Bitcoin could still pull back to the broken short-term trend line for a quick retest and formation of a reversal pattern. Applying the Fib retracement tool on the breakout move shows that the 61.8% level lines up with the broken resistance that might now hold as support.
If so, an inverse head and shoulders pattern could be formed, with the neckline around the $7000 level. This would be around $500 tall so the resulting rally could be of at least the same height.
However, the 100 SMA is below the longer-term 200 SMA to signal that the path of least resistance is to the downside. This suggests that the selloff is more likely to continue than to reverse. Also, the 100 SMA is holding as a dynamic inflection point at the moment and the 200 SMA could also keep gains in check.
Stochastic is making its way down to show that sellers have the upper hand. In that case, price could reach back down to the lows at $6500 or even create new ones to reflect continuous selling pressure.
Bitcoin has been off to a shaky start as investors grapple with the repercussions of the cryptocurrency ad bans on Google and Twitter. There have also been reports of governments, such as those in Chile and Kazakhstan, taking an adverse stance against cryptocurrrencies.
In contrast, the dollar is supported by safe-haven flows even as geopolitical risks returned. China recently announced higher tariffs on a number of US goods as a pre-emptive move ahead of the White House announcement on Chinese products subject to higher duties.
The US NFP report is also lined up for the week and strong readings could stoke dollar gains further. After all, the Fed already hiked in March and signaled room for more tightening for the rest of the year. On the other hand, downbeat data could weigh on these tightening forecasts and the dollar’s gains.