BTCUSD has formed higher lows and higher highs, creating a rising wedge pattern visible on its 4-hour chart. Price is approaching the peak of the formation so a breakout could be due sooner or later.
A downside break from the small consolidation pattern seems to be taking place, which suggests that a test of the wedge support around $620 could happen. This lines up with the 100 SMA dynamic support. This short-term moving average is above the longer-term 200 SMA, confirming that the path of least resistance is to the upside and that a bounce is likely.
A break of the 100 SMA and wedge support, however, could still find a floor at the 200 SMA dynamic support near $610 but a move below this could signal that a downtrend is in order. The wedge spans $540 to $640 so the resulting breakout move could be of the same height.
Economic data from the US has been weak so far this week so there hasn’t been much fuel for the dollar rally. Today has the CPI numbers on deck and strong upside surprises could reinforce Fed rate hike expectations and dollar strength against bitcoin.
Risk appetite has been shaky in the financial markets as US earnings haven’t been particularly impressive yet. Other event risks for the week include the outcome of the British High Court hearings, the ECB interest rate decision, the BOC policy statement, and Chinese top-tier data.
Chinese GDP, retail sales, industrial production, and fixed asset investment are all expected to post improvements which might shore up risk appetite for the week. If so, BTCUSD could have enough momentum for an upside break if it encourages traders to let go of the safe-haven dollar.
If not, BTCUSD might wait until the next weeks to reestablish direction while waiting for more US reports to give a better indication of when the Fed might hike rates.