ETH Faces the Risk of Sub-$1,600 on US Stats and Hawkish Fed Chatter

Key Insights:

• On Wednesday, bitcoin (BTC) and ethereum (ETH) joined the broader market in positive territory, with BTC revisiting sub-$24,000.
• Economic data from China delivered a broad-based crypto rally, with the Shapella upgrade ETH positive.
• However, ETH and BTC saw red this morning.

Ethereum (ETH) rallied by 3.74% on Wednesday. Reversing a 1.71% fall from Tuesday, ETH ended the day at $1,665.

A bearish start to the day saw ETH fall to an early low of $1,595. Steering clear of the First Major Support Level (S1) at $1,585, ETH rallied to an early afternoon high of $1,670. ETH broke through the First Major Resistance Level (R1) at $1,636 and briefly through the Second Major Resistance Level (R2) at $1,668 before easing back to end the day at $1,665.

On Wednesday, bitcoin (BTC) rallied by 2.44%. Reversing a 1.53% loss from Tuesday, BTC ended the day at $23,707. The bullish session supported a BTC return to the $24,000 handle for the first time in five sessions.

A mixed start to the day saw BTC fall to an early low of $23,036. Steering clear of the First Major Support Level (S1) at $22,934, BTC rose to a late morning high of $24,009. BTC broke through the First Major Resistance Level (R1) at $23,483 and briefly through the Second Major Resistance Level (R2) at $23,823 before ending the day at $23,707.

Economic Data from China and the Shapella Upgrade Deliver Support

The smooth Shapella upgrade delivered ETH price support on Wednesday, with staking inflows also ETH positive. However, the global economic calendar was the driving force behind the Wednesday breakout.

Stats from China delivered support to riskier assets on Wednesday. The all-important Caixin Manufacturing PMI jumped from 49.2 to 51.6 in February. Economists forecasted a rise to 50.2. Significantly, the manufacturing sector expanded for the first time since July 2022.

The stats were good enough to mute the influence of US economic indicators and the NASDAQ Composite Index.

Sub-components of the ISM Manufacturing PMI survey supported the more hawkish sentiment toward Fed monetary policy. The ISM Manufacturing Prices Index jumped from 44.5 to 51.3. Hawkish Fed chatter also weighed on the NASDAQ Composite Index. Fed dove Kashkari is reportedly open to a 25-basis point or 50-basis point rate hike in March.

This morning, investors responded to the hawkish chatter and inflation numbers, sending BTC and ETH into the red.

The Day Ahead

Economic indicators will also draw interest. US jobless claims and unit labor cost figures will influence the NASDAQ Composite Index and the broader crypto market. A fall in jobless claims and a jump in unit labor costs would be a bearish combination.

However, we expect the crypto news wires to continue providing direction. Investors should monitor the crypto news wires for regulatory activity and US lawmaker chatter. Binance and FTX updates need consideration together with news from the ongoing SEC v Ripple case.

For ETH, investors also need to monitor updates on the Shanghai upgrade. Reports of bugs or delays to the March upgrade would be ETH bearish.

Ethereum (ETH) Price Action

At the time of writing, ETH was down $1,649. A mixed start to the day saw ETH rise to an early high of $1,678 before falling to a low of $1,645.

Technical Indicators

ETH needs to avoid the $1,643 pivot to target the First Major Resistance Level (R1) at $1,692 and $1,700. A move through the morning high of $1,678 would signal a breakout session. However, Shanghai upgrade news and the crypto news wires should be ETH-friendly to support a breakout.

In the event of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at $1,718 and resistance at $1,750. The Third Major Resistance Level (R3) sits at $1,793.

A fall through the pivot would bring the First Major Support Level (S1) at $1,617 into play. However, barring another broad-based crypto market sell-off, ETH should avoid sub-$1,550. The Second Major Support Level (S2) at $1,568 should limit the damage. The Third Major Support Level (S3) sits at $1,493.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bullish signal. Ethereum sat above the 50-day EMA, currently at $1,636. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1,636) would support a breakout from R1 ($1,692) to target R2 ($1,718) and $1,1750. However, a fall through the 50-day ($1,636) and 100-day ($1,632) EMAs would bring S1 ($1,617) into view. A fall through the 50-day EMA would send a bearish signal.

Bitcoin (BTC) Price Action

This morning, BTC was down 0.58% to $23,509. A mixed start to the day saw BTC rise to an early high of $23,800 before falling to a low of $23,460.

Technical Indicators

BTC needs to move through the $23,574 pivot to target the First Major Resistance Level (R1) at $24,132. A return to $24,000 would signal a breakout session. The crypto news wires and Fed chatter should be crypto-friendly to support an extended rally.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $24,557 and resistance at $25,000. The Third Major Resistance Level (R3) sits at $25,530.

Failure to move through the pivot would leave the First Major Support Level (S1) at $23,159 in play. However, barring another crypto event-fueled crypto sell-off, BTC should avoid sub-$22,500. The Second Major Support Level (S2) at $22,611 should limit the downside.

The Third Major Support Level (S3) sits at $21,638.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a mixed signal. BTC sat below the 100-day EMA ($23,513). The 50-day EMA narrowed to the 100-day EMA, while the 100-day EMA widened from the 200-day EMA, delivering mixed signals.

A move through the 100-day ($23,513) and 50-day EMA ($23,570) EMAs would support a breakout from R1 ($24,132) to bring R2 ($24,557) and $25,000 into view. However, a fall through S1 ($23,159) would give the bears a run at the 200-day EMA ($22,982). A move through the 50-day EMA ($23,570) would send a bullish signal.