Crypto Correction Nears Ideal Region for Higher Low, Return to Trend

Macro vs Technicals
US rates remain in a choppy corrective range, even after the recent Fed meeting and CPI print this week. Considerable focus has been shifted onto employment – the 4-week moving average of US jobless claims this week rising out of the recent range – as that is considered a key to equity performance going forward.

However, the Nasdaq continues to push higher, while the Russell 2000 continues to reflect weakness in the underlying market. For now, while Nasdaq holds up, we can see crypto turning around from support levels. Yet the real test for crypto will be whether it can fully de-couple from the Nasdaq if it starts to collapse.

So, while the technical outlook is bullish, we do still need to watch equities and the incoming data closely and the interaction between the asset classes. 

Ethereum vs Bitcoin
No change, as the cross has been tracking sideways in the last week or so. As such, after holding and reacting higher from Fibonacci support around 0.062, my studies are looking for a return to the higher end of the previous range. We have developed a higher low around 0.064 and should now see the spread work higher to 0.075-0.078 after this sideways consolidation phase. A break of pivot resistance around 0.067 and then trend resistance at 0.069 triggers that next leg higher. This outlook is wrong on a break of 0.064 and then 0.062, such a move opening 0.057.  

Bitcoin

It is a key week or so ahead now, as the correction phase from the 31,000 spike high has extended in wave C. This still has the potential for a push to the 25,500-25,000 weekly trend and pivot support region. However, if my studies are correct, this is where we should see a higher low develop. We should then see a bounce and further range trading develop before new highs, or a move straight back to new highs in the coming weeks, targeting next resistance in the 33,000 region.  

A rally back through 28,500 near-term pivot resistance supports the higher low, while a move back through 30,000 confirms the decline as a 3-wave correction process. A collapse through this support would be the first warning sign that is not the case and opens the risk for a move to 22,000-20,000.

Longer term, my studies suggest the bear cycle from the 2021 highs completed last year around 15,500.

First targets and resistance in the bull move lies in the 33,000 region. But the main target is 36,000, that being Fibonacci and the head and shoulders projection. I suspect we see that region hold on the first test, but ultra long-term targets are 42,000-48,000.

A decline back through 19,500 would negate and signal the whole move up to around 30,000 has just been a 3-wave correction process and we are likely to remain in a side and choppy range between 15,000 and 30,000 for several months.

Ethereum
As with Bitcoin, we have a key week or so ahead. After completing the B wave at 2006 Fibonacci resistance, we have seen wave C extend lower this last week. We are now moving into the ideal region between 1720 and 1650 to look for a higher low develop. If so, we should then move into a broader range before new highs, or just straight to new highs, targeting 24,500. A rally back through 1875 and then 2006 confirms that 3-wave correction lower.

As with Bitcoin, a collapse through and close below 1650 would be the first warning this outlook is wrong and risk an extension back towards the 1370 March lows.

Longer term, the reversal from last year’s lows targets ~2400/2450 resistance, but through there can extend towards 3000-3300. A decline back through 1400 negates this underlying bullish outlook, signalling the gains have just been another 3-wave correction and keeping us in a wide but lower choppy range.

Robin is a global market veteran, with over 30 years of experience on the sell and buy-side, as a strategist and trader. He now provides strategic trading and investing advice to hedge funds, family offices, HNW individuals and trading desks around the globe.

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(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)