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After pulling back from their recent highs, the major cryptocurrencies were all testing—and some bouncing—off key technical levels ahead of the weekend. So, are we about to see renewed bullish momentum in the coming days?
There is no doubt where the market’s focus is today, as the much-hyped speech from Jerome Powell at the Jackson Hole conference takes centre stage. We could see some big moves in the dollar , stocks , gold and other traditional markets depending on whether the Fed Chair will announce a definitive plan for tapering QE or delay that decision until the FOMC’s September meeting.
I have my doubts as to whether Powell will announce anything significant as the rising cases of the Delta variant of COVID-19 means he has a bit of freedom to buy himself some time. Given this uncertainty, it is best to wait until after his speech before looking for new trades. While the financial markets could be impacted as a whole, crypto currencies will probably see relatively lower volatility. This is partly why I am looking at Cardano (ADA) and Bitcoin (BTC) charts instead.
Cardano’s token is currently the world’s third-largest digital currency after BTC and ETH , with a market cap of about $82 billion. There has been a lot of hype behind it, which is part of the reason why it has repeatedly hit new highs. For as long as sentiment towards cryptos remain positive, ADA should be able to rise to new highs, although it obviously won’t be able to in a straight line.
Right now, the bulls are still in control of ADA/USD’s price action:
As per the daily chart, ADA/USD had bounced off a key support area between $2.46-$2.50 at the time of writing. This area marks the previous significant high hit in May and the point of origin of the latest breakout. Once resistance, it looks like this area is now turning into support. If we get a nice bullish close on the daily chart here, this would suggest the profit-taking and consolidation phases are over and we may see renewed bullish momentum come in over the weekend. Standing in the way of a move higher is short-term resistance circa $2.61, previously support. So, we will need to see a daily close above this level from a bullish point of view.
Taking a closer look at price action, the hourly chart shows price is currently residing inside what looks like a bullish flag:
For confirmation, a clean breakout from this flag is needed before we can become more confident that ADA is likely to hit a new high in the coming days. A bullish breakout could target the next psychologically-important $3.00 level, which happens to come in just above the previous record high hit earlier this week.
However, if the bull flag fails and price breaks the above-mentioned $2.46-$2.50 support range first, then this could lead to a potential drop towards the next nearest support at $2.20. But my base case scenario is that support will hold here, and we will see a bullish breakout to a new high.
Whether or not Cardano and other cryptos will be able to sustain their recent bullish moves depends on sentiment on the crypto sector as a whole. As a minimum, the biggest player Bitcoin needs to hold its ground, even if it doesn’t move higher, for other cryptos to retain their bullish bias in the short-term outlook:
Bitcoin was likewise in consolidation mode after rising for 5 straight weeks previously, before hitting a ceiling at $50K. At the time of writing, it was testing a massive support area between $46K to $47K, as shown on the chart. As well as the prior breakout zone, this is where we also have the 21-day exponential and 200-day simple moving averages converging.
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