February 9, 2019
First, a review of last week’s events:
- EUR/USD. One of the development scenarios, supported, however, by only 30% of experts, suggested a decline of the pair to the lower border of the medium-term side channel 1.1300-1.1500. This is what happened: having lost about 130 points, the pair recorded the week low at the level of 1.1320.
The reason for the strengthening of the dollar and, as a result, for the fall of the pair, was the growth of anti-risk sentiment due to increased pessimism in resolving the US-China trade conflict and not the most favorable expectations for economic growth in the Eurozone. Thus, the European Commission, talking about "significant risks", has substantially lowered its forecast for the GDP growth from 1.9% to 1.3% in 2019 and from 1.7% to 1.6% in 2020. Such an adjustment has significantly pressured the euro, making the market understand that it is not worth expecting an increase in interest rates this year;
- GBP/USD. In unison with the European Commission, the Bank of England also declared that its previous forecasts were too optimistic, and the lack of clarity with Brexit is a burden for the country's economy. The Bank specialists expect the growth rate to be the lowest in the last 10 years, as a result of which the UK GDP forecast for 2019 has been lowered from 1.7% to 1.2%.
The pound sank sharply on this negative news and, as 65% of the experts had expected, the pair reached 1.2850. Then it rose a little against the background of an article about possible progress in negotiations on the British exit from the EU and special conditions for Ireland, and then sank again and completed the five-day period at 1.2940;
- USD/JPY. The majority of analysts (70%), supported by graphical analysis on D1, had expected strong fluctuations of the rate and the fall of the pair to the zone 108.00-108.55, after which it should return to the horizon 110.00. However, contrary to forecasts, the pair behaved very calmly, and the maximum amplitude of its oscillations did not exceed 60 points. For the third week in a row, time after time, the pair returns to the zone of 109.55-110.0 0. This time again, starting the week session at the level of 109.55, the pair completed it at the level of 109.75;
- Cryptocurrencies. We divided the experts into two groups last week. The first is those who believe that the current calm is the calm before the storm. The second one thinks is that it is a lull before ... even more calm. All week, Bitcoin quotes were falling smoothly and quietly, reaching a low of $3,400 on Wednesday, February 6. Then a very sluggish “side” followed, and Friday afternoon it “jerked”: the BTC/USD rushed up, in a matter of hours adding about 12% and reaching the level of $3,800.
Is this a precursor of a storm? If you look at the graph H1, of course it is. However, everything is not so impressive on the daily timeframe: the pair has just returned to the consolidation line (or Pivot Point), along which it has been moving for 11 weeks already, starting from the end of November 2018.
The reason for the growth was an interview fragment published in Tweeter of one of the four SEC commissioners, Robert Jackson, who said that the US Securities and Exchange Commission may still allow the launch of Bitcoin-ETF funds.
Following Bitcoin (BTC/USD), the rest of the top cryptocurrencies went up. The greatest growth was demonstrated by Litecoin (LTC/USD), adding at its maximum 40% and reaching the price of $46.0 0. Ethereum rose to the level of $124.70, and Ripple (XRP/USD) reached a height of $0.3250.
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. It is clear that after the week-long rally to the south, most of the indicators are colored red. However, already 25% of oscillators on both H4 and D1 give signals the pair being oversold, which means at least an upcoming strong correction, if not a complete reversal of the trend.
A graphical analysis for the next five days draws lateral movement in the range of 1.1285-1.1400, after which the pair should return to the upper boundary of the medium-term channel in the 1.1500 zone by the end of the month.
The expert community has not yet decided: 50% expect the pair to fall, 50% see its growth, which is due to the lack of any clarity both on Brexit and on the US-China negotiations. In addition, the events of the coming week can make their own adjustments. here we should bear in mind the publication of data on GDP of Germany and the EU on Thursday, February 14, as well as on inflation and retail sales in the US on February 13 and 14.
Also, on Tuesday, February 12, the market will look for signals from the head of the Federal Reserve J. Powell regarding a possible increase in interest rates. Meanwhile the level of recession expectations in the United States has risen to 20%, and it is possible that the issue of interest rates will be postponed until better times. EU and UK regulators are also constantly talking about the risks to economic growth, which should entail easing monetary policy.
According to many experts, this gives reason to think about buying stocks on the stock market, because slowing economic growth while maintaining cheap money can lead to an increase in their prices. Here it makes sense to pay attention to portfolio investments in shares of the most reliable and promising global companies that are offered to their clients by the brokerage company NordFX;
- GBP/USD. On Monday, February 11, data on GDP will be published, and on Wednesday, February 13, there will be data on inflation in the UK. Most likely, they will indicate a slowdown in the growth of the country's economy, as already mentioned above. Thus, according to forecasts, GDP growth will decline compared with the previous quarter from 0.6% to 0.2%. But, like many months in a row, news and rumors about Brexit will have a major impact on quotes.
There is another category of rumors, that some international companies are buying the British currency, which Bloomberg hinted at carefully, and this gives the pound some support.
At the moment, 60% of analysts have voted for the pound strengthening and rising of the pair to the horizon of 1.3040, and then another 80-100 points higher. The remaining 40% of experts, on the contrary, expect the pair to drop to at least the level of 1.2830. But the graphical analysis on H4 has taken a compromise position, indicating that the pair can first decline to the level of 1.2830, and only then go to growth, reaching the height of 1.3040;
- USD/JPY. The prevailing color is gray, that is, neutral, both with experts and indicators. The strengthening of the US dollar against major world currencies is on one side of the scale. On the other, there are increased risks of a slowdown in the global economy and another round of tension between the United States and China, which entails an increase in demand for a safe haven currency such as the Japanese yen. The pair managed to keep in a very narrow range of 109.55-110.15 for the whole week, which indicates the complete uncertainty of the market and does not allow to make any predictions for the moment;
- Cryptocurrencies. The full interview by SEC Commissioner Robert Jackson will be released this week and its content may both push the quotes further up or have the opposite effect. After all, whatever you say, but the Securities and Exchange Commission has almost 240 days to make a final decision on the application to launch Bitcoin-ETF, and during this time a lot can change.
In the meantime, experts call its movement in the $3,250-3,800 range as the main scenario for the BTC/USD. However, they do not exclude the short-term breakdown of the upper limit and the rise of the pair to the level of $4,000.
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.