The rise in the ETH/BTC pair is painting a bearish technical pattern, hinting at a potential correction.
Ether (ETH), Ethereum’s native toke, has been continuing its uptrend against Bitcoin (BTC) as euphoria around its upcoming network upgrade, “the Merge,” grows.
ETH at multi-month highs against BTC
On the daily chart, ETH/BTC surged to an intraday high of 0.075 on Aug. 6, following a 1.5% upside move. Meanwhile, the pair’s gains came as a part of a broader rebound trend that started a month ago at 0.049, amounting to approximately 50% gains.
The ETH/BTC recovery in part has surfaced due to the Merge, which will have Ethereum switch from proof-of-work (PoW) mining to proof-of-stake (PoS).
Ethereum’s “rising wedge” suggests sell-off
From a technical perspective, Ether stares at potential interim losses as ETH/BTC paints a convincing rising wedge.
Rising wedges are bearish reversal patterns that occur when the price trends higher inside a range defined by two rising, converging trendlines. As a rule, they resolve after the price breaks below the lower trendline by as much as the structure’s maximum height.
Moreover, a declining volume and relative strength index (RSI) against a rising ETH/BTC further increases bearish divergence risks. This gives weight to the wedge’s bearish setup for a target of 0.064 BTC, or down 11% from today’s price.
Ether looks stronger vs. dollar
Meanwhile, technicals paint a brighter picture for Ethereum against the U.S. dollar. The potential of a 10% breakout for ETH/USD looks strong in August due to a classic bullish reversal pattern.
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On a four-hour chart, ETH/USD has formed what appears to be a “double bottom.” This pattern resembles the letter “W” due to two consecutive lows followed by a change in direction from downtrend to uptrend, as illustrated below.
Meanwhile, a double bottom pattern resolves after the price breaks above its common resistance level and—as a rule of technical analysis—rises by as much as the distance between the first bottom and the resistance.
As a result, ETH could rally toward $1,940 in August, up 10% from today’s price.
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