Ripple is now testing the descending channel resistance on its 4-hour time frame and could be due for a drop as per technical indicators. Applying the Fibonacci extension tool also illustrates the next downside targets for XRPUSD.
The channel resistance lines up with a broken support area at 0.1800, which is now holding as resistance. If it continues to keep gains in check, Ripple could drop to the swing low at 0.1300 or until the 76.4% extension closer to the channel support at 0.1172. Stronger selling pressure could take it down to the full extension at 0.0960.
Stochastic is already indicating overbought conditions and is starting to turn lower, reflecting a return in selling pressure. Also, a bearish divergence can be seen since stochastic made higher highs since July 13 while Ripple price had lower highs since then. A drop below the 75.00 level for stochastic could be enough to draw more sellers in and allow the selloff to resume.
RSI, however, is still on the move up to show that there’s buying momentum left. In that case, Ripple still has a chance at breaking past the channel resistance and starting a reversal from the downtrend. This oscillator is only halfway through on its climb and has plenty of room to go before indicating overbought conditions.
The dollar is weaker across the board on downbeat inflation and spending reports last week and roadblocks in fiscal reform early this week. CPI and retail sales data missed expectations, lowering the chances of a Fed rate hike in September or December. Meanwhile, the US Senate is likely to reject the Obamacare repeal as three Republicans have expressed opposition while Democrats are firmly against the replacement bill.
Lower odds of getting this repeal through would mean more setbacks for the tax reform plans, which would also delay the administration’s increased infrastructure spending plans. This could be a negative for the US economy and the dollar so it’s understandable that investors are moving their funds elsewhere, like cryptocurrencies. Also, the return in risk aversion in the global financial markets has also benefitted Ripple.
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