Ethereum bulls fold before the Merge, but this is why ETH price pullback isn’t a bad thing

Ethereum price is giving up on its bid for a pre-Merge rally amid concerns over rising inflation levels. The leading smart contracts token exchanges hands slightly above $1,600, with losses expected to close below the same level on Tuesday. On the bright side, this pullback might give investors another chance to catch an anticipated Merge-triggered bullish breakout above $2,000.

Read more: Ethereum v. Bitcoin: ETH is winning despite BTC price rally to $22,000

Rising inflation wreaks havoc in global economies – Ethereum price bows to selling pressure

Global markets, including crypto and stocks, have given back tentative gains on Tuesday following reports of hotter-than-expected inflation levels in the United States. The country’s consumer price index (CPI) inflation grew by 0.1% for the month and 8.3% annually throughout August.

Market participants expect the Federal Reserve to continue tightening the monetary policy, which could further cause more pain. The Federal Open Market Committee (FOMC) will be meeting in September to review measures in place in August. A 0.75% rate hike seems very likely- making it the third one this year.

Meanwhile, Ethereum losses are unlikely to stop at $1,600 – a support area reinforced by the lower boundary of an ascending trend line. The Direction Movement Index (DMI) is on the verge of confirming the Ethereum price downtrend.

Traders wishing to short Ethereum price to the 100-day (blue) Simple Moving Average (SMA) should be on the lookout for the +DI as it crosses below the –DI. Further confirmation will stem from the price ratifying a break below the ascending channel.

 

ETH/USD daily chart

Ethereum price pre and post-Merge rallies are still possible, notwithstanding the global economic pressure. The software upgrade on September 15 will be the biggest in Ether’s history – eliciting interest across the crypto space.

Read more: Ethereum holders watchout for proof-of-work fork post Merge

If investors quickly move past the pullback on Tuesday, they may appreciate vital support areas that IntoTheBlock’s IOMAP on-chain model highlights. According to this metric, 1.37 million addresses purchased 8.56 million ETH tokens between $1,557 and $1,064. If this region is defended, new buy entries will trickle in as Ethereum price escapes bearish shackles to spike above $2,000.

 

Ethereum IOMAP model

A rebound from support at $1,600 would be largely undeterred due to the relatively weak resistance levels. A seller congestion zone is projected in the region running from $1,609 and $1,657, but it might not be robust enough to prevent Ethereum price from sprouting to $1,800 and later to $2,000.