- Bitcoin price recovers almost 5% at the start of the week.
- BTC prices could fool traders as the recovery happened with the US markets closed.
- US dollar strength kicks back in and weighs on BTC price, which could drop to $16,020.
Bitcoin price made an excellent recovery move on Monday, with a shy 5% in the books and breaking above the lows of last weekend. This is a tricky setup, as traders might be fooled by the idea that this jump in price action is the start of the rally. The week started with the 4th of July US holiday, which saw the US dollar unmoved and provided cryptocurrencies some room to move in as their main headwind was out of office. During early European hours on Tuesday, USD strength has kicked back into gear after a day at the beach and weighs on the recovery in cryptocurrencies.
BTC price is set to drop 20% if the US dollar advances
Bitcoin price got underpinned over the weekend with the $19,036 level acting as a supportive measure, making sure that bulls had an anchor to hold on to and start buying at. That resulted in a broad move on Monday that netted near 5% profit for BTC bulls. With the US on holiday on Monday, trading on Tuesday morning saw the US dollar returning to life after a long weekend and started trading where it left off on Friday, coming in stronger.
BTC price could see its gains evaporate on the back of that dollar strength, as cash gets reallocated from cryptocurrencies into the safer USD to withstand the current woes and inflation turmoils in global markets. Expect to see a return back to $19,036, with a squeeze on the bulls to cut their losses. That would trigger a spiral selloff, with Bitcoin price at risk of dropping towards $16,020 and losing roughly 20% in the process.
BTC/USD daily chart
With the US dollar move coming in this early, a pullback could unfold once the US trading session takes over. That would mean that the USD pairs give back its gains, and cryptocurrencies get a free lunch by getting a lift in the price action on the back of that dollar pullback. Translated into BTC price action, that could mean a test against $21,969 and a possible pop higher with prospects of trading towards $23,878.