For ether bulls to save the day, U.S. inflation data that is less than expected is needed.
Ether (ETH) is getting sold off before the U.S. inflation report, which could show if the Federal Reserve has room to slow down the tightening of liquidity.
Thursday, Ethereum’s native token fell by 4% to $1,220, ending a three-week pennant pattern of triangular consolidation. The main image, which comes from TradingView, shows this pattern.
A chartered market technician named Goncola Moreira says that the so-called “pennant breakdown” is a bearish sign.
Pennants are short periods of stability that happen after a big move up or down and usually set the stage for the trend to continue.
Ether’s breakdown of the pennant pattern has opened the door to a deeper drop, which the bears may take advantage of if the U.S. consumer price index (CPI) is higher than expected.
On the other hand, Moreira thinks that the resulting sales may not last long because bargain hunters will take advantage of the lower prices.
“The good news is that ether is getting close to the territory of buyers,” Moreira said in a new letter. “On a log-scale weekly chart, if we move the lower edge of the pennant pattern to the left, the extended trendline lines up with the low in June and the low in March 2020.”
A trendline that connects the lows on September 21 and October 3 makes up the bottom edge of the pennant.
A logarithmic scale chart shows the values between two points based on the percent change instead of the absolute change. This type of chart is good for data with very different values. For example, the price of ether went from two digits in March 2020 to four digits at the time of this writing. Technical analysts often use log charts to look at long-term trends.
If the U.S. data show that inflation slowed down a lot in September, the pennant breakdown would be of no use. That could bring back hopes that the Fed will change course, which would be good for risky assets like cryptocurrencies.
At 12:30 UTC, the Labor Department will make the CPI data public.
