pair EUR/USD: Too Much Uncertainty
The movement of major currencies throughout March was determined by reports from the Russian-Ukrainian front, the sanctions and energy war with Russia, and the pace of monetary tightening. The US dollar has strengthened significantly in recent months thanks to a sharp increase in the US government bond yield and signs of a Federal Reserve rate hike. The EUR/USD pair fell to 1.0805 on March 07, the lowest level since mid-May 2020. However, the dollar's growth stopped, and the pair moved to a sideways movement along the 1.1000 pivot point. The Fed's hawkish statements pushed the pair down, and hopes for a resolution of the armed conflict between Russia and Ukraine sent him above that line.
The same factors determined the dynamics of the EUR/USD pair last week as well. The pair rose by 240 pips from Monday, March 28 to Thursday, March 31: from 1.0944 to 1.1184. First, the Euro's strength was caused by reports in the US media that the European Central Bank may begin actively raising the refinancing rate this year. Allegedly, a large number of market participants are asking the European regulator to raise the price four times by the end of 2022. As a result, investors began to include in prices the possibility of such a move by the European Central Bank, and the yield on government bonds in Europe.
The next day, March 29, hopes rose for the success of the peace talks between Russia and Ukraine, which took place in Istanbul (Turkey). The success of the energy war between the European Union and Russia has also helped the European currency. A week ago, Russian President Vladimir Putin signed a decree to sell energy tankers to Europe for only the ruble. The goal was clear: to support the ruble exchange rate under sanctions. However, the main European consumers categorically refused to do this, and the President of Russia was forced to take note of his decision.
Everything would have been good for the euro, but in the second half of the week it turned out that the rumors about an increase in the euro rate in 2022 are nothing more than speculation, and that there was no serious turn in the negotiations in Istanbul. Macroeconomic statistics also helped the dollar a bit. As a result, the EUR/USD pair's growth stalled and headed south, ending the five-day period not far from the 1.1000 pivot point at the 1.1045 level.
The outcome of hostilities in Ukraine remains unclear. The situation with regard to the supply and payment of raw materials to Europe also remains puzzling. The price of oil has fallen about 14% since March 24. This is how the market reacted to President Joe Biden's plans to sell additional oil from national reserves. The White House plans to sell up to 1 million barrels of oil per day over the next six months. This may be the largest sale in the nearly 50-year history of the United States' Strategic Petroleum Reserve. It should be noted here that, despite the small quantities, the sale of oil brings Russia more profit than currently gas. And such a decision by the United States should reduce Europe's dependence on Russian energy carriers, causing additional damage to the Russian economy.
Another case of uncertainty is being introduced by the Federal Reserve. Remember that the US GDP forecast has been revised recently. They showed that the regulator expects economic growth to slow in 2022 from 4% to 2.8% due to the sanctions war with Russia. In addition, interest rate expectations have also changed. It was earlier said that it will reach 0.75-1.00% by the end of the year. This number has now increased to 1.75-2.00%. Given that there are only six meetings left this year, it turns out that the FOMC will have to raise the rate by 0.25% in each.
But that's not all, either. The rate forecast for the end of 2023 was also raised from 1.50-1.75% to 2.75-3.00%. Moreover, it appears that we will face many monetary tightening measures in 2024. That is, this is not just a revision of expectations, but a sharp tightening of US monetary policy, which could deal a serious blow to the labor market and lead to a widespread recession. The market may receive important signals about the future movement of the dollar on Wednesday, April 6th. The minutes of the FOMC's March meeting will be published today.
At the moment, 50% of analysts vote for a stronger dollar. 40% voted for EUR/USD growth and 10% took a neutral stance. Among the oscillators on D1, the picture is mixed: 30% of them are colored red, 20% are green, and the remaining 35% are colored neutral gray. Trend indicators have an advantage on the side of the red indicators: those are 85% versus 15% of the green ones.
The closest target for the bulls is the breakdown of the resistance area at 1.1100-1.1135, followed by the 1.1185-1.1200, 1.1280-1.1350 areas, and the January 13 and February 10 highs in the 1.1485 area. a
pair GBP/USD eastern direction, along 1.3100
The statistics from the UK last week turned out to be somewhat contradictory. According to data published on Thursday, March 31, the British economy for the fourth quarter 21 grew by 1.3%, higher than the previous rate of 1.0% and expectations of 1.0%. The economy grew by 7.5% over the last year, the highest since 1941. But it is necessary to take into account here that the GDP fell by 9.4% in 2020. Therefore, there was no definitive recovery after the epidemic level. The state's current account data for the fourth quarter reached 21 7.3 billion pounds, compared to an expectation of 17.6 billion, and the previous value was 28.9 billion pounds.
UK manufacturing sector activity was also lower than expected, which was confirmed by an IHS Markit report on Friday, April 1st. The Purchasing Managers' Index (PMI) was 55.2 in March versus an expectation of 55.5.
As with the Euro and for the same reasons, investors and traders in the GBP/USD pair suffer losses. As a result, the pair has been moving east along the 1.3100 level in a narrow corridor all week. The lowest price for the week was steady at 1.3050, the high was 1.3182, and the last chord was at 1.3112.
Giving a forecast for the next week, 55% of experts support the bulls, 35% support the bears and 10% remain neutral. The median forecast still points to the 1.3100 horizon. True, turning to the forecast for the entire month of April, its value rises to the region of 1.3235. Most trend indicators on D1 point north. Of the oscillators, 55% are red, 20% are green and the remaining 25% are neutral gray. Trend indicators, as in the case of the EUR/USD, have an overwhelming advantage on the side of red indicators: those are 90%.
The nearest support is located in the region of 1.3080-1.3100, then 1.3050 and the low of March 15 (and at the same time 2021-2022) – 1.3000, followed by support 2020. Resistance levels 1.3160, 1.3190-1.3215, then 1.3270-1.3325, 1.3400, 1.3485, 1.3600, 1.3640.
Among the events related to the UK economy, we can highlight BoE Governor Andrew Bailey's speech on Monday 4 April, as well as the publication of the UK Composite PMI and business index on services activity. Tuesday, April 5, and construction PMI on Wednesday, April 6.
pair USD/JPY: The Japanese currency continues to weaken
The USD/JPY pair reached 122.43 on Friday, March 25, and was already up 263 pips at 125.09 on Monday, March 28. The reason for the continued weakness of the Japanese currency is the same: the Bank of Japan, which does not want to change its ultra-soft monetary policy. Its president, Haruhiko Kuroda, stated back on March 22 that it was too early to discuss the possibility of cutting back on the quantitative easing (QE) program, as well as raising the interest rate. Remember that it has been at a negative level for a long time, minus 0.1%. Additionally, the regulator has been actively buying Japanese Government Bonds (JGB) all last week in a desperate attempt to prevent its yields from breaching the 0.25% target.
Last week's high at 125.09 is already close to 2015 high at 125.86. And if the pair manages to break higher, then, according to the strategists at Credit Suisse, this will open the way for it to 135.20 in the long term, and then even higher, to the 147.00-153.00 area. However, in their opinion, the correction that started now can continue during the second quarter, first to 119.79, then to 119.09, after which the pair will move to trade in the range of 119.00-125.00. Credit Suisse also believes that if the pair breaks through the support level at 119.09, the decline could turn deeper to the 116.35-116.50 area.
The same rally in the second quarter was called by specialists at Rabobank, who expected the pair to rise above 125.00 only in the second half of this year. They believe that the Fed's policy tightening is already embedded in the current dollar rates, and this will hamper the pair's growth in the coming months. However, the difference in interest rates and Japan's position as an importer of raw materials will play their part in the third and fourth quarters, and the yen will continue to weaken gradually. A quick jump in USD/JPY above 125.00 will seriously increase the likelihood that the Bank of Japan will review its quantitative easing (QE) program.
The IR rose to 125.09, and the correction began. The bottom was recorded on Thursday, March 31st at 121.27, after which the pair climbed again and finished at 122.54.
With 50% of experts giving a bullish outlook for the next week, it looks very moderate and sees the pair rising to the 124.00-124.50 area as a target. 25% of analysts, on the contrary, vote for a further decline in the pair, and 25% take a neutral position. It should be noted that when switching to the monthly forecast, the vast majority (85%) of experts expect a strengthening of the Japanese currency and expect to see the pair in the region of 115.00-117.00.
Among the indicators on D1, there is almost complete consensus after such a strong breakout in the north. 90% of trend indicators and 100% of oscillators are looking up, even though 25% of oscillators are already in overbought territory. The closest resistance levels are 123.20 and 124.20 and the highest on March 28 is at 125.09. Then, as mentioned earlier, the bulls may try to reach the 2015 high at 125.86. The nearest support is 122.00 then 121.30. It is followed by the areas 120.60-121.40, 119.00-119.40, 118.00-118.35.
No important statistics on the state of the Japanese economy are expected this week.
Cryptocurrencies: What are whales and speculators doing in the short term?
Investors' appetite for risk, which has caused stock indices to grow, continued to draw the cryptocurrency market with it at the start of last week. Bitcoin gained 28% and Ethereum nearly 40% in the second half of March.
The major cryptocurrency reached the strong resistance level of $45,000 on the evening of Friday, March 25, for the fifth time since the beginning of the year. Failing to gain a foothold above it in the previous four times, the BTC/USD pair has fallen lower. This time around, it looks like the bulls finally won the long-awaited victory: prices hit a local high of $48.156 on March 28th. However, the pair reached the 200-day simple moving average and stopped rising. The most plausible explanation for this pause is the strength of the dollar at the end of last week.
At the time of writing, April 1, the major cryptocurrency is back for the first time to the $45,000 area, which has switched from resistance to support, and then rebounded to $46,500. Total market capitalization increased to $2.140 trillion ($1.995 trillion a week ago). The Crypto Fear & Greed Index also grew slightly: from 47 to 50 points.
Nicholas Merten, CEO of DataDash, believes that short-term investors and leveraged traders influence bitcoin's volatility, and that "whales" affect growth. “There has been a lot of panic about the macro environment over the past couple of months,” Merten wrote. The Federal Reserve raises interest rates ... the war between Ukraine and Russia, the possible next wave of COVID-19 - all these problems have caused pessimism among small investors. At the same time, “whales,” on the contrary, did not sell cryptocurrencies… In fact, we have seen how long-term investors continue to buy more or hold bitcoin.
One such investor was the well-known software developer MicroStrategy. The company recently received a $205 million loan guaranteeing its crypto assets. The loan was issued by the US Silvergate Bank. The purpose of the loan is to buy bitcoins. According to the Bitcoin Treasury website, MicroStrategy already has 125,051 BTC worth about $6 billion. “This loan represents an opportunity to strengthen our position as a leader among public companies investing in bitcoin,” said Michael Saylor, CEO of MicroStrategy.
Note that MicroStrategy is not the only company that provides crypto assets as collateral. For this type of loan, Silvergate Bank has a special SEN leverage program, whose total liabilities have already exceeded $570 million.
Despite numerous macroeconomic and geopolitical challenges, Bitcoin is very likely to enter the second half of a bear market, according to analysts at Glassnode. This is evidenced by the active accumulation of cryptocurrencies in the range of $35,000-42,000 and the absence of significant spending on purchased bitcoins in the first quarter of 2021. The share of “old” bitcoin has grown over a year by 9.4% over the past eight months to approach a record 62.9% . These coin holders have not dumped the asset in the face of two corrections of over 50% in the last 12 months. The growth rate of this indicator is comparable with the recovery of the market in 2018-2019. This may reflect increased investor confidence in Bitcoin.
At the same time, analysts at Glassnode are warning that the process of bottoming and investors capitulating in a bear market is often a long and painful process. Therefore, they urge not to rush to ensure the end of the bear market.
A number of experts believe that a strong new southward correction is only a matter of time. There are still no drivers for the rapid growth of bids, and
d Everything depends on the severity of the geopolitical situation and the dynamics of global economic recovery. The $30K level may become a downside target for the BTC/USD pair.
Peter Brandt, CEO of Factor Trading, calls for caution in optimistic forecasts. This legendary trader tweeted to his 629,400 followers that BTC’s last move was mentioned in April 2019 when the cryptocurrency’s top price reached $3,500, which started the first phase of an upward cycle. However, the expert stresses that even a technical breakthrough does not guarantee that the coin will repeat the 2019 rally.
“The charts do not predict the future. The charts don't even offer odds. Charts provide opportunities and are useful for managing risk in a trading software. Chart patterns either work, fail, or turn. If the laser eyes reappear and BTC stops, be careful,” Brandt warns.
Cryptocurrency analyst Dave the Wave posted a comment saying that Bitcoin is forming a larger ascending triangle on the weekly time frame and could rise to an all-time high of $69,000.
We noticed in the last week of March forecast that Ethereum is currently doing slightly better than Bitcoin. The above growth figures are clear evidence of this. Many investors are now buying ETH with BTC. In addition, the community is waiting for the long-awaited update of the ethereum mainnet. The integration update is nearing its release after successful testing on the testnet. Prior to its launch, over $5.0 billion in ETH tokens had already been withdrawn from circulation as a result of the burn. Since burning reduces the overall supply of Ethereum, this positively affects its price, which contributes to the rise of the altcoin. Glassnode analysts have found that the volume of Ethereum on exchanges has declined in recent days. The inflow of this altcoin into the trading floor is 20% less than the outflow, which creates the right conditions for the formation of an Ethereum deficit.
The growth in the value of the coin was observed on the back of the activation of the ten largest ETH addresses. Whales have accumulated as much as 23.7% of the total Ethereum supply, according to a new report from analytics firm Santiment. And they will not dispose of their assets, preferring to send ETH to offline storage. A similar trend was observed in the first half of 2017, after which we saw the popular altcoin run through the hype five years ago.
And at the end of the review, some special cryptocurrency news
Have you ever wondered what the purpose of using the toilet is? We will tell you: to mine cryptocurrency! This is exactly what Gabriel Kozak and Dusan Matuska of Slovakia decided. As a result, they created the AmityAge mining farm, which runs on electricity obtained from human and animal waste. Dusan Matushka, said that "their devices run on methane, which is produced during the biodegradation process." Since there is no shortage of this waste for the foreseeable future, bitcoin mining on their farm is not dependent on rising global energy prices. Moreover, it is done in an environmentally friendly manner using renewable energy sources, which completely removes all claims against the industry.