August 18, 2018
First, a review of last week’s events:
- EUR/USD. Most analysts (60%), supported by graphical analysis and indicators, expected the pair to fall to the 1.1120-1.1300 zone. And indeed, the pair reached the level of 1.1300 on Wednesday August 15, but did not go lower, turned around and returned to zone 1.1400 by the end of the week .Analysts call the stabilization of the situation with the Turkish lira as one of the main reasons for the trend change, although they do not rule out that the lull is temporary, and soon the storm will come again;
- GBP/USD. 45% of experts, supported by 20% of the oscillators, who signaled that this pair is oversold, were expecting a correction, which occurred earlier this week: on Tuesday the pair rose to the level of 1.2825. However, the main forecast was that the downward trend will continue. Problems with Brexit have not gone away, so most analysts agreed that the pair would reach the zone 1.2675-1.2720 in its fall last week. Taking into account the standard backlash, this forecast also proved to be absolutely correct: the pair found the local bottom at 1.2660, and completed the five-day session at the mark 1.2745;
- USD/JPY. The expansion of the trade war between the United States and China continues to play into the hands of the Japanese yen as a safe haven. There was a hint for breakdown of the lower boundary of the medium-term rising channel of the pair in the first half of August, which began at the end of March this year. At that time, it was still too early to consider this as a real breakthrough, but almost 70% of the experts voted that the strengthening of the yen would continue, and the pair would drop at least to the horizon 110.30. This forecast was accurate as well: the minimum value of the week was fixed at 110.10, and the final chord sounded in the zone of 110.50;
- Cryptocurrencies. News from the bitcoin battlefields can be considered positive: the pair BTC/USD could not break the level of 5.760 and, as we predicted, it stayed in the corridor of $5.760-6.800. And this was despite a powerful correction, as a result of which the crypto market capitalization dropped to $189 billion at the beginning of the week. The main reason for this BTC "stability" is that mining becomes almost unprofitable below the $6,000-6,100 zone, and most miners are working on the recoupment verge right now. That is why 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.
Litecoin (LTH), ripple (XRP) and many other top coins have regained their positions after a fall in the middle of the week. The second largest crypto-currency, Ethereum (ETH), has gone up, but it is much more difficult to do it for Ethereum than for its "colleagues". Its own popularity played against the Ethereum. According to the Invest in Blockchain study, 60 of the 100 largest crypto-currencies are not based on a working product, not mentioning smaller tokens. And, recall, most ICOs were held basing on ETH, and now few successful projects are rushing to cash their Ethereum, fearing further decline of the market.
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 main factors determining the movement of dollar pairs in the coming week will be the next stage of negotiations between the US and China, as well as the Federal Reserve head Jerome Powell's speech at the economic symposium in Jackson Hole.
The investors do not pin hopes on the US-China talks. But they expect some clarity from Powell regarding the policy of quantitative tightening and raising interest rates. According to a number of economists, if instability in world markets continues, it could lead to a crisis in emerging markets, and that, in turn, will lead to a new global financial crisis. And the current problems of Turkey are just the first sign.
In the meantime, the experts' opinions are divided as follows: 55% of them, supported by graphical analysis and oscillators on D1, are for the further fall of the pair, 45% along with graphical analysis and oscillators for H4, are for its growth. In this case, it should be taken into account that on H4, it is already 10% of the oscillators that signal the pair is overbought.
The nearest target for the bulls is 1.1525, the following targets are 1.1575 and 1.1630. The bear target is the zone 1.1270-1.1300, then a support follows at 1.1165;
- GBP/USD. It seems that even the impressive volume of retail sales cannot assist the British pound: fears about the tough scenario Brexit outweigh everything. Most analysts (60%) predict further strengthening of the dollar and decline of the pair first to the level of 1.2660, and then on to zone 1.2600.
An alternative point of view is expressed by 40% of experts who expect a correction and a return of the pair to the upper boundary of the medium-term downtrend channel, 1.3010. Intermediate resistance levels are 1.2825, 1.2910 and 1.2950. It is important to note that when we move from a weekly forecast to a monthly one, the number of bulls' supporters among experts increases from 40% to 65%;
- USD/JPY. Despite the fact that it is already 15% of the oscillators that signal the pair is oversold, the overwhelming majority of experts believe that the global trends, or rather, the economic wars unleashed by US President Trump, will determine the trends in this case. They are expecting continued mutual reproaches and threats to introduce new import duties from the upcoming US-China talks, and therefore the demand for the yen as a safe haven will grow. 75% of analysts expect the pair to fall into the 109.00 zone, and only 25% voted for its return to the levels of 111.00-112.00. The next target is the height of 113.15.
If we talk about the medium-term forecast, 65% of experts are confident that the pair will not be able to overcome the very strong support of 2017-18. in the 108.00 zone in its fall and will eventually return to the upper boundary of the two-year horizontal channel 114.45;
- Cryptocurrencies. Negative sentiment continues to dominate this market, severely limiting the new investment flow. However, the growth of capitalization in the second half of the previous week higher than the $204 billion mark is a good signal: traders continue to buy bitcoin and altcoins in times of recessions. Nevertheless, you cannot call such trades long-term investments. Rather, it is intraday and intraweek trade, when traders quickly close their bullish positions. That's why it will be difficult enough for bitcoin to rise above the resistance of $6,830. Any significant positive news may serve as the driver in this case, thanks to which the pair BTC/USD will be able to move to the level of $6,850-7,150.
The breakdown of the support of $5.760 will, most likely, be a very strong signal for the mass sale of cryptocurrencies. Although, according to experts, such a scenario is unlikely in the near future for the reasons described in the first part.
Roman Butko, NordFX