Ethereum recently broke below the neckline of its head and shoulders pattern, confirming the selloff signal. However, it found support around $545 and could be due for a retest of the broken support.
Applying the Fibonacci retracement tool on the latest swing high and low shows that the 61.8% level is closest to the broken support around $700. For now, price seems to be testing the resistance at the 38.2% retracement level at $613.52.
The 100 SMA just crossed below the longer-term 200 SMA to signal that the path of least resistance is to the downside. In other words, the selloff is more likely to continue than to reverse. The moving averages are also close to the broken neckline to add to its strength as resistance.
RSI is pulling out of the oversold level to show that buying pressure is in play, likely sustaining a larger correction. Similarly, stochastic is moving up so ethereum could follow suit and test the higher Fib levels.
Cryptocurrencies have been on the back foot for the most part of the week as headlines focused on regulation in the absence of positive developments.
The US Department of Justice is said to launch a criminal probe into price manipulation of altcoins while the CFTC recently had a press release citing their intention to provide guidance for exchanges seeking to list virtual currencies.
Meanwhile, Spain’s central bank governor and an FOMC official recently had negative remarks on cryptocurrencies, spooking more investors into liquidating their holdings.
The dollar is also on weak footing, though, so there may be a chance for ethereum to regain the upper hand. Geopolitical risk, weaker tightening expectations, and disappointing medium-tier reports are currently keeping a lid on the US currency’s gains.
Moving forward, overall sentiment could continue to push ethereum and the dollar around but it would take a considerably positive update to allow ethereum to resume its rallies.