April 18, 2020
First, a review of last week’s events:
- EUR/USD. The number of applications for unemployment benefits in the United States has amounted to 22 million over the past four weeks. For comparison, this figure remained at the level of about 930 thousand in the previous few years. In other words, the unemployment has increased 23 times! The number of employed in the US was just over 150 million, so the losses caused by the COVID-19 crisis approached 15% of all jobs.
Major banks, such as Morgan Stanley and JP Morgan, have updated their forecasts and expect that the collapse of the US economy could reach a catastrophic 40%. And the head of the St. Louis Federal Reserve Bank, James Boulard, said that every third American will be left without work soon.
But things are not better in Europe, and this keeps the EUR/USD pair from sharp fluctuations. The actions of the Administration and the U.S. Federal Reserve to stimulate the U.S. economy also help the dollar. As a result, the maximum volatility last week was less than 180 points, which at present time can be considered flat. As for the final changes in quotes, the figure is even lower: the pair lost only 70 points in five days, ending the session at 1.0870;
- GBP/USD. The British currency also shows “Olympic calm”, even though both the IMF and domestic forecasts predict that Britain's economy may be among the most affected by the pandemic, and the decline in the GDP in the second quarter could reach 35 per cent.$ For the third week in a row, the GBP/USD pair returns to 1.2500 again and again. According to some experts, now, while the attention of investors is focused on S&P500 and the dollar, the pound received a respite after the collapse in the second decade of March and the subsequent correction.
As the graphical analysis on H4 predicted, the pound went up at the beginning of the week, reached a height of 1.2650, then turned around and sank to the horizon of 1.2400. The final chord sounded around the three-week Pivot Point, at 1.2500;
- USD/JPY. 60% of experts voted last week for further weakening of the dollar and decrease of the pair to marks around 107.00. This forecast turned out to be 100% correct: the pair reached its target on Wednesday, April 15, after which it rebounded and moved sideways in the narrow channel 107.15-108.05, completing the five-day period in its central part, at the level of 107.60;
- cryptocurrencies. It became known last week that the number of addresses, which store more than 1000 BTC, has increased to a two-year high. GlassNode agency experts said that cryptocurrency holders over the past two weeks have been actively accumulating positions in anticipation of the main coin halving. In their opinion, many investors are counting on a jump in bitcoin at least twice. But, GlassNode analysts warn, relying on such forecasts is not worth it, as the situation in the crisis caused by COVID-19 is changing daily.
Crypto scammers have also become more active against the background of the pandemic. The FBI even compiled a list of the most common types of such fraud, including blackmail with the threat of hacking personal data and collecting alleged donations to fight the coronavirus.
Interestingly, despite the increase in the number of transactions to the addresses of crypto-currency scammers, their income has decreased. According to Chainalysis. in early April, the amount of daily funds received by scammers was a little more than $400 thousand, while in January it was twice as much.
We noted in our previous forecasts that, starting from March 20, the main cryptocurrency has been unsuccessfully trying to gain a foothold above the $7,000 level. Last week was no exception. The battle of bulls and bears continues with varying success, keeping the main cryptocurrency in the channel $6,550-7,180. As for the total capitalization of the crypto market, it has not changed much during the week and is in the region of $200 billion. The Crypto Fear & Greed Index has not changed either. Having stopped at the level of 15 out of 100 possible, it still indicates the presence of a strong fear in the market.
Such top altcoins as Ripple (XRP/USD), Litecoin (LTC/USD) and Ethereum (ETH/USD), as usual, followed in the wake of the main cryptocurrency. Ethereum was slightly different, showing a 6.5% increase over the seven-day period.
As for the forecast for the coming week, summarizing the views of a number of experts, 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. If in the medium-term market expectations look rather gloomy, in the short term the plans to resuscitate the U.S. economy, announced by President Trump, have had a positive impact. The decline in the rate of coronavirus infection in the United States also helped. Some investors, having rejected macroeconomic data and forecasts, looked at the future with optimism, citing China as an example, where 100% of large companies and about 80% of small ones have already returned to normal operation.
At the moment, 60% of the experts, supported by 65% of the indicators on H4 and D1, expect the dollar to strengthen and the pair to fall to the level of 1.0750. The next target is a low of 1.0635. The remaining 40% of analysts still doubt the dollar, expecting the pair to grow at least to the height of 1.1000, and then, perhaps, 100 points higher.
Business activity in Germany and the Eurozone, as well as applications for unemployment benefits in the United States, are among the events of the upcoming week. All this data will be published on Thursday, April 23. The dynamics of orders for durable goods in the USA, which we will see on Friday, April 24, can also influence the formation of local trends;
- GBP/USD. On Thursday, April 23, business activity indicators will become known not only in Germany and the Eurozone, but also in the UK. In addition, unemployment data will be published on Tuesday, April 21, and the UK consumer price index on Wednesday, April 22.
As mentioned above, according to forecasts, this country may be among the most affected by the coronavirus, and unemployment can reach values comparable to the United States. The political and economic risks associated with Brexit have not been canceled either, there remains a lot of unresolved issues. However, investors hope that the final divorce from the EU will be postponed for a longer period or, at least in the current situation, the islanders will be able to trade better terms from Europe.
In this situation of uncertainty, the analysts' forecasts for the next week and month look equally uncertain: 15% of them vote for the growth of the pair, 25% - for its fall, and 60% simply shrugged. Indicator readings on H4 are also neutral, while on D1 75% of oscillators and 60% of trend indicators are colored green.
As for the graphical analysis, the picture here is somewhat different: on H4 and D1, it first draws a decline in the pair to supports 1.2335 and 1.2200, respectively, and then its return to the levels of 1.2500 and 1.2650;
- USD/JPY. The 107.00 zone has been a significant level of support/resistance for the yen for months and even years. It is close to it that the pair has been moving for the past few days. The vast majority of analysts (70%) predict that the pair will again try to break this level from top to bottom and, if successful, will drop to the 105.80 horizon. The next targets are 105.00 and 104.40.
Opponents of this development (they are 30%) believe that after the dramatic events of February-March, the yen has returned to the 107.60-110.00 corridor, where it will stay for the next few weeks. The nearest resistance is 108.40.
Indicators on both timeframes recommend opening short positions, but 15% of oscillators already signal that the pair is oversold;
- cryptocurrencies. - The head of Galaxy Digital Mike Novogratz said in an interview for Bloomberg TV, that the Bitcoin time has come. Less than a month is left before the halving, which is why investors should be prepared for serious changes in the cost of the main cryptocurrency, and if the optimistic scenario for sharing rewards for miners is implemented, now is the time to buy bitcoins. "If the trend continues, the capitalization of bitcoin will increase several times before halving," the billionaire believes.
Talking about the growing popularity of digital assets, Mike Novograts cites China as an example. But what will happen to bitcoin, when in addition to the paper yuan, there will also be a digital one? It is quite possible that it will pull on a significant share of investors' funds, primarily Chinese. So, in terms of the prospects of the main cryptocurrency, not everything is so rosy.
In addition, US authorities, whose goal is to restore the securities market, can also hinder the growth of bitcoin. “The USA are trying to rebuild the economy by all means, but the process can be delayed due to the pandemic and a number of other important circumstances, including the depreciation of the dollar. Due to the support of the fiat market, Bitcoin does not receive investor support,” said Dan Topier, a financier. In his opinion, the fall of bitcoin by 20% in March with a single case of drawdown by about 50%, speaks about increased correlation of the market of digital assets and securities. The connection of the main coin with gold and dollar is gradually decreasing.
Returning to the weekly forecasts and the possibility of the BTC/USD pair overcoming the resistance of $7,000, we note that 60% of experts vote for the pair's growth to the $7,200-7,800 zone. Interestingly, unlike Mike Novogratz, none of the analysts expect that the main cryptocurrency will be able to increase its value many times as a result of halving. The most ambitious forecasts barely reach the height of $9,000, and 35% of experts still expect the quotes to fall to the level of $5,700-6,000.
NordFX Analytical Group
Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.