SOL, the cryptocurrency that underpins the high-performance smart-contract-enabled Solana blockchain, has been trending downwards with the larger cryptocurrency market on Monday, and price forecasts are getting more negative.
Despite the lacklustre price activity, a substantial amount of trade is occurring behind the scenes. According to CoinMarketCap, Solana’s 24-hour transaction volume was above $600 million, ranking it ninth among all cryptocurrencies.
SOL/USD was last trading just below its 21-Day Moving Average (DMA) in the $23s per token, down more than 13% from its late-January highs in the $27 region as traders assess mixed signals emanating from the US economy in the form of recent strong US jobs and ISM Services PMI data versus an underwhelming corporate earnings season thus far.
These contradictory signals have contributed to the uncertainty over how much additional Fed tightening to anticipate in the coming quarters. Traders of Solana will thus need to keep a close eye on remarks made by Fed chairman Jerome Powell on Tuesday – at last week’s Fed meeting, he appeared less hawkish than many had anticipated, boosting crypto prices.
There are indications that the Federal Reserve may not be as dovish as everyone had hoped a week ago. This increases the likelihood of a short-term correction in crypto markets. In light of Solana’s recent inability to maintain a break over the $25-$27 resistance zone and the 200-day moving average around $26.30, the cryptocurrency’s short-term technical outlook has dimmed somewhat.
With the cryptocurrency presently trading below its 21-day simple moving average and targeting a test of near-term support in the $22 region, some analysts anticipate a drop in support in the $20 region. The 50 and 100-day DMAs as well as the 23.6% Fibonacci retracement from the lows in late December 2022 around $8.0 to the highs in the summer of 2022 around $48 are located in the $18 area.
A further technical signal for Solana bulls to be concerned about is that the cryptocurrency continues to cling to a long-term decline that has been in effect since early 2022. Even if SOL/USD were able to break above its 200-day simple moving average and go to new highs, it would encounter substantial resistance above $30. If Solana cannot break above this downtrend in the next weeks, it will become more difficult to maintain a price over $20.
On-chain indications are mounting that the crypto market bear market of 2022 may now be finished. Various Bitcoin indicators are flashing a long-term buy signal, while the macroeconomic environment in 2023 is anticipated to be more favourable, with the Federal Reserve forecast to engage in only limited additional tightening.
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