Ethereum pared a small portion of its recent gains this Monday on profit-taking sentiment.
The ETH/USD exchange rate fell by more than 6 percent to $595.22 ahead of the New York opening bell. The pair’s downside move appeared a day after it logged a new year-to-date high of $676.94. While it managed to hold its gains during the Asian session, traders started securing their profits during the European hours as demand shifted back to the US dollar amid an anti-risk sentiment.
Ethereum typically tails price moves in the Bitcoin market, which, in turn, trades inversely to the US dollar. So it appears, the second-largest cryptocurrency plunged due to its positive correlation with Bitcoin that too fell by 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 upper band of its Bollinger Band pattern. Traders typically sell-off the asset if it closes above the band. Meanwhile, if the price dips below the lower band, they tend to repurchase it for cheap. The middle of the band is the 20-period simple moving average that acts as a bias indicator.
Ethereum pulled back to the downside after testing the upper band and targeted the 20-SMA as support. If the cryptocurrency slips below the wave, then it may fall towards the lower band.
Ethereum Not Bearish Yet
Switching to Ethereum’s weekly chart shows that its latest dip is a part of a broader upside move.
The cryptocurrency is trading upward in what appears to be a Rising Wedge. It pulls back to the downside after testing the structure’s upper trendline. Similarly, a retest of the lower trendline tends to rebound the price back towards the upper trendline. Ethereum expects to stay inside the Wedge pattern.
Ethereum weekly outlook. Source: ETHUSD on TradingView.com
From here, the ETH/USD exchange rate may attempt a pullback towards the 20-WMA (near $454) of the Bollinger Band, which coincides with the Wedge’s lower trendline. Thereafter, it could either attempt an early breakdown from the Wedge to test the lower band at $258.64, or it could rebound to retest the Wedge’s upper trendline, this time at higher-than-previous levels.
An uptrend continuation could see the Ethereum price hitting at least $980 before it eventually breaks out of the Wedge, falling to levels located as low as the Wedge’s maximum height (which is $156).