A rebound in the US dollar has brought wrath over the Bitcoin market in the last couple of trading sessions.
The BTC/USD exchange rate briefly fell below $10,000 over the weekend, a level that behaved as a bias-defining pivot for traders. Moving below it put the pair at risk of continuing its downtrend. Meanwhile, maintaining it as a price floor left some possibilities of an upside retracement.
Stronger US Dollar
Bitcoin hit $9,813 on Saturday, its lowest price in the last two months. At first, it appeared like traders closing their positions to secure short-term gains. But a bigger picture showed Bitcoin under the influence of a macro bearish sentiment across gold, stocks, and whatnot.
All the bullish markets fell late last week on stronger dollar sentiment. The US Dollar Index, which measures the greenback against a basket of foreign currencies, rose by 1.63 percent from its two-year low nadir at 91.74.
So it appears, investors decided to migrate a portion of their risk-on capital into cash in anticipation of a US economic recovery. Optimistic jobs and manufacturing reports showed the sentiment was recovering following the aftermath of the coronavirus-induced lockdown.
That further reflected in the fading hopes about the second US stimulus relief package. Ben Koltun, a senior research analyst at Beacon Policy Advisors in Washington, told FT:
“In the Cares Act [the March stimulus bill] we got to a deal because there was a crisis mentality on both sides when the market was crashing and the economy was shutting down. The crisis mentality is just not there right now on the Republican side.”
That could further strengthen the bullish bias in the US dollar market this week. Prospects of more money injection into the US market have kept the greenback lower since the first stimulus package.
Bitcoin This Week
Bitcoin rebounded back above the $10,000-mark but stayed below $10,500, a level it had repeatedly failed to break to the upside between February and late July.
Looking ahead, traders can expect the cryptocurrency to trade in the $10,000-10,500 range due to an extended Labor Day weekend. A short-term momentum might follow as the weekly session matures. Given the US dollar’s strong positioning, Bitcoin would keep targeting $10,000 for a breakdown towards $9,600, a popular downside target among bears.
Textbook distribution on Bitcoin, suggesting greater likelihood of more downside.
CME gap fill (~9600) looking probable.
Note: strong move by stock market over next days would invalidate this. pic.twitter.com/7ou61NPE9c
— Charles Edwards (@caprioleio) September 5, 2020
Meanwhile, a successful break above $10,500 could help revive the bullish momentum back towards levels above $11,000.