June 29, 2019
First, a review of last week’s events:
- EUR/USD. It was two weeks ago that most experts predicted the rebound of the pair up. The target for the bulls was to return to the level of 1.1350, and then rise to the zone 1.1420-1.1450. This forecast came true, if not by 100%, then by 99%: the pair recorded a local high at the height of 1.1411 on June 25. There followed a slight reversal after that, and, waiting for the results of negotiations at the G20 summit in Osaka, Japan, the pair turned into a sideways trend in the narrow channel 1.1345-1.1390, ending the working week at 1.1370;
- GBP/USD. After jumps of 250 points in the second decade of June, the British currency calmed down a bit, and the past week was relatively calm for it. The pair returned to the corridor 1.2650-1.2765 and finished the week near the strong support/resistance zone 1.2700;
- USD/JPY. The currency of the G20 host country, Japan, came close to the monthly Pivot Point as well. In the run-up to the meeting of US President Donald Trump and Chinese President Xi Jinping during the G-20 leaders meeting, demand for safe haven currencies fell slightly, pushing off from the low of the last 5.5 months at 106.77, the pair rose to 107.90 yen for 1 US dollar;
- Cryptocurrencies. “Bitcoin does not stop!”, some exclaim. “It is easily stopped,” others grin. One thing is clear: those who were the first to take the train leaving in the right direction and got off at the right stop can get a huge profit. Those who jumped into the last car or mixed up the trains will receive huge losses.
Bitcoin grew from $7,500 to $13,765 just in the last three weeks, that is, more than 80%. And then, in just two days, it crashed to $10,390, shrinking 25%. And the next day, again an increase of 15%...
Interestingly, at the time of the BTC fall by 25%, the capitalization of the crypto market declined by only 13% (from $367.42 billion to $318.61 billion). This suggests that many investors are in no hurry to take profits and get rid of their bitcoins but expect its growth to continue.
At the same time, analysts warn that one should not expect the same rise from altcoins. This is clearly seen even in the charts of the TOP cryptocurrencies, such as, for example, Litecoin (LTC/USD) or Ripple (XRP/USD). But Ethereum (ETH/USD) quite accurately repeats the dynamics of the reference coin.
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. Markets do not expect any breakthrough solutions from the work of the G20 summit. The bilateral talks between the leaders of the world's most powerful economies at this forum, and, first of all, the talks between Chinese leader Xi Jinping and US President Trump on Saturday June 29, are of much greater interest. Investors are hoping for a decrease in the intensity in the trading opposition of these countries, and if this happens, on Monday trading in the foreign exchange market may open with gaps.
\However, many analysts still look at this event calmly enough and believe that there will be no global truce in this war. Tariffs have affected 10,000 categories of goods from China, and one of the conditions voiced by Beijing, is the cancellation by the United States of all the existing duties. The probability that Trump will go to such a step is close to zero. The ban on cooperation with the Chinese company Huawei is unlikely to be lifted either. The parties will warmly smile at each other, shake hands, but hardly any of them will make serious concessions. Such a zero (or minimal) result of the meeting will allow Trump, on the eve of the presidential election in the United States, to announce his next “victory”, and for China to gain time.
In such a situation, the US Federal Reserve will become an important figure in this “chess game”, which, against the background of falling global stock indices, will still be forced to ease its monetary policy, which will lead to a weakening of the US currency.
The weaker US macroeconomic data, which will be released next week, may push the Fed to reduce interest rates. Indicators of the ISM business activity index will be known on July 1 and July 3, and data from the labor market (including NFP) will traditionally be made public on the first Friday of the month, July 05.
A quarter of experts believe that the Fed may cut rates by 25 or even 50 basis points very soon, at its meeting on July 31. The market hopes to get more accurate signals from the speeches of FOMC member Richard Clarida in Finland on July 1 and Fed Vice Chairman John Williams on July 2 in Zurich.
On the other hand, the political risks and economic problems of the Eurozone have not disappeared. And it is not excluded that the ECB will also undertake an additional package of measures to stimulate the economy, and this will happen at the meeting on July 25.
It is not possible to give any specific forecast for the upcoming week, since the opinions of the experts are almost equally divided. However, if you go to the monthly and medium-term forecasts, 75% of analysts believe that the pair will definitely make another attempt to update the lows of spring 2019 and still break through the support in the 1.1100 zone. The following targets for bears are 1.0900 and 1.0800. In the opinion of the remaining 25% experts, the 1.1100 zone is the limit of the fall, and the pair expects growth to the zone of 1.1530-1.1650.
As for the indicators, most of the trend indicators and oscillators on D1 are colored green. However, it is already 20% of oscillators that give signals that the pair is overbought;
- GBP/USD. British Prime Minister Theresa May gradually fades away, and her most likely successor, Boris Johnson, becomes the main newsmaker on Brexit. He stated last week that, becoming the head of the government, he would do everything possible to preserve the possibility of “hard” withdrawal of his country from the EU, without a deal. According to Johnson, such a threat will strengthen his position in negotiations with the European Union, and for this the politician is even ready to set a recess in the work of Parliament.
The markets have already reacted to such rhetoric by the pound falling against the euro. As for GBP/USD, here, most experts (65%) expect the British currency to further weaken, and the pair will fall first to 1.2475-1.2500 and then, during July, to January 3, 2019 low, 1.2400.
35% of analysts still keep optimism and hope for a positive course of negotiations with the EU. In this case, the pair will continue to move up. The immediate goals are 1.2775 and 1.2830, then 1.2930.
The compromise option in the form of cyclic movement on the channel 1.2500-1.2860 is offered by graphical analysis on D1;
- USD/JPY. As already mentioned, the most likely outcome of the meeting between President Trump and Chairman X on the G20 is the continuation of endless and fruitless talks between the two countries. In such a situation, global stock indices are waiting for a fall, US monetary policy is easing, and the dollar is weakening. Investors will naturally respond to all this by increasing the demand for defensive assets, including the yen.
However, this not a case for one day, and not even one week. In the meantime, only 40% of experts and D1 graphical analysis vote for the strengthening of the Japanese currency and the movement of the pair to the south. Another 30% turned their looks to the north, while the rest of the analysts just shake shoulders. Approximately the same situation is with the oscillators and trend indicators on D1.
Support levels are in zones 106.80-107.00, then 105.50-106.00. Resistances are at 108.85, 109.70 and 110.65;
- Cryptocurrencies. - Morgan Creek Digital's founder and partner, Anthony "Pomp" Pompliano has predicted the growth of Bitcoin to $100 thousand in his letter addressed to the company's customers. In his opinion, the probability of such a development in the next 2.5 years is 70-75%.
A similar forecast is given by a well-known trader and analyst Peter Brandt. “Bitcoin is looking at $100,000. The BTC/USD pair is going through the fourth parabolic phase since 2010. No other market has looked like this on logarithmic graphics in my 45 years of trading,” he writes.
But one of the Fundstrat Global Advisors founders Tom Lee as well as 45 experts believe that Bitcoin expects a powerful correction. And it’s not at all the fact that the fall of BTC / USD by 25% on July 26-27 was exactly that. Analysts do not rule out a decrease in the pair to $7,500-8,000.
As for the altcoins from the TOP-10, judging by the capitalization graphs, they are gradually losing ground to digital currency No. 1. Thus, it is only Bitcoin that has shown growth over the past 12 months, increasing its share in the total market capitalization from 41% to 66%. The share of the other coins either falls or, at best, remains at the same level.
P.S. As forecasted above, the meeting of US President Donald Trump with PRC President Xi Jinping on the final day of the Osaka summit did not put an end to the trade war. The leaders were able to agree only on a respite in the hostilities and the resumption of trade and economic consultations on the basis of "mutual respect and equality."
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.