September 23, 2018
First, a review of last week’s events:
- EUR/USD. Recall that most experts (55%) had voted for the further growth of the pair and its transition to the zone 1.1745-1.1845. This forecast turned out to be 100% true, and the pair fixed the weekly high at 1.1802 on Friday morning, having risen by 180 points in five days.
The main reason for the dollar to weaken was the hope that China and the United States could avoid a full-scale trade war. The devastating victory of the Americans became less obvious, and investors turned their attention to more risky assets and started to get rid of the dollar mass.
Another reason for the US currency fall was the delay in the deal between Canada and the US on the North American Free Trade Area (NAFTA). As for the upcoming interest rate raise on September 25-26, the market has already played this scenario long time ago. As a result, the dollar index fell to a two-month low. However, at the very end of Friday, the "buck" managed to win back a part of the losses, and the pair completed the week-long marathon at 1.1750;
- GBP/USD. 60% of experts, supported by the overwhelming majority of oscillators, trend indicators, as well as graphical analysis on H4, felt that the pair would continue its growth to the area of 1.3210-1.3315. That was how it all happened: the week high was seen on Thursday at height 1.3296. In addition to the factors listed above, the pound growth was facilitated by positive retail sales statistics in the UK and some progress on the issue of the Irish border at the Brexit talks.
However, the pound's victory over the dollar turned out to be short-lived, and it was on Friday, that, having broken through the support of the two-week rising channel, the pair collapsed by more than 200 points, returning to the mark of the beginning of the week at 1.3075. The reason is still the same: the uncertainty for Brexit;
- USD/JPY. While the dollar was weakening against the euro and the pound, it continued to strengthen against the yen. Interest in risk-free assets this week was falling rapidly, and, in addition to the American currency, the Japanese currency was on this list as well. And the yen, having a negative interest rate of -0.1%, topped this rating of UNattractiveness for investors, ahead of the dollar. As a result, the yen lost about 50 points to the dollar, and the pair ended the week at 112.60;
- Cryptocurrencies. As expected, the bitcoin stayed in the corridor between $6,000 and $7,000, compensating the drop in the first half of the week with a subsequent rise above $6,700. The end of the five-day week was to please the holders of almost all coins from the TOP-100, which moved into the green zone. But if the growth of the ethereum (ETH/USD) or the litecoin (LTH/USD) turned out to be rather weak, the ripple (XRP/USD) became the real star of the week, jumping up by almost 45%. The factors that contributed to its rise, include the hints of the Ripple management to launch a new product xRapid, the company's exit to the world's largest Asian money transfer market and the launch of its work in Africa.
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 coming week will be filled with a variety of events that can affect trends and exchange rates. As for dollar pairs, the most important of such events will be the Fed's decision on the interest rate. It goes without saying that the market has already prepared for its increase, but the volatility growth on Wednesday September 26 is still guaranteed. But if the rate remains unchanged by any chance, it will produce an explosion effect, and the dollar will collapse at a cosmic speed.
The final decision of the US Federal Reserve is still unknown. At the time of writing this forecast, the situation looks like this:
90% of the indicators, graphical analysis on H4 and D1, as well as 55% of experts vote for the growth of the pair. The nearest target is 1.1850, the next one is 100 points higher.
45% of analysts have given their votes for the strengthening of the dollar as well as 10% of oscillators that signal the pair is overbought. Supports are 1.1620 and 1.1530. The ultimate goal in the medium term is at the low of August at the level of 1.1300;
- GBP/USD. 55% of experts also vote for the growth of this pair, 30% are for its fall, and the remaining 15% have taken a neutral position. After a sharp fall on Friday September 21, the indications of trend indicators were divided almost in half, and 20% of the oscillators signal the pair is oversold.
As for the graphical analysis, it shows a possible fall of the pair to the level of 1.3000 on H4, and as for D1, the target of the week is the level of 1.2800, after which a rebound to 1.3020 may follow.
Resistance is at the levels of 1.3165, 1.3215 and 1.3300;
- USD/JPY. Theoretically, the formation of trends could be influenced by the Bank of Japan management meeting on Tuesday, September 25, but it is hardly worth waiting for any radical decisions from it.
Most analysts (60%) believe that the yen has already made too many concessions to the dollar, and now one should expect the correction of the pair down. Graphical analysis on H4 agrees with this as well as 10% of oscillators on D1, giving signals that the pair is overbought. Supports are at the levels of 111.70, 111.25 and 110.75.
An alternative scenario, the growth of the pair to the height of 113.20, is supported by 40% of experts, graphical analysis on D1 and 100% of trend indicators on H4 and D1. The following targets are 113.75 and 114.75;
- Cryptocurrencies. The crypto market desperately needs some positive news that can move it up. This can be the appearance of major institutional investors capable of pouring into it billions of dollars. However, some experts fear that such "whales" will very quickly supersede the small "fish" from the market, making the entire idea of decentralized finance doubtful. They name the launch of bitcoin futures last December, which laid the foundation for a massive collapse in the digital currencies rates, as an argument.
But the fears do not end there. For example, a meeting of Mt.Gox creditors is planned for September 26, where a chance to compensate the losses of former customers of this exchange by selling off reserves of 170 thousand BTC coins will be discussed. Nobody knows what can happen in this case. But it is enough to remember that in February-March this year, the bitcoin lost about 20% of the cost on the news of a similar sale. And if on September 30 the US regulator (SEC) rejects the application for the ETF launch, the rate of the model crypto currency may just as well collapse significantly below $5,000. The positive SEC decision (and even just a hint on it) could raise the pair BTC/USD above the $7,000-7,500 zone.
Roman Butko, NordFX