XRP News Today: Yen Carry Trades Lift Sentiment After Sharp Selloff

XRP is having its worst quarter since 2022. The token fell for the fifth consecutive session on Thursday, December 25, disappointing hopes for a Santa rally. Technicals continued to overshadow fundamentals, sending XRP toward critical support levels.

Profit-taking continued into the holidays as XRP failed to break above the $2.0 psychological resistance level. Notably, the number of active accounts (unique senders) trended lower, highlighting weakening XRP demand.

Meanwhile, institutional demand cushioned the downside as the US XRP-spot ETF market extended its inflow streak to 27 consecutive days.

On Friday, December 26, Japanese economic indicators weakened the yen, fueling yen carry trades into risk assets. A less hawkish BoJ rate path and fading bets on a March Fed rate cut would likely keep carry trades profitable, supporting a constructive medium- to longer-term bias.

Below, I will explore the key drivers behind recent price trends, the medium-term (4-8 weeks) outlook, and the key technical levels traders should watch.

Active Accounts Tumble as Crypto Market Languishes in Extreme Fear

XRP has plunged 35.5% in the fourth quarter, potentially snapping a five-quarter winning streak as the year-end approaches.

Fading bets on a Fed rate cut continued to weigh on market sentiment, countering robust institutional demand. The number of active accounts (unique senders) trended lower on December 25, falling from 17,516 on December 24 to 14,636 as investors locked in profits.

Notably, the fourth quarter sell-off left the Crypto Fear & Greed Index at 20, deep within the Extreme Fear Zone, a bullish price indicator. Typically, Extreme Fear suggests the market could be undervalued.

US XRP-Spot ETFs Deliver Price Support

The US XRP-spot ETF market reported net inflows of $11.93 million in a shortened session on Wednesday, December 24. Inflows on Wednesday took total net inflows since launch to $1.14 billion, underscoring robust institutional demand.

The Canary XRP ETF (XRPC) led the way, with total net inflows of $385.13 million since launch, benefiting from a first-to-market advantage. However, the Bitwise XRP ETF (XRP), the Grayscale XRP ETF (GXRP), and the Franklin XRP ETF (XRPZ) also reported strong inflows since launch, totaling $722.49 million.

Demand for US XRP-spot ETFs contrasted sharply with the US BTC-spot ETF market, which extended its outflow streak to five consecutive days on December 24. Institutional demand for XRP-spot ETFs reinforced the bullish short- to medium-term price outlook.

Japanese Inflation Cools, Fueling Yen Carry Trades

While XRP-spot ETF inflows cushioned the downside, Japanese economic indicators signaled a less hawkish BoJ rate path, lifting sentiment on December 26.

Tokyo’s annual inflation rate fell from 2.7% in November to 2.0% in December, while the core-core inflation rate eased to 2.6% (November: 2.8%). USD/JPY rose 0.20% to 156.205 in response to the data. A weaker yen and falling 10-year Japanese Government Bond (JGB) yields fueled yen carry trades, sending XRP higher.

XRP briefly dropped to a low of $1.8244 before climbing to a morning high of $1.8792 following the data, supporting a bullish short-term outlook. Crucially, a less hawkish BoJ rate path would ease concerns about a yen carry trade unwind, reinforcing the positive medium- to longer-term price outlook.

Medium- and Long-Term Outlook: Constructive Bias Intact

A softer Japanese inflation backdrop, strong demand for US XRP-spot ETFs, and progress toward crypto-friendly legislation support a constructive bias.

Considering the current market dynamics, the short-term (1-4 weeks) outlook remains cautiously bullish, with a $2 price target. The medium-term (4-8 weeks) and longer-term (8-12 weeks) outlooks remain constructive, with price targets of $2.5 and $3.0, respectively.

Downside Risks to the Constructive Bias

Several scenarios could derail the positive price outlooks. These include:

• The Bank of Japan announces a neutral interest rate of between 1.5% and 2.5%, signaling aggressive rate hikes.
• US data and the Fed dampen expectations of a March rate cut.
• The MSCI delists digital asset treasury companies (DATs). Delistings would likely reduce interest in XRP as a treasury reserve asset.
• US Senate opposes the Market Structure Bill.
• XRP-spot ETFs report outflows.

These events would likely send XRP toward $1.75, indicating a bearish trend reversal.

In summary, the short-term outlook remains cautiously bullish as fundamentals oppose the bearish technicals. Meanwhile, the medium- to longer-term outlooks are constructive.

Financial Analysis

Technical Outlook: EMAs Signal Caution

XRP fell 1.55% on Thursday, December 25, following the previous day’s 0.59% loss, closing at $1.8325. The token faced heavier losses than the broader crypto market, which declined 0.81%.

Thursday’s pullback left XRP well below the 50-day and 200-day Exponential Moving Averages (EMAs), indicating a bearish bias. While technicals remain bearish, bullish fundamentals are building, outweighing the technical structure.

Key technical levels to watch include:

• Support levels: $1.75, and then $1.50.
• 50-day EMA resistance: $2.0930.
• 200-day EMA resistance: $2.3880.
• Resistance levels: $2, $2.5, $3.0, and $3.66.

Looking at the daily chart, a break above the $2 psychological level would bring the 50-day EMA into play. A sustained move through the 50-day EMA would signal a near-term bullish trend reversal, opening the door to testing the 200-day EMA and the $2.5 resistance level.

A sustained breakout above the EMAs would reinforce the constructive medium-term outlook and the longer-term (8-12 weeks) $3.0 price target.

Fundamental Indicators: ETF Demand, Central Bank Rate Paths, and Legislation

Near-term price drivers include:

• XRP-spot ETF flow trends.
• US economic data and March Fed rate cut expectations.
• US crypto-related regulatory headlines.
• The BoJ’s neutral interest rate.

Bullish Structure Formation: What Happens if XRP Reclaims $2.0?

Despite a five-day losing streak, XRP’s short-term bullish structure remained intact, supporting the positive short- to medium-term outlook.

A break above $2.0 would pave the way to the upper trendline and the $2.5 resistance level. A sustained move through the upper trendline would indicate a bullish trend reversal, affirming the price targets.

• Medium-Term (4-8 weeks): $2.5.
• Longer-term (8–12 weeks): target of $3.0.

However, rejection at the $2.0 psychological level and a sustained drop below the lower trendline would invalidate the bullish short- to medium-term outlook, and signal a bearish trend reversal.

Outlook: $2.0 Remains the Key Level

Looking ahead, Fed and BoJ forward guidance, US economic data, XRP-spot ETF flow trends, and legislation-related news will influence near-term price trends.

Increasing expectations of a March Fed rate cut and a less hawkish BoJ policy stance would likely boost demand for XRP. Strong XRP-spot ETF inflows will also boost sentiment.

In summary, strong institutional demand for XRP-spot ETFs and the progress of the Market Structure Bill support a medium-term (4–8 weeks) move to $2.5. A March Fed rate cut and the Senate passing the Market Structure Bill would reinforce the longer-term (8–12 weeks) price target of $3.0.

Looking further ahead, a break above the all-time high $3.66 is likely if the Fed and BoJ adopt dovish stances and the Senate passes crypto legislation over the 6-12 month time horizon.