July 18, 2020
First, a review of last week’s events:
- EUR/USD. Relations between Beijing and Washington continue to heat up, the onslaught on coronavirus goes with great difficulty. 1.3 million people applied for primary unemployment benefits last week in the United States. For more than 17.3 million it was not the first time that they received them, which is 10 times higher than the pre-crisis norm. But at the same time, the risk appetite of investors does not fade away, the stock markets continue to grow. The S&P500 index has been climbing since March 23 and is already approaching February highs. The Nasdaq 100 has broken all records, jumping over the 10,650 mark.
Some analysts attribute this to low expectations of a post-crisis economic recovery. Investors had expected to see a complete disaster, but everything turned out to be not so bad, and 80% of the companies that reported showed very optimistic results, fueling the craving for risky assets.
Amid the growth of the stock market, the US dollar as a safe-haven currency is not so attractive. If in March its USDX index, showing the ratio of the dollar to a basket of six major currencies (EUR, JPY, GBP, CAD, SEK and CHF), was approaching at 103, it has now fallen below 95.
The dollar weakened against the European currency as well. Since Monday the EUR/USD has gone up steadily. However, it fell slightly short of the 1.1500 height predicted by the Bloomberg probability calculator, and stopped at 1.1450 on Wednesday, July 15. A day later, on July 16, following the ECB meeting, a slight rebound followed, but then the dollar retreated again, and the pair ended the five-day period at 1.1435;
- GBP/USD. The absence of any significant drivers last week led to the British currency moving into a side trend, gradually consolidating in the 1.2560 zone. The pair failed to rise above the resistance of 1.2670 and fall below 1.2480, and as a result it placed the final chord almost in the middle of this corridor: at 1.2570;
- USD/JPY. The share of the Japanese currency in the USDX is not so large - only 13.6%, but some analysts consider the behavior of the USD/JPY pair to be a good indicator that determines the risk appetite of the markets. However, it should be noted that during the COVID-19 pandemic, the dollar has sharply strengthened its position as a protective asset, and it has become much more difficult to use this indicator. So last week it gave almost no signals. The pair demonstrated a classic sideways trend of two parabolic waves within 106.65-107.40, completing the trading session in the central part of this channel, at the horizon 107.00
- cryptocuencies. News of the week: The night of July 16 saw the largest hacking attack in Twitter history. Crypto scammers hacked over 50 accounts, including profiles of Tesla and Space X CEO Elon Musk, Microsoft founder Bill Gates, Amazon CEO Jeff Bezos, musician Kanye West, former U.S. President Barack Obama, current Democratic presidential candidate Joe Biden, Wall Street legend billionaire Warren Buffett, as well as Bloomberg, Apple and Uber, official profiles of Bitcoin, Ripple, Cash App, Coindesk, Coinbase and Binance. There appeared reports of bitcoin giveaways on all of these pages. The scammers acted according to the classic scammer scheme: they asked to send them a certain amount of cryptocurrency, promising to return twice as much.
Although the real account owners and social network employees tried to delete these messages, they immediately appeared again. Even the two-factor authentication used for most of these accounts did not help.
This hacking attack is called by many a coordinated attack on bitcoin and Twitter, whose founder is a well-known supporter of the first cryptocurrency. However, bitcoin hardly noticed this event. The bears failed to break through the $9,000 level, and the BTC/USD pair rose to $9,180 by the evening of July 17.
The main cryptocurrency continues to consolidate after the May halving, the amplitude of fluctuations did not exceed $ 350 last week, which, together with a decrease in trading volume to $15 billion, suggests that most players are not interested in the current levels: they see no reason to open either long or short positions. Bitcoin's Crypto Fear & Greed Index is at 41 for the third week in a row.
There is another interesting version. According to Paolo Ardoino, technical director of the Bitfinex crypto exchange, the reason for the decrease in the bitcoin volatility could be an increase in the number of companies engaged in high-frequency trading (HFT). So, according to him, 80-90% of trading volumes on Bitfinex for the BTC/USD and ETH/USD pairs are generated precisely due to this type of transactions.
Speaking of Ethereum. We have repeatedly written about the increase in investor interest in this altcoin, quotations of which have increased by almost 80% since the beginning of 2020. In addition, ΕΤΗ shows more than twofold growth in the number of active wallets and is seriously ahead of BTC in this indicator. However, in order to catch up with the leading cryptocurrency, it is necessary that the capitalization of Ethereum grow by more than 6 times, which, of course, is hardly possible in the near future.
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. The ECB left the interest rate unchanged at 0.0% on July 16. A day earlier, the Bank of Japan remained in the same positions with a negative rate of -0.1%. Of course, when the pandemic comes to an end, inflation figures and which regulators will start raising their interest rates faster will play a decisive role. In the meantime, factors directly related to COVID-19 continue to play a crucial role on market sentiment.
Recall that a week ago the Bloomberg probability calculator, based on the options market readings, showed that the EUR/USD pair is more likely to rise above 1.1500 than fall below 1.1200. And now this forecast is supported by 80% of experts, pointing to the zone 1.1470-1.1530. Only 20% expect the pair to decline to the area of 1.1200-1.1300.
75% of oscillators and 95% of trend indicators on H4 and D1 are also painted green. The remaining 15% of the oscillators give signals that the pair is overbought. Graphical analysis on H4 expects the pair to grow up to 1.1500 as well, after which, according to its readings, it should return to the 1.1385 zone.
There is such a strategy - to trade “against the crowd”, that is, see where most traders are looking, and do the opposite. The current nearly unanimous “green” sentiment “for some reason” makes us remember it...
- GBP/USD. The vast majority of experts (70%) expect that market interest in protective assets such as the dollar will continue to weaken, and this will help the GBP/USD pair to continue its northward movement, which began on June 30. The main goal is the high of June 10, 1.2810, the resistance is located at levels 1.2670 and 1.2740. Bullish sentiment is supported by 60% of oscillators and trend indicators on D1. As for their readings on the H4 timeframe, there is complete confusion caused by the sideways trend of the past week.
The remaining 30% of analysts support the pair's fall. Support levels: 1.2480, 1.2350 and 1.2250;
- USD/JPY. Except for a single release on June 02-05, the pair has been moving in the lateral corridor 106.00-108.10 for 14 weeks, and, according to experts, is not going to leave its limits yet. Moreover, this channel has narrowed even more in the last week, to just 75 points. In such conditions, opinions of experts were divided equally, 50% by 50%, but indicators on D1 give priority to the bears: 85% of oscillators and 100% of trend indicators are painted red.
They are opposed by 15% of oscillators giving signals about the pair being oversold and graphical analysis on H4, confidently indicating the height of 108.10;
- cryptocurrencies. As usual, first about crypto guru predictions. - Max Keiser, the founder of Heisenberg Capital, told the world about the day when the first cryptocurrency will destroy all other coins, as well as which of these coins is "outright garbage". Bitcoin will rise to $100,000, the billionaire said during his Keiser Report show on the Russia Today channel. He noted that the first cryptocurrency will destroy all other projects this or next year, including the XRP token, which is, in his view, “outright garbage.” Keiser was sharply critical of the projects that received government subsidies from the US government during the crisis. This list includes 75 companies related to the field of blockchain and cryptocurrencies.
A more modest forecast was made by economic bestselling author Robert Kiyosaki, stating that the BTC/USD pair could reach $75,000 within the next three years.
But Weiss Crypto experts said that the cost of bitcoin will reach $70,000 by 2021. This can be indicated by the Stock-to-Flow model that the main cryptocurrency has chosen. It implies measuring the ratio of the value of an asset to its annual growth. Even if the coin quotes are almost unchanged, it remains promising for long-term investments.
According to the experts, if the Stock-to-Flow model is maintained, the value of bitcoin will approach the $50,000 mark by the end of this year. A slight downward correction is possible in January, which happens almost annually. A return to positive dynamics will follow, but it could end with an even stronger drawdown. If traders and investors survive the losses and do not arrange a massive sale of bitcoins, the value of the main coin will be about $70,000 by the middle of next year.
As for forecasts for the next week, the vast majority of analysts (55%) expect the pair to rise to the zone of $9,400-9,700. 10% are in favor of the pair's movement in the channel $9,000-9,400, and 45% think that it could drop to the $8,400-8,700 zone.
And at the end news for skeptics claiming bitcoin faces an imminent collapse to the zero mark. "This will never happen!" – this is what crypto entrepreneur Alistair Milne decided and placed a bid on the Bitfinex exchange to buy 18.52 million BTC ($174 billion at the current exchange rate) at the price of 1 cent for 1 coin. “I hereby confirm that bitcoin will never go down to zero,” Milne wrote. “I buy them all at $0.01.” Milne's application amounted to $185,000 - that's the money for which you can now buy only about 20 bitcoins.
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.