Ethereum has been trending lower inside a descending channel visible on its 4-hour chart. Price recently bounced off this resistance, which happened to line up with the 200 SMA and a former support zone.
Now that ethereum appears to be gaining downside traction, it could be poised to test the Fibonacci extension levels from here. Price is already hovering close to the 50% extension at $424 and might be due for a dip to the 61.8% extension near the swing low.
Stronger selling pressure could take it down to the 78.6% extension at $384 or the full extension at $354.40. The 100 SMA is below the longer-term 200 SMA after all, indicating that the path of least resistance is to the downside or that the selloff is more likely to resume than to reverse.
However, RSI is already dipping into oversold territory. It has yet to turn higher to signal a return in buying pressure. Stochastic is also in the oversold region but isn’t showing any signs of pulling up just yet. Still, a bounce could hit a ceiling at the dynamic inflection points at the moving averages.
Cryptocurrencies took hits from remarks by well-known American economists who highlighted how price volatility and regulation could still weigh on the industry. This erased nearly half the gains posted in the first week of July and the second quarter, also dampening investor optimism.
However, the dollar could also be facing tough challenges as trade war troubles have been revived. The US released a list of Chinese products to target with higher tariffs and it wouldn’t be surprising if China retaliates with countermeasures.
With that, demand for US assets could fall as stocks take a hit and businesses price in the uncertainty. This might discourage traders from putting funds in traditional markets and move over to cryptocurrencies like ethereum instead.