Ethereum’s mini-rally could do little in protecting ETH from a 30% price drop — here’s why

YEREVAN (CoinChapter.com) — Ethereum’s native token, Ether (ETH), price rose modestly higher on July 7 as the number of Americans applying for jobless benefits increased and caused minor rallies across riskier markets, including U.S. stocks.

Ether’s hate triangle

ETH’s price grew 0.12% to almost $1,190, continuing its recovery trend that started on June 18. Since then, the Ethereum token has surged by more than 35%. Nevertheless, its upside retracement does not guarantee continued gains for the rest of 2022.

The trouble lies with a classic technical indicator called the “ascending triangle.” Notably, ascending triangles are continuation patterns, meaning they resolve after the price exits their trading ranges in the direction of their previous trend.

And as a rule of technical analysis, a breakout out of an ascending triangle range could have the price rise or fall by as much as the maximum distance between the structure’s upper and lower trendline. Unfortunately, Ether has been painting a bearish ascending triangle pattern, as shown below.

As a result, ETH’s break below the structure could lead its price to $860, almost 30% below today’s price.

Fed will continue tightening policy

More downside cues for Ether come from a super-hawkish Federal Reserve.

On July 6, the U.S. central bank officials released the minutes from their June FOMC meeting, revealing their intention to increase benchmark rates aggressively to curb inflation that has been running at its four-decade high.

That has raised the risk of another 75 basis points (bps) rate increase by the end of this July. Moreover, the Fed will continue slashing its balance sheet by 45.5 billion every month until September. That could lead to a cash crunch, reducing investors’ appetite for riskier assets like Ether and Bitcoin.

On a brighter note, the number of new job applications for U.S. unemployment benefits rose in the week ending July 2 to 235,000, according to the Labor Department’s statement on July 7. Investors anticipate a further cooldown in the jobs market in the U.S. jobs report to be released this July 8.

“What the market is wanting to see is that there is some cooling in the labor market, but it’s not going to want to see a crash,” said Kiran Ganesh, a multi-asset strategist at UBS.

That could stabilize Ether’s price at around $1,000.