September 8, 2018
First, a review of last week’s events:
- EUR/USD. As for the trends and their changes, the forecast given last week turned out to be absolutely accurate: starting from Tuesday, September 6, we saw the weakening of the dollar and the pair's growth, and the strengthening of the dollar and the fall of the pair at the end of the week, thanks to the positive data on the labor market in the US. As for the volatility, even despite the end of the summer, it was significantly lower than expected: the maximum range of fluctuations was only 130 points. The market reacted sluggishly even to the growth of NFP (Non-farm Payrolls) by 36.7% (from 147K to 201K), and as a result, the pair completed the five-day period at 1.1552, improving the dollar position by only 50 points;
- GBP/USD. Unlike the euro, the volatility of the pound, due to new statements by European officials on Brexit, is only growing, and amounted to over 240 points last week. The last jump of the pound was caused by the EU negotiator Michel Barnier's statements regarding the situation with the border between Great Britain and Ireland. As a result, as most analysts (60%) had assumed, the pair went north, reaching the level of 1.3025 by mid-Friday. However, later, driven by the news on the US labor market, the dollar played back 110 points, as a result of which the pair, similar to EUR/USD, returned to the values of the start of the week, having stopped at the level of 1.2915;
- USD/JPY. The forecast, which had been supported by more than 55% of experts, oscillators and graphical analysis on D1, suggested the movement of the pair in the side channel with a rather narrow range of 110.00-111.45. This scenario turned out to be quite accurate, with a certain tolerance: the pair stayed within 110.37-111.75, returning to the central zone of the corridor at the end of the week and finishing at 111.00;
- Cryptocurrencies. The forecast for BTC/USD had assumed first the growth of the pair to $7,760 (in reality, the pair rose to $7,400), and then a correction and a decline, but not below the level of mining profitability in the zone $6,000-6,230. In reality, the price of bitcoin fell to the support of 6.300, having lost about 15% in 16 hours. The situation with Ethereum is even sadder for the bulls: the pair ETH/USD has lost almost 30%, having fallen from the mark of 302.1 to 211.6. The price of Litecoin (LTH) has fallen by 22%, that of the Ripple (XRP) - by 20%.
There are two possible reasons for this: 1) the decision of ShapeShift crypto platform to enter the users' registration and to start collecting their personal data, and 2) the news (which later turned out to be a fake) that Goldman Sachs will not create a special unit for trading cryptocurrencies.
In fact, neither of these two pieces of news had any meaningful significance for the crypto market, these are just private solutions of private companies. But, as it has been said many times before, suffice the big players to wish to collapse the market, and they will always find an excuse for this.
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. From the point of view of fundamental analysis, the most important events await us on Thursday, September 13. The ECB's interest rate decision and the ECB's press conference are expected on that date. As for the interest rate, there are no surprises expected here. But as for the press conference, some information on the timing of the tightening of monetary policy in the Eurozone may sound, although this is unlikely to happen in the nearest future. This though cannot be said about the decisions of the US Federal Reserve.
On the same Thursday, the data on the US inflation will be published, the high rates of which have become a serious signal for raising the interest rate by the Fed. The market is almost 100% confident that this will happen in September. Traders and experts are waiting for an answer to the question whether there will be another increase in December.
Basing on these expectations, most analysts (60%) vote for the growth of the dollar and a fall of the pair. Graphical analysis on D1 and about 85% of oscillators and trend indicators agree with them. The nearest support is 1.1530 and 1.1400, the targets for the end of September - the beginning of October are 1.1300 and 1.1125.
The remaining 40% of experts believe that the correction of the pair is not over yet, and therefore it can move in the side channel 1.1530-1.1745 for a while. Graphical analysis on H4 and 15% of oscillators that signal the pair is oversold, agree with this;
- GBP/USD. Macroeconomic data from the UK will be released on Monday (GDP), and on Tuesday (pay), and again on Thursday, when the Bank of England will announce its decision on the interest rate. The rate is most likely to remain at the level of 0.75%, so it is not the rate itself that is of interest, but the number of votes given for its rise. And, traditionally, the market will closely follow the news about Britain's "divorce" from the European Union.
In this situation, the readings of trend indicators, as well as the opinions of experts, are divided in two equal parts. Oscillators do not give clear signals either: about 50% of them are painted in a neutral color, 25% are green, 25% are red.
As for the graphical analysis, it shows the further growth of the dollar and the decline of the pair first into the zone 1.2785-1.2800, and then even lower, to the level of 1.2660, on D1. As for H4, graphical analysis does not exclude that, before going south, the pair will move along Pivot Point 1.2935 in the horizontal channel 1.3035-1.3040 for several days;
- USD/JPY. The financial community paid attention to the article of James Freeman in the Wall Street Journal, which said, if briefly, that Japan will soon become a new target in the trade wars of Donald Trump. At such, Freeman refers to a personal telephone conversation with the US President.
So, Japan is on the brink of war, which it tried to avoid. If you add to this the increase in sales tax planned for the next year and dependence on the Iranian oil, the preponderance of forces is on the side of the Americans. The growth of wages and expenditures of households, leading inflation to the coveted bar in 2%, side with the Japanese.
So far, the experts' votes have been divided as follows: 55% are for the fall of the pair, 45% are for its growth. The indicators do not give any clear picture, and the graphical analysis on H4 draws the pair's oscillations within 110.30-111.80. When switching to the time frame D1, the oscillation range expands to 109.80-112.15;
- Cryptocurrencies. Most likely, bears will not stop there, and the pair BTC/USD will still try to break through the level of $6,000 and get close to this year's low in the $5.760 zone. Although it is possible that it will take a breather for some time, moving to the east in the corridor of $6,230-6,640. The next resistance is in the zone $6,895-6,985.
Roman Butko, NordFX