Forecasts of GBP/USD, USD/JPY, EUR/USD and Bitcoin this week 23-27 May 2022

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pair EUR/USD: the pair's growth as a result of the DXY correction

The DXY Dollar Index reached a multi-year high of 105.05 on Friday, May 13th after a six-week rally. The last time he jumped to such a high level was 20 years ago. However, a reversal followed, and the DXY was below the horizon of 103.00 on May 19-20. According to a number of analysts, this decline is likely to be the result of a technical correction, and not a result of changes in fundamentals. The latter is still on the side of the US currency. However, there are already some disturbing signs here, as the sharp tightening of the Federal Reserve's monetary policy is heightening concerns about the growth of the US economy and increasing the possibility of a recession.

But, again, the fundamentals remain on the dollar's side. Thus, data on US retail sales released on May 17 showed an increase in consumer activity in April of 0.9%, higher than expectations of 0.7%. Industrial production also beat expectations: it grew by 1.1% instead of the expected 0.5%.

Last week, Federal Reserve Chairman Jerome Powell reiterated his intention to raise the key interest rate by 0.5% at the June-July Federal Open Market Committee meetings. Remember, the US regulator has raised the price twice this year. This has of course increased the costs of various types of loans not only to the industry but also to the population, including mortgage lending, consumer loans, interest on credit cards, etc.

However, on Tuesday May 17, Jerome Powell stated unequivocally that the Fed would continue to tighten and roll back sharp rate increases only when it received "clear and convincing evidence" that inflation is slowing. And if the rate of de-inflation does not suit the central bank, it may not limit it to 3.0%, but increase it to 4.0% in 12-15 months. This will give the dollar additional advantages over other currencies in the DXY basket, including the euro.

Unlike the US economy, investors are more concerned about the prospects for the European economy. This concern is primarily due to the strong reliance of the European Union on Russian energy resources. On Monday, May 16, the countries of the European Union began negotiations on the sixth package of sanctions against Russia over its invasion of Ukraine. It is known that we are talking, among other things, about a ban on the purchase of Russian oil and gas. It is not yet clear whether such a ban will be total or partial, when it will be applied and what are the exceptions, but it is already clear that it will create serious problems not only for the Russian economy, but also for the European economy. . This cannot help but worry investors.

US Treasury Secretary Janet Yellen added further uncertainty to this complex situation. She stated that the G7 countries are discussing the idea of setting the maximum possible energy tariffs from Russia. On the other hand, it makes no sense to impose a ban on their supply in this case. But on the other hand, it will severely affect the pockets of European consumers who want to avoid energy hunger.

The situation with inflation in the euro area is still unclear. According to data published on Wednesday, May 18, it remained at a record level of 7.4%, 3.7 times the European Central Bank's target level of 2.0%. Finnish Central Bank President Olli Rehn said that in such a case, ECB board members would agree on the need for a “fairly quick” move away from negative interest rates. Remember that the eurozone deposit rate is now less than 0.5%, and has been negative for 8 years, since 2014. However, a “fairly quick” exit is very vague wording, unlike the US Federal Reserve’s specific decision to raise The dollar rate increased by another 1.0% in the next two months.

This difference between the particularly tight monetary policy of the Federal Reserve and the vaguely pessimistic European Central Bank indicates that the US currency will continue to consolidate its position. Although the opposite happened last week: the dollar lost about 150 pips against the euro from May 16 to May 20, and the EUR/USD pair ended the trading session at 1.0557. However, according to some experts, what happened is the result of the general correction of the DXY indicator and fits with the downside trend of the pair in the medium term.

At the time of writing, on the evening of May 20, expert opinions are divided as follows: 45% of analysts are sure that the EUR / USD pair will return to the movement to the south, the same number is waiting for the continuation of the correction to the north and the 10% is taken The remainder is a neutral position. There is some discrepancy in the indicator readings on D1 due to the correction. Among the trend indicators, 40% are sided with red, and 60% are sided with green. A clearer picture of the indicators: 70% are green, 20% are red and 10% are neutral gray. The nearest resistance is located in the 1.0600 area, followed by the 1.0640 resistance and the rise to the 1.0750-1.0800 area. For the bears, task #1 is to break the support in the 1.0500 area, then 1.0460-1.0480, and then update the May 13th low at 1.0350. If successful, they will move on to break into the 2017 low at 1.0340, and there is only 20-year support below.

As for the calendar for the coming week, it will be useful to pay attention to the publication of business activity data (Marquette) for Germany and the Eurozone as a whole on Tuesday 24 May. Released on Wednesday. The minutes of the last meeting of the Federal Reserve's Federal Open Market Committee will be published on the same day, and preliminary US GDP indicators for the first quarter of 2022 will be announced on Thursday, May 26.

pair GBP/USD: Inflation continues to rise

Of course, the dynamics of the GBP/USD pair were dominated by what happened to the DXY dollar index last week. However, some adjustments were also made by specific factors related to the UK economy.

The Bank of England published a forecast about two months ago that inflation should have peaked in April. Data published on Wednesday, May 18, confirmed these expectations, with the exception of one very large "but". The regulator had forecast a peak of 7.2%, but it turned out to be 9.0%, the highest in the past 40 years. And in this case, to paraphrase the great English playwright William Shakespeare, it is time to shout: “Is this the climax or not? this is the question! “Apparently, there is no talk of any slowdown in inflation yet, and this is exactly the main 'toothache' for the British economy.

GBP/USD reached 1.2524 at a weekly high. Two news prevented the pound from weakening. First, according to the UK's Office for National Statistics, retail sales in the country unexpectedly rose 1.4% in April, while the market expected a 0.2% decline. In addition, the British currency was supported by the Chief Economist of the Bank of England Hugh Bell, who said that the regulator has not yet continued to tighten monetary policy, as the upward risks of inflation still prevail, and are expected to rise to double. numbers in 2022.

As a result, the pair finished the five-day period at 1.2490 where it traded in late April-early May, and where it was already in 2016, 2019 and 2020. Will it continue to decline? 20% of the experts answered in the affirmative, 25% answered in the negative. The majority (55%), who did not know how to react to the words of the chief economist of the Central Bank, shrugged their shoulders. As for the indicators on D1, as for the EUR/USD pair, their opinions are divided. Among the trend indicators, 50% indicates the growth of the pair, the exact same number indicates a decrease, among the oscillators, the balance of forces is somewhat different: only 20% go south, 80% go north, although a quarter of them are present Already in the overbought zone. Supports are located at 1.2435, 1.2400, 1.2370, 1.2300, 1.2200, then 1.2154-1.2164 and 1.2075. There is a strong support point for this pair at the psychologically important 1.2000 level. In the event of a further correction to the north, the pair will have to overcome the resistance in the area of 1.2500-1.2525 and then there are areas of 1.2600-1.2635, 1.2700-1.2750, 1.2800-1.2835 and 1.2975-1.3000.

UK economic developments in the coming week include a speech by Bank of England Governor Andrew Bailey on Monday 23 May and the release of the composite PMI and Markit manufacturing and services PMI on Tuesday 24 May.

pair USD/JPY: Why is the yen strengthening

Forecasts of GBP/USD, USD/JPY, EUR/USD and Bitcoin this week 23-27 May 2022According to officials from the International Monetary Fund, “in general, the depreciation of the yen is helping Japan.” The same thing can be heard over and over again from the leaders of the Bank of Japan. The IMF also believes that the yield curve control applied by the Japanese regulator is very effective, and that the dynamics of the yen are “in line with medium-term fundamentals.”

However, contrary to the statements of senior officials, we have not seen weakness, but rather strength of the Japanese currency over the past two weeks. And on May 20, it was exactly where it was on April 20: at the level of 127.85, without updating the maximum of May 09 at 131.34. According to a number of experts, the appreciation of the Japanese currency was due to the increasing appetite of investors for risk-free assets. However, this is not the only reason.

Inflation in the country continues to grow, which causes discontent among the population. Consumer price increases are recorded for the eighth consecutive month. In April, they rose 2.5% compared to the same month a year earlier, indicating the highest growth rate since October 2014. As noted by Dow Jones, inflation has crossed the 2.0% mark for the first time since September 2008, and that is without taking into account the impact from the consumption tax increase. . It was 1.2% in March. Naturally, all this causes discontent among the citizens of the country, with which politicians are already actively interacting. But at some point, there will have to be a reaction from the BoJ. Many investors, especially foreign ones, expect that despite the regulator's assurances of its commitment to ultra-soft monetary policy, it will still be forced to raise the interest rate. It is clearly this expectation that is providing the JPY with additional support.

At the moment, 55% of analysts vote for the yen to continue its strength and USD/JPY to continue moving south, 40% for the resumption of the uptrend to the north, and 5% expect a move to the sides. At the same time, supporters of technical analysis pay attention to the fact that a classic figure has formed on the chart: a “double top” (or “head-shoulders”). Among the indicators on D1, the forces align as follows. Oscillators contain 80% red, 10% green, and 10% neutral gray. Among trend indicators, parity is 50% to 50%. The nearest support is located at 127.50, followed by areas and levels at 127.00, 126.30-126.75, 126.00 and 125.00. The bulls' goal is to rise above 128.00 horizon, then overcome the resistances of 129.00, 129.60, 130.00, 130.50 and renew the May 09 top at 131.34. The January 1, 2002 high, 135.19, is considered the ultimate target.

Among the events of the coming week, one can pay attention to the speech of Bank of Japan Governor Haruhiko Kuroda on Wednesday, May 25, although it is unlikely to bring any surprises and affect in some way the market sentiment. But what if something happened? The markets remember 2016, when Haruhiko Kuroda first categorically denied the possibility of changing prices, and then suddenly decided to take such a step ...

Cryptocurrencies: The end of the digital gold rush?

The BTC/USD bulls have been trying hard to keep the price in the $30K region since May 11th. The conflict has occurred in the region of $28,650-31,000 over the past week. And although the S&P500, Dow Jones and Nasdaq indices rebounded on May 18, adding to the pressure on Bitcoin, they continued to resist.

In general, separating bitcoin from stock indices, primarily the S&P500, is the dream of many proponents of the first cryptocurrency. On the other hand, these same people dream that as many institutions as possible will come to the cryptocurrency market, and that bitcoin, along with stocks, will take its rightful place in their investment portfolios. But in order to become a full participant in the financial markets, cryptocurrency must comply with the rules and laws placed on it. And if big investors get rid of risky assets, one should not expect that by dumping shares of Microsoft, Apple or Amazon, they will invest the dollars they earned not in Treasuries, but in Bitcoin or Ethereum.

Another dream is for bitcoin to prove itself as a store of value on par with physical gold. However, the concept of “digital gold” at the moment is nothing more than a compliment towards the number one cryptocurrency. Or a marketing ploy to increase its value in the eyes of small investors. But the importance of the precious metal to humanity was confirmed thousands of years ago, while the history of Bitcoin did not even exceed 15 years. Its value lies only in its limited emission and thirst for profit.

In 2010, BTC was worth 5 cents, and its price reached $69,000 at its peak in November 2021. It is clear that the prospect of quickly and easily converting $100 into $138 million has attracted a large number of people who want to get rich quickly. So what happened in the past ten to twelve years can be called a “digital gold rush,” similar to the gold rush in the United States in the second half of the nineteenth century. But then, instead of getting rich, many lost their money. The same can now be observed: Bitcoin, after dropping to $26,579 on May 12, refreshed its lowest level for the current year and returned to its December 2020 values, after losing about 60% of its value in just 6 months.

According to the Bloomberg Billionaires Index, Coinbase CEO Brian Armstrong's net worth has fallen from $13.7 billion to $2.2 billion. This was due not only to the decline in the price of digital assets, but also to the decline in the shares of Coinbase, whose price fell by more than 80%. The CEO of FTX crypto exchange Sam Bankman-Fried has halved and now stands at $11.3 billion. The famous founders of cryptocurrency exchange Gemini, brothers Cameron and Tyler Winklevoss, have lost more than $2 billion, which is equivalent to nearly 40% of their total fortune. Well, what means of “saving and hedging” can we talk about in such a situation?

Another feature of Bitcoin that its proponents love to talk about is its decentralized nature and the anonymity of its owners. However, it seems that this is just a fake The Chairman of the US Securities and Exchange Commission (SEC), Gary Gensler, explained that although the cryptocurrency markets are considered decentralized, in reality, most of the activity takes place on a few large trading floors. Regulators and law enforcement officers keep a close eye on them. And the fact that the wallets of the Russians were closed after the imposition of sanctions on Russia, says a lot.

Finally, the fourth opportunity to raise the value of Bitcoin is to use it on a large scale as a means of payment. Although not everything is so smooth here. For example, Sam Bankman-Fried, CEO of crypto exchange FTX, recently expressed doubts about Bitcoin's ability to become a popular payment system. The top manager cited the inability to scale the network “to millions of transactions” per second due to the inefficiencies and high environmental costs of its blockchain system.

Returning from wishful thinking to reality, we must announce that the overall capitalization of the cryptocurrency market continues to decline. At the time of writing this review, Friday evening, May 20, the price was $1.248 trillion ($1.290 trillion a week ago). The Crypto Fear & Greed indicator has solidified in the Extreme Fear area and is at around 13 points. Moreover, it dropped to 8 pips on Tuesday May 17, the lowest level since March 28, 2020. The BTC/USD pair is barely staying in the “war zone”, at the level of $29,325.

Gold advocate Peter Schiff, president of Euro Pacific Capital Inc. Bitcoin has already lost an important support level near $33,000. The cryptocurrency must drop to $8000 to touch the next level. “The support line has been broken. There is a high probability of a move to the lower support line. The chart shows two patterns simultaneously: a double top pattern and a head and shoulders pattern. This is an ominous combination. We still have a long way to go, Schiff wrote in his blog.

Rich Dad Poor Dad, bestselling author and entrepreneur Robert Kiyosaki, described the bitcoin crash as “great news” and predicted a test at the $17,000 level. “As I said earlier, I expect Bitcoin to drop to $20,000. Then we will wait for the bottom test, which could be $17,000. Once that happens, I'll be big. “Crisis is the best time to get rich,” he said.

But according to crypto strategist DonAlt, the question of where Bitcoin will move after breaking the key $30K support area has not been resolved. “Over the next three months, we will either see the capitulation that everyone has been waiting for, or Bitcoin will close the range and start moving up to $58,000,” the expert wrote. In his opinion, the downside potential is higher, and the next support is at $14,000. DonAlt notes that the current Bitcoin market structure may indicate that a bottom has already been reached. However, he fears the strong correlation between BTC and the stock market and the possibility of a further collapse of the S&P500 index.

A trader known as Rekt Capital agreed with the opinion that Bitcoin is expected to fall further. The specialist believes that the currency needs to lose another 25% of its value before the expected local minimum.

On the other hand, the analyst nicknamed Pentoshi expects a rally in Bitcoin soon, as the situation, in his opinion, is in favor of the bulls. According to Bentoshi, the bears are making serious efforts to bring down the price of bitcoin, but they have not succeeded in achieving the desired result. “A lot of coins are exchanged with great effort. But are the sellers adequately paid? It does not seem so.

For example, he looked at an inverted Bitcoin chart, which shows a very high trading volume, along with a small movement in the exchange rate. As Pentoshi believes, the bears' failure to devalue BTC despite strong selling pressure indicates that momentum is about to shift in favor of the bulls.

US billionaire investor Bill Miller is also optimistic. According to him, he has survived at least three drops of bitcoin by more than 80%. And despite the fact that some of his coins are currently being sold on a margin call basis, he remains bullish on the longer term.

As follows from the above, there is no consensus among influencers and experts at the moment. What do you do in such a situation? Of course, you can sit and wait with your hands down. Or you can, for example, engage in active trading. Moreover, trading on the principle of CFDs, you can earn both on the growth and fall of the cryptocurrency market. Moreover, you do not need real cryptocurrency for this: at the exness brokerage, in order to open a transaction with 1 bitcoin, you will need only $150 and $15 for 1 ether transaction Register now.

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