Ethereum faces further downside risk as CPI and Iran developments loom

Ethereum experienced a sharp selloff on Thursday as a stock market downturn sparked widespread risk aversion across financial markets. This shift in sentiment also hit the crypto market, with traders evaluating the adverse effects of the blue sweep on the macroeconomic outlook.

A Democratic Congress is expected to bring more fiscal discipline and tighter regulation, including further limits on AI infrastructure investment. Given the US economy's heavy reliance on AI investment, a reversal could substantially impact the broader economy.

Additionally, a Democratic Congress does not curtail Trump's ability to impose tariffs or sustain military operations against Iran. Consequently, the future US growth outlook has become even more negative, unless the Iran conflict reaches a resolution.

No fresh developments have emerged on the US-Iran front. Trump told CNN that the US is unlikely to resume military action against Iran if talks make adequate progress on Tehran's nuclear program and the reopening of the Strait of Hormuz. However, he emphasized that any decision to avoid further strikes hinges on Iran agreeing to a sufficiently robust deal, adding that the US remains prepared to take military action if needed.

US Secretary of State Rubio stated that negotiations with Iran have achieved little progress, calling Tehran's demands unacceptable, but stressed that Washington remains open to pursuing a diplomatic solution.

The US CPI report is due tomorrow. The data could seal a rate hike for the December FOMC meeting, with traders already assigning a 79% probability. A hot report could put renewed pressure on Ethereum as hawkish repricing occurs. Conversely, soft data might trigger a short-term relief rally, but it would not alter the fundamental trend.

ETHEREUM TECHNICAL ANALYSIS – DAILY TIMEFRAME

On the daily chart, Ethereum broke above the downward trendline but ultimately plunged to new lows. Sellers will continue targeting the 1,900 level. If the price reaches there, buyers are expected to step in, with a defined risk below that level, to position for a rally toward the 3,400 resistance. Sellers, meanwhile, will seek a break lower to increase bearish bets toward the 1,500 level next.

ETHEREUM TECHNICAL ANALYSIS – 4 HOUR TIMEFRAME

On the 4-hour chart, a downward trendline defines the bearish momentum. If a pullback occurs, sellers are expected to lean on the trendline, with a defined risk above it, to continue targeting the 1,900 level. Buyers, on the other hand, will want to see the price break higher to pile in for a rally to new highs.

ETHEREUM TECHNICAL ANALYSIS – 1 HOUR TIMEFRAME

On the 1-hour chart, there is little additional to note, as sellers will have a better risk-to-reward setup around the trendline, while buyers will need a breakout to open the door for new highs. The red lines define the average daily range for today.

UPCOMING CATALYSTS

Tomorrow brings the US CPI report. On Thursday, the latest US Jobless Claims figures are due. On Friday, the week concludes with the US PPI data.