ETH’s recent decline could do more harm despite expectations that $1,200 should hold.
Ethereum’s native token (ETH) is showing signs of bottoming out as ETH’s price bounced off a key support zone. Notably, ETH price is currently holding above a key 200-week Simple Moving Average (SMA) support near $1,196.
The 200-week SMA support appears to be purely psychological, in part due to its ability to serve as low levels in previous Bitcoin bear markets.
Independent market analyst Blunts argues that the curved level will also serve as a strong price level for ether where accumulation is likely.
“BTC has hit a 4x bottom since 2014 with 200 WMA. It’s [probably] safe to assume that’s a pretty strong level. Of course we can go below that, but there are still six days until the end of the week.”
Weekly ETH/USD price chart. Source: Trade View
ETH/USD is currently almost 75% off its all-time high, seven months after hitting $4,950.
This massive correction made the Ethereum token an “oversold” asset according to its relative strength (RSI) below 30, another technical indicator showing that ETH is “buyable”.
The last time Ethereum was oversold was in November 2018, which preceded the end of a 12-month downcycle when ETH lost 94% of its value.
Unfortunately, the same bearish exhaustion cannot be promised for 2022 as Ethereum continues to face some major macro headwinds.
ETH bullish technical signals not enough
Ethereum’s attempt to find a concrete bottom comes amid a selling frenzy taking place in the cryptocurrency and traditional financial markets.
At the heart of its 75% price correction is a hawkish Fed with its ability to raise interest rates by 175 basis points by the end of September, according to interest rate swaps linked to FOMC earnings data.
Fed interest rate target change. Source: Bloomberg/CME.
In other words, riskier assets will suffer if borrowing costs rise. This could hurt Ethereum’s recovery prospects despite being held above the so-called “strong” support level.
Ether Price Targets
ETH price is testing the 0.786 (around $1057) Fibonacci line as a temporary support. This price level is part of a Fibonacci retracement chart drawn from the swing high of $1,323 to the swing low of $82 as shown in the chart below.
Weekly ETH/USD price chart with Fibonacci support/resistance levels. Source: Trade View
A 94% price drop, just like in 2018, could see ETH approaching the 0.236 Fibonacci line by around $375, 70% below the June 1st price.
Related: This key Ethereum price indicator shows that ETH traders are not as bearish as it seems.
Conversely, if Ether bottoms near its 200-week SMA, its path of least resistance appears to be in the $2,000 region. A longer pullback above $2,000 would test the Ethereum token at $3,500 as the next bullish target.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Cointelegraph.com. Every step of investing and trading involves risk, you should do your own research when making a decision.