February 17, 2019
First, a review of last week’s events:
- EUR/USD. Recall that the expert community was not able to form a more or less definite opinion on the movement of this pair last week. This was due to the lack of clarity on both Brexit and the US-China negotiations. In addition, analysts were waiting for the release of data on GDP in Germany and the EU, as well as inflation and retail sales in the US. And if Europe showed an expected growth of 1.2%, and Germany rose by 0.2% (from -0.2% to 0.0%), the data from the USA caused a strong alarm in the market. Retail sales fell by 1.2%, the maximum value in 10 years. As a result, the dollar index suspended growth and moved away from two-month highs.
The dollar has also stopped growing to the European currency. However, if we sum up the results of the whole five-day week, the victory nevertheless remained with the “American”: having started from the level of 1.1320, the pair finished the week at the level of 1.1295;
- GBP/USD. Pound is falling for the third week in a row. The problems associated with Brexit have been supplemented by poor macroeconomic indicators indicating a slowdown in the country's economy: the GDP growth has declined compared to the previous quarter from 0.6% to 0.2%, and the consumer price index fell by 0.3%. As a result, the pair recorded a weekly minimum at 1.2770 on Thursday.
Then the statistics on the US economy came out and turned the trend from south to north. As a result, the British pound was able to win back 115 points from the dollar and complete the week at 1.2885;
- USD/JPY. The Japanese currency was losing ground throughout the first half of the week, reaching the value of 111.12 yen per dollar. But then, against the background of the fall in the stock market due to the weak economic data from the United States and the US-China talks that once again reached a deadlock, the pair made a sharp reversal. Increased appetites for risk-free investments allowed the quotes to lower to the level of 110.25, after which a correction followed, and the pair froze at 110.45;
- Cryptocurrencies. Last week, answering the question of whether the Bitcoin jerk to the height of $3,800 could be considered a harbinger of a storm, we noticed that the pair had just returned to the consolidation line (or Pivot Point), along which it has been moving for 11 weeks, beginning in late November 2018. And we were right: the consolidation continued, and the pair kept in a very narrow side corridor of $3,630-3,750 for the whole, already the 12th, week.
The total capitalization of the crypto market has also remained almost unchanged. If it was at the level of $121.78 billion on Friday, February 9, after seven days it was equal to $120.16 billion. As for the top altcoins, in contrast to the reference cryptocurrency, they showed a somewhat greater volatility. So, for example, the fluctuations range of Litecoin (LTC/USD) was about 15%, and of Ripple (XRP/USD) - about 7%.
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. Not the rosiest economic situation in Europe is on one side of the scale, on the other is the collapse of stock indices and trade wars in the United States. JP Morgan and Macroeconomic Advisers lower their forecasts for the US GDP growth. And BofA Merrill Lynch and Bloomberg raise their forecasts for the Eurozone. In their opinion, the zero growth of Germany’s GDP is a temporary factor, and in the case of the soft Brexit and improvements in the Chinese economy, Germany, together with the rest of Europe, will turn to sustainable economic growth. All this, together with the desire of the Fed to take a pause in monetary tightening, gives the market a reason to believe that the measures of the regulator are late, the recession in the US is not far off, and the balance will swing to Europe. In this case, the pressure on the dollar will increase. But this is for the future.
In the meantime, 70% of experts, supported by indicators on D1, expect the dollar to strengthen and the EUR/USD downtrend line to continue. The immediate goal is 1.1200. The following support is located in the zone 1.1085-1.1115.
The opposite opinion is held by 30% of analysts and graphical analysis on D1, who believe that problems in the US economy will force the dollar to lose ground in the near future. In this case, the pair will return to the limits of the medium-term corridor 1.1300-1.1500 and rush first to its central and then to the upper border;
- GBP/USD. The forecast for this pair for the coming week is similar to the forecast for the pair EUR/USD. Here, also, 70% of experts, along with 90% of oscillators and trend indicators on D1, expect the pair to fall, and 30%, along with graphical analysis, show its growth. The inevitably approaching hour of divorce from the EU under still incomprehensible conditions, sides with the former. The latter have those problems of the United States, about which much has already been said above, on their side. Support levels are 1.2830, 1.2715, 1.2655, resistances are 1.2925, 1.3000 and 1.3065;
- USD/JPY. If the US dollar feels good enough against the euro and the pound, this cannot be said about the confrontation with the yen. The positive dynamics of the Japanese currency as a safe haven may continue with a further deterioration in the global economic outlook and a decrease in risk appetites.
Experts' opinions have divided in half regarding the nearest future of the pair, but in the transition to the monthly forecast, 65% of analysts vote for the strengthening of the yen. The support levels for the pair are 110.00, 109.60, 109.10, 108.50. The resistance levels are 110.65, 111. 25, 112.30, 113.70;
- Cryptocurrencies. As analysts say, there are no fundamental factors explaining the Bitcoin jump to the height of $3,800. So, most likely, this upward impulse will not develop further. 65% of experts believe the most likely movement of the BTC/USD pair is in the range of 3,500-3,300 with a gradual decrease to the level of $3,000. The remaining 35% of analysts have an opposite point of view, expecting the pair to be able, at least for a while, to rise 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.