August 11, 2018
First, a review of last week’s events:
- EUR/USD. No matter how you see President Trump, the US economic policy demonstrates obvious success. Forecast for the US GDP in 2018 grows together with stock indexes, and the unemployment rate should go down by the middle of next year to the lowest level for the last 50 years. As a result of the US-led trade wars, the economies of the Eurozone and China have already begun to experience serious problems. Strengthening the success, Donald Trump is likely to increase import duties further, which allows American producers not to be afraid of the dollar strengthening.
At the same time, 88% of respondents interviewed by the Wall Street Journal expect that the Fed will increase interest rates four times this year. And it also fuels interest in the American currency.
And then the Turkish lira has hit the euro. Against the deterioration in US-Turkish relations over the past few days, it has "dried up" with respect to the dollar by about 25%.
It's no secret that a number of major European banks are lending to the Turkish economy, and a sharp reduction in the price of its currency can create serious difficulties for them. This is what an article in the Financial Times said, fueling panic. As a result, starting from Thursday August 9, the pair EUR/USD has sharply gone down.
Recall that 70% of the experts had voted that the pair would go down to the medium-term support 1.1505, which was reached by the pair on Friday. But it did not intend to stop there and fell another 120 points, groping for the local bottom at the level of 1.1385. At the end of the week's session, after a slight rebound, the pair was traded in the zone 1.1410;
- GBP/USD. The future of the British pound looks even gloomier than a week ago. The statements of the British Secretary of State for International Trade Liam Fox about 60% probability of a hard version of Brexit sounded in unison with the speech of the head of the Bank of England Mark Carney and strengthened the pessimism of the market.
Last week, most analysts (70%) predicted a decline of the GBP/USD to the minimum values of the summer of 2017, which was what happened. The weekly low was fixed at 1.2720, and the end of the five-day period was at 1.2765;
- USD/JPY. The expansion of the trade war between the US and China, combined with the Turkish crisis, play into the hands of the Japanese yen as a safe haven. As a result, it won back about 35 points from the dollar, finishing the week at around 110.90;
- Cryptocurrencies. This market was still controlled by the bears. Moreover, their pressure has greatly increased. The market capitalization has fallen by about 10% and now stands at about $230 billion.
In our last week forecast, we indicated that the strongest support for bitcoin is in the $6,000-6,100 zone, the level when mining becomes almost unprofitable. This forecast was 100% true: on Thursday August 8, the pair BTC/USD reached the low at $6,125, after which it fought back and rose to the area of 6,500.
The Ethereum (ETH) lost about 14.5% in the week, Litecoin (LTH) - 22%, ripple (XRP) - more than a quarter of its value.
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:
- the main factors that determine the movement of dollar pairs for the near future, have been described above. As for the EUR/USD, 60% of analysts believe that the dollar will continue to strengthen, and the pair will go down. Graphical analysis on H4 and D1, most indicators agree with this development. The target is the zone 1.1120-1.1300.
On the other hand, 40% of the experts have voted that the pair will be able to stay in the echelon 1.1370-1.1515 in the near future, which is confirmed by signals that it is oversold, which are filed by 15% of the oscillators;
- GBP/USD. Zone 1.2770 is a fairly strong level of support/resistance, which the pair repeatedly tested in both 2016 and 2017.
55% of experts believe that the negative momentum of the pair will continue for some time, and it may drop to support 1.2675-1.2720. As for the remaining 45% of analysts, in their opinion, the pair is already expecting a corrective retreat to the upper boundary of the medium-term downward channel in the zone 1.2940. And only after having reached this height, it will turn around and continue its movement to the south. Both graphical analysis and 20% of oscillators that signal the that this pair is oversold agree with this scenario;
- USD/ PY. If you look at the graphs on the time frames D1 and W1, you can see the expected breakdown of the lower boundary of the medium-term channel, which began at the end of last March. It is still too early to consider this a breakthrough, but almost 70% of experts, supported by graphical analysis on H4, believe that the strengthening of the yen, as a safe haven, will continue, and the pair will drop to at least 110.30. The next support is 100 points lower.
On the other hand, the Pivot Point area of the last 12 months can be considered the zone of 111.60-110.80, which indicates the possibility of the pair rebounding upwards - to the resistance of 112.00-112.25, with which 30% of analysts and the graphic analysis on D1 agree;
- Cryptocurrencies. Negative sentiment in this market is constantly fueled by negative publications in the media. Thus, Nobel laureate Paul Krugman has predicted in his article in the New York Times, a complete collapse for the entire cryptocurrency market. The reason is the high cost of transactions with virtual money, which makes it unprofitable to use it in trading operations. According to Bloomberg, the volume of commercial operations with bitcoin around the world in May fell to a meager amount of $60 million.
Another publication, in the Wall Street Journal, confirms the version that the volatility of cryptocurrencies is not subject to any economic justification. For example, their rate is influenced by the actions of organized groups of "gray traders" that are created in social networks, such as Telegram. According to the WSJ version, 175 cases of such market manipulation were registered in half a year, when a sharp jump up of the cryptocurrency is followed by a sharp collapse. This manipulation has been called "Pump and Dump".
As for the near future of the pair BTC/USD, it is possible that it may linger in the $5.760-6.800 zone for some time. This is expected, of course, if the week does not bring any important news - either real, or "inflated" according to the " Pump and Dump" scheme. It is important to note that the level of 5.760 is the support that the pair could not overcome from the very beginning of its fall on December 17, 2017.
Roman Butko, NordFX