Ripple recently formed a head and shoulders pattern on its 1-hour time frame to signal that a selloff is underway. Price seems to have broken below the formation’s neckline to confirm that the downtrend is starting. The chart pattern spans 0.1700 to 0.2000 so the resulting drop could be of the same height, taking Ripple to 0.1400.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. Ripple is just pulling back up to the broken neckline support at the moment before heading further south. The 200 SMA lines up with this broken neckline and might serve as dynamic resistance.
Stochastic is heading lower from the overbought levels to reflect an increase in bearish momentum. RSI is also turning lower so Ripple might follow suit and head south as well.
Dollar demand has taken a hit at the start of the week on month-end profit-taking and concerns about political chaos in Washington. Trump has recently replaced his chief of staff and has just fired his communications director Scaramucci. This casts some doubt on the administration’s ability to push forward with its fiscal reform agenda as senior officials scramble to get their act together.
Meanwhile, cryptocurrencies are waiting with bated breath to see if bitcoin will be split into clone versions. The other week, the industry enjoyed a pickup in positive sentiment when BIP 91 was locked in, but jitters returned with proponents of Bitcoin Cash continued to push for their software version.
The day of reckoning is this August 1 so it remains to be seen whether there will be strong consensus support for the upgrade to SegWit2x. If so, cryptocurrencies like Ripple could enjoy a rebound in interest as investors’ confidence is sustained that other digital assets could avoid the same hard fork down the line. A weak rally could also be possible if bitcoin faces a hard fork as investors shift their holdings to other digital assets like Ripple.
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