Bitcoin was lower on Tuesday after the U.S. dollar continued a corrective bounce from recent weakness. The U.S. dollar index, which tracks the greenback versus a basket of trade-weighted currencies, was holding above the 93.00 level after falling to 92.20 a week ago.
Lending support to the dollar is the continuing negotiations over a second stimulus package in the United States, with both parties struggling to find bipartisan agreement. This is boosting the dollar after the recent spending and rise in the Federal Reserve balance sheet has spooked investors. Trade talks between the U.S. and China are also lending a more optimistic tone, however, it is very unlikely that China will commit to any deal before the result of the upcoming U.S. election is final.
For Bitcoin, the weakness in the U.S. dollar was a key part of the recent rally through the stubborn $10,000 level and the largest cryptocurrency by market capitalization went on to test the $12,000 mark. Another reason for the rally in BTC was safe haven demand amidst the rise of the Federal Reserve balance sheet, which stoked fears about inflation and saw investors piling into gold and silver.
Tomorrow sees the Federal Reserve’s annual Jackson Hole Symposium. The two-day event is being held virtually this year, but it will still see over 100 delegates discussing economic theory and monetary policy for the years ahead. The event often provides market volatility due to the interviews with Fed officials and finance ministers from around the world. This year’s event will be important because of the economic backdrop and we could see officials try to take the steam out of the market’s inflation expectations, which could see a pullback in gold and Bitcoin.
Bitcoin Technical Outlook
Bitcoin has broken lower from channel support and is hinting at lower prices in the days ahead. The price will attempt the $11,000 level first, but the next big area of support will be around the $10,400 level, which provided the highs of 13th February and 1st June. If BTC can find some support ahead of these levels then another push to $12,000 could be possible.
Bitcoin Daily Chart