First, a review of the events of the past week:
As expected by the majority of experts (65%), the dollar continued to weaken at the beginning of the week, and the EUR/USD pair rose. Disappointing data from the US labor market, which was released on July 2, weighed on the dollar. According to forecasts, the unemployment rate was supposed to decrease from 5.8% to 5.7%, however, it rose to 5.9%.
US business activity indicators released on Tuesday, July 6th rescued the greenback from further declines. And although the ISM index in the services sector fell to 60.1 in June (from a record low of 64 in May), this did not scare investors, as a result of which above 50 is seen as positive and supports the dollar. This is exactly what happened: after hitting a high of 1.1895, the EUR/USD pair reversed and fell, reaching the local level at 1.1780 on Wednesday, July 07.
The minutes of the June meeting of the Federal Reserve, which were published at the end of the same day, showed that despite the discussion of reducing fiscal and credit stimulus programs, no specific decisions were reached. The regulator will not rush to tighten monetary policy, relying only on indicators of inflation, and will wait for the full recovery of the labor market. And in this regard, as mentioned earlier, the indicators are not particularly optimistic at the moment, indicating a slowdown in the US economy.
The next day, Thursday, July 8, was the day the euro was able to recover losses, not only due to the pessimistic stance of the Federal Reserve, but also thanks to the publication of the new inflation target by the European Central Bank. Previously, the goal was to keep inflation "below 2% but close to it". Now, the official target level allows the indicator to be exceeded or delayed at certain points in time. At the same time, European Central Bank President Christine Lagarde stressed that her bank will not copy the new strategy of the Federal Reserve and will not specifically stimulate consumer price growth in order to reach the average.
The growth of the European currency and the decline in global risk appetite due to the spread of the delta strain of the Corona virus helped traders begin to close open positions on the high-interest currencies of developing countries and return to funding currencies such as the euro and Japanese yen.
As a result of all the volatility and changes in trends, the five-day total can be considered close to zero, the EUR/USD pair ended the weekly session almost as it started at 1.1877
pair GBP / USD
The dynamics of sterling against the dollar last week followed the movements of its European counterpart. The prediction provided by the graphical analysis proved to be the most accurate, as it first indicated the growth of the GBP/USD pair to 1.3870-1.3900 and then its sideways movement in the channel 1.3730-1.3870. In fact, after adjusting some points, this is what happened. As for the last chord of the week, it appeared near the upper boundary of the channel at 1.3890
pair USD / JPY
The competition over which currency is better continues in financial storms. The yen won it by a clear advantage last week, having outperformed the dollar by 100 pips. As expected by the vast majority of experts (75%), the pair moved purposefully south throughout the first half of the entire week, hitting a local low of 109.50 on July 07. At some point, thanks to the stock market flight from investors and lower US government bond yields, Her superiority was up to 150 points.
After that, on the back of the US Treasury yield recovering to 1.3433%, the dollar managed to recover some losses, and the pair closed at 110.10
A Morning Brew survey found that what retail investors fear most are Elon Musk's tweets. This was confirmed by another poll conducted by Investing.com. According to his findings, one in five participants who sold bitcoin in May 2021 linked this decision to Musk's criticism of the cryptocurrency.
His tweets, such as the ban on cryptocurrency trading in China, surely triggered the crash, which plunged bitcoin from a high of $64,600 to $30,000. However, many experts believe that the main reason for what happened is the use of leverage in the cryptocurrency market, or margin trading, which allows traders to open large positions with little money. It was the avalanche-like closure of such positions that led to lower bids and a drop of more than 45% in the total cryptocurrency market capitalization.
As for the Chinese authorities, they continue to put pressure on cryptocurrencies outside the country. The People's Bank of China said that bitcoin and stablecoins pose a threat to financial security and social stability and banned a range of services for market-related companies, including software development, building rental and marketing services.
Currently, large companies are watching the process of exodus of miners from the People's Republic of China and if the United States is the destination, it is likely to enhance the image of the industry in the eyes of institutions. Especially since Crypto Head estimates that out of 76 countries, the United States is the best prepared for mass adoption of digital assets. However, it is believed that miners fear the American authorities no less than the Chinese. Thus, they can choose the countries of Central Asia - Kazakhstan, Mongolia, etc., where there are regions with a cold climate and access to relatively cheap energy resources. Although not everything is so smooth there. For example, Kazakhstan has already passed a law on additional energy fees for cryptocurrencies in anticipation of a move by miners.
Note that due to the ban introduced in China, the hash rate on the blockchain has dropped by almost 50%. This led to significant changes in the complexity of the algorithm, and an equally serious increase in the profits of the remaining miners. They are now earning almost as much income as they did when Bitcoin was at $60,000.
As for investors, they have been watching the major cryptocurrency as it attempts to rise above the $36,000 resistance for the third week. But it failed, and the BTC/USD pair was trading in the $32,500-33,500 region by Friday night, July 9.
The total market capitalization of the cryptocurrency market changed slightly over the course of the week: from 1.358 trillion dollars to 1.370 trillion dollars. However, there has been a small influx of funds from altcoins (including Ethereum) into Bitcoin over the past few days. JPMorgan analyst Nikolaos Panegirtuoglu also noted this in an interview with CNBC. The move reversed a trend that began in April when there was a massive influx of funds into altcoins and could mean the BTC bear market is coming to an end. But it is clearly too early to talk about any serious rise. This is confirmed by quotes, trading volume and readings of the Crypto Fear & Greed indicator, which is still in the area of extreme fear, having fallen by one point during the week, from 21 to 20.
Next week's forecast:
The epidemiological situation associated with the spread of new strains of COVID-19 appears to have emerged again. Risk appetite declines and investors, fearing a repeat of last year's situation, begin to gravitate again towards protective assets. Stock indices - Nasdaq, Dow Jones, Standard & Poor's 500 - stopped growing, and went sideways. Impressive neutral candles appeared in their daily charts. In parallel, the demand for US Treasury liabilities rose: the yield on Treasuries fell to a new multi-month low, to 1.25%.
Despite the deterioration of the epidemiological situation, the European Commission raised its forecast for GDP growth in the euro area from 4.3% to 4.8% in 2021. The growth of economic activity should be affected by the relaxation of quarantine measures (if it continues, of course) and mass vaccination of the population. GDP is expected to return to pre-crisis levels as early as the fourth quarter of this year, a quarter earlier than expected, and this could prompt the European Central Bank to begin ending its quantitative easing programs more quickly.
But if European inflation and GDP are growing by 2% and 4.8%, then the growth of similar American indicators is 5% and 7%, respectively. And who will start tightening monetary policy early? The Federal Reserve has taken a very pessimistic wait-and-see attitude. But there are not many hawks among the leadership of the European Central Bank, and its current position is more like a compromise between monetary expansionists and their opponents.
The opinion of experts about the near future of the EUR/USD pair can also be considered a compromise, with 40% in favor of growth, 45% in favor of a decline, and 15% for the continuation of the sideways trend. At the same time, the number of supporters of a weak dollar and a strong euro rises to 60% when you move to the end of summer forecast.
Among the H4 trend indicators and oscillators, 70% are green, and 30% are red. The situation at D1 is different: 70% of the trend indicators are looking down, and the oscillator readings are a mixture of red, green and neutral gray. The chart on H4 indicates a sideways trend within the 1.1780-1.1900 channel.
The closest target for buyers is 1.1900, then 1.1975, 1.2000, 1.2050 and 1.2150. The challenge for July is to update the May 25 high at 1.2265. The bears' task is to test the March bottom at 1.1700. Support on the way to this target is 1.1845, 1.1800 and 1.1780.
The following events can be observed in the economic calendar for the coming week. German and US consumer market data will be released on Tuesday, July 13th. US Federal Reserve Chairman Jerome Powell is scheduled to speak in Congress on Wednesday and Thursday, and another batch of US consumer data, including retail sales and the University of Michigan consumer confidence index. The business week will be closed on Friday 16 July;
pair GBP / USD
UK GDP, trade and industrial production numbers did not reach the expected values. This will put some pressure on the pound. But despite this, 60% of analysts vote for GBP/USD to move north.
The pair finished last week rising to the 1.3900 area. The medium term chart clearly shows that this level is in the central part of the 1.3700-1.4000 channel. Thus, the pair has many opportunities to continue the upward movement to its upper boundary.
The remaining 40% of experts, in agreement with the graphic analysis on H4, believe that the British currency will not be able to break through the 1.3900 resistance due to a new wave of the spread of COVID-19 in the country. The readings of the technical indicators are almost completely in line with their readings for the EUR/USD pair.
In terms of macroeconomic statistics, the June Consumer Price Index (CPI) data is due to be released on Wednesday, July 14, which is expected to rise from 2.1% to 2.2%. The next day we await a portion of the data on the state of the UK labor market, including claims for unemployment benefits and the country's unemployment rate. It is noteworthy that the rise of the same index in the United States hit the dollar on the first Friday in July. For the UK, it is expected to hold steady at 4.7%.
It is almost impossible to bring the indicator readings for this pair to any denominator, neither on H4 nor on D1. Will it continue the upward trend that began in early January? Will he be able to gain a foothold above 111.00? A new impetus was given to this movement after the correction on April 26, and only now the first signal of a trend breakdown and a breach of the lower boundary of this channel has appeared.
We talked above about the reasons for the Yen strengthening last week. However, it is not possible to capture investor sentiment, as well as indicators for the coming week. Expert votes are roughly equally divided: 30% with bulls, 40% with bears, and 40% neutral.
The graphic analysis on D1 indicates a sideways movement first of the USD/JPY pair in the trading range 109.50-111.00, and only then does it rule out the continuation of the bullish trend and its breach to 112.00.
The BoJ rate decision and its next traditional press conference may be of interest next week. Both events are scheduled for Friday, July 16. Most likely, there will be no surprises for us, and Japan will once again reaffirm its title as a very quiet haven for investors.
Trading volume decreased Bitcoinper day to its lowest level since early 2021, according to analytics firm Arcane Research. The BTC/USD pair is unsuccessfully trying to rise above the $36000 horizon for the third consecutive week. The fact that it has traded near local lows since the end of May, of course, scares investors. A dip below the current local record low of $28,800 could lead to another massive selloff and a new crypto winter.
At the same time, a number of experts interpret the current situation as an accumulation stage according to the Wyckoff method. This means that $28,800 is the minimum correction (“spring”), and gradual growth is expected in the future. The Wyckoff chart will be confirmed if Bitcoin holds above the $36,000 resistance level.
Famous crypto analyst PlanB has identified a worst-case scenario for the movement of the major cryptocurrency. This expert is known for applying the S2F model to bitcoin, which has previously been traditionally applied to commodities such as gold and silver. According to PlanB's calculations, a worst-case scenario for bitcoin in July would be a month-end close at $28,000.
Whereas in August, $47,000 is where the worst-case closing scenario might be. According to PlanB, the next six months will determine whether, by the end of the bull run, Bitcoin will actually be able to reach the six-figure range and, as a result, reach the $288,000 mark.
It should be noted that the expectations of institutions appear more modest. For example, CNBC conducted a Wall Street survey of nearly 100 investment managers, financial strategists, and portfolio managers. 44% believe that Bitcoin will close in 2021 at a price below $30,000. While 25% of respondents think it will close near $40K. A similar proportion of respondents believe it will close at $50,000, while only 6% expect a rise to $60,000.
Discussing the results, the channel's hosts generally agreed with the short-term outlook, noting that even $30,000 for the end of the year would allay many market participants' concerns by setting a long-term bottom.
While assessing the prospects for altcoins, several experts, including the founder of Galaxy Digital cryptocurrency bank Michael Novogratz, say that Ethereum It may outperform Bitcoin in the future and become the basis for pricing in the market. BTC has become popular as a way to save. But if you sum up the number of projects and directives running on the blockchain, the advantage of Ethereum becomes clear.
The 3.0ETH platform has the potential to become the next foundation. However, there is one problem: Ethereum is facing stiff competition from Solana And the Terra.[ccpw id=”72982″]
Experts from Goldman Sachs, one of the largest investment banks, believe that today Ethereum is the cryptocurrency with the highest potential for real use and could outperform Bitcoin. But at the same time, bank experts are also confident that no Bitcoin, Ethereum or any other cryptocurrency will surpass gold in popularity in the near future. Due to its high volatility, investors cannot accept digital assets as a safe haven, and thus lose out in direct competition with the yellow metal.