Solana’s (SOL) price has rebounded significantly today, recovering from a sharp sell-off on August 5 that many have dubbed as Black Monday. As of August 6, SOL’s price has risen to just over $144, marking a 31% increase from its local low the day prior. This recovery aligns with broader market gains in both the cryptocurrency and global stock markets, spurred by positive economic data from the United States and increased chances of a rate cut in September.
US Service Sector Expansion Eases Recession Fears
Recent data released on August 5 shows that the US services sector expanded in July, recovering from its sharpest contraction in four years the previous month. This rebound has alleviated concerns about an imminent economic downturn, leading to sharp price reversals in risk-on assets like Solana. The Institute for Supply Management’s (ISM) services index increased by 2.6 points to 51.4, surpassing the median forecast in a Bloomberg survey of economists. Readings above 50 indicate expansion, highlighting the sector’s renewed growth.
US services purchasing managers index. Source: Bloomberg
The positive service sector data follows a government report released on August 2, which revealed that the unemployment rate climbed to a nearly three-year high of 4.3% while payroll growth significantly slowed. This jobs report has increased the likelihood that the Federal Reserve will implement more aggressive interest rate cuts in 2024. According to CME data, there is now an 80.50% probability of a 50 basis point rate cut in September, compared to just 5.5% a month ago.
Target rate probabilities for the September Fed meeting. Source: CME
Charles Edwards, founder of Capriole Investments, noted the similarities to early 2020, stating, “Stocks are overvalued, recession risks are growing, unemployment is rising, and global market moves are sharply correlated. At some point, the Fed will likely step in with early rate cuts and possibly increased liquidity. But when? Until then, expect all markets to correlate.”
SOL Price Bounces After Hitting “Oversold” Threshold
Solana’s gains today are part of a bounce that started after its daily relative strength index (RSI) neared its oversold readings. On August 5, SOL’s daily RSI fell to 31.78, just above its oversold threshold of 30. Historically, price consolidation or a rebound becomes more likely when the RSI is a
SOL/USD daily price chart. Source: TradingView
t or below 30. For instance, SOL/USD recovered by as much as 51.50% a month after its daily RSI neared 30 in June. With growing rate cut possibilities in the US, traders may be eyeing a similar rebound in the coming weeks.
Should Solana’s rebound continue, its price will likely target $188.50—its May and July high—as its next upside target by September.
