Ethereum is facing a crucial test after soaring to $4,800 and then sharply declining due to the loss of global market momentum. The Dow Jones has slid from its record high, Bitcoin has fallen below $111,000, and the dollar has strengthened—all putting pressure on investor sentiment toward cryptocurrencies.

At the same time, signals of potential interest rate cuts next month from Fed Chair Jerome Powell have led investors to expect that liquidity may return and push ETH prices higher. The current question is whether Ethereum can hold the $4,000 support level or if pressure from the broader market will force it to undergo a deeper correction.

Ethereum Price Forecast: Stocks Decline After Dow Jones Hits Record High

Source image: The Wall Street Journal/FactSet

The US stock market started the new week unfavorably. The Dow Jones index fell by 0.8% after reaching a record high on Friday, while the S&P 500 and Nasdaq also recorded slight declines.

This decline occurred despite ongoing optimism about the Fed's potential interest rate cuts as early as next month. Nvidia's upcoming earnings report and optimistic signals from Powell remain key factors driving investor sentiment in stocks, technology, and cryptocurrencies.

Cryptocurrency stocks like Coinbase and MicroStrategy also fell alongside Bitcoin, from $117,000 to $110,200. The correlation is clear: risk assets continue to fluctuate as a group, with cryptocurrencies tracking stocks as market tensions return.

Ethereum Price Forecast: Decline from Local Highs

ETH/USD Daily Chart - TradingView

On the daily ETH/USD chart, Ethereum's price recently tested the Bollinger Band near $4,800 but then fell sharply, trading at $4,396. This rejection aligns with the overall market weakness and profit-taking after several weeks of continuous gains.

Key technical signals:

- Bollinger Bands indicate that the price is declining from overbought levels, with ETH sliding towards the midpoint support near $4,385.

- Pivot resistance point (R3) around $4,800 has created strong selling pressure, preventing breakthrough attempts.

- Current price action shows accumulation between $4,200 (support level) and $4,600 (resistance level). A complete drop below $4,200 could open up opportunities to retest the psychological support level of $4,000.

Global Perspective: Fed Policy and the Strength of the US Dollar

The yield on the 10-year Treasury bond rose slightly to 4.28%, while the dollar index increased by 0.7% to 98.43. Both of these developments are short-term barriers to cryptocurrency. High yields make risk assets less attractive, while a strong dollar puts pressure on dollar-denominated assets like ETH.

However, Powell's hints about upcoming interest rate cuts still maintain a positive medium-term trend. Low interest rates reduce the opportunity cost of holding cryptocurrencies, improving liquidity and historically acting as a driving factor for Ethereum and Bitcoin.

Ethereum's Outlook: Can the bulls maintain the $4,000 level?

In the coming weeks, the price of ETH may fluctuate according to global sentiment. If Nvidia's earnings report is impressive and Powell reaffirms his dovish stance in September, ETH could reclaim the resistance area of $4,600-$4,800. A breakthrough above $4,800 could pave the way for a bullish surge to $5,200.

Conversely, if it cannot hold the $4,200 level, the risk of ETH sliding to $4,000 will increase. This level coincides with the pivot area R1 and will serve as a significant battle point for bulls.

ETH Has the Potential to Accumulate Before the Next Bull Run

In the short term, Ethereum's price may struggle to maintain upward momentum as the stock market cools and the dollar strengthens. However, as long as the $4,000 level is held firmly, the overall upward trend remains intact.

The possibility of the Fed cutting interest rates next month, along with positive sentiment in the stock market, could be a driving factor for ETH's next significant bullish run.

The potential path for Ethereum: a drop between $4,200 and $4,600 in the next two weeks, followed by an attempt to break through $5,000 if global conditions are favorable.

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