pair EUR/USD: in a state of uncertainty
Giving their forecast a week ago, 20% of analysts were in favor of a decline in the EUR/USD pair, 50% voted for it to rise, and 30% were neutral. As a result, 80% of those who indicated upside and sideways trend were right. After it started at 1.1600, the pair first rose to 1.1668, then fell to 1.1616, and then moved sideways in this channel. After the Federal Reserve's speech on Friday, the pair fell to the bottom of this trading range but closed roughly in the middle of it at 1.1643.
According to Reuters, Jerome Powell said it was time to start reducing asset purchases but added that it was not yet time to raise interest rates. In his opinion, high inflation is likely to continue next year, but the central bank expects it to return to the 2% target.
The numbers released during the week from the US labor market can be considered positive. This was due to a larger revision of previous data on repeated claims for unemployment benefits, from 2.593K to 2.603K. Thus, the current figure of 2.481K showed a decrease of 122K instead of the expected 118K.
These numbers improve data on initial benefit claims, too. As a result of a revision of the previous results, it decreased by 6 thousand instead of increasing by 2 thousand.
However, all this positivity did not help the dollar much, as the US Treasury yields remained at around 2.15%, while their growth potential remained around 3.0%.
Weak Markit PMI in German and Eurozone manufacturing sectors could have pushed EUR/USD lower on Friday, October 22nd. But the numbers were contradictory. The European index turned into the red, down from 56.2 to 54.3 versus 55.2 expected. But Germany's index, on the contrary, is green at 58.2 versus the expected 56.5.
Continued improvement in the US labor market should eventually provide more support for the dollar. Federal Reserve Governor Jerome Powell has repeatedly emphasized that the monetary stimulus (QE) program aims to stabilize the labor market, among other things. This task, although not fully accomplished, is very close to the goal. Thus, there is nothing to prevent the Fed from starting to cut monetary stimulus in the near future.
So, what can be expected from EUR/USD in the near future? While 55% of the oscillators on D1 were painted red, 15% green, and 30% neutral gray a week ago, the picture has now changed. 50% of indicators are up, 20% are neutral, 15% are looking down, and the remaining 15% indicate that the pair is overbought. As for the trend indicators, its readings have also been affected by the sideways movement in recent days, resulting in a parity of 50% by 50%.
The vast majority of analysts expect the dollar to rise by the end of the year. But their opinions are roughly evenly divided on the outlook for the next week. 45% of experts vote for the bullish scenario as much as they vote for the downside, and 10% take a neutral stance.
The support levels are 1.1615, 1.1585, 1.1560, 1.1520, 1.1485 and 1.1450. Resistance levels 1.1670 1.1715, 1.1800, 1.1910.
As for the upcoming week's events, it is worth noting the Eurozone Bank Lending Report to be published on Tuesday, October 26th. US capital and durable goods orders are due on Wednesday, October 27. Expect plenty of macro stats on Thursday and Friday, including consumer markets and GDP data from the Eurozone, Germany and the US. In addition, the European Central Bank will meet on October 28. The interest rate is likely to remain unchanged at 0%. Therefore, the subsequent press conference and commentary by the ECB management on monetary policy are of much greater importance.
pair GBP/USD: Wherever the Euro goes, the Pound Goes
The GBP/USD chart last week is very similar to the EUR/USD chart: a sideways movement with some advantages for the bulls and ending just above the starting level at 1.3758.
UK consumer price growth slowed from 3.2 per cent to 3.1 per cent, a good sign for investors who fear global inflation. However, the market has not reacted much to these figures, as it closely monitors gas prices, the energy crisis is now a major threat not only to Europe but also to the breakaway United Kingdom. Certainly, inflation is very important, but the country is repeating the path already taken by the Eurozone and the United States, where strong growth followed after a slight decline.
The Markit Business Activity Index (PMI) in the British services sector published on Friday 22nd October rose from 55.4 to 58.0 instead of the expected decline. This did not help the pound. The dollar helped, aided by Jerome Powell, who gave a speech shortly before markets closed.
Unlike its European counterpart, the pound has been growing since September 29. And this could not but affect the readings of the indicators on D1, among which the feature remains on the green side. Of these oscillators 55%, 25% are gray and 20% indicate that the pair is overbought. Among the trend indicators, 60% are heading north, 40% are already heading south.
For experts, there is no noticeable advantage: 35% vote for the growth of the pair, 25% for its decrease, and 40% for the movement in the side channel.
Supports are located at 1.3740, 1.3675, 1.3600, 1.3575, 1.3525 and 1.3400. Resistance levels and upside targets are 1.3770, 1.3810, 1.3835, 1.3900 and 1.4000.
pair USD/JPY: Back to 2017
The USD/JPY pair raised its highest level in four years on October 20 to reach 114.70 which is the highest it was in November 2017. After that, the bulls' enthusiasm waned, and the pair returned to last week's values.
While the dollar has strengthened against the euro and the pound since Fed Governor Jerome Powell's October 22 speech, it has weakened slightly against the yen as a safe haven currency. As a result, the last chord looked around 113.42.
As we know, the pair's performance is heavily influenced by the US government bond yield, which is hovering around 2.15% so far. However, if it rises, the USD/JPY will see a new high in volatility.
At this point, 65% of analysts expect the pair to first return to the horizon of 113.00, and then decline to the area of 111.00-112.00 by the end of November. The remaining 35% of experts adhere to the opposite view, and expect the next update of multi-year highs and the rise of the pair to the range 115.00-116.00.
The resistance levels are 114.45, 114.70 and 115.50, and the long-term target for the bulls is the December 2016 high at 118.65. Support levels are 113.25, 112.00 and 111.65.
Regarding the events of the coming week, the meeting of the Bank of Japan, which will be held on the same day as the European Central Bank meeting, can be noted on Thursday, October 28. However, it is very likely that it will not come with any surprises, and the interest rate will remain negative at -0.1% as before.
Bitcoin: $66,925 New High
Bitcoin price reached $64,850 on April 14, followed by a 55% decline to $29,230. And now what cryptocurrency investors have been waiting for has finally happened. After months of angst and anticipation, the BTC/USD pair not only regained what it lost, but also rose to its all-time high, peaking at $66,925 on October 20. Ethereum also reached an all-time high ETH/USD at $4,363.
Analysts say the reasons for the current rally are two. The first is the launch of Bitcoin ETFs (Exchange Traded Funds), the US Securities and Exchange Commission (SEC) approving a Bitcoin futures ETF from ProShares, followed by the approval of VanEck to launch a similar ETF.
The second and main reason for the bullish trend was investor concerns about inflation. Experts at JPMorgan Chase, the largest banking conglomerate, noted that real gold, unlike digital gold, has barely responded to inflationary concerns. This points to Bitcoin's renewed role as the best capital protection tool for investors and supports the bullish outlook for BTC through the end of the year.
Several other analysts agree with JPMorgan Chase, who are bullish on the performance of the major cryptocurrency through the end of December. But at the same time, they are urging investors to be very careful in early 2022 as BTC's big four-year cycle is coming to an end. So Michael Berry, founder of the hedge fund Scion Capital, who predicted the 2007 subprime mortgage crisis, had already considered opening a short Bitcoin position.
Finder surveyed 50 fintech experts with representatives from Cypherpunk Holdings, Bitcoin Reserve, Kraken, Arcane and CryptoQuant, as well as 7 professors representing universities in Asia, Europe and Australia. In their opinion, the rate of BTC will peak at a level just above $80,000 over the next two months, and the major cryptocurrency will end the year around $71,400.
The levels indicated by these experts turned out to be well below expectations of analysts at Standard Chartered and Bloomberg, who believe that bitcoin could surpass $100,000 this year.
Popular crypto analyst Willy Wu believes that the next phase of the Bitcoin market will be more volatile than the previous bullish periods, which means a longer time frame for the current cycle. Remember, this analyst wrote in a series of Twitter posts a year ago that according to his model, $200,000 per bitcoin by the end of 2021 is a conservative forecast. However, he did not rule out the possibility that BTC could rise to $300,000.
Mark Jusko, CEO of Morgan Creek Capital Management, calls numbers similar to Willie Wu's predictions. He notes that the price of the oldest cryptocurrency could rise to the level of 250 thousand dollars, not only in 2021, but in the next five years. However, I acknowledge that the path to such a summit may not be easy.
In the meantime, there is a downturn in the crypto market. More cautious investors close out long positions. Bitcoins are also sold by those who bought them at the height of spring. They have earned a little and do not want to risk again.
Binance added to the concerns as well, as an algorithm flaw on the platform prompted a price crash of 87%. However, the performance of other exchanges and brokers was not affected by this, and the BTC/USD pair was trading at $61,000 at the time of writing. The total cryptocurrency market cap is $2.6 trillion, and the Bitcoin dominance index is 45.94%. The Crypto Fear & Greed indicator is in the Greed area at 75 points. However, this does not mean that the market is strongly overbought, and in the opinion of the developers of indicators, it is still dangerous to open short positions in this case.
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