Key Week for Bitcoin and the Dollar Index

Bitcoin

(BTC),
the
leading
cryptocurrency
by
market
value,
fell
over
10%
in
the
seven
days
to
Sept.
1,
reversing
the
preceding
week’s
price
bounce
as
the
decline
in
the
dollar
index
stalled.

The
slew
of
U.S.
economic
data
due
this
week
will
likely
determine
whether
the
dollar
resumes
the
two-month
weakening
trend,
offering
a
tailwind
for
risk
assets,
including
cryptocurrencies.

The
economic
releases
start
Tuesday
with
the
Institute
of
Supply
Management’s
(ISM)
manufacturing
purchasing
managers’
index
(PMI)
for
August.
According
to
ForexLive,
the
consensus
is
that
the
index
will
rise
to
47.5
from
July’s
46.8,
which
signaled
the
sharpest
contraction
in
factory
activity
since
November
2023.

A
weak
reading
will
strengthen
the
case
for
the
Federal
Reserve
to
cut
interest
rates,
sending
the
dollar
lower
and
boosting
demand
for
riskier
assets.
Interest-rate
markets
are
already
pricing
a
70%
chance
of
a
25
basis
point
cut
and
a
30%
chance
of
a
50
basis
point
cut
in
September,
according
to
CME’s
FedWatch
tool.

“Rate
cuts
are
good
for
BTC,
as
it
is
particularly
sensitive
to
monetary
liquidity
conditions
(seen
as
a
risk
asset,
with
no
cash
flow
or
margins
to
get
hit
in
a
slowdown),”
Noelle
Acheson,
author
of
the
popular

Crypto
Is
Macro
Now
newsletter,
said
in
last
week’s
edition.

“A
weaker
U.S.
dollar
is
good
for
BTC,
as
it
tends
to
boost
monetary
liquidity
by
lowering
the
cost
of
capital.
Plus,
expectations
of
continued
dollar
weakness
highlight
the
utility
of
a
dollar
hedge
and
should
boost
spending
power
(and
hedge
interest)
in
other
jurisdictions.
And,
the
dollar
is
the
denominator
of
the
most-quoted
pair
(BTC/USD),”
Acheson
wrote.

That
said,
July’s
weaker-than-expected
ISM
PMI,
released
Aug.
1,
triggered
recession
fears,
weighing
on
risk
assets
even
as
the
dollar
dropped.
BTC
fell
3.7%
to
$62,300
that
day.
Traders,
therefore,
should
watch
out
for
a
“growth
scare”
should
the
PMI
come
in
worse
than
expected.

“This
is
a
key
metric
as
risk
assets
moved
sharply
lower
the
last
time,”
Markus
Thielen,
founder
of
10x
Research,
said
in
a
weekly
preview
note.

ForexLive
analyst
Giuseppe
Dellamotta’s
weekly
preview
note
echoed
the
sentiment.
“The
main
culprit
might
have
been
the
employment
sub-index
falling
to
a
new
4-year
low
ahead
of
the
NFP
report,
which
eventually
triggered
another
wave
of
selling
[in
risk
assets]
as
it
came
out
weaker
than
expected
across
the
board,”
Dellamotta
said,
referring
to
the
U.S.
nonfarm
payrolls
release.

Later
this
week,
the
focus
will
shift
to
the
JOLTS
job
opening
data,
due
Wednesday,
ISM
services
PMI,
ADP
and
weekly
jobless
claims
on
Thursday,
and
the
main
event
of
the
week
–
the
August
nonfarm
payrolls
(NFP)
report
on
Friday.

“If
the
consensus
is
right
about
Friday’s
jobs
report
(165,000
job
gains
and
a
drop
in
the
unemployment
rate
back
to
4.2%),
then
market
pricing
will
firm
up
just
a
25bp
cut
as
the
start
to
the
Fed
easing
cycle
on
18
September,”
analysts
at
ING
said
in
Monday’s
morning
note.

However,
according
to
ING’s
U.S.
economists,
the
payrolls
could
show
additions
of
just
125,000
and
an
uptick
in
the
jobless
rate
to
4.4%,
resulting
in
a
continued
drop
in
the
U.S.
dollar.

From
a
technical
analysis
view
point,
BTC
is
on
the
defensive
ahead
of
the
key
data
releases,
with
indicators
like
the

MACD
histogram
pointing
to
a
strengthening
of
the
downside
momentum.

“Technical
indicators
suggest
that
the
bearish
momentum
may
persist,”
Valentin
Fournier,
an
analyst
at
research
firm

BRN,
said
in
an
email.
“The
MACD
is
showing
increasingly
negative
momentum,
while
the
RSI
is
at
a
neutral
level.
The
lower
band
of
the
Bollinger
Bands
remains
around
$56,000,
indicating
potential
further
declines
toward
this
level.”