Source: PaxForex Premium Analytics Portal, Fundamental Insight

After cryptocurrencies plunged by a broader margin than other assets, some traders may bottom fish the Top 10 cryptocurrencies. The risk remains to the downside as the global risk-off sentiment that accelerated in September is set to continue, and the cryptocurrency market ranks among the most vulnerable ones. Bitcoin has led the march lower, and traders should expect a sustained breakdown below 40,000 after price action dipped below it earlier today before a massive recovery spiked it over 10% from its intra-day low. Ethereum may witness a rise in selling pressure, driven by its bearish head-and-shoulder chart pattern. 

Besides a sell-off in other sectors, which often leads to traders dumping non-essential assets like cryptocurrencies to meet margin calls elsewhere, traders should monitor the fallout from top Chinese property developer Evergrande, the world’s most indebted real estate developer. It vowed to meet its interest payment tomorrow but is likely to crumble, and some analysts point out that the real estate developer is already in technical default with banks. Many Chinese investors piled into cryptocurrencies over the past two years, aiding a massive rally to all-time highs in the sector. A ripple effect from an Evergrande contagion event may force selling in cryptocurrencies, with Ethereum vulnerable to plunge towards the 2,000 level.

The forecast for the ETH/USD remains bearish despite its massive two-phase correction to date. After price action broke down below the ascending trendline of its head-and-shoulders chart pattern, selling pressures intensified. The Tenkan-sen and the Kijun-sen continue to descend, while the Ichimoku Kinko Hyo cloud, which forced a pause in the sell-off, trends higher. Traders should expect a rise in volatility and must remain patient, as this cryptocurrency pair is expected to attempt another breakdown. The CCI dropped into extreme oversold territory, and traders should wait for a breakout and reversal before selling the ETH/USD. Can bears maintain their control over price action and force the ETH/USD 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 2,750 to 2,915 zone, PaxForex recommends the following trade set-up:

• Timeframe: D1           
• Recommendation: Short Position
• Entry Level: Short Position @ 2,840
• Take Profit Zone: 1,715 – 1,975
• Stop Loss Level: 3,160

Should price action for the ETH/USD breakout above 2,915, PaxForex recommends the following trade set-up:

• Timeframe: D1           
• Recommendation: Long Position
• Entry Level: Long Position @ 3,160
• Take Profit Zone: 3,570 – 3,670
• Stop Loss Level: 2,915

Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.