If we get a daily close above that $2100 region above, this market could take off.

The Ethereum markets initially tried to recover during trading on Wednesday but have sold off yet again. As the $2000 level continues to offer significant resistance, it’s obvious that it’s going to be a bit of a battle to get above there. The $1800 level is an area where we had seen a significant amount of support previously, so I think a little bit of “market memory” is about to enter the picture here.

The shape of the candlestick is a shooting star, so it does suggest that maybe we have a little bit more selling pressure ahead of us. I suppose if you are stuck on the principle of Fibonacci, we are at roughly 50% of the move from previous selling as well.

Two Major Factors in Ethereum Market

The first one has been the bond yields in America dropping, as institutional traders believe that the Federal Reserve will not be able to tighten monetary policy as much as once feared. However, we are starting to see interest rates turn around to the upside again, and that has had a little bit of a negative influence on crypto in general, including Ethereum. After all, Ethereum, and crypto by extension, is pretty far out on the risk appetite spectrum, and therefore it’s not overly surprising to see it suffer.

The second important influence has been the idea of “The Merge” happening quicker than originally thought, and it looks like a theory of is actually going to pull all of this off. That obviously is good for the longer-term outlook when it comes to the network, so it does make a certain amount of sense that people bought coins based upon that.

• We are still in a very tenuous economic situation, and it must be noted that Ethereum is no longer an outlier when it comes to the financial markets, especially as the institutions have gotten involved.
• Ethereum now has a negative correlation to interest rates, much like a lot of other “risk on” assets.
• You will have to keep an eye on the 10 year yield as well.

Furthermore, the Federal Reserve looks hell-bent on trying to spook the markets into driving back down, so I think we may have peaked. However, if we get a daily close above that $2100 region above, this market could take off.

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I think that we are a little stretched at the moment, so do not be surprised at all to see a short-term bounce.

The euro has continued to drift a bit lower on Tuesday to reach the 1.0850 level. This is an area where we have seen a little bit of support as of late, and if we can break down below there we could likely go looking to reach the 1.08 handle next. That is an area where we expect to see a lot of support, so I am not necessarily looking to short this market until we get a daily close below that area.

In the meantime, I think that a bounce will more than likely be sold into, so am looking for some type of short-term bounce and show signs of exhaustion that I can start selling again. I do think that it is probably only a matter of time before the sellers come back because the market has been in a negative trend for quite some time. Furthermore, the overall fundamental situation does nothing to help the euro, as the Federal Reserve is looking to tighten monetary policy, while the ECB is nowhere near it. Furthermore, interest rate differentials between Germany and the United States continue to favor the greenback as well, so as long as that is the case, I like “buying cheap dollars.”

It is not until we break above the 1.12 level that I would be convinced that perhaps we can start to look to the upside. I think that we are a little stretched at the moment, so do not be surprised at all to see a short-term bounce. That bounce should be an opportunity as far as I can tell, so I will simply wait for an exhaustion candle to get involved in what has been a relatively reliable downtrend. The 50-day EMA is sitting at the 1.1080 level, and it is likely that it will offer a bit of dynamic resistance as well. I will probably sit on the sidelines for the next couple of days, and start shorting this market rather easily on a long wick to the upside. If we do break down below the 1.08 level, I believe that the area down to the 1.05 level is very noisy, so I would not expect to see the market simply fall apart.