GBP/USD, USD/JPY, EUR/USD and Bitcoin forecast this week 04-08 October

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pair EUR/USD: Bears' new win

GBP/USD, USD/JPY, EUR/USD and Bitcoin Forecasts This Week Oct 04 - 08The EUR/USD pair fell to 1.1562 last week, breaking through the key support level at 1.1630, which ended the uptrend that started in March 2020.

September turned out to be the worst month for the US stock market, allowing the dollar to consolidate its position as a safe asset. In addition, the Federal Reserve made it clear at its last meeting that it may be ready to start a small rollback of its monetary stimulus (QE) program in November. After that, the DXY dollar index posted its best monthly gain this year.

Things could have changed last Thursday. The United States ended its fiscal year on September 30, and as of October 1, the country should live under a new budget, which still does not exist. If President Biden does not sign legislation before midnight to increase the national debt limit, he will threaten not only a suspension of the US government, but also a default. However, Biden agreed to raise the limit at the last minute, but only until December 3.

In the midst of the government debt conspiracy, the market was hardly affected by the trend of contradictory US macro statistics, although the news from the labor market was not the most satisfactory. For example, initial applications for unemployment benefits rose from 351,000 to 362,000, versus the expected decline to 335,000. The Chicago PMI fell in September from 66.8 to 64.7 (versus an expectation of 65). But the US GDP for the second quarter grew by 6.7% and turned out to be better than expected by 0.1%.

Central bankers on both sides of the Atlantic remained cautious last week, leaving avenues for escape. Federal Reserve Chairman Jerome Powell, speaking before senators, said once again that acceleration in inflation should be replaced by slower inflation. He said the surge in prices was "driven by supply chain problems" that his administration could not control.

Almost the same statement was made by European Central Bank Governor Christine Lagarde on Tuesday 28th September. It warned market participants not to overreact to accelerating inflation in the Eurozone, considering this phenomenon as a temporary factor.

Consumer inflation rose 3.4% in September, the highest level in 13 years, according to Eurostat data. As for inflation in Germany, the main driver of the European Union, it peaked in 29 years at 4.1%. According to preliminary forecasts, inflation in the euro area will approach 4% in the fourth quarter and will remain above 2% in the first half of 2022. According to analysts, this increase is likely to be caused by a sharp jump in energy prices.

These stats and the fact that some market participants decided to close EUR/USD short positions at the end of the US fiscal year, and recorded gains, helped the common European currency a bit, and the pair finished, having fought off the local bottom at 1.1595.

As for the long-term outlook, many experts believe that the euro does not have certain prospects. Some believe the pair will return to its spring 2020 lows by the end of next year. As for the outlook for the near future, 50% of analysts are in favor of a further decline in the pair. It is supported by 100% of trend indicators and 85% of oscillators on D1 (15% giving signals that the pair is oversold). 20% vote for sideways trend, and the remaining 30% of experts vote for pair growth.

The support levels are 1.1560, 1.1500 and 1.1450. Resistance levels 1.1685 1.1715, 1.1800, 1.1910.

Of the upcoming events, note the release of the US services sector PMI on Tuesday, October 5th. Eurozone retail sales will be available the next day, October 6. The ADP employment report will also be released on that day. Another piece of data will arrive from the US labor market on Friday, October 8, including an important indicator such as the number of new jobs outside the agricultural sector (NFP).

pair GBP/USD: Bank of England vs. the US Federal Reserve

Last week ended with a bearish victory for the GBP/USD pair as well. After it started at 1.3670 and lost 260 pips, it reached the bottom at 1.3410 on Wednesday, September 29th. This was followed by a fairly strong recovery and ended at 1.3545.

Given the US government debt situation, the market paid little heed to the encouraging macro stats from the UK. But it turned out to be much better than expected. The decline in GDP in the first quarter of 2021 was not only revised from 6.1% to 4.8%, but with an expectation of - 1.5%, it was 5.5% in the second quarter.

However, according to a number of experts, the pound's growth at the end of the week is indirectly related to these impressive positive stats. The main reason is that the British currency is strongly oversold: it has lost about 500 pips against the dollar since mid-September.

At the moment, 70% of experts expect the pair to head south again to test support in the 1.3400 area. The remaining 30% took a neutral stance. As for technical analysis, it still stands by the bears as well: 85% of oscillators and trend indicators on D1 are colored red.

It should be noted that when we turn to the forecast before the end of the year, the picture suddenly changes to the opposite: 70% of analysts already say that the GBP/USD pair will return to the 1.3900-1.4000 region. Moreover, a third of those 70% do not even rule out that it could reach its May-June highs at 1.4200-1.4250.

The closest resistance along the way is 1.3600, 1.3690, 1.3765, 1.3810. Support is found in the 1.3400, 1.3350 and 1.3185 areas.

According to Citibank experts, the pound is currently supported by the following factors. First, there is a decrease in the number of hospitalizations in the UK due to COVID-19. British assets are attractive both in terms of valuation and in terms of the economy's normalization after the pandemic. Second, is a reduction in political risks associated with the negotiations between the European Union and the United Kingdom on the Northern Ireland Protocol and the rejection of the Scottish independence referendum. And of course, the BoE's decision on a possible increase in the key rate to 0.25% in May 2022 and to 0.50% in December. Such possibilities for monetary policy in the UK, according to analysts at Citibank, "the pound is well-positioned to counteract Fed policy".

pair USD/JPY: 112.00 again 

As most experts expected (60%), the USD/JPY pair managed to climb to 112.00 after the Federal Reserve announced the cut of quantitative easing, and even slightly higher, hitting a high of 112.07. And forecasts continued, saying that it was unlikely to gain a foothold above this horizon. This is exactly what happened. Amidst US government bond yields falling from 1.567% to 1.474% and dollar weakness, the yen managed to recoup a lot of losses at the end of the week and ended the trading session at 111.02.

Remember that unlike other central banks in developed countries, the Bank of Japan remains committed to ultra-soft monetary policy and negative interest rates. Therefore, the yen is still of interest not as a tool for making money, but as a safe haven currency.

At the moment, 50% of experts expect the pair to make another attempt to consolidate above the horizon of 112.00. 25% of analysts are neutral, and 25% expect the pair to fall.

Support levels are unchanged: 110.45, 110.15, 109.60, 109.10, 108.70 and 108.30. Bears dream (it seems impossible indeed) is to retest the April low at 107.45. The nearest resistance levels are 111.00 and 111.65.

It should be noted that the USD/JPY pair has been moving along the horizon of 110.00 since last March, with rare attempts to break out of the 108.30-111.00 trading channel. On this basis, the absolute majority of analysts believe that after the failure of the storm at 112.00, the pair will return to this trading range.

Bitcoin: Bye bye bears

According to statistics from 99Bitcoins, Bitcoin was expected to collapse 37 times in 2021. Interestingly, this amount is 2.65 times higher than in 2020, during which BTC “collapsed” only 14 times.

99Bitcoins has served as the official Bitcoin sponsor since 2010, with precise criteria for selecting these publications. The last recorded obituary is dated September 21, 2021 and was written by the famous economist Steve Hanke of Johns Hopkins University, who stated that Bitcoin is a highly speculative zero-value asset.

Another obituary may be recorded soon, written by businessman Robert Kiyosaki. Expect a book authorRich Dad, Poor Dad“A giant stock market crash” occurred in October. The same fate awaits gold, silver and bitcoin, he said. The main reason for Kiyosaki's upcoming collapse is the Federal Reserve, which has started selling a lot of Treasuries.

Another unhappy forecast was made by an analyst under the pseudonym PlanB, author of the Stock-to-Flow (S2F) model. This model predicts the value of Bitcoin based on the ratio of the total available supply of the asset and its annual increment. PlanB calculations recently showed that the price of Bitcoin will cross $100,000 at the end of this year. And now things have changed for the worse: according to the analyst, the price of the main currency could fall to 30 thousand dollars instead of rising.

In fact, the dynamics of Bitcoin did not bode well for the crypto market in September, as the BTC/USD pair dropped to $39,666. However, October 1 changed everything: Bitcoin rose to $48,250. We have repeatedly noted the correlation between stock markets and cryptocurrencies, which is based on the risk appetite of investors. This time, too, the rise in the price of digital assets occurred in parallel with the rise of stock indices such as the S&P500 and Dow Jones.

Bitcoin could have been given an additional boost by increasing the volume of crypto-derivative exchanges. According to analyst Joseph Edwards of London-based Enigma Securities, derivatives trading often influences spot bitcoin prices. Another motivation could be the Iranian authorities' decision to lift the ban on cryptocurrency mining.

A popular trader applauded the rise of the major cryptocurrency, saying, “Bye bye bears,” and noting that the leading cryptocurrency has moved into the green.

Another trader, billionaire Stephen A. Cohen, owner of hedge fund SAC Capital Advisors, has a perfect scenario for bitcoin that could lead to future highs. Cohen believes that Bitcoin may continue to decline, while it is important that its price does not fall below the 20-week simple moving average (SMA). This will be the key to creating bullish momentum that will push the coin to $64,000.

The 20-week simple moving average, along with the 21-week moving average (EMA), is what Cowen calls a "bullish market support range." In his view, it is critical for Bitcoin to stay above this range, as history shows that BTC tends to break out the first time it is retested.

The total cryptocurrency market cap rose again above the psychological threshold of $2.0 trillion on October 1 and reached $2.06 trillion ($1.84 trillion a week ago). But the Crypto Fear & Greed Index is still in the fear zone at 27 points.

And in conclusion, so what does it take to make money from cryptocurrency? It turns out it's all about getting a hamster and giving it a chance...trading. Over the past three months, the value of Mr. Goxx - a crypto hamster trader on Twitch - by 30%. At the same time, the assets of Warren Buffett's Berkshire Hathaway Fund fell 2%.

A hamster owner built his own cage in June 2021, with optical sensors connected to an Arduino Nano controller, Mr. Goxx “picks” a specific cryptocurrency for trading. The software will sell the coin when the hamster passes through the left tunnel and will buy it if it goes through the right tunnel.

The talented hamster managed to outperform not only Berkshire Hathaway, but also the S&P 500 (+6% over the same period) and the NASDAQ 100 (+12%), as well as Bitcoin itself (+ 23%).

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