In the last week, Ethereum has lost more than 20% of its value despite the rapid price increase we saw between July and August. The main reasons behind the correction are the same as always: the lack of inflows into the digital assets markets, the USD rally and the end of the Merge euphoria. But the second biggest cryptocurrency on the market may still have some power to bounce.
Factors that might help Ethereum bounce
There are at least three reasons that might help Ethereum to bounce around the values we see now: the moving averages ribbon, the fact that the asset is above the important 50-day moving average and the fact that it is still moving in the local uptrend.
The high density of moving averages around the price of Ethereum could be considered a sign of an upcoming volatile move that has all the chances of facing upward. For now, Ether is concentrated around the 50-, 21-, 12-, 26- and 55-day moving averages. The last time the ribbons were this close to each other, Ether nosedived from $3,000 to $1,650 in a matter of days.
Ethereum's placement on the chart also matters as the asset is successfully holding above the 50-day moving average, which usually acts as a barrier for assets moving in an up or downtrend. The drop below the support would confirm Ethereum's return to the deep phase of the bear market.
Since the middle of July, Ethereum was moving in the local uptrend and, with a 55% price increase at the end of the month, the asset has entered another local ascending channel, not yet dropping below it despite the 24% retrace from the local top.
At press time, Ethereum is changing hands at $1,653 and moving in the local consolidation channel for the last five days.
DXY to face important resistance
As we have mentioned numerous times before, the rally of the U.S. dollar is one of the main fuels of the selling pressure on the cryptocurrency market as the biggest digital asset investment tools are denominated in USD.
On the weekly chart, DXY is expected to face a local resistance level at around $115, which would be the highest value of the index since 2002, which might be a logical top for this rate hike cycle.
Unfortunately, if the resistance plays out as expected, the accelerate recovery of the cryptocurrency market will start around July 2023. If the U.S. dollar somehow manages to climb to $115 earlier than the summer of 2023, the digital assets market will most likely face a severe downtrend that will put some assets on critical price levels.
As for Bitcoin, the first cryptocurrency is still looking for ground to reach as it fails to bounce after a plunge to the $21,000 price range, and it is now moving at the July 26th level. As the trading volume suggests, traders are not interested in moving their funds toward digital gold, although the situation may change drastically in September, when the Ethereum Merge update does live on the mainnet.