GBP/USD, USD/JPY, EUR/USD and Bitcoin forecast this week 04-08 July 2022

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pair EUR/USD: the dollar is gaining strength again

The EUR/USD pair moved in a side channel from 1.0500-1.0600 for a week and a half. However, it is clear that neither investors nor speculators are interested in such a recession. But some kind of influence is needed to get out of it.

The recent meeting of the G7 leaders and the NATO summit did not make any particularly loud statements. In both events, the desire to continue to help Ukraine in its military confrontation with Russia was expressed, and the NATO bloc was replenished with two new members, Sweden and Finland. But these results were not enough to influence in some way the prices of the dollar and the euro.

The dollar's consolidation, which forced the EUR/USD pair to head south on Tuesday, June 28 and break through the lower bound of the channel the next day, was driven by growth in demand for protective assets amid concerns about the outlook for the global economy. Considering the fact that the US currency has recently acted as a protective asset, the metrics have tilted in their direction.

Speaking at the annual European Central Bank Forum in Sintra, Portugal, European Central Bank President Christine Lagarde said that “inflation expectations in the eurozone are much higher than before,” and that “it is unlikely that we will return to low inflation conditions soon,” and that The regulator will "go as far as possible to bring inflation down to the 2% target." Christine Lagarde confirmed that the European Central Bank intends to raise the key interest rate by 0.25% at its meeting on July 21 in order to achieve this goal. However, according to market participants, such a modest move is unlikely to have any serious impact. The next meeting of the bank will be held on September 8. Therefore, most likely, inflation will continue to grow during this period.

The speech of US Federal Reserve Chairman Jerome Powell, who participated in the European Central Bank Forum as a fellow and guest of honor, was very different in the tone of Christine Lagarde's words. The American assured the audience that the US economy is in a good position to deal with the active tightening of monetary policy, which is being implemented by his department.

The difference between the European Central Bank's dovish monetary policy and the hawkish Federal Reserve has long been interpreted by the market in favor of the dollar. The same thing happened this time as well, and the EUR/USD pair continued to fall.

The European currency was slightly helped by weak macro data from the US in the second half of June 30th. The temporary rise in the pair was prompted by the release of data on the GDP, which turned out to be lower than expected, declining by 1.6% instead of the expected 1.5%. In addition, statistics showed a slowdown in economic growth rates from 5.5% to 3.5%. Data on core personal consumption spending in the US also fell short of expectations. The data on applications for unemployment benefits in the US turned out to be significantly worse than expected. Thus, the number of initial orders had to be reduced from 233 thousand to 218 thousand. However, their number decreased to only 231 thousand. The situation is similar to repeated orders, which decreased from 1.331 thousand to only 1.328 thousand.

However, all the negative factors mentioned above provided temporary support for the European currency. Determining quarterly earnings on the dollar didn't help much, and it went on the offensive again on Friday. The publication of eurozone inflation data, which accelerated from 8.1% to 8.6%, accelerated the flight of investors to safe assets. As a result, the pair consolidated a local low at 1.0364 and ended the five-day period at 1.0425.

Expert votes at the time of writing the review, broken down as follows: 35% with bulls, 50% with bears, and 15% with neutrals. Among the oscillators on D1, 75% are red, 10% are green, and 15% are neutral gray. The trend indicators are 100% on the red side. The nearest resistance is located in the region of 1.0470-1.0500, followed by the region of 1.0600-1.0615, if successful, the bulls will try to reach the area of 1.0750-1.0770, the next target is 1.0800. Except for 1.0400, the Bears #1 task is to break through the 1.0350-1.0364 support area, formed from the lows of May 13 and July 01. If successful, they will move on to break into the 2017 low at 1.0340, just below it is 20 years of support and dear target, 1:1 parity.

Next week, July 4th is a public holiday in the United States: the country celebrates Independence Day. Eurozone retail sales statistics will be released on Wednesday, July 06. On the same day, the ISM's index of business activity in the US service sector will be released and the minutes of the June meeting of the Federal Open Market Committee (FOMC) are also noteworthy. Similar minute ECB meeting and ADP report on US private and non-farm payroll data will be released on Thursday, July 07. Another piece of data will arrive from the US labor market on Friday, October 08, including important indicators such as the unemployment rate and the number of new jobs created outside the agricultural sector (NFP).

pair GBP/USD: Similarities and Differences with EUR/USD

The GBP/USD pair showed similar dynamics to the EUR/USD last week. The reasons for rising and falling prices are also the same. Therefore, it makes no sense to retell it again. The pair moved stuck in the side channel 1.2165-1.2325 for a week and a half, and then collapsed lower on June 28. The breakdown of support at 1.2100 added to the downside pressure, and it hit a two-week low of 1.1975. This was followed by a correction towards the north, and the pair closed at 1.2095;

Despite the fact that the euro and the pound behave similarly against the dollar, there are still differences between them. The situation of the eurozone economy is complicated by the heavy dependence on Russian natural energy, the supply of which is limited by the sanctions imposed on Russia after its invasion of Ukraine. The situation is gradually improving: it became known that the United States bypassed Russia in gas supplies to Europe in June, for the first time. However, the final solution to the energy problem remains elusive.

Unlike the European Union, the UK's dependence on Russian energy is minimal. However, the strengthening of the British currency is hampered by political instability. Prime Minister Boris Johnson already survived a no-confidence vote in June, with many lawmakers from his Conservative Party voting against him. In addition, after the by-election, the party lost two seats in the UK Parliament. The problems associated with Britain's exit from the European Union are also adding to the tension. The British pound came under additional pressure after MPs approved a bill allowing ministers to scrap part of the Northern Ireland Protocol.

As for the country's economy, according to some experts, inflation in the UK will continue to grow and may exceed 11% by November.

At the moment, 60% of experts believe that the GBP/USD pair will constantly try to test the 1.1975 and 1.1932 support in the near future. Conversely, 40% are waiting for the breakdown of resistance at 1.2100 and beyond in the north. Among the trend indicators on D1, the strength ratio is 100:0% in favor of red. Among the oscillators, the advantage of the bears is slightly lower: 75% indicate a fall, and the remaining 25% turn their eyes to the east. There is a strong support at 1.2000, followed by the July 1 low at 1.1975 and the June 14 low at 1.1932. The medium term target for the bears may be the March 2020 low at 1.1409. In the event of growth, the pair will face resistance in the areas at 1.2100, 1.2160-1.2175, 1.2200-1.2235, 1.2300-1.2325, 1.2400-1.2430 and 1.2460, and then track targets in the 1.2500 and 1.2600 areas.

As for the UK macroeconomic calendar, we advise you to focus on Tuesday 5 July, when the BoE President Andrew Bailey's speech is expected. The composite PMI and business activity index in the UK services sector will be published on the same day, and business activity in the construction sector in this country the next day.

pair USD/JPY: Just a break or a change in trend?

GBP/USD, USD/JPY, EUR/USD and Bitcoin forecast this week 04 - 08 July 2022

USD/JPY hit a 24-year high again last week, climbing as high as 136.99 on Wednesday, June 29. However, the difference from the previous June 22 high is less than 30 pips, and the already two-week chart looks more like a sideways channel than an uptrend. Perhaps the strength of the bulls has dried up and they, at least, need a breather.

And maybe, finally, the long-awaited dream of Japanese importers and housewives will come true, and the yen will continue to attack, regaining the status of the popular safe-haven currency? It's possible. But it is not guaranteed. The difference between the BoJ's soft monetary policy and the obviously tight US central bank's monetary policy is very large.

Most analysts (50%) still expect the pair to move at least lower to the 129.50-131.00 area. 30% of experts vote for the fact that the pair will try again to renew the maximum and rise above 137.00, and 20% believe that the pair will take a rest, moving in the side channel 134.50-137.00. As for indicators on D1, the picture is completely different from the opinion of experts. As for oscillators, 65% of them are colored green (10% are overbought), and the remaining 35% are neutral. For trend indicators, 65% point north as well, and only 35% point south. The nearest support is located at 134.50-134.75 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. Aside from overcoming the immediate resistance at 136.00-136.35 and the rally at 137.00, it is difficult to identify other targets for the buyers. In general, round levels like 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.

No significant events, be it the release of macroeconomic statistics or political factors expected in Japan this week.

Cryptocurrencies: Will Bitcoin Drop to $1,100? 

The fight continued for $20,000 throughout the second half of June. The BTC/USD pair fell to $17,940, then rose to $21,940. It should be noted that $20,000 is historically the most important level for the major cryptocurrency. Suffice it to recall the disastrous crash of December 2017, when Bitcoin approached that mark, reaching a high of $19,270, and then crashed by 84%. Many experts are now predicting something similar, as they expect a further decline of 50-80% for the BTC/USD pair. Robert Kiyosaki, author of the bestselling book Rich Dad Poor Dad, predicts a stronger crash of Bitcoin, by 95%, to $1,100.

Meanwhile, the coin is trading in the $19,060 area. The total crypto market capitalization at the moment is $0.876 trillion ($0.960 trillion a week ago). The Crypto Fear & Greed Index, like last week, is in the Extreme Fear area at around 11 points out of a possible 100.

If you look at the charts, you can see that the bears have had a clear advantage over the past week. And in fairness, we note that Bitcoin itself is not to blame. It's all about strengthening the dollar, which is growing due to higher interest rates and the tightening of monetary policy of the US central bank. In such a situation, investors prefer to get rid of risky assets by buying US currency. Global stock markets are under pressure from sellers, and the MSCI World and MSCI EM indices are falling, indicating the situation in developed and emerging markets, respectively. Among the developed markets, the main pressure on European positions has eased, but it has not moved beyond the US either: the S&P500, Dow Jones and Nasdaq Composite, to which BTC is directly linked, are also moving south.

Miners in need of liquidity are putting additional downward pressure on the prices of the first cryptocurrency. According to JPMorgan's strategist, Nikolaos Panegirzoglu, this situation will continue into the third quarter of 2022. According to the expert's calculations, public miners account for about 20% of the hash rate. Many of them sold bitcoins to cover operating expenses and service loans. With limited access to capital, private miners have also taken similar steps. Unloading will continue in the third quarter, if production profitability does not improve. This was already evident in May and June. JPMorgan strategist believes there is a risk that the process will continue.

According to Bloomberg, the cost of mining 1 BTC has fallen from $20,000 at the beginning of the year to about $15,000 in June due to the introduction of more energy-efficient equipment. However, it is not yet clear whether this will be sufficient for the stable performance of the two metals.

The stagnation in the cryptocurrency market will continue for an additional 18 months, and the industry will see the first signs of recovery after the Federal Reserve eases monetary policy. This was stated by Mike Novogratz, president and founder of Digital Galaxy Crypto Bank, in an interview with New York Magazine. “I hope we have already seen the worst. I would be more confident about this if I knew what inflation would be like in the next two quarters. [...] I think the Fed is going to have to give up on raising rates by the fall, and I think that will make people calm down and start building again,” he said.

According to Novogratz, the crisis has changed people's attitudes toward riskier assets like cryptocurrencies. He noted that the past few months have shown the industry's reliance on leverage, which no one knew. Bankruptcy of weak players and selling of collapsing assets will take some time now. According to the head of Galaxy Digital, the situation is similar to the global financial crisis of 2008, followed by a wave of consolidation in the investment and banking sectors.

Cryptoanalyst Benjamin Cowen doubts that the predictions for a BTC rally in 2023 can come true. In particular, he spoke about the predictions of investor Tim Draper, according to which the bitcoin price could grow by more than 1,000% from current levels and reach $250,000.

“I used to think BTC would be above $100,000 by 2023, but now I'm skeptical about that idea. Especially after Fed policy has changed so much over the past six months,” Quinn wrote. “I also look at other things, like social media stats. If it is difficult for people to buy gasoline, it will be even more difficult to buy bitcoin.”

Instead of a massive rally, Cowen predicts an uninteresting bitcoin market over the next two years: “I think the bear market will end this year, and then the build-up phase will start, as in 2015 and 2019. Then there will be slow preparations for the next bitcoin halving, The Federal Reserve may lower interest rates due to victory over inflation during this period.”

It is clear that many forecasts depend on the models, indicators and other analysis tools used. For example, we wrote a week ago how the creator of The Daily Gwei, Anthony Sasano, and Ethereum co-founder, Vitalik Buterin, criticized the Stock-to-Flow (S2F) model, on which a popular analyst also known as PlanB issued his forecast. After the criticism, PlanB has unveiled a scheme of not one, but five different forecasting models. In fact, S2F showed an overly optimistic view. The most accurate picture is provided by estimates based on the complexity and costs of mining the first cryptocurrency.

Another analyst called Dave the Wave uses a logarithmic growth curve (LGC) model and believes that BTC can grow by 110% within 4 years and reach $260,000. In the short term, Dave the Wave predicts the potential for Bitcoin to rise to $25,000.

According to the crypto-analytics platform CryptoQuant, most cyclical indicators (Bitcoin Puell Multiple, MVRV, SOPR, MPI BTC Miner Center Index) indicate that Bitcoin is near the bottom. The readings of these indicators are based on a historical pattern that preceded the uptrend several times. Indications are also that Bitcoin is currently undervalued, indicating an impending rally. This forecast confirms a large amount of unrealized losses.

Anthony Scaramucci, founder of investment fund SkyBridge Capital, said the first cryptocurrency was “technically oversold.” He came to this conclusion by analyzing the current BTC price in the context of exponential growth in wallet activity and an increase in the number of use cases. At the same time, the hedge fund manager advised investors to evaluate bitcoin retroactively. With this approach, the asset will become “very cheap due to excessive leverage, which is worth taking advantage of.”

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