Written by Hazel J. Greene, Senior Analyst

The Bitcoin and cryptocurrency market experienced significant price gains last week, driven by positive developments in the Ripple lawsuit and declining US consumer and producer prices. Altcoins such as Solana, Cardano, and Polygon witnessed double-digit gains after Ripple’s favorable court ruling. Despite reaching a new yearly high, Bitcoin failed to sustain its bullish breakout. As the market enters a new week, all eyes are on the US Dollar Index (DXY) and its potential impact on Bitcoin and the cryptocurrency market.

The US dollar index holds a crucial position this week as it teeters at a crossroads. For the first time since April 2022, the DXY is below 100, with analysts predicting a potential deep fall towards 90. Historically, such a decline is seen as positive for risk assets like Bitcoin and cryptocurrencies due to their inverse correlation with the US dollar.

Nevertheless, ING currency analyst Francesco Pesole suggests that the US dollar may find support ahead of the Federal Reserve’s rate decision on July 26. Although core inflation is down, Pesole highlights the tight labor market and other resilient economic indicators that could slow down the dollar’s decline. He anticipates a potential rebound in the DXY as investors become more cautious leading up to the Fed’s decision.

Several crucial data points scheduled for release this week will provide insights into the US economy’s health and its impact on the DXY and the cryptocurrency market. The final US retail sales figures for June, to be published by the US Census Bureau on Tuesday, will indicate private households’ consumption sentiment. A positive outcome could further fuel the correction in the DXY.

The preliminary estimates of US building permits for June, also to be released on Tuesday, serve as a leading indicator for the housing market’s health. A marginal decline might put additional pressure on the DXY. On Thursday, the manufacturing index from the Philadelphia Fed, considered a leading indicator for the key ISM purchasing managers’ index, will shed light on business outlook for US industrial companies.

Additionally, with earnings season commencing, reports from major banks, Tesla, Netflix, and TSM will reveal the performance of big tech companies. The S&P 500 is expected to post its third consecutive quarter of earnings decline in 2Q2023, according to chief economist and strategist Christophe Barraud.

Investor market behavior will also play a crucial role this week. Analysts have noted that the Bitcoin market currently appears to be “pretty short” on Binance. Spot supply is accumulating above the price, indicating profit-taking on price spikes. However, there are numerous spot bids between $30,000 and $29,500, suggesting a strong support zone.

Glassnode’s analysis provides optimism for a breakout from the current trading range after a month of consolidation. The analysts caution that Bitcoin’s spot CVD needs to hold the uptrend to break above the supply wall at $32,000, indicating the entry of new players willing to push the price higher.

As the US Dollar Index remains in focus, alongside crucial macroeconomic data and market behavior, this week has the potential to impact Bitcoin and the wider cryptocurrency market. Traders and investors will closely monitor key indicators, retail sales, building permits, and manufacturing data to gauge consumer sentiment and the business outlook in the US. Furthermore, Bitcoin’s performance within its trading range will determine whether a breakout is on the horizon. All eyes are on the ever-changing landscape of the USD and its impact on the cryptocurrency market.

Disclaimer: The information provided in this research report is for informational purposes only and should not be interpreted as financial or investment advice. The cryptocurrency market is highly volatile, and readers should conduct thorough research before making any investment decisions.