First, a review of the events of the past week:
The last week of April was marked: the meeting of the Federal Reserve, as well as the publication of data on the gross domestic product of the United States and the eurozone.
As for the US Federal Reserve, the outcome of its meeting was expected. The interest rate remained unchanged at 0.25%. The size of the quantitative easing program remained the same, $120 billion per month. Regulatory Authority Chairman Jerome Powell spoke almost word for word about what we wrote in previous forecasts: While the pace of the US economic recovery is impressive, this is not entirely enough to talk about scaling back fiscal stimulus. So far, everything is somewhat shaky, and the acceleration of inflation, according to Powell, is a temporary factor, and the number of employees is still 8.5 million less than it was in February 2020.
On the other hand, US GDP growth in the first quarter was higher than expected and reached 6.4% (versus 4.3% in the previous quarter), showing the best dynamics since 1984. The country's economy needs to add only 1% to reach the pre-crisis And, most likely, he will fully recover even before the beginning of July.
These strong statistics led to an increase in the US Treasury yield. But that didn't help the dollar much until the end of the week, as European bonds were also growing. Germany's 10-year debt rates are at their highest since March 2020.
The gap between the US and the EU regarding the speed of return to pre-crisis indicators may soon be narrowed. European Central Bank President Christine Lagarde said on April 28 that “there is already visible light at the end of the tunnel with the acceleration of vaccination in the European Union” and the economic recovery is expected to accelerate in the second half of the year.
As a result of the above, the fight between the bulls and the bears on the EUR/USD pair has continued with mixed success throughout the week. Strong inflation expectations continue to weigh on the dollar. President Joe Biden continues to flood the economy with massive amounts of money. After the $1.9 trillion stimulus Congress has already approved, $2.25 trillion in infrastructure development and $1.8 trillion in social support await their turn. As a result of such steps by the US administration, the dollar fell and the EUR/USD pair renewed its two-month high on Thursday, April 29, reaching 1.2150.
With that, the US Treasury sold $130.6 billion worth of debt securities there. This withdrawal of liquidity from the financial system provided additional support to the US currency. As a result, the pair completed the five-day period well below the start of the week, at the 1.2020 . level
pair GBP / USD
Presenting last week's forecast for the pair, 45% of experts voted for it to move north, 35% south and the remaining 20% east.
As expected by most of them (45%), the pound has been strengthening its positions in the first four days, and investors are starting to hope that the GBP/USD pair will break the 1.4000 level again and return to steady growth, as it was from the end of March 2020 until the end of February 2021 However, after reaching 1.3975, its movement stopped, and the bearish pressure intensified, and collapsed lower at the end of the week as 35% of analysts expected. The pair reached a local bottom at 1.3800, boosted by the results of the auction held by the US Treasury. This was followed by two small bounces and an end at 1.3810, which can be considered the pivotal point of the past nine weeks. So, 20% of the experts who voted for the pair's sideways trend were also satisfied.
pair USD / JPY
It has already been said that the US government bond yield was the main indicator for this pair. Which has been growing over the past week. The dollar grew with it against the yen. As a result, the USD/JPY pair rose above the 109.00 level and, after adding 145 pips, completed the trading session at 109.30
In our forecast seven days ago, we wrote that the main task of the bulls last week will be to keep the BTC/USD pair in the $50,000 area. They succeeded despite the difficulty. Despite the fact that the price dropped to $47,000 on April 25, it managed to rise again to the $50,000-55,000 region. Investors and speculators are actively buying from the downside, counting on more profits. And if the total value of the cryptocurrency market was at the level of $1.750 trillion on April 26, it has already reached $2.110 trillion on the last day of the month.
Although not much, the news background helped the bulls. Therefore, as we mentioned on CoinDesk, the American financial giant JPMorgan decided to launch a fund focused on Bitcoin. Journalists have discovered that this bitcoin fund will start operating this summer.
The launch of the Bitcoin-ETF could be another supporting factor. However, the US Securities and Exchange Commission (SEC) postponed its decision on VanEck's application until June. Currently, a total of 10 applications have been submitted to launch ETFs, and the regulator has decided that they need more time to consider them.
Therefore, the main cryptocurrency remained in the region around $50,000. But it was not able to rise above the 50-day moving average, which has been a continuous support for the BTC/USD since October 2020. As prices approach this line, which is now resistance, the activity of buyers begins to drop sharply. This is a rather worrying sign for investors, which is confirmed by the Crypto Fear & Greed indicator located in the heart of the neutral zone: at the level of 51 points.
We have repeatedly said that in such a state of uncertainty about the reference cryptocurrency, many investors are turning their attention to alternative digital currencies. Bitcoin continues to decline. If its share in total capitalization was 72.65% on January 2, and 50.70% on April 23, it declines at the end of the month, reaching its lowest level since July 2018 at 47.87%.
On the other hand, the attractiveness of Ethereum is constantly increasing. CoinMetrics calculates that the Ethereum network hash rate has grown by 89% over the past 100 days. The ETH/USD pair, unlike Bitcoin, continues to update its historic highs again and again, as it rose to $2,790 on April 29.
Next week's forecast:
The weakening of the dollar, which has become almost the main safe-haven asset during the pandemic, is facilitated by the growth of inflation expectations, which have exceeded 2.4% and reached their highest levels since 2013. Huge financial injections should lead to record growth in the US GDP, which, according to Therefore, it entails an increase in risk sentiment and attracting investors to the stock market.
According to market data from Dow Jones, the S&P500 rose 11% during the first 100 days of Joe Biden's tenure as US president. This was the best result since President Franklin Roosevelt in 1933, and on average, since 1929, stock indices have grown 3.2% annually.
On the other hand, since the US economy is the strongest in the world, the US economy will support the economies of other countries, closing the gap in the speed of their recovery. The dollar should also help by increasing yields on US Treasuries.
Until now , 60% of experts expect EUR/USD to try to rise again. The closest resistance is at 1.2055 and 1.2100, and the target is to reach the April 29 high at 1.2150. 70% of oscillators and 75% of trend indicators on D1 agree with these expectations. The remaining 30% of the oscillators are colored neutral grey.
When moving from a weekly to a monthly forecast, the opinion of experts changes radically. Here, 75% of them are waiting for the dollar to strengthen and the pair to fall to the 1.1900 area, and then another 100 pips drop. The bears target is to update the March 31st low at 1.1704.
The graphical analysis on D1 indicates the movement of the pair in the trading range 1.1945-1.2150. At the same time, according to its readings on H4, the pair first faces a decline to the lower boundary of this channel, and then an upward rebound.
As for next week's events, the release of ISM business activity data in manufacturing (May 3) and private sectors (May 5) in the US should be watched. We also await US employment data: the ADP report will be released on Wednesday, May 5, and the number of new jobs created outside the agricultural sector (NFP) will be known on Friday, May 7.
The European consumer market is likely to delight investors on May 3-6. The decline in Germany's retail sales is expected to shrink from -9.0% to -3.15%. Retail sales in the eurozone as a whole may grow, according to forecasts, from -2.9% to +9.4%
pair GBP / USD
The main event for the British currency will be the Bank of England meeting on Thursday 6 May, which will be devoted to monetary policy. The interest rate is likely to remain unchanged at 0.1%. As for quantitative easing, the volume of government bond purchases may fall from 895 to 875 billion pounds. If this happens, the market will receive a signal about the intention of the British regulator to start tightening its policy.
The bank may also revise its forecast regarding the speed of the country's economic recovery. There are many reasons for this, Britain's unemployment rate fell 0.1% in the first quarter, from 5.0% to 4.9%. Also, nearly 30 million people have already been vaccinated in the country, and more than 2.5 million of them have received two doses of vaccines against COVID-19. Some quarantine restrictions have been removed. All these are positive factors for the pound, which may push the GBP/USD pair higher again. This is confirmed by the forecasts of the graphic analysis on H4 and D1.
As for the technical indicators' readings, it looks a bit cloudy on D1 due to the sideways movement in recent weeks. On H4, of course, most of it is painted red, although 25% of oscillators indicate that the pair is oversold.
As for experts, 60% expect the pair to grow at least to the 1.4000 level. In the event that it can break through, the next target is 1.4240. The nearest resistance levels are 1.3860, 1.3925 and 1.3975. The remaining 40% of analysts support bears. The main support is in the area 1.3670-1.3700, then – 1.3600
pair USD / JPY
The opinion of the experts fully agrees with what was expressed a week ago. 70% of them believe that the pair will head south again, below the horizon at 109.00. The next supports are 108.40 and 107.45. The remaining 30% of analysts expect the pair to continue rising. Resistance is at 110.00, the target is a rise of another 100 pips to 111.00.
As for indicators, 75% of oscillators and 100% of trend indicators on H4, and respectively 70% and 95% on D1 are colored green. The remaining oscillators are indicating that this pair is in the overbought territory. The graphical analysis on both time frames indicates a decline in the pair to the level of 107.45
As said in the first part of the review, the BTC/USD pair was unable to break above the 50-day moving average on the last day of April. This sounds like a wake-up call for investors. Especially since the drop below this line occurred for the first time since the beginning of October last year, when the pair just broke the $10,000 level. The Bitcoin Dominance Index has also fallen below 50%, which has led to the withdrawal of some institutions.
Taken together, both of these factors, according to a number of analysts, closely resemble the situation in January 2018, which marked the beginning of a prolonged crypto winter.
But, along with the pessimists, the voices of the optimists are usually heard. Thus, the creator of the stock-to-flow model, a popular cryptocurrency analyst known as PlanB, believes that the current decline in bitcoin is completely normal and expected, the analyst stressed that one should not expect constant growth, and sometimes declines should occur as well: “Nothing grows without corrections. Bitcoin has already been growing for 6 consecutive months. This is similar to the mid-cycle correction we saw in 2013 and 2017.”
PlanB notes that even it has “calmed down somewhat”: the market was very overheated, and now a small “cooling-off” phase awaits. In addition, the rate of the first cryptocurrency is currently lower than the expectations of the S2F model, which means that it may continue to grow.
Dan Morehead, CEO of venture capital firm Pantera Capital, is also positive. According to the entrepreneur, BTC is doomed to further growth, as more and more investors begin to understand that storing capital in cryptocurrency is much more efficient than traditional instruments.
According to the calculations of the head of Pantera Capital, the value of BTC adds $200 every time one million new users sign up on its network. If these dynamics continue, the price of the cryptocurrency in 2022 will approach or even exceed $200,000.
According to Dan Morehead, the spread of Bitcoin is the result, among other things, of the growth in the number of smartphone users. There are now about 3.5 billion people in the world who own such devices, which makes bitcoin available anywhere, anytime.