Neon glowing Stellar Lumens (XLM) coin in Ultra Violet colors with cryptocurrency blockchain nodes in blurry background. 3D rendering

The Stellar Lumens price retreated today as investors reacted to the strong US consumer price index (CPI) data. XLM is trading at $0.6780, which is 13% below this week’s high of $0.7795. According to CoinMarketCap, it has a market cap of more than $15.6 billion and is the 14th biggest digital currency in the world. It is sandwiched between Chainlink and USD Coin.

Stellar Lumens ranking

Stellar Lumens ranking

US inflation data

The recent strong performance of cryptocurrencies has been attributed to the easy money policies by the Federal Reserve. In response to the pandemic, the bank slashed interest rates to zero and expanded its balance sheet to more than $7.9 trillion. The bank is achieving this by buying assets worth $120 billion every month.

Low-interest rates are usually bullish for cryptocurrencies because of several reasons. First, they lead to a lower US dollar, which is a good thing for assets that are traded in dollars. Second, low interest rates lead to a rotation from other assets like bonds to riskier assets like stocks, gold, and cryptocurrencies. Third, they make it easier and cheaper for people to borrow funds and invest in these assets. 

Data published today showed that the headline consumer inflation rose to a 13-year high of 4.2% while core inflation rose to 3.0%. These numbers were significantly higher than what analysts were expecting. They are also higher than the Fed target of 2.0%.

Therefore, the Stellar price declined as investors started to price in gradual tightening by the Fed. Indeed, in a statement last week, Janet Yellen, the current Treasury Secretary, and former Fed chair suggested that the Fed will likely start to gradually tighten.

So, will the Stellar Lumens price continue falling? From a fundamental perspective, possibly not. For one, investors were already expecting inflation to rise. Further, inflation will likely retreat as the impacts of the recent stimulus start to fade.

Stellar price prediction

Stellar Price

The four-hour chart shows that the XLM price has fallen for the past four consecutive hours and the pace of decline is accelerating. Still, we see that the price is still slightly above the 25-day and 50-day moving averages. Also, the decline started when the currency approached the upper side of the ascending channel. 

So, is this a case to worry about? Not necessarily. For one, the price is still above the 2 MAs. It is also slightly above the lower side of the channel. Therefore, until the XLM price moves below this channel at $0.6500, there is no need to worry. If it moves below the channel, it will be a signal that the head and shoulders pattern is intact, meaning that the price will fall further.

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