Terra (LUNA) has been on a slow grind higher over the past few months forming a rising channel in the process. Will today’s retest of the lows hold or will the bears break the pattern?
The last time we looked at Terra (LUNA), the market was just making new all-time highs above the $50 handle on LUNA/USD, likely a bullish reaction to news of a coming supply burn to mint more UST (Terra U.S. dollar pegged stablecoin) needed for upcoming protocols. That seems to have marked the top for LUNA/USD as the bullish sentiment has faded since that headline, now trading around 25% lower to the bottom of the rising channel drawn on the chart above.
From a technical perspective, this could draw in buyers who still see the market in an uptrend, a condition that we see won’t be invalidated from a price action standpoint until the $35 handle is retested and broken. So, it’s likely we’ll start to see this recent dip potentially slow down in this area between $35 – $40.
Bullish reversal patterns in this area would also likely draw in longer-term fundamental players, who are likely focused on the current positive tokenomics (e.g., supply burn, rising staking yields to incentivize locking up supply, etc.), growing UST adoption across different networks, and upcoming partnerships, including today’s news of a deal with Gameville:
— Do Kwon (@stablekwon) November 18, 2021
But while we have all of that going on, there is a growing macro risk narrative that the record high inflation environment we’re seeing will hurt economic activity, which could start to push traders away from risk assets like crypto and back into safe havens like the U.S. dollar. Couple that with fresh headlines of surging covid-19 cases and lockdown protocols, and the U.S. dollar could really draw in capital and put the pressure on LUNA/USD in the short-term.
For now, we think the inflation/economic fears will continue to grow, potentially taking LUNA/USD down to that significant $35 handle. We’ll be watching there to see if it holds and if inflation pressures lighten up over the next few weeks or months.
If so, LUNA/USD could be a strong longer-term buy candidate on Terra’s positive fundamentals and a solid technical setup (previous support and stochastic oversold signal), and the potential reward-to-risk setup would be favorable as well if keeping a tight stop just under $35 and a longer-term target well beyond the previous highs just above $50.
What do you all think? Will we see $35 again on LUNA/USD? Will that draw in buyers or will $35 break on rising dollar strength? Let me know in the comments section below!
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