Ethereum Price Prediction: ETH Bull Flag Faces Rate Hike Risk

Ethereum (ETH) has dropped by nearly 4% in the past 24 hours after the European Central Bank (ECB) hiked interest rates by 25 basis points.

Even though this was a widely expected move, the market is reacting with a sell-off as it occurs in the context of persistent inflation across developed economies and higher oil prices.

Crude prices just jumped above $100 once again, as the United States continues to attack Iran and tensions in the Middle East keep escalating.

“The outlook remains highly uncertain, with risks to the upside for inflation and to the downside for economic growth,” highlighted the ECB’s Governing Council in a press release published today.

Rate Hike Odds in the U.S. Jump to 74%

In the United States, the odds of a rate hike by the Federal Reserve during the next FOMC meeting have now jumped to 74%, as analysts now expect that the central bank could mimic the move of its European peer.

This is weighing on the short-term performance of crypto assets, including Ethereum (ETH), as it could prompt more severe revisions to the Fed’s dot plot.

Data from FedWatch shows that the odds of another 25 basis points rate hike in December have jumped to nearly 60% now. This means a strong upward revision compared to a couple of weeks ago, and it could hit the pause button for Ethereum’s latest rally.

Market sentiment just plummeted to its lowest level since the mid-August rally commenced. The Crypto Fear and Greed Index currently sits at 68, now nearing Neutral territory amid this latest news.

We had already been seeing signs of an impending pullback for ETH, as the Relative Strength Index (RSI) hit extreme overbought levels at 88 just a month ago.

These macroeconomic woes could exacerbate the decline, although there is still hope that the market will bounce back as these hawkish moves from top central banks were already priced in.

Bull Flag Pattern Still in Play for ETH Despite Today’s Retreat

Looking at the daily chart, we can see that Ethereum’s bull flag pattern is still in play, as the price would have to break below the $2,350 lower bound to invalidate this setup.

If that happens, the next area of support to watch would be the 200-day exponential moving average (EMA). A retest of this key technical indicator from above is not out of the question, especially as the market continues to digest these changes in the macroeconomic backdrop.

Nonetheless, the $2,400 level had been a strong area of resistance for ETH for weeks and may have now turned into a strong demand zone.

If that’s the case, we could witness the token bouncing off this mark after this “sell the news” moment passes.

Beyond the price action alone, on-chain data has also been favoring a bullish outlook for ETH in the mid-term. Trading volumes have been steadily rising, and a crossover between a couple of key moving averages for this metric seems imminent at this point.

Moreover, the MVRV Ratio, a metric that tracks the relationship between Ethereum’s market value and the aggregated value of all ETH tokens in circulation at the price at which they were bought, is about to send a buy signal as well upon crossing above the zero line.

With this in mind, today’s decline could be the “blood in the streets” moment that late buyers may be waiting for to get into what could be the earliest stage of ETH’s next bull market.