ETHUSD (Ethereum) is moving sideways today, just below the January 21 high of 1,679. Cryptocurrencies started the year on a very positive note and appear to have survived the busy week almost unscathed. However, the recent bullish trend seems to be weakening. While the RSI remains comfortably above 50, supporting, on face value, further bullish episodes, the stochastic is sending a different message. It broke between its overbought area and it is edging aggressively lower, potentially setting up for a bearish divergence if ETHUSD makes another higher high soon. Amidst this dichotomy, the aggressive tightening of the Bollinger bands and the convergence of the various simple moving averages (SMAs) are pointing to a sizeable move soon.
Should ETHUSD break below the January 4 upward sloping trendline, the bears could be encouraged to push it ever lower with the first target at the 23.6% Fibonacci retracement level of the April 4, 2022 –June 18, 2022 downtrend of 1,510, just ahead of the 200-day SMA at 1,441. Even lower, the 1,355-1,392 range populated by the 50- and 100-day SMAs could trouble the bears.
On the other hand, the bulls would be content with another higher high, above 1,679. Higher, the September 11 high of 1,790 and the 38.2% Fibonacci retracement at 1,907 could prove to be stronger resistance points. Upon successfully breaking these levels, the path will be clear for the bulls to test 2,000, a level not seen since August 8, 2022.
To sum up, the rally appears to have lost support from technical indicators. As there is increasing evidence for a sizeable move on the cards, a break below 1,580 could prove a catalyst for further correction towards the 1400s area.
