Source: PaxForex Premium Analytics Portal, Fundamental Insight
Ethereum bulls may get prematurely excited over the ETH/USD breakout above its bearish price channel as underlying fundamentals and technicals continue to flash bearish signals. While the reversal may extend moderately, traders should consider the possibility of a false breakout. The preceding collapse exceeded 55%+, and a short-covering rally was expected. It can retrace 50% while maintaining a bearish chart pattern, which would take ETH/USD to 3,235. Price action stalled after moving to 3,229 yesterday, as bears gear up for more selling, extending the sell-off.
Fundamental issues continue to plague Ethereum, with more dApp projects showing concern over the $30+ transaction fee. Transaction speed and scalability remain issues the Ethereum blockchain struggles with, while competing third-generation projects deliver a superior overall product. While they started on the Ethereum blockchain, they will move away from the Ethereum blockchain and implement their proprietary solution as they mature, raise capital, and prove real-world applications.
Futures data confirms bears remain in control of Ethereum, and retail traders are sidelined without risk appetite to open leveraged long positions. On-chain metrics show the lack of bullishness, with daily transaction volume hovering at $6.2 billion, reflecting a similar 55% drop in price action. The one-year low is $5.6 billion, and while this data excludes layer-2 solutions, it confirms contraction in the primary layer, plus a decrease of daily users. Traders should prepare for the ETH/USD to challenge its horizontal support area once again, from where further analysis will show if price action will follow through with a breakdown below 2,000 or if bulls can prevent more bleeding.
The forecast for the ETH/USD remains bearish following its bounce off its horizontal support area. With the Kijun-sen descending, and the Tenkan-sen flat, traders should monitor both for a potential bearish crossover, resulting in more selling pressure. The descending Ichimoku Kinko Hyo Cloud maintains bearish momentum, and the CCI moved into extreme overbought territory. A breakdown below 100 could trigger another wave of selling, and traders should remain cautious. Can bears extend the sell-off in the ETH/USD, which remains in a bear market, and pressure price action into challenging its horizontal support area again? 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 3,000 to 3,330 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 3,100
- Take Profit Zone: 2,155 – 2,485
- Stop Loss Level: 3,410
Should price action for the ETH/USD breakout above 3,330, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 3,410
- Take Profit Zone: 3,890 – 4,135
- Stop Loss Level: 3,330
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