March 23, 2019
First, a review of last week’s events:
- EUR/USD. The Federal Reserve has left the interest rate unchanged, at 2.5%, and is no longer going to raise it this year. The Fed also lowered its forecasts for US GDP and inflation and raised the unemployment forecast for 2019-2021.
Such actions and statements of the American regulator confirm the start of a recession, which should negatively affect the US currency. As a result, the dollar fell to the mark of $1.1447 for 1 euro on Thursday, March 20. But then, instead of continuing to decline, it recovered in relation to almost all major currencies, and, above all, in relation to the euro. This happened due to disappointing data from Germany – PMI (business activity index in the manufacturing sector) in February was only 44.7 instead of the expected value of 48.0. This news caused concern about the global economic crisis once again and led not only to a depreciation of the euro, but also to a sharp drop in stocks and bonds. The pair EUR/USD lost 175 points in two days, and then, after a small rebound, completed the week at 1.1300;
- GBP/USD. The Brexit final stage is delayed. The pitiable finale for the pound is delayed as well. The British currency lost about 300 points in the first four days of the week, coming close to the level of 1.3000. However, the pigeon rhetoric of the US Federal Reserve Head Jerome Powell and the “help” from the EU, which gave Prime Minister Teresa May time until April 12 to resolve the issue of accepting her deal, allowed the pound to move a little away from the brink of abyss and finish the five-day close to a strong support /resistance level 1.3200;
- USD/JPY. Unlike its European “colleagues”, the past week was successful for the yen. Against the backdrop of expectations of a recession, a revision of macroeconomic forecasts and a fall in the value of stocks and bonds in the United States and Europe, the pair dropped to 109.70 by mid-Friday, March 22, and the final chord sounded at 109.90;
- Cryptocurrencies. All sorts of gurus continue to hypnotize the public with predictions of an upcoming rise of digital currencies. So, famous American venture investor Tim Draper believes that the massive transition to cryptocurrency will begin in about two years' time. And Tom Lee, a financial analyst and co-founder of Fundstrat Global Advisors, has given a shorter-term forecast, having said in an interview to CNBC that the bearish sentiment on the bitcoin market will be replaced by the bullish one within six months. The turning point, in his opinion, will be in August, and the BTC rate can easily reach $10-20,000.
In contrast to this, yet virtual, optimism, quite real pessimistic notes are heard. For example, the Chicago Board Options Exchange (CBOE), which once launched Bitcoin futures trading, has now refused to add new contracts.
On such a news background, as we predicted, the BTC/USD did not manage to break above the $4,150 horizon. The only hope for investors can be the fact that the pair did not fall below $4,000 for almost the entire week, which allows us to go on talking about an uptrend, albeit a weak one.
Also, the Litecoin (LTC/USD) has not left the limits of the ascending channel, the Ethereum (ETH/USD) is consolidating near the $139.00 horizon, and for the Ripple (XRP/USD), a 10-week Pivot Point can be considered the level of $0.318.
As for the forecast for the coming week, summarizing the opinions of a number of analysts, as well as forecasts made on the basis of a variety of methods of technical and graphical analysis, we can say the following:
- EUR/USD. The situation with this pair can be described as a complete ... uncertainty. On the one hand, the slowdown in US GDP, on the other - disappointment with the prospects for the German economy. The Fed’s refusal to raise the interest rate is playing against the dollar, and the endless uncertainty with the UK leaving the EU is playing against the euro. The yield on 10-year US Treasury bonds touched more than a year's bottom, but the yield on 10-year German bonds is on the verge of falling below 0%. US futures S&P 500 fell by 0.5%, and European stocks are in the red, approaching as for the main indexes to a loss of 1%.
This swing can be swung indefinitely. That is why the votes of experts this week have been evenly divided, 50 to 50. It should be noted that in the transition to the medium-term forecast, 70% of analysts are already on the side of bulls.
The graphical analysis on H4 draws first the rise to the level of 1.1380 for the coming days, then the fall to the level of 1.1175, after which the pair should return to the limits of the medium-term corridor 1.1215-1.1570.
As for the events of the coming week, we can note the speech of the ECB Head Mario Draghi on Wednesday, March 27, as well as the publication of the German consumer price index and annual data on US GDP on Thursday, March 28. Moreover, according to the forecast, the real value of GDP may be 0.2% lower than the previous one.
- GBP/USD. Prime Minister Theresa May asked the European Union to delay the exit of Britain from the EU until June 30, 2019. However, the EU has already said that the delay should be longer. Otherwise, there should be no delay at all. The transfer of Brexit for such a short time is a very undesirable option, as it simply prolongs the ambiguity, of which everyone is already rather tired, and which constantly puts pressure on the pound.
At the moment, most experts (60%) believe that the pair should test the level of 1.3000 again, and, in case of its breakdown, reach the bottom at the level of March 11 low, 1.2955.
An alternative point of view will be realized at the release of positive news regarding Brexit, in which case the pair can rise to the height of 1.3310. The following resistance levels are 1.3350 and 1.3 445;
- USD/JPY. The overwhelming majority of both trend indicators and oscillators on H4 and D1 are colored red. However, already 15% of oscillators on both timeframes signal that the pair is oversold. The graphical analysis on D1 speaks About a possible reversal of the trend to the north, according to its readings, the pair can return to the zone 110.75-112.15.
The opinions of the experts are divided as follows: 50% have voted for the pair to fall further, 30% are for its upward reversal and 20% are for its lateral movement. The formation of trends , as this have been happening recently, will be influenced by news regarding the course of the US-China negotiations and macroeconomic indicators from Europe and the USA, supporting or refuting the possibility of a new global economic crisis;
- Cryptocurrencies. The total capitalization of the crypto market has slowly grown to the value of last November, checking out on Wednesday March 20 at the height of $141.6 billion. It is possible that this is why, for the first time in a long time, 70% of the experts have not given gloomy forecasts, and limited to moderate optimism. In their opinion, the BTC/USD pair will not fall below $3,900 next week but will try to overcome the resistance of $4,200. However, in the transition to the medium-term forecast, the balance of powers changes, and here, as before, 70% of analysts side with the bears, voting for the decline of the pair in spring below $3,000.
Roman Butko, NordFX
Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.