[A critical week for Bitcoin and the U.S. dollar index]
U.S. manufacturing data on Tuesday may show continued contraction, hinting at a weaker dollar and possible strength in Bitcoin (BTC). BTC is down more than 10% in the past seven days, giving up the previous week’s gains. Upcoming U.S. economic data will impact the direction of the U.S. dollar and, in turn, risk assets including cryptocurrencies.
The ISM's August manufacturing PMI is expected to rise to 47.5 from 46.8 in July. If the data is weak, the Federal Reserve may cut interest rates, pushing the dollar lower and boosting risk assets. Markets are pricing in a 70% chance of a 25 basis point rate cut in September and a 30% chance of a 50 basis point cut, according to CME data.
Rate cuts and dollar weakness are generally positive for BTC, as BTC is sensitive to changes in currency liquidity and capital costs. In early July, poor PMI data had triggered recession fears, and BTC fell 3.7% that day.
Highlighted data this week include Wednesday's JOLTS job openings data, Thursday's ISM Services PMI and Friday's non-farm payrolls report. ING forecast that nonfarm payrolls data could show just 125,000 jobs added, with the unemployment rate rising to 4.4%, further weakening the dollar.
Technically, BTC is on the defensive, with the MACD indicator showing increasing downside momentum, the RSI at neutral levels, and the price could fall further to $56,000 near the lower Bollinger Bands.
