January 19, 2019
First, a review of last week’s events:
- EUR/USD. One of the scenarios suggested that the pair would return to the limits of the medium-term lateral channel 1.1300-1.1500, and its central line was called as the main target. It is this scenario that was brought to life. It was already on Tuesday, January 15, that the pair reached the horizon of 1.1400 and then moved along its length up to the weekend, making oscillations in a fairly narrow range. At the same time, the pair was under constant pressure, which allowed the bears to lower it to the level of 1.1360 by the end of the working week.
The euro is falling for a number of reasons: this is the weak economic indicators of the Eurozone (first of all, Germany), and the decline in export potential, and chaos with Brexit. At the same time, an active game to increase the British pound has been underway recently, which also did not benefit the European currency;
- GBP/USD. Against the background of talk about a possible postponement of the UK’s exit from the EU and even the possibility of a second referendum, the game to raise the pound after the failure of Prime Minister Theresa May during the Brexit vote was particularly well seen in pairs such as EUR/GBP and GBP/CHF. As for the pound against the US dollar, having fought off on Tuesday from the level of 1.2667, it managed to rise by more than 330 points by Thursday, reaching a symbolic height of 1.3000. After that, there followed a strong rebound, and the pair ended the week almost at the same place where it started, in the zone of 1.2870;
- USD/JPY. The balance that emerged a week ago between the attractiveness of the yen as a safe haven and investors' interest in riskier, but also more promising investments, shifted towards the latter. As a result, the pair quotes went up, and by the end of the week, 109.76 yen were already being paid for the dollar;
- Cryptocurrencies. Paraphrasing the name of a famous novel, one can say: "All Quiet on the Crypto Front" Among the positive news is the plans of the Thailand Stock Exchange to obtain a license for operations with digital assets. However, the timing of this initiative is not yet known. The Constantinople hard fork in the Ethereum network is postponed indefinitely until the elimination of vulnerabilities. In general, there reigns a complete uncertainty. Even the ETC tokens stolen from the Gate.io Exchange were for some reason returned back by the attackers without explaining the reasons for their action.
On this blurred news background, the pair BTC/USD is flat. At the same time, the range of its oscillations, starting from Wednesday, is continuously decreasing. Following Bitcoin, Litecoin, Ripple, and other top altcoins also moved to the lateral movement. And even Ethereum managed to partially recover the loss. As a result, the decline in the ETH/USD pair in seven days was only about 5%.
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. Major investor concerns related to European currency have been listed above. However, not everything is so bad in Europe. Due to the low euro exchange rate, the PMI activity index no longer falls, and many factors point to the stabilization of the eurozone economy. In addition, the market is waiting for the promised ECB interest rate increase in early autumn 2019. As for the US dollar, here, on the contrary, the likelihood of another rate increase in the near term is practically nil. Further growth of the economy is also questionable. Experts believe that the political crisis and the current cessation of government work could lead to a fall in annual GDP of 0.5-0.75%.
All this allows 45% of analysts to talk about the possible strengthening of the euro and the upcoming trend change from bearish to bullish. The immediate goal is the central line of the two-month ascending channel in the 1.1450 zone, then the levels of 1.1500 and 1.1570. 15% of oscillators that give signals that the pair is oversold are in agreement with this scenario.
The remaining 85% of the oscillators, as well as 100% of the trend indicators on H4 and D1, are colored red. 55% of the experts Insist on the further decline of the pair as well. The support levels are 1.1300, 1.1270 and 1.1215.
The ECB decision on interest rates on Thursday, January 24 can be noted among the events of the upcoming week. However, with almost one hundred percent probability the rate will remain unchanged, and therefore this decision will not affect the quotes of the pair. Of much more interest is the speech of Prime Minister Theresa May at the Parliament of Great Britain, where she should announce her backup plan for leaving the country from the EU;
- GBP/USD. Naturally, everything connected with Brexit directly affects the quotes of the pound. And here there are plenty of options for further developments, which makes the British currency a risky and unpredictable asset.
What is the probability of elections? Will the May government change to the Corbin government? How possible is the hard “divorce” scenario with the European Union? And will the timing of “divorce” be postponed in accordance with Article 50 of the EU Treaty? Is there any chance of a new referendum? And wouldn't this referendum be the reason for large-scale protests and riots?
Questions, questions, questions ... And the complete uncertainty, which is fertile ground for rumors and all sorts of speculations. In such circumstances, 40% of experts believe that the pair still has potential for growth, 40% are waiting for it to fall, and the remaining 20% advise to wait for greater clarity, carefully watching the developments.
Support is in zones 1.2800-1.2830 and 1.2615-1.2645. Resistance levels are 1.2920, 1.3000 and 1.3070;
- USD/JPY. Most experts (60%), in agreement with 90% of oscillators, expect the continuation of capital outflows towards riskier assets and a fall in the yen. In this case, the pair can rise to a height of 110.30, and then another 100 -130 points higher - to a strong support/resistance level of 2017-18. in the zone 111.55.
An alternative point of view is supported by 40% of analysts, graphical analysis on D1 and 10% of oscillators, signaling the pair is overbought. The main support levels are 109.00 and 107.75;
- Cryptocurrencies. For the whole past week, the BTC/USD pair was trading in a very narrow range of $3,570-3,800. Very often, such a lull is a harbinger of strong price movements. 45% of analysts believe that the pair will try to break through the lower boundary of this channel, and, if successful, it is expected to decline to the lows of 2018 in the zone of $3,200-3,250. A bit more experts (55%), on the contrary, expect a rebound upwards. The goal is to return the pair to $3,850-4,215. The reason for this optimism is a certain increase in the capitalization of the crypto market, which, compared with January 13, increased by about 5%, approaching the mark of $130 billion.
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.