Ethereum cut a small portion of its recent gains on profit this Monday.
The The ETH / USD exchange rate fell by more than 6 percent to $ 595.22 before the opening bubble in New York. The pair’s downward movement appeared a day after it recorded a new year-to-date high of $ 676.94. While it managed to hold its gains during the Asian session, traders started to secure their gains during European hours as demand returned to the US dollar amid anti-risk sentiment.
Ethereum typically tracks price movements in the Bitcoin market, which in turn is traded inversely against the US dollar. So it looks like the second largest cryptocurrency plummeted due to its positive correlation with Bitcoin, which also dropped 5.30 percent on Monday.
Ethereum corrects from its technically overbought zones on BB. Source: ETHUSD on TradingView.com
The Ethereum correction also appeared after it closed above the top band of its Bollinger Band cartridge. Traders typically sell the asset when it closes above the band. Meanwhile, if the price falls below the lower band, they tend to buy it back cheaply. The center of the band is the simple 20-period moving average that acts as a bias indicator.
Ethereum retreated to the bottom after top band testing, targeting the 20-SMA as a support. If the cryptocurrency sinks below the wave, it could fall to the bottom band.
Ethereum not bearish yet
Switching to Ethereum’s weekly chart shows that the latest dip is part of a broader upward movement.
The cryptocurrency is trading upwards in what appears to be a Rising Wedge. It pulls back to the bottom after testing the structure’s top trendline. Likewise, a retest of the lower trendline tends to make the price move back towards the upper trendline. Ethereum expects to stay within the Wedge pattern.
Ethereum weekly outlook. Source: ETHUSD on TradingView.com
From here, the ETH / USD exchange rate can try to pull back towards the Bollinger Band’s 20-WMA (nearly $ 454), which coincides with the Wedge’s lower trend line. After that, it could either try an early breakdown of the Wedge to test the bottom band at $ 258.64, or it could rebound to retest the Wedge’s top trendline, this time at higher than previous levels.
A continuation of the upward trend could see the Ethereum price hit at least $ 980 before finally breaking out of the wedge and falling to levels as low as the maximum wedge height (which is $ 156).