GBP/USD, USD/JPY, EUR/USD and Bitcoin forecast this week 20-24 June 2022

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pair EUR/USD: FOMC meeting results

The most important event of the last week was on Friday, June 10th, when the US inflation statistics were released, which amounted to 8.6% versus the expected 8.3%. After learning of this disturbing data, market participants started pricing the dollar with the possibility of a rate hike of 0.75% instead of the previously expected 0.5%. Some daredevils even talked about increasing it by 1.0% right away. As a result, the Federal Open Market Committee (FOMC) at its meeting on Wednesday, June 15, raised the key interest rate to 1.75%, or 0.75%.

According to Federal Reserve Chairman Jerome Powell, this was the most aggressive round of monetary tightening since 1994. Moreover, the US central bank, despite the threat of a recession, intends to follow the chosen path further, raising the rate by 50 or 75 basis else. point at the next meeting.

After the FOMC meeting, inflation estimates for 2022 were revised from 3.4% to 5.2%, and the headline rate forecast was raised from 1.9% to 3.4%. At the same time, Jerome Powell hopes that this will not be a shock to the economy, given the strength of the consumer sector and the labor market in the United States. It is true that, despite the Fed Chairman's optimism, the projected economic growth rate for 2022 has fallen from 2.8% to 1.7%, and the forecast for the unemployment rate has been raised from 3.5% to 3.7%.

Overall, Jerome Powell's comments on the regulator's plans turned out to be somewhat vague, and the market didn't understand how strong quantitative tightening (QT) was and what the probability of raising the fed funds rate to 4.0% was. As the Fed chair said, “a rate hike of 75 basis points is unusually large,” so he doesn’t think “such hikes will happen often.”

As a result, the DXY dollar index reached its highest level (105.47), and the EUR/USD pair reached its low (1.0358) not after the FOMC meeting, but directly during it. The rapid strengthening of the dollar at the beginning of the week was caused not only by expectations of an unprecedented rate hike, but also by weak macroeconomic statistics from Europe. The rate of decline in industrial production in the Eurozone accelerated from -0.5% to -2.0%, although it was expected to slow on the contrary. The main reason remains the energy crisis caused by anti-Russian sanctions due to the Russian military invasion of Ukraine.

The dollar appears to have exhausted its bullish potential on the evening of June 15th, which triggered a quick rebound on June 16th, and the EUR/USD rally to 1.0600. For the last day of the working week, the trend changed again after the European Central Bank promised new support to contain the cost of borrowing among southern Eurozone countries. The pair put the last chord of the five-day period in the 1.0500 area, at the level of 1.0495.

Many analysts believe that the US and European currencies will reach a parity of 1:1 by the end of the year (or perhaps sooner). Meanwhile, the expert votes are split as follows on the evening of June 17: 30% with the bulls, 20% with the bears, and 50% with no predictions. The indicators on D1 give unambiguous signals. Among oscillators, 100% is red, and among trend indicators, 90% is red and 10% is green. Except for 1.0500, the closest strong resistance is in the 1.0600 area, and if it succeeds, the bulls will try to break through the 1.0640 resistance and rise to the 1.0750-1.0760 area, the next target is 1.0800. For the bears, task #1 is to break the support in the 1.0460-1.0480 area, 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 next week's events, Monday, June 20 is a public holiday in the United States. Data will be released from the housing market on Tuesday, June 21 and Friday, June 24, and from the US labor market on Thursday. In addition, we will have two speeches by Federal Reserve Chairman Jerome Powell in Congress on June 22-23. We also recommend that you pay attention to the publication of data on business activity in Germany and the Eurozone as a whole on June 23.

pair GBP/USD: A pleasant surprise from the Bank of England

Before the US Federal Reserve meeting, the dollar rose against the pound by 585 points in just 3 working days, from June 10 to 14, and the GBP / USD pair fell to 1.1932, the lowest level since March 2020. But then the regulator intervened in United kingdom.

At its meeting on Thursday, June 16, the Bank of England raised its key interest rate from 1.00% to 1.25%. 25 basis points appears to be only a third of the 75 basis points the Fed raised the rate the day before, but the pound rose and the pair held a domestic high at 1.2405. The British currency strengthened by 365 pips in a few hours.

The reason for this rise, as it often happens, is expectations. First, 3 out of 9 members of the bank's board of directors supported an increase not of 25 but of 50 basis points in one go. Second, the comments published after the meeting clearly indicated that the pace of monetary policy tightening could be accelerated, starting with the next meeting of the regulator. This means that the price could reach 1.75% as early as August 4, well above market expectations. In addition, the Bank of England intends not to stop there and raise interest rates further.

Contrary to the vague comments of the Federal Reserve, the Bank of England was clear enough about its monetary policy that it left a positive impression on investors. Analysts also noted that unlike their colleagues on the other side of the Atlantic, BoE leaders did not place all the blame for rising inflation on China and Russia.

The British pound retreated from the positions gained by the end of the week, and the pair ended the trading session at the level of 1.2215. At the moment, 50% of experts believe that in the near future the pair will try to test resistance at 1.2400 again, 10%, on the contrary, are waiting for a test of support around 1.2040, and the remaining 40% of their analysts have taken a neutral stance.

Whether among trend indicators or among oscillators, 90% is down, and the remaining 10% is in the opposite direction. Support is located at the levels of 1.2155-1.2170, then 1.2075 and 1.2040. The strong foothold of this pair is located at the psychologically important 1.2000 level, followed by the June 14th low at 1.1932. In the event of growth, the pair will face resistance in the areas at 1.2255, 1.2300-1.2325, 1.2400-1.2430 and 1.2460, then targets in the 1.2500 and 1.2600 areas will follow.

Among the macroeconomic events for the coming week in relation to the United Kingdom, we can highlight the publication of the May value of the Consumer Price Index (CPI) on Wednesday, June 22, and a full set of PMI indicators, reflecting business activity in individual sectors and in the country's economy in general in The next day, on June 23. UK Retail Sales for May will be released on Friday, 24 June.

pair USD/JPY: No surprises from the Bank of Japan

The dollar's rally is pushing the USD/JPY pair again and again to 20-year highs. Last week, after reaching a height of 135.58, he broke the record on January 01, 2002 of 135.19. This was followed by a strong decline to the level of 131.48 and a new, no less strong recovery, after which the pair closed near the level of 135.00 near 134.95.

A weak yen, especially in the face of high inflation, is a major problem not only for households, but for the entire Japanese economy, as it increases the cost of raw materials and natural energy imported into the country. However, the Bank of Japan is stubborn in maintaining its ultra-soft monetary policy, in contrast to sharp tightening by central banks in other countries. After the US Federal Reserve, the Swiss National Bank and the Bank of England raised interest rates last week, the Bank of Japan left the interest rate at the previous negative level - 0.1% at its meeting on Friday, June 17, while promising to maintain the yield on 10-year government bonds at around 0 %. There have been several attempts to test the 0.25% yield on government debt over the past weeks, but violent repurchases of these securities immediately followed in response.

Japanese officials tried to provide some support to the yen on the morning of June 17th. The government and the Bank of Japan issued a joint statement (which is rarely seen) stating their concerns about the sharp drop in the national currency. These words were supposed to signal to investors that the possibility of adjusting monetary policy is not ruled out at some point. But there was no word in the statement about when and how this might happen, so the market reaction to it was close to zero.

A number of specialists, such as, for example, strategists at the largest banking group in the Netherlands ING, believe that there remains “an increased risk that USD/JPY will significantly exceed 135.00 in the coming days if the Japanese authorities do not even step in and implement currency intervention.” .

Most analysts (55%) have long been waiting for the authorities to step in, or at least renew interest in the yen as a safe haven currency. However, these expectations did not materialize for several weeks. Although it is possible to repeat a strong correction as happened on June 15-16, when the pair fell by 410 points. 35% of experts are counting on updating the top at 135.58, and 10% believe the pair will take a break, moving sideways. As for indicators on D1, the picture is completely different from the opinion of experts. As for trend indicators, 100% of them are all colored green, oscillators 90% of them, 10% of them are overbought, and the other 10% vote red. The nearest support is located at 134.50, followed by areas and levels at 134.00, 133.50, 133.00, 132.30, 131.50, 129.70-130.30, 128.60 and 128.00. It is difficult to identify additional targets for the bulls after the new update of the high of January 1, 2002. Most often, levels such as 136.00, 137.00, 140.00 and 150.00 appear in the forecast. And if the pair's growth rates remain the same in the past three months, it will be able to reach the 150.00 area in late August or early September.

Except for the release of the Bank of Japan Monetary Policy Committee meeting report on Wednesday, June 22nd, there are no other major events expected this week.

Cryptocurrencies: bloodbath or battle at $20,000 levels

GBP/USD, USD/JPY, EUR/USD and Bitcoin forecast this week 20 - 24 June 2022Anthony Scaramucci, founder of the $3.5 billion investment fund SkyBridge Capital, called it a "bloodbath." It's hard to disagree with him. Overall, bitcoin lost 70% between November 11, 2021 and June 15, 2022. It lost about a third of its value in the past week alone. According to some experts, the impetus this time was the announcement of the Celsius Network crypto lending platform to suspend the withdrawal, exchange and transfer of funds between accounts “due to harsh market conditions.” (As of May, the platform has managed $11 billion in user assets.)

However, a general negative macroeconomic background is likely the cause. This view was expressed by industry participants in a survey conducted by The Block. Many experts believe that the crypto markets “would have gone down regardless of Celsius.” Bloomberg notes that the market has entered a “period of selling everything but the dollar.” Traders are turning to “safe haven” due to the tightening of monetary policy by the US Federal Reserve (QT) caused by rising inflation. The market is actively dumping risky assets, with the S&P500, Dow Jones and Nasdaq stock indices dropping, as well as bitcoin and other cryptocurrencies.

The price of BTC dropped to nearly $20,000 on Wednesday, June 15, the price of Ethereum dropped to $1,000, and the crypto market capitalization fell to $0.86 trillion. Remember, it reached $2.97 trillion seven months ago, in November 2021.

The bear market annoys all investors. But the two largest institutional holders of Bitcoin are particularly distinguished. They lost a total of about $1.4 billion on these assets. According to the analytical source Bitcointreasuries.net, nearly 130,000 bitcoins owned by Microstrategy and 43,200 bitcoins owned by Tesla made their owners even poorer (we are talking about an unrealized loss so far).

Michael Saylor, CEO of MicroStrategy, spent nearly $4 billion ($3,965,863,658) on 129,218 BTC, roughly 0.615% of the total first cryptocurrency issuance. The decline in the price of Bitcoin reduced the company's investment to $3.1 billion, and thus the loss amounted to $900 million. Regardless of this, Microstrategy's shares have fallen to their lowest levels in recent months.

The investment of Elon Mask, whose auto company Tesla bought more than 40,000 Bitcoins during the 2021 bull market, has also been a huge success. He lost about $500 million in his investments.

Of course, Michael Saylor and Elon Musk aren't the only ones struggling. The fall of the cryptocurrency market has hit the largest cryptocurrency exchange in the US as well. Coinbase Global announced the layoffs of 1,100 employees (about 18% of the total number of employees). Coinbase's stock price itself has fallen by 26% over the past week, and its capitalization has fallen to $11.5 billion. “The recession could cause a new crypto winter to last for a long time,” said the company’s director and co-founder Brian Armstrong.

Stablecoins are also adding coolness to the hearts of investors. UST (Terra)'s passion has yet to subside, as USDD for the Tron network faces a systemic crisis. USDD lost touch with the dollar on June 13, TRX is down 22%.

As of this writing, the BTC/USD bull/bear fight is the 200-week moving average (200WMA). This WMA has been used as a strong support throughout the previous bear market. So far, Bitcoin has not been able to gain a foothold below this line, and we will find out on Monday 20 June if it has managed to do so this time. (Traders by "getting a foothold" mean the closing of a candle below a certain level).

Arcane Research believes that the $20,000 level is critical for Bitcoin in the context of technical analysis. “Therefore, a potential visit below this level could lead to the surrender of many scammers and trespassers.” There is also a lot of open interest in bitcoin options around the $20,000 mark. This is an additional pressure factor on the spot market if the level above does not withstand the bears' attack.

Popular trader and analyst Tone Vays cites the Bitcoin Momentum Reversal Indicator (MRI), which predicts trend life cycles. At the moment, the MRI indicates a few more days (4-5) of decline, after which a market reversal may occur.

The head of brokerage Euro Pacific Capital, Peter Schiff, predicted a dip to $8,000 a month ago. American economist and Nobel Prize winner Paul Krugman described cryptocurrencies as a fraud and a bubble that will soon burst.

As of Friday evening, June 17, the total cryptocurrency market capitalization was $0.895 trillion ($1.192 trillion a week ago). The BTC/USD pair is trading at $20,500. Bitcoin's Crypto Fear & Greed Indicator has solidified firmly in the area of ​​extreme fear and was dropping to 7 points out of a possible 100 (13 weeks ago). This value is comparable to March 2020 values. Then the bitcoin price reached a bottom at $3800. According to Arcane Research analysts, the index has been in fear territory since April 12, a record term. Market participants are tired of this, and many give up. Historically, buying has been a profitable strategy in times of fear. However, it is not easy to catch a falling knife.

And finally, some optimism from SkyBridge Capital founder, Anthony Scaramucci, with whom we started this review. In an interview with CNBC, the former politician and White House communications director not only called what was happening a "bloodbath," but also added that he had survived seven bear markets and hoped he could "crawl" out of the eighth.

“All crypto assets have a long-term perspective, as long as they do not face short-term losses,” the financier said. Then the investors start tearing their hair and hitting the wall. It is better to buy a quality crypto asset without distracting others and to maintain discipline without looking at the bear markets that sometimes occur. Scaramucci encourages investors If you keep your cool during these periods, you will get rich.

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