We Are in an Important Week for Bitcoin and the Dollar Index

Bitcoin (BTC), the leading cryptocurrency by market value, fell more than 10 percent in the seven days to September 1, reversing the previous week’s price jump as the dollar index stalled its decline.

Economic data due from the U.S. this week will determine whether the dollar extends its two-month weakening trend and offer support for risk assets including cryptocurrencies.

Economic data begins tomorrow with the Institute for Supply Management’s (ISM) August manufacturing purchasing managers’ index (PMI). The consensus is for the index to rise to 47.5 from 46.8 in July, marking the sharpest contraction in factory activity since November 2023, according to ForexLive.

Weak data will increase the likelihood that the Federal Reserve will cut interest rates, weakening the dollar and thus increasing demand for risk assets. Interest rate markets already see a 70% chance of a 25 basis point cut in September and a 30% chance of a 50 basis point cut, according to the CME’s FedWatch tool.

Later in the week, all eyes will be on the JOLTS labor force data on Wednesday, the ISM services PMI, ADP and weekly jobless claims on Thursday and the August nonfarm payrolls (NFP) report on Friday.

However, ING economists report that they expect only 125,000 more payrolls and a 4.4% increase in unemployment, which could lead to further declines in the US dollar.

From a technical analysis perspective, BTC is trading fairly stable ahead of the data releases, with indicators such as the MACD histogram indicating that downward momentum is strengthening.