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Bitcoin will likely continue pulling back as investors buy the dip. If this happens, it will likely retest the lower side of the flag pattern.
Bullish view
- Buy the BTC/USD pair and set a take-profit at 21,200.
- Add a stop-loss at 19,500.
- Timeline: 1-2 days.
Bearish view
- Set a sell-stop at 19,500 and a take-profit at 18,500.
- Add a stop-loss at 21,000.
The BTC/USD price dropped below the important support at 20,000 as the US dollar index surged to the highest level in over 20 years. It then pared back some of those losses and is trading at 20,200, which was slightly above this week’s low of 19,500.
US dollar index rallies
The BTC/USD price continued its downward trend and hit its lowest level since July 13 of this year. This price was about 22% below the highest level this month.
This decline happened as the US dollar index surged to the highest level in over 20 years following the extremely hawkish statement by Fed officials. In a statement last week, Jerome Powell said that the bank will continue hiking interest rates in the coming months.
The Fed has already hiked interest rates by 225 basis points this year and analysts expect that the bank will hike by either 0.75% or 0.50% in the coming meeting in September.
Bitcoin’s retreat coincided with that of American shares. The Dow Jones and the S&P 500 indices dropped slightly on Monday after they fell by more than 3% on Friday.
The next key catalyst for the BTC/USD pair will be the upcoming US consumer confidence that will come out on Tuesday. This is an important number because consumer spending is the biggest part of the American economy.
Economists expect the data to show that confidence rose slightly in August as consumer and producer inflation eased. Data published this month showed that the headline CPI dropped to 8.7% in July. With gasoline prices easing, there is a likelihood that inflation eased in August too.
The US will also publish the latest house price index (HPI) which is expected to show that prices remained at an elevated level.
BTC/USD forecast
The four-hour chart shows that the BTC/USD pair has been in a strong bearish trend after it peaked at over 25,000 this month. As it dropped, the pair formed a bearish flag pattern that is shown in red. It moved below the bearish flag pattern and crossed the important support at 20,722, which was the lowest level in July.
The pair moved below the 25-day and 50-day moving averages and the standard pivot point. Therefore, the pair will likely continue pulling back as investors buy the dip. If this happens, it will likely retest the lower side of the flag pattern.
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