Bitcoin (BTC) headed for multi-day highs after the Aug. 23 Wall Street open as United States economic data tripped up the dollar.
Dollar suffers as data shows incomes "squeezed"
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.”
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.
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.”
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.
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.
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.
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