Bitcoin (BTC) headed for multi-day highs after the Aug. 23 Wall Street open as United States economic data tripped up the dollar.
BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView
Dollar suffers as data shows incomes “squeezed”
Data from Cointelegraph Markets Pro and TradingView followed BTC/USD as it eyed $21,700 at the time of writing, near resistance in place since last week’s near-12% drop.
The pair gained momentum as the U.S. Purchasing Managers Index (PMI) prints for August showed a drop versus the month prior, hitting the lowest levels since May 2020 at the height of the first round of COVID-19 lockdowns.
“The S&P Global Flash US Services Business Activity Index posted at 44.1 in August, down from 47.3 in July, to indicate a further reduction in overall services activity,” a press release from curator S&P Global stated.
“The decrease in business activity was sharp overall and the fastest since May 2020. Service providers noted that hikes in interest rates and inflation dampened customer spending as disposable incomes were squeezed.”
Yikes! The US Composite #PMI just fell to 45.0! That is near #recession levels. The Services PMI is down to 44.1, where an increase to 49.8 was expected. pic.twitter.com/GwSKfnOXS3
— jeroen blokland (@jsblokland) August 23, 2022
The implied slowdown in demand caused an immediate knock-on effect for dollar strength, with the U.S. dollar index (DXY) falling from new twenty-year highs.
U.S. dollar index (DXY) 1-hour candle chart. Source: TradingView
The inversely-correlated DXY had conversely gained rapidly in the days prior, this coinciding with U.S. stocks facing resistance and Bitcoin seeing multiple trips below $21,000.
“The Aug. PMI Composite Index fell to 45 from 47.7 in July. It was expected to rise to 49.2,” gold proponent Peter Schiff reacted.
“The Services PMI tanked to 44.1, the lowest since May 2020 and Mfg. sank to 51.3, the lowest since July 2020. The U.S. PMI is weaker than any PMI in Europe or Asia.”S&P Global Flash US PMI Composite Output Index chart. Source: S&P Global/ Twitter
The S&P 500 and Nasdaq Composite Index were up a modest 0.25% and 0.45% at the time of writing, respectively
BTC bulls face $21,700 challenge
Analyzing what could be next for risk assets, commentators hoped for a rally in stocks on the back of a declining dollar.
Related: Bitcoin addresses in loss hit 1-month high as BTC price retests $21K
Popular Twitter account Game of Trades called the S&P 500 “extremely oversold in the short-term” based on relative strength index (RSI) data.
“Watch out for all the potential bullish RSI divergences it has picked up along the way,” part of a fresh update read.
On Bitcoin, optimism from some likewise focused on a return to the range highs since June, with a “clean break” above $25,000 being the deal breaker for $28,000 or more to appear.
#Bitcoin / $BTC
Are you ready? pic.twitter.com/dZ0NI1JleS
— K A L E O (@CryptoKaleo) August 23, 2022
For on-chain analytics resource Material Indicators, meanwhile, it was $21,700 that needed to be cracked as a first step.
“If we don’t see more BTC bids coming in above $21k, the downside illiquidity (dark areas) will be exploited,” it warned alongside a chart of support and resistance levels on the Binance order book.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.