Litecoin staged a sharp selloff in the previous week on confirmation that China is starting to shut down cryptocurrency exchanges in the country. Price dipped to the support levels marked on the daily time frame and bounced off the floor around $35 as expected.
However, the downtrend is very much intact on the short-term time frame and price is currently correcting to the nearby resistance levels. A descending channel can be seen on the 1-hour time frame and the resistance is located at the $60 barrier. This coincides with the 61.8% Fibonacci retracement level.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. In other words, the selloff is more likely to persist than to reverse. In that case, LTCUSD could drop to the swing low or create new ones below $35.
Stochastic is still pulling higher to signal that bullish pressure is present. RSI also has room to climb so LTCUSD might follow suit. However, both oscillators are nearing overbought levels and turning back down could indicate that bears are back in the game.
Trading activity has taken a huge hit in China as investors rushed to liquidate their holdings before the exchanges are officially closed. This has also led to a flurry of profit-taking in other markets to avoid being caught up in the slide and potential consolidation on a much smaller market.
Meanwhile, the dollar has to contend with the upcoming FOMC decision to see where it might be headed next. Any indication that a December hike is still on the table could be dollar bullish, which would then mean more declines for LTCUSD. On the other hand, cautious remarks and downgraded forecasts based on the latest hurricanes could throw tightening expectations out the window and spur a rally for LTCUSD.
Also, market sentiment would also likely impact cryptocurrency movement as always since a pickup in risk-off moves stemming from North Korea’s missile threats still has the tendency to prop litecoin higher.