A fractal from 2018-2019 repeating could spell trouble for XRP’s long-term upside outlook, however.
Why the XRP/USD 50-week EMA is key
On Feb. 13, XRP/USD reached as high as $0.916, above its 50-week exponential moving average (50-week EMA; the red wave) around $0.833. The upside move, albeit not decisive, opened possibilities for further bullish momentum, mainly owing to a historical buying sentiment around the said wave.
XRP/USD weekly price chart featuring 50-week EMA. Source: TradingView
For instance, traders had successfully reclaimed the 50-week EMA as support in the week ending July 27, 2020, more than a year after flipping the wave as resistance. Later, XRP’s price rallied by more than 820% to $1.98 in April 2021, its best level in more than three years.
Conversely, during the bearish cycles between 2018 and 2020, XRP’s 50-week EMA acted as a strong resistance level on multiple occasions. That showed the wave’s ability to withstand bullish recovery sentiments, such as the one witnessed during the current price rebound.
Can XRP retake $1?
XRP now needs to hold decisively above its 50-week EMA, which could have it reclaim $1 in the sessions ahead.
The level, which sits around 25% above the current price levels, coincides with XRP’s two key resistance targets. The first is the multi-month downward sloping trendline that has been capping the token’s upside bias since April 2021
XRP/USD weekly price chart featuring upside target. Source: TradingView
Meanwhile, the second target is the 0.382 Fib line of the Fibonacci retracement level drawn between $2.70-swing high and $0.10-swing low, also having a history of limiting XRP’s strong trends by acting as both support and resistance.
Still a lower high, the $1-level does not promise to take XRP out of its correction bias. Instead, it may bring opportunities for traders to secure their interim profits, thus exposing XRP to a pullback toward an imminent support target near $0.71, as per the Fibonacci retracement graph.
The bears’ case
Conversely, failure to obtain a decisive close above the 50-week EMA resistance could have XRP eye a pullback toward its 200-week EMA (the blue wave) near $0.54.
This move risks trapping the price inside a range defined by 50-week EMA as resistance and 200-week EMA as support, which may result in a further breakout to the downside. The bearish outlook appears out of a fractal from June 2018-June 2019 session, as shown in the chart below.
XRP/USD weekly price chart. Source: TradingView
Notably, XRP’s run-up to its record high of $3.55 in January 2018 coincided with its weekly relative strength index (RSI), forming a lower high, thus confirming a bearish divergence.
Later, the price declined below its 50-week EMA but picked support from its 200-week EMA. The RSI’s fall also exhausted near 37, just above its oversold reading of 30.
XRP trended sideways inside the said moving average range, while the RSI maintained a reading above 37. Nonetheless, in June 2019, the price broke below the 200-day EMA support, extending its decline to as low as $0.10 as of March 2020.
If the fractal plays out as it did in 2018-2019, XRP would risk breaking below its 200-week EMA support near $0.54 in the coming sessions. Such a move may shift XRP’s interim downside target to the 0.786 Fib line near $0.43, according to the Fibonacci retracement graph painted from $0.14-swing low to $1.52-swing high.
XRP/USD weekly price chart featuring downside targets. Source: TradingView
Meanwhile, a further break below $0.43 would put the next downside target at $0.22, a level with a history of high-volume trading activity.
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