Bitcoin price has remained in a tight range this week. It has failed to move above the key resistance level at $82,550, which it tested first earlier this month. This article explores whether the soaring US dollar and the forming rising wedge pattern will derail the BTC rally.
US Dollar Index is Soaring and Has Formed an Inverted H&S
A major risk that Bitcoin price faces today is the rising US dollar index, which has jumped to $99.15, its highest point since April 27. A closer look shows that the index has formed a double-bottom pattern at $97.63 and a neckline at $99.3, its highest point on April 27. A double-bottom is one of the riskiest patterns in technical analysis.
The index has also formed a giant inverted head-and-shoulders pattern. Its head is at $95.55, its lowest point this year, while the two shoulders are around $97.63. This pattern normally leads to a strong bullish breakout.
Therefore, there is a likelihood that it will surge in the coming days, potentially to the key resistance level at $100.50, its highest point this year. A move above that level will point to more gains, potentially to $105.
Fundamentals support more gains. For example, data released this month showed that US consumer and producer inflation continued rising in April. The headline Consumer Price Index (CPI) jumped to 3.8%, while the Producer Price Index (PPI) soared to 6%.
These numbers mean that the Federal Reserve will have a hard time cutting interest rates this year. Indeed, a Polymarket poll estimates that the bank will leave rates unchanged this year, making the US dollar more attractive. This explains why US Government bond yields have continued to rise, with the five-year hitting 5% for the first time in years.
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Bitcoin Price Technical Analysis Points to a Reversal
Technicals also point to a Bitcoin price reversal, which likely explains why spot Bitcoin ETF inflows have stalled recently. The daily chart reveals that the coin has slowly formed a rising wedge pattern whose two lines are about to converge. Wedges are some of the most common bearish reversal patterns in technical analysis.
This wedge has converged close to the 38.2% Fibonacci Retracement level, where reversals tend to happen. The coin has also struggled to move above the 200-day Exponential Moving Average (EMA), a sign that bulls are getting skeptical about the rally.
Therefore, there is a risk that the BTC price will drop sharply in the coming days. If this happens, the next key target to watch will be at $70,000. Losing this level will raise the possibility of Bitcoin retesting the key support at $60,000.
Bitcoin has some bearish fundamentals, including the ongoing flows in the ETF market. Spot BTC ETFs have shed over $709 million in assets this week, the first time since March this year. That is a sign that investors are booking profits this year. More data shows that Bitcoin’s futures open interest have continued falling in the past few days.
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