GBP/USD, USD/JPY, EUR/USD and Bitcoin forecast this week from September 05-09, 2022

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pair EUR/USD: a boring week

Last week was boring, so to speak. The aggregate statistics released from August 30 to September 2, although varied, turned out to be very close to market expectations. For example, Germany's harmonized CPI came in at 8.8%, with a forecast of 8.8%. Eurozone CPI came in at 9.1% instead of the expected 9.0%. The US Manufacturing Business Activity Index (PMI) was unchanged over the month at 52.8 (52.0 expected), and the number of new jobs created outside the US Farm Sector (NFP) did not diverge from the expected 315K vs. 300K. As a result, the EUR/USD has been moving along the parity line 1.0000 throughout the five days, fluctuating in the range of 0.9910-1.0078, and completed the five-day period at the level of 0.9955.

Market participants are likely to be more active next week. The main day will definitely be Thursday 08 September, when the European Central Bank will decide the deposit rate, issue a statement and comment on its monetary policy. Eurozone inflation increased further in August: from 8.9% to 9.1%. Therefore, many experts, such as the strategists at the international financial group Nordea, believe that the European regulator will raise the price by 75 basis points in one go.

“Considering that the rate is up by 75 basis points. They are not fully priced in financial markets and the tone of the press conference is likely to be hawkish, as Nordea economists wrote, "We expect the first reaction from the markets to be higher yields, a broader bond spread, and a stronger euro."

If we talk about average expectations, it will look like this at the time of writing the review. 50% of experts vote on the fact that the EUR/USD pair will move south in the near future, 35% vote for its growth, and the remaining 15% are waiting for the sideways trend to continue. The readings of the indicators on D1 give more specific signals. Whether among the trend indicators or among the oscillators, all 100% aside for the bears. However, 10% of the latter give signals that the pair is oversold.

The closest bearish target for the EUR/USD is the 0.9900-0.9910 area. Note that 0.9900-0.9930 is also a strong support/resistance area for 2002. Apart from the parity level at 1.0000, if the Euro strengthens, the first priority for the bulls will be to rise above the 1.0030 resistance. After that, it will be necessary to surpass the level of 1.0080 and consolidate in the area of 1.0100-1.0280, the next target area is 1.0370-1.0470.

Among the upcoming week's events, apart from the ECB meeting, we can single out the release of data on retail sales in the Eurozone on Monday, September 5th. Monday is a holiday in the United States, as the state celebrates Labor Day. We await business activity data (ISM) in the US service sector on Tuesday, September 6th, and GDP indicators for Germany and the Eurozone will be published on Wednesday. Federal Reserve Chairman Jerome Powell is scheduled to speak and US unemployment data will be published on the same day.

pair GBP/USD: On the way to a 37-year low

We titled our review of the GBP/USD pair 'Blemish Sterling Outlook Continues to Come True' a couple of weeks ago. The previous headline sounded like “Terrible Long-Term Outlook” We cannot say anything exhilarating this week either: Sterling remains one of the weakest G10 currencies, affected by the deteriorating outlook for the UK economy.

The British Chamber of Commerce (BCC) estimates that the UK is already in the midst of a recession and that inflation will reach 14% this year. According to Goldman Sachs, it could reach 22% by the end of 2023. According to the Financial Times, the number of British households living in fuel poverty will double in January to 12 million people. The new prime minister will have to take urgent measures to avert an economic catastrophe. Just what to do? It seems that no one knows yet.

In such a situation, the concern of market participants about the nomination of the next prime minister, whose name will be announced on Monday, September 5, is completely understandable. It is noteworthy that the current Prime Minister, Boris Johnson, has resigned after a sex scandal involving a member of his government.

Against this gloomy background, the pound has been declining since August 01. After breaking through the support at 1.1500, it hit a two-year low (1.1495) last week. As for the last chord of the five-day period, it looked a little higher, at around 1.1510. Most experts (55%) believe that GBP/USD will continue to decline in the coming weeks. And it won't stop even if the Bank of England raises interest rates by 75 basis points on September 15th. 30% hope for a correction and 15% are neutral.

According to currency strategists at UOB Group, the next important support level after 1.1500 is at its lowest in March 2020. “However,” experts note, “short-term conditions are severely oversold, and it is not yet clear whether this major support will be in within reach this time.” As for a possible correction in the north, UOB believes that only a break above 1.1635 will indicate that the British currency is not ready to fall further.

Note that the lows of March 2020 (1.1409-1.1415) are at the same time the lowest levels in the last 37 years (!). The GBP/USD pair fell only to 1.0800 in 1985. As for the bulls, they will face resistance in the areas at 1.1585-1.1625, 1.1700, 1.1750, 1.1800-1.1825, 1.1900 and 1.2000. The readings of the indicators on D1 are similar to those of the EUR/USD pair: all 100% are colored red. However, a third of the oscillators here indicate that the pair is oversold, often indicating a possible correction.

The UK economic calendar could fall on Monday 05 and Tuesday 06 September when the UK Manufacturing and Services PMI and Composite Index (PMI) are released. A hearing on the inflation report will be held on Wednesday, September 7th, but it will not be the most informative, and no important decisions will be made on that day.

pair USD/JPY: higher, higher, higher

Most analysts (60%) were expecting a fresh test of the July 14 high and taking the high of 139.40 last week. This is exactly what happened. USD/JPY climbed to a high of 140.79, hitting a 24-year high. The weekly trading session closed at 140.20.

The reason for another record is still the same: the difference between the monetary policy of the Bank of Japan (BOJ) and other major central banks, led by the US Federal Reserve. Unlike the American hawks, the Japanese regulator still intends to pursue a super-soft policy, which aims to stimulate the national economy through quantitative easing (QE) and a negative interest rate (-0.1%). This divergence is a major factor for further yen weakness and USD/JPY growth.

Economists at Bank of America Global Research expect USD/JPY to remain at high levels until a major correction occurs in the fourth quarter of 2022. Moreover, such a correction is only possible if inflation in the states shows steadily slowing down. “We expect USD/JPY to end in 2022 at 127,” these analysts say. "However, the structural weakness of the Japanese yen should appear in the long term."

At the moment, the majority of analysts (50%) believe that USD/JPY will continue its northward movement. Fortunately, it still has room to grow: it was worth more than 350 yen to $1 in 1971. 30% of experts expect bulls to take a breather in their highs, and another 20% rely on a corrective move to the south.

As for the indicators on D1, 100% of them point north, while a third of the oscillators are in the overbought zone. The main task of the bulls is to update the high of September 02 and rise above 140.80. The next target is 142.00. Support for the pair is located at the levels and in the areas 140.00, 138.35-139.05, 137.70, 136.70-137.00, 136.15-136.30, 135.50, 134.70, 134.00-134.25.

As for economic events next week, the release of Japan's GDP data on Thursday can be highlighted.

Cryptocurrencies: All Hope for Ethereum

GBP/USD, USD/JPY, EUR/USD and Bitcoin forecast this week from September 05-09, 2022

The BTC/USD pair has been moving in a narrow range along the $21.330 horizon for a week prior to Jerome Powell's August 26 speech. The Fed Chairman's speech led to the collapse of risky assets, and the stock and cryptocurrency markets plummeted. However, if the S&P500, Dow Jones, and Nasdaq stock indices continue to fall throughout the past week, Bitcoin has managed to stay in the $20,000 region ($19,518-20,550), and even Ethereum has grown in anticipation of a move to PoS mechanism.

As a result, instead of the usual correlation between BTC/USD and technology stocks, we can note its correlation with the major forex pair, EUR/USD these days, which moved sideways along the parity line at 1.0000. A slight recovery occurred on Friday, September 2 due to the release of US unemployment data. But the pair has not crossed the weekly trading range and Bitcoin is trading at $19,930 at the time of writing the review. The total value of the cryptocurrency market has fallen below the psychologically important $1 trillion level and stands at $0.976 trillion ($0.991 trillion a week ago). The Crypto Fear & Greed Index is down another two points in seven days, from 27 to 25, and is in the area of extreme fear.

Over the past 10 years, investors have only experienced more serious losses in 2018. The pressure on the cryptocurrency market continues, mainly due to the tightening of monetary policy by the US central bank. According to CoinShares, the turnover of cryptocurrency investment products fell in the last decade of August to the lowest level since October 2020, and the inflow of funds continued for the third week in a row. Specialists explain that “although part of this dynamic is due to seasonal influences, we are also seeing persistent apathy after the recent price drop. We believe this caution is due to the hawkish rhetoric of the Fed. “In addition to speculators and occasional “tourists,” medium-term holders of Bitcoin (with a coin history of over 5 months) are starting to leave the market.

The number of cryptocurrency enthusiasts is rapidly dwindling. Bitcoin is a “purely speculative asset without interest,” due to a lack of technological progress. This was stated by Justin Pons, founder and chief investment officer of Cyber ​​Capital Fund. He used to be a staunch advocate of bitcoin, but he changed his mind, calling it “one of the worst cryptocurrencies.” “The world has moved forward. It was said that digital gold would simply embrace the best technology. Obviously, this thesis has not been fully confirmed. Pons explained that Bitcoin has no smart contracts, privacy technologies, or scaling hacks.

“Bitcoin's economic characteristics are also incredibly weak. It competes with cryptocurrencies that can achieve negative inflation, high storage capacity, and interest, such as ETH after a merger.” “Most people invest in the first cryptocurrency only because they believe in price increases. They act on the same principle as the participants in the Ponzi schemes,” believes the founder of Cyber ​​Capital.

Omar Farooq, head of blockchain at Onyx, which is part of the JPMorgan conglomerate, also voiced a lot of criticism of the cryptocurrency market. In his opinion, most crypto assets in the market are “junk,” and the lack of full industry regulation prevents many traditional financial institutions from participating in the market. In addition, the technologies and practical applications of digital currencies are not well developed. For this reason, for example, they cannot be used as products like bank deposits with tokens.

Investor and broadcaster Kevin O'Leary also believes that the price of Bitcoin is in the doldrums due to a lack of regulation. As a result, institutionalists cannot invest in this sector. “You need to use the trillions of dollars that the sovereign wealth manages, but they are not going to buy bitcoin because there is no regulation,” O'Leary says. People forget that 70% of the world's wealth resides in pension funds and sovereign wealth. Accordingly, if they are not allowed to buy this asset class, they will not bet on it.”

However, the investor believes that regulation will still appear over the next two to three years. Meanwhile, without a regulatory framework, cryptocurrency cannot be considered a full-fledged asset class, and Bitcoin is unlikely to rise above $25,000.

Analyst Justin Bennett's forecast looks bleaker. According to him, the recent sell-off in the stock market will inevitably lead to a drop in the price of bitcoin: “The stock sale that occurred confirms the existence of a large bull trap and is likely to cause a long-term decline. This means the S&P500 will drop by about 16%, and BTC by 30%-40%, to the $12,000 level.”

“BTC Tests the 2015 Trendline Again,

The analyst writes. – “Don't believe those who consider it a healthy phenomenon. The two long bottom wicks of 2015 and 2020 that indicate strength in demand are well worth looking for. This time we see the exact opposite.” According to Bennett, the main target for the bears is the pre-COVID-19 high of $3,400.

Regarding Ethereum, Bennett believes that the asset is forming the top of a “head and shoulders” pattern on the chart with a bearish target near $1000: “The right shoulder of this pattern is starting to form and ETH dropping below $1500 is confirmation. ”

A similar scenario was presented by Bloomberg analysts. They are also expecting ETH to drop below $1,000 despite its recent return from the August 29 lows. This is largely due to the volatility of the Ethereum price in bear market conditions. “Technical indicators of momentum and price trends show that the coin’s decline from a peak near $2,000 in mid-August to the current region near $1,500 is likely to continue,” Bloomberg said in its report.

Sentiment in the ETH community has been bullish lately due to the upcoming merger. However, this did not provide the asset with any immunity from the latest unfavorable macroeconomic conditions, Bloomberg analysts wrote. Ethereum has established a promising support on the 50 day EMA. However, after the market plunged on August 25-26, the asset was below this support, indicating the risk of a further breakdown and a retest of the support around $1,000.

And some optimism at the end of the review. According to a number of experts, if the transition to the Ethereum 2.0 network and the implementation of the Proof-of-Stake mechanism goes as planned, the altcoin could rise sharply in price and attract the entire market with it, primarily its main competitor, Bitcoin. Remember that the Ethereum network update is scheduled for September 15-20. So we will soon find out which of the predictions will be correct.

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