Source: PaxForex Premium Analytics Portal, Fundamental Insight
Financial markets attempt to hold on to bullishness among conflicting signals for the global economy. The bear market completed its first phase, and a bear market rally has many market participants believing that the June lows across asset classes signaled the beginning of a new bull run. Friday’s blowout US NFP report reassured perma-bulls that their idol, the US Federal Reserve, will raise interest rates and engineer a soft landing. The cryptocurrency market came roaring back following massive sell-offs but faces identical bearish headwinds moving forward, especially once equity markets enter the second phase of this bear market.
Ethereum put together several positive trading sessions after briefly dipping below $1,000. While the 70% rally offered short-term traders an excellent trading opportunity, bulls should remember that price action plunged from close to $5,000. One temporary bullish catalyst for Ethereum is its pending and long-awaited shift from the power-consuming proof-of-work (PoW) consensus model to the proof-of-stake (PoS) alternative. The merger will eliminate Ethereum miners but also lower the carbon footprint of Ethereum by up to 99%, according to some estimates, as unnecessary mining becomes obsolete.
Volatility will increase, and many traders will attempt to capture short-term upside resulting from the retail crowd euphoria who believe they have accomplished another groundbreaking feature. It explains the bullish positioning, which merged with bottom-hunters, and pushed price action into resistance. A few days after the merger, speculative positions could unravel, and this cryptocurrency pair can follow other assets in a race to retest the June lows. A breakdown could result in a cascading race to the next support area, which hugs the $500 level. The global economy continues to slow, and stagflation risks rise, placing long-term downside pressure on risk assets like Ethereum amid an outflow of institutional money.
The forecast for the ETH/USD turned bearish after this cryptocurrency pair accelerated from its horizontal support area into its narrowing Ichimoku Kinko Hyo Cloud, which shows its Senkou Span A drifting higher, and its Senkou Span B moving lower. Confirming the lack of short-term bullishness are the Kijun-sen and the Tenkan-sen, which both trend sideways. Traders should monitor the CCI after it has formed a negative divergence in extreme overbought territory. A sustained breakdown below 100 could trigger more downside, as price action completed a healthy bear market rally. Can bears regain control over the ETH/USD and force this cryptocurrency pair into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the ETH/USD remain inside the or breakdown below the 1,570 to 1,865 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,710
- Take Profit Zone: 995 – 1.080
- Stop Loss Level: 2,010
Should price action for the ETH/USD breakout above 1,865, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 2,010
- Take Profit Zone: 2,330 – 2,420
- Stop Loss Level: 1,865
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.
