Bitcoin has been trying to form an inverse head and shoulders pattern for quite some time but is still struggling at this right shoulder. If support holds, price could test the neckline at the $10,000 major psychological level next.
The 100 SMA is still below the longer-term 200 SMA so the path of least resistance is to the downside. This suggests that the selloff is more likely to resume than to reverse. In addition, the 100 SMA is holding as dynamic resistance and a bounce could hit a ceiling at the 200 SMA.
RSI is turning lower to signal that sellers are regaining the upper hand. Similarly stochastic is pointing down to show that bearish pressure is in play. In that case, a break below the $8,000 area could still lead to a move to the next floor around $6,500.
On the other hand, a strong bounce off this area of interest could lead to a test of the neckline, and a break higher could lead to an uptrend of the same height as the formation. This might be enough to take bitcoin to the $13,500 level or even the highs close to $20,000.
Note that some analysts are predicting that bitcoin could reach $25,000 by the end of the year. The second quarter has typically been positive for the cryptocurrency and a lot could still go on with one month left.
For now, though, investors are still holding out for more positive updates in the industry. Profit-taking at the $10,000 level has sparked a prolonged drop and it would take a strong catalyst to revive the rally.
Meanwhile, the dollar has drawn support from strong fundamentals and rate hike expectations. Some policymakers have expressed concern about the slack in the labor market, however, so these thoughts could be emphasized on the release of the FOMC minutes this week. Any doubts that two more hikes are in order could weigh on the US currency.