreated to a low of $62 and is hovering near the lowest level since December last year.
US dollar index surges
Litecoin and other cryptocurrency prices have come under scrutiny after last week’s events. On Wednesday, the Securities and Exchange Commission (SEC) suffered a major blow when Greyscale won a major case in the US.
The victory means that the SEC will likely approve the launch of spot Bitcoin ETFs. While coins like BTC and LTC jumped after the news, their rallies fizzled after the SEC decided to delay a decision on funds by companies like Blackrock and Invesco.
Litecoin investors are watching these events closely because of the close correlation that exists between BTC and LTC. For one, Litecoin was created from a Bitcoin folk.
Therefore, if Bitcoin succeeds in having a spot ETF, there is a high possibility that a Litecoin will also have its ETF shortly afterward.
The other big event moving Litecoin is the strong performance of the US dollar. The dollar index jumped to $104.5, which was the highest level in more than 5 months. It has soared by more than 5.25% from the lowest level this year.
The index has risen because of the strength of the American economy. Recent data shows that countries like China and Germany are struggling. At the same time, the Fed has hiked rates to the highest level in more than two decades.
As I wrote here, the resurgent US dollar has pushed yields on basic things like money market funds and CDs to over 5%. Therefore, investors are moving from crypto assets like Litecoin to those assets.
Litecoin price forecast
The daily chart shows that the LTC price has been in a downward trend in the past few weeks. This sell-off accelerated after the LTC halving momentum waned. It has moved below all moving averages and is now forming a bearish pennant pattern. All these patterns are usually bearish.
Therefore, Litecoin price will likely have a bearish breakout as sellers target the next support level at $55.