Ethereum has formed lower highs and lower lows to trade inside a descending channel on the 4-hour chart. Price recently bounced off resistance to confirm that the downtrend will persist and is starting to break below the mid-channel area of interest to pave the way for a test of support.
Price has also busted through the 38.2% and 50% extension levels to signal sustained bearish momentum. Ethereum could make its way down to the 61.8% extension next at $473.47 or the 78.6% extension closer to the channel support. Stronger selling pressure could lead to a move to the full extension below $400.
The 100 SMA is below the longer-term 200 SMA to confirm that the path of least resistance is to the downside. This means that the selloff is more likely to continue than to reverse. Also, the 100 SMA lines up with the top of the channel at $550 to add to its strength as resistance in another bounce.
Stochastic is pulling up from oversold territory to indicate that sellers are taking a break and letting buyers take over. RSI is also turning higher to confirm that buyers are jumping back in, especially after a bullish divergence from the third week of May.
However, dollar strength was seen across the board in recent sessions as traders may be positioning ahead of the FOMC decision. An interest rate hike of 0.25% is widely expected and dollar traders are simply waiting to hear how the pace of tightening could proceed from here.
Hawkish remarks signaling that two more rate hikes are possible could mean more gains for the dollar versus ethereum and its other rivals. On the other hand, cautious remarks on weak wages and subsequently slower inflation could mean profit-taking for dollar longs.
For now, cryptocurrencies are on the back foot as investors await the results of the probe into price manipulation.