XRP reached a multi-year high above $3.66 on Friday, indicating aggressive buying by bulls. This contributed to XRP's market capitalization surpassing that of global fast-food giant McDonald's on Monday. However, the lack of momentum maintenance may have tempted short-term buyers to take profits after the strong rise.
What are the critical support and resistance levels to keep in mind? Let's analyze the charts to find out.
XRP's failure to surpass the $3.66 resistance in recent days has initiated a pullback below $3.40.
The XRP/USDT pair could drop to the 20-day exponential moving average ($2.99), a critical level to watch. If the price strongly rises from the 20-day EMA, it will indicate buying at lower levels. Bulls will then try to push the price up to $3.66. A breakout and close above $3.66 could drive the pair to $4 and then to $4.86.
This optimistic view will be invalidated in the short term if the price continues to drop and falls below the 20-day EMA. This suggests that the breakout above $3.40 may have been a bull trap.
The pair fell below the $3.34 support, indicating that bears are trying to gain ground. The next support on the downside is at $3 and subsequently at $2.80. If the price rises from the support zone and breaks the moving averages, this suggests that the corrective phase may have ended. The pair could then rise to $3.66.
On the other hand, if the recovery stalls at the 20-day EMA, this suggests a shift in sentiment, moving from buying on dips to selling on rallies. This increases the risk of a deeper drop to $2.60. Such a move could delay the resumption of the bullish trend.