Bitcoin (BTC) is trading at $108,993 today, July 4, after dropping by 0.74% in the last 24 hours. Despite the recent decline, BTC might be headed for a rally after a decline in the US dollar index (DXY) by 11% this year.
The value of the dollar has been dropping due to concerns about the US Federal Reserve leaving interest rates unchanged because of a strong jobs market. Because of this drop, traders are looking forward to how the Bitcoin price may perform.
US Dollar Index Drops Below 97 to 3-Year Low
The US dollar index is off to a rough start in July after dropping below 97, which is its lowest level in three years, and this is because of several concerns that have seen traders abandon the dollar for stronger currencies and assets. One of these concerns came from the US jobs data report released yesterday.
As reported, the US jobs data was strong in June, and usually, it is the market’s expectation that such an increase supports the strength of the dollar. However, this has not happened this time around because of crushed hopes that the Fed will reduce interest rates.
Bitcoin price also shook after the report because many traders were expecting the Fed to reduce rates at the upcoming FOMC meeting. However, with the higher chance that the Fed will maintain its tight monetary policy, the dollar is most likely heading for another move lower that may bode well for BTC price if history repeats.
Moreover, the passing of President Donald Trump’s one big beautiful bill has also created concerns about an increase in the US national debt, and this is having a negative effect on the strength of the US dollar while increasing optimism towards Bitcoin.
Bitcoin Price Targets Recovery on Weakening Dollar
It is important that while Bitcoin price is currently showing the same weakness as the dollar index, it has a high chance of recovery in the long term. This is because Bitcoin is inversely correlated with the dollar, meaning that when the latter rises, BTC price drops, and when the DXY falls, BTC tends to rise.
These gains are more likely to happen due to Bitcoin creating an inverse head and shoulders pattern that shows the trend is about to change from a bearish one to a bullish one.
The height of this pattern to the support level of $108,272 indicates that if BTC price continues to close above this level, there is a chance that it may rise by 10% to above $119,000. Going by this bullish Bitcoin price prediction, it is possible that a Bitcoin all-time high forms soon, with the rally coming from the dropping US dollar index.
At the same time, the RSI at 58 is supporting the bullish thesis outlined above, and as long as buyers are more than sellers, the BTC price might overcome the $108,272 resistance.
However, even with the bullish outlook seen from the bullish pattern and the RSI, it is important to note that the previous all-time high of $111,970 will act as a strong resistance. Whenever BTC attempts to cross this level, it may face a setback as some traders look to scoop profits.
In summary, Bitcoin price might be heading for more gains after a decline in the US dollar index to the lowest level in three years created optimism about the demand for risk assets. If the inverse head and shoulders pattern on the daily chart plays out, it is possible that BTC will increase by 10% to above $119,000.