As Ethereum’s native token Ether is beginning to show signs of bottoming, ETH price has risen from a critical support zone. Notably, ETH is now above the key support level at the 200-week simple movement average (SMA), near $1,196.
The 200-week SMA support is psychological in nature, partly because it was able to serve as the bottom levels of previous Bitcoin bear markets.
Independent market analyst, “Bluntz”, argues that Ether’s curvy level could also be used as a strong price floor to encourage accumulation.
“BTC has dropped 4x to the 200wma since 2014. It’s probably safe to assume that it is a strong level. We can certainly wick below it but there are still six days in the week.”
Weekly chart of the ETH/USD exchange rate. Source: TradingView
Currently, the ETH/USD ratio is just 75% lower than its record high of $4,950, seven months ago.
This huge correction has made Ethereum token an “oversold”, per its below-30 relative strength readings (RSI), another technical indicator indicating that ETH is a buy.
Ether was last oversold in November 2018. This occurred before the end of a 12-month-long bear cycle that saw ETH lose 94% of its value.
Unfortunately, 2022 will not see the same bearish exhaustion as in 2022 because Ether is still facing serious macro headwinds.
ETH’s technical bull signs are not sufficient
The backdrop to Ether’s efforts to find a concrete bottom is a selling frenzy across traditional and crypto financial markets.
The core of the 75% price correction is a hawkish Federal Reserve, with its potential to raise interest rates by 175 base points by September’s close according to interest rate swaps that are linked to FOMC policy outcome dates.
Changes in Fed’s Interest-rate Targets Source: Bloomberg/CME
This means that riskier assets will suffer when lending costs rise. Even though Ether is above a “strong” support level, this could impact Ether’s recovery prospects.
The Ethereum merge would take between 1-2 months and be completed between August-October. It will be backed by traders. It doesn’t really matter if the Fed becomes more aggressive. But if it doesn’t, that’s your catalyst.
— Alex Kruger (@krugermacro) June 2, 2022
Price targets for Ether
ETH’s price was testing the 0.786 Fib Line (near $1057) as an interim support. This price level is part of the Fibonacci Retracement graph. It shows the swing high and low at $1,323, $82, respectively.
Weekly price chart for ETH/USD with Fibonacci support/resistance levels. Source: TradingView
An ETH price drop of 94% in 2018 would bring it to the 0.236 Fib line at $375. This is down 70% since June 1.
Related: This important metric for Ethereum price shows that ETH traders don’t appear as bearish.
If Ether does indeed reach its 200-week SMA then its path of least resistance is likely to be towards $2,000. If Ether does indeed bottom near its 200-week SMA, it appears that the path of least resistance is toward $2,000.
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