Key Takeaways:
- Litecoin price dropped nearly 18% WTD in the week beginning July 3.
- The bearish pressure resulted in LTC invalidating a bullish technical setup.
NEW DELHI (CoinChapter.com) — Litecoin, often deemed “silver to Bitcoin’s digital gold,” has had a disappointing run in the week beginning July 3, with prices dropping by nearly 18% since July 3 to reach a daily low near $94.3 on July 7.
Although the bulls tried to mount a recovery rally on July 7, the bearish pressure against Litecoin forced LTC price to pare gains. Litecoin is trying to hold above the 20-day EMA (red wave) trendline support.
One of the reasons behind Litecoin’s recent misfortune could be its overbought RSI levels. LTC’s relative strength index became overbought on July 2, likely due to the hype surrounding its listing on the Wall Street-backed crypto exchange EDX and the protocol’s approaching halving event in August.
Overbought RSI levels often result in an asset’s price reversing in the bears’ favor or consolidating sideways.
However, needling below the EMA support could result in the LTC price dropping to its 100-day EMA (blue wave) support near $90. Moreover, breaching the immediate support level might force Litecoin price to test the support level near $80 before recovering.
On the other hand, bulls would need to needle above the immediate resistance near $100.5 to infuse some confidence in LTC’s price action. Breaking and consolidating above the immediate support might help LTC price challenge resistance near $115 before corrections pare gains.
The RSI for LTC is currently neutral, with a value of 52.96 on the daily charts.
LTC Price Invalidates Breakout From Bullish Triangle Setup
The recent downtrend resulted in LTC price painting a fakeout from a bullish technical setup called the ‘Ascending Triangle.‘
A horizontal trendline that connects swing highs and an ascending trendline connecting swing lows forms an ascending triangle pattern. Volume helps determine if a breakout is strong.
Under ideal conditions, buyers would enter the market as the trendlines close the gap. As a result, the toke’s price would push above the horizontal resistance with heavy volumes. Unfortunately, a low-volume breakout on the upside will likely fail, resulting in a pullback.
Per the rules of technical analysis, the price target for a breakout is equal to the triangle’s height at its thickest point. Had the LTC price confirmed a breakout, the token would have had a theoretical price target of $268, 179% above its current levels.
However, since LTC failed to paint a breakout from the pattern and dropped back inside, it might drop to the pattern’s ascending trendline support near $75. Hence, the token would likely continue its bear run in the short term.
Fed Meeting Minutes Adds To Bearish Pressure
Additionally, the FOMC meeting minutes revealed that the US Federal Reserve plans to continue raising the federal funds rates. According to the meeting minutes released on July 5, participants remained divided regarding the rate hikes, with some believing the rate hikes should continue.
Almost all participants noted that in their economic projections that they judged that additional increases in the target federal funds rate during 2023 would be appropriate.
Excerpt from the Fed meeting minutes
Furthermore, the document stated that the decision not to raise interest rates was in the light “of the significant cumulative tightening in the stance of monetary policy and the lags with which policy affects economic activity and inflation.”
Speculation of further rate hikes might have impacted Litecoin’s prices since high fund rates have often acted as a bearish cue for the crypto sector.
