ETHXBT has been trending lower and is now moving inside a descending channel on its 1-hour chart. Price just bounced off support around 0.01250 and is now retracing to the top of the channel around 0.01350.
Using the Fib tool on the latest swing high and low shows that the 61.8% level lines up with the channel resistance at 0.01380 and the 200 SMA dynamic resistance. This also coincides with a broken support level, which might now hold as resistance. If so, ETHXBT could resume its drop to the channel support around 0.01200 or at least until the swing low.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Also, the gap between the moving averages is widening, which suggests that bearish pressure is getting stronger. In fact, the 100 SMA even appears to be holding as dynamic resistance for now.
Stochastic is heading south so ETHXBT could follow suit, but the oscillator is already nearing the oversold region so a return in buying momentum could be due. RSI is also turning down to indicate that sellers are in control of price action and has quite a long way to go before reaching oversold levels.
Bitcoin could continue to enjoy strong demand from Chinese investors, particularly since the government is acting to weaken the yuan once more. This means that mainland investors are seeing eroding gains on their holdings so they’d have to hedge those yuan-denominated positions with other assets such as bitcoin. Keep in mind that the cryptocurrency has been the main beneficiary of yuan outflows in the past few months, which suggests that bitcoin could stay afloat.
Meanwhile, ethereum has been the less-desired cryptocurrency in this match since it has suffered severe attacks in the past. These have forced developers to implement a hard fork but the move wasn’t enough to secure the network from more hacks. Bears could simply be waiting for an opportunity to short ETHXBT at better prices after the correction is completed.
On the longer-term ETHXBT chart, it can be seen that the pair already broke below a key support zone, signaling a surge in bearish momentum. Of course pullbacks are expected once traders book profits off the short positions, possibly encouraging more sellers to hop in the downtrend and put stronger downside pressure on ethereum.
The moving averages had a downward crossover on the daily time frame but oscillators are turning higher to show that corrections are in play for the time being. A larger pullback from this strong drop could last until the 0.01600 level, which is a retracement level on the longer-term charts. A break past that area could signal that the breakdown was a fakeout and that gains are in the cards.