Daily Market Analysis from NordFX

Forex and Cryptocurrencies Forecast for February 26 - March 01, 2024

EUR/USD: ECB Rhetoric Against the Dollar

Data on consumer inflation (CPI) in the US, published on February 13, exceeded expectations. The Producer Price Index (PPI) also indicated a rise in industrial inflation in the country. However, despite this, the American currency failed to gain additional support. The Dollar Index (DXY) began to decline from February 14, while EUR/USD steadily climbed higher.

The minutes of the latest FOMC (Federal Open Market Committee) meeting of the US Federal Reserve were published on Wednesday, February 21, serving as a reminder that the American regulator might not be in a hurry to lower interest rates. However, market expectations still dominate that the Fed will begin to ease its monetary policy significantly earlier than the ECB. This factor exerts serious pressure on the dollar, especially as such expectations are constantly fuelled by statements from high-ranking European officials. ECB Executive Board member Isabel Schnabel stated that monetary policy must remain restrictive until the regulator is confident that inflation has sustainably returned to the medium-term target level of 2.0%.

A similar stance was taken by Schnabel's ECB colleague, Bundesbank President Joachim Nagel. On Friday, February 23, he stated that "it is still too early to cut rates, even if this step might seem tempting to some." According to Nagel, the price forecast is not clear enough yet, and key data on price pressure will only be received in Q2, which is when it might be appropriate to consider lowering interest rates.

The Bundesbank head believes that the period of rapid inflation decrease has ended, some setbacks are possible ahead, and in the coming months, inflation will remain noticeably above the target level of 2.0%. (According to the latest forecasts by MUFG Bank, CPI in the Eurozone is expected to be 2.7% in 2024).

EUR/USD surged to 1.0887 on Thursday February 22 and then fell to 1.0802, due to uneven business activity (PMI) data across various Eurozone countries. Preliminary estimates showed that France's manufacturing PMI jumped from 43.1 to 46.8 points, exceeding the expected 43.5. The services index rose from 45.4 to 48.0, surpassing the anticipated 45.7. Significantly exceeding expectations, these indicators ignited investor risk appetite, encompassing not only stock indices but also purchases of the common European currency against the dollar.

However, the joy of euro bulls was short-lived, halted by the publication of Germany's PMI. The manufacturing index of this powerhouse of the European economy plummeted from 45.5 to 42.3, against a forecast of 46.1. The Eurozone's manufacturing PMI dropped from 46.6 to 46.1, contrary to the expected rise to 47.0. It's important to note that all these indicators are below the key horizon of 50.0, indicating an economic downturn. Only the services sector reached this significant threshold of 50.0. Overall, the Eurozone's composite PMI increased to 48.9, the highest since June 2023, but it still remains in the negative zone for the seventh consecutive month.

Regarding the situation on the other side of the Atlantic, these indicators suggest economic growth in the US. Preliminary data showed that the business activity indicator in the services sector was 51.3 points, and in the manufacturing sector, 51.5. On Thursday, the traditional number of initial unemployment claims in the United States was also published, decreasing from 213K to 201K over the week (forecast was 217K), indicating a strengthening labour market.

EUR/USD closed the last week at 1.0820. According to some analysts, the recent macroeconomic data suggest that the dollar's weakening is a temporary phenomenon, and the DXY is expected to return to an upward trajectory. Only extraordinary events in the economy or politics could prevent this. As of the writing of this review, on the evening of Friday, February 23, 50% of experts voted for the strengthening of the dollar and the fall of the pair. 30% sided with the euro, while 20% took a neutral position. Among the oscillators on D1, only 10% are coloured red, 15% are in neutral grey, and 75% are green, with 20% of them in the overbought zone. The balance among trend indicators is different: 35% are red, and 65% are green. The nearest support for the pair is located in the 1.0800 zone, followed by 1.0725-1.0740, 1.0695, 1.0620, 1.0495-1.0515, 1.0450. Bulls will encounter resistance in the areas of 1.0840-1.0865, 1.0925, 1.0985-1.1015, 1.1050, 1.1110-1.1140, 1.1230-1.1275.

Key events to highlight for the upcoming week include Tuesday, February 27, when updates on US durable goods orders will be released. Preliminary data on the American GDP volume for Q4 2023 will follow the next day. Data on retail sales and consumer prices (CPI) in Germany will be published on Thursday, along with the Personal Consumption Expenditures Index and labour market statistics in the US. Significant volatility can be expected towards the end of the working week. On the first day of spring, the annual inflation rate (CPI) in the Eurozone and the final figures of the Business Activity Index (PMI) in the United States will be disclosed.

GBP/USD: UK Economy Gains Momentum

Alongside business activity data from the US and the Eurozone, preliminary indicators for the United Kingdom were also released on Thursday, February 22. The UK's manufacturing sector Business Activity Index (PMI), though slightly below the forecast of 47.5, showed a modest increase from 47.0 to 47.1 points. The services sector indicator remained steady at 54.3. However, the composite PMI reached 53.3, surpassing both the forecast and the previous value of 52.9. Values in the green zone above 50.0 clearly indicate an improvement in the outlook for the British economy. It seems that the technical recession experienced in the second half of 2023 has ended or is at least close to ending.

In a previous review, we cited economists from Scotiabank's forecast that, starting from a strong long-term support zone of 1.2500, GBP/USD would begin to rise towards 1.2700. This prediction came true on 22 February, following the publication of the British PMI, as the pair reached a peak of 1.2709, returning to the very centre of the medium-term sideways channel of 1.2600-1.2800.

Favourable data on the UK economy and the recovery of global risk appetites should have a positive impact on the pound. In such a situation, strategists from the Japanese MUFG Bank write, "if the Fed and the ECB delay the timing of the first rate cut, then the Bank of England (BoE) will delay it as well." Recall that at the conclusion of the meeting that ended on February 1, the BoE announced it would keep the bank rate at its current level of 5.25%. The accompanying statement mentioned that "before lowering rates, more evidence is needed that the Consumer Price Index will fall to 2.0% and remain at this level." Market participants expect the first rate cut to occur in August. This expectation is already priced in and prevents GBP/USD from falling.

MUFG believes, "although the pound's correlation with global stocks has begun to weaken, it remains stronger than the dollar's correlation with risk. And if risk appetite persists, this could cause some strengthening of the pound." However, the bank's experts warn that some concerns about the growth of the British economy still remain, and this could restrain the growth of GBP.

GBP/USD closed the past week at 1.2670. As for the median forecast of analysts for the coming days, 65% voted for the pair's decline, while 35% supported its growth. Among the oscillators on D1, only 10% point south, 15% look east, and the remaining 75% point north, of which 10% signal overbought conditions. Trend indicators show a significant bias towards the British currency: 90% point north, with the remaining 10% pointing south. Should the pair move southward, it will encounter support levels and zones at 1.2635-1.2650, 1.2570, 1.2500-1.2535, 1.2450, 1.2370, 1.2330. In case of an increase, resistance will be met at levels 1.2695-1.2710, 1.2755-1.2775, 1.2825, 1.2880, 1.2940, 1.3000, and 1.3140-1.3150.

No significant macroeconomic data releases related to the UK economy are scheduled for the upcoming week.

USD/JPY: To the Moon and Beyond, Mars is Next

The yield on 10-year US Treasury bonds, currently around 4.30%, continues to support the dollar against the yen, with its low yield and negative interest rates. USD/JPY once again rose above 150.00 last week and attempted to storm the 151.00 mark. Again, it was unsuccessful: the local maximum was recorded at 150.76, with the week closing at 150.52.

The caution of bulls on USD/JPY is largely due to the fact that the 150.00-152.00 zone was where the Ministry of Finance of Japan initiated currency interventions in October 2022 and November 2023. However, every trader knows that past results do not guarantee future performance. Thus, it is not certain that the Ministry of Finance and the Bank of Japan (BoJ) will follow the same path this time.

It should be noted that Japan's GDP has fallen for the last two quarters. A weak national currency supports exporters by making Japanese products more attractive and competitive in foreign markets, thereby stimulating the country's economy. This explains the reluctance of Japanese financial regulators to tighten monetary policy. According to Kazuo Ueda, the head of the BoJ, the question of maintaining or changing monetary policy, including the negative interest rate, will only be considered "when there is a chance of sustainable and stable achievement of the target price level."

As mentioned, the likelihood of a reversal in USD/JPY southward from the 151.00-152.00 zone is high, yet it remains less than 100%. Currently, the pair's rate is approximately 14% higher than a year ago. As some experts note, the financial authorities in Japan start to get nervous when this figure approaches 20% year-on-year. For now, they can feel relatively relaxed and comfortable, especially since the country's economy has already adapted to such an exchange rate over the past two years. Therefore, it's not entirely out of the question that instead of falling to 140.00 as expected by Danske Bank, we might see the pair reach heights of 160.00, as was the case 34 years ago in April 1990.

Regarding the near future, specialists at Singapore's United Overseas Bank believe that within one to three weeks, USD/JPY is likely to trade within the range of 148.70 to 150.90. However, UOB does not rule out that a breakthrough above 150.90 could trigger a rise to 152.00. At the time of writing this review, 40% of experts sided with the dollar, while the majority (60%) voted for the strengthening of the yen. Trend indicators and oscillators on D1 all point north, yet 10% of the latter are in the overbought zone. The nearest support level is located in the zone of 149.70-150.00, followed by 148.25-148.40, 147.65, 146.65-146.85, 144.90-145.30, 143.40-143.75, 142.20, 140.25-140.60. Resistance levels and zones are at 150.90, 151.70-152.05, and 153.15.

No significant events related to the Japanese economy are scheduled for the upcoming week.

CRYPTOCURRENCIES: Five Reasons for the End of the Crypto Winter


Throughout the past week, there was a lull in the battle between bitcoin bears and bulls. Choosing $51,500 as the Pivot Point, BTC/USD moved sideways in a narrow corridor of $50,500-$52,500. Bulls' attempt to break through resistance on 20 February ended in failure, and the pair returned to its defined boundaries. However, as experience shows, any calm is not everlasting. It is inevitably replaced by thunder rolls, stormy winds, and squally showers, especially true for the highly volatile crypto market. So, what can we expect if the weather changes?

According to Lucas Outumuro, head of research at IntoTheBlock, there's an 85% likelihood that bitcoin will reach a new all-time high within the next six months, potentially surpassing $70,000. The analyst identified five factors that could catalyse this growth.

1. Halving in April: This will be the fourth halving event, reducing the block reward from 6.25 BTC to 3.125 BTC, leading to decreased selling pressure. Outumuro does not rule out the possibility of bitcoin reaching an all-time high (ATH) just a month after the halving.

2. Continued inflow into spot Bitcoin ETFs: While the duration of strong inflows remains uncertain, a stable inflow over time is expected to bolster the price of bitcoin by increasing demand.

3. Federal Reserve's interest rate policy: The Fed's stringent stance on interest rates in 2022 laid the groundwork for a bearish trend in risk assets, including the crypto market. With inflation dropping from 10% to 3% by 2024, many anticipate a policy shift by the Fed and the beginning of a rate-cutting cycle. "This expectation is likely the main driving force behind the recent rallies in both bitcoin and stocks... This time, bitcoin's price movement has been more closely linked with traditional assets, leading to its correlation with the Nasdaq and S&P 500 reaching two-month highs," explains Outumuro.

4. US Presidential Elections: Despite the current President Joe Biden's general opposition to digital assets, election campaigns positively impact the crypto market. "The prediction market Polymarket currently gives Biden just a 33% chance of re-election, making Donald Trump, who is significantly more crypto-friendly, the most likely victor," reports IntoTheBlock. The Fed may begin to ease its monetary policy more aggressively to increase the current US President's re-election chances, benefiting stock and cryptocurrency markets.

5. Hedge Funds: Outumuro points out that when bitcoin recovered after the COVID-19 pandemic in 2020, traditional financial giants first recognized cryptocurrency's potential. With the launch of spot Bitcoin ETFs, hedge funds have the opportunity to accumulate a new asset class, leading to increased adoption and acceptance of digital assets.

However, IntoTheBlock acknowledges that these scenarios could change due to several factors. For instance, if the Fed does not ease policy, bitcoin could face a 10% correction. Geopolitical conflicts also negatively impact digital gold's price. Unexpected selling pressure in the event of major player bankruptcies is not ruled out.

As mentioned (in point 3), the correlation between bitcoin and the S&P 500 is increasing, suggesting BTC could rise alongside the US stock market. Following the S&P 500 surpassing 5,000 points, investment bank Goldman Sachs revised its end-of-year forecast for the index to 5,200, potentially providing additional support for bitcoin.

Every trader knows that determining the optimal moment to sell an asset is just as important as the decision to buy it. Dennis Liu, also known as Virtual Bacon, shared his bitcoin investment methodology a few days ago, identifying three elements designed to signal that the market may have reached its peak.

1. Specific Price Milestones: The first sign to look out for is reaching certain price milestones: $200,000 for bitcoin and $15,000 for Ethereum. Liu's assumption is based on historical cycles and diminishing returns. This is a clear, quantifiable indicator that eliminates guesswork when deciding to exit a position.

2. Time-based Exit Strategy: The second benchmark Liu mentions is time-bound. Regardless of the asset's price dynamics, the trader plans to exit positions by the end of 2025. This decision is grounded in the importance of historical patterns and is based on the analysis of halving cycles and the duration of bull markets.

3. Monitoring Price Patterns: The last element of Liu's methodology involves closely monitoring price patterns, specifically BTC's behaviour relative to its 200-day and 21-week exponential moving averages (EMAs). A fall below these support levels would signal the need to sell bitcoin.

It's clear that $200,000 for bitcoin is a forecast, and moreover, a forecast for the relatively distant future. As for the near future, as we've noted, many on-chain indicators from Glassnode have already entered what's termed the "risk zone." They record a relatively low level of realized profit considering the active price growth in the last four weeks. According to Glassnode specialists' observations, a high risk indicator is usually seen in the early stages of a bull market. This is because, upon reaching a "significant level" of profitability, hodlers may begin to take profits, potentially leading to a sharp correction downwards.

Analyst Gareth Soloway suggested that bitcoin could potentially fall to the $30,000 mark, especially if the stock market undergoes a correction. The expert referred to the new potential support for bitcoin as the "line in the sand." "My main line in the sand is between $30,000 to $32,000. [...]. If we drop there, I'll start buying quite large volumes of BTC," he wrote.

Investor and founder of MN Trading, Michael Van De Poppe, also advises investors to wait for a 20-40% correction before entering the market. The specialist believes that a bitcoin pullback could occur upon reaching the $53,000-$58,000 zone. "However," adds Van De Poppe, "if you're buying bitcoin with the intention to hold it for two to three years, and if you believe it will rise to $150,000 during that period, then nothing should stop you from purchasing it at these [current] prices."

While the leading cryptocurrency has been in a flat trend over the last week (a 4% fluctuation for BTC is definitely considered flat), its main competitor, Ethereum, has been significantly more active. Recovering from the previous year, this altcoin has shown excellent dynamics since the end of January, growing by more than 35% and reaching a significant level of $3,000. This is related to both a revival in the DeFi sector and hopes for the launch of ETH-based ETFs in May this year. Although previous reviews have cited several leading experts' doubts about this, there are also many optimists. For instance, analysts at Bernstein believe that the likelihood of the US Securities and Exchange Commission (SEC) approving an ETH-ETF in May is almost 50%, and there is almost a 100% certainty of approval within the next 12 months.

"Ethereum, with its dynamic yield rates, environmentally friendly design, and utility in creating new financial markets, has good prospects for mass institutional adoption. It's probably the only digital asset alternative to bitcoin that could receive unequivocal ETF approval from the SEC," Bernstein analysts argue. They believe that officials might be influenced by the fact that participants in the traditional stock market not only want to launch spot ETH ETFs similar to bitcoin ETFs but also express the intention "to build more transparent and open tokenized financial markets on the ETH network, where utility goes beyond simple asset accumulation." According to Standard Chartered bank estimates, with the anticipation of ETH-ETF approval, the coin's price could rise to $4,000 in the near future.

As of the evening of February 23 when this review is written, BTC/USD is trading in the $51,000 zone, and ETH/USD is at $2,935. The total market capitalization of the crypto market has remained unchanged over the week, standing at $1.95 trillion. The Crypto Fear & Greed Index has risen to the lower boundary of the Extreme Greed zone at 76 points (up from 72 a week ago).
 

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Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for February 19 - 23, 2024

EUR/USD: A Week of Mixed Data


The macroeconomic statistics released last week were mixed in both the United States and the Eurozone. As a result, EUR/USD failed to break through either the 1.0700 support or the 1.0800 resistance, continuing to move within a narrow sideways channel.

The US dollar received a strong bullish impulse on Tuesday, February 14, following the release of US inflation data. The Dollar Index (DXY) surged by more than 0.5% and nearly reached the 105.00 resistance level. Consequently, EUR/USD moved downward, towards the lower boundary of the specified sideways range. Meanwhile, the S&P 500 stock index fell from 5051 to 4922 points.

It can be said that the US inflation data caught the markets off guard. Some analysts even described them as shocking. It turned out that the final victory over prices is not as close as it seemed before, and that the Federal Reserve is unlikely to start lowering interest rates anytime soon.

In January, the Consumer Price Index (CPI) sharply increased against the backdrop of a significant rise in the cost of rent, food, and healthcare services. On a monthly basis, the overall index accelerated from 0.2% to 0.3%. On an annual basis, the CPI was 3.1%, which is below the previous value of 3.4%, but significantly above the forecast of 2.9%. Excluding the volatile prices of food and energy, inflation in January rose from 0.3% to 0.4% month-on-month, while the annual core CPI remained at the previous level of 3.9%, although analysts had forecast a decrease to 3.8%. Particularly sharp was the increase in so-called "super-core inflation," which also excludes housing costs. In January, on a monthly basis, it reached 0.8%: the highest level since April 2022.

Certainly, the Federal Reserve's achievements in combating inflation are significant. It is worth recalling that in the summer of 2022, the CPI reached a 40-year peak at 9.1%. However, the current inflation rate is still almost twice the target level of 2.0%. Based on this, the market concluded that the Federal Reserve is now unlikely to rush into easing monetary policy and will probably maintain high interest rates for longer than previously anticipated. At the beginning of January, according to the FedWatch Tool, the probability of a 25 basis point (bp) rate cut in May was 54.1%. After the inflation report was released, this figure dropped to 35%. An even lower probability is given by the monitoring tool developed by Investing.com. The possibility of a dovish pivot in March, according to its readings, stands at 5%, and in May – around 30% (just a few weeks ago, it was over 90%). As for the beginning of summer, the probability of a reduction in the cost of borrowing through federal funds in June is estimated at 75%.

The inflation report was a boon for dollar bulls, but their joy was short-lived. The data on industrial production and retail sales in the US released on Thursday, February 16, were weaker than expected. In January, retail sales showed a decline of -0.8% compared to the December increase of 0.4% and the forecast of -0.1%. As a result, the dollar was under pressure, and the EUR/USD pendulum swung in the opposite direction: the pair headed towards the upper boundary of the 1.0700-1.0800 channel.

The dollar received a slight boost at the very end of the workweek. On Friday, February 16, the Producer Price Index (PPI) indicated that industrial inflation in January rose just as consumer inflation did. Against a forecast of 0.1%, the actual increase was 0.3% month-on-month, which is 0.4% higher than December's figure. On an annual basis, the PPI rose by 2.0% (forecast 1.6%, previous value 1.7%). However, this support was soon offset by a drop in the University of Michigan's US Consumer Confidence Index, which, although it increased from 79.0 to 79.6, was below the forecast of 80.0 points.

On the other side of the Atlantic, the news was also rather contradictory, resulting in the European statistics not being able to significantly support its currency. The February Economic Sentiment Index from ZEW in Germany improved more than expected, rising to 19.9 from 15.2 in the previous month. The economic sentiment indicator for the Eurozone as a whole also showed growth, moving from 22.7 points to 25.0. However, the assessment of the current situation fell to -81.7, the lowest level since June 2020.

Preliminary GDP data for Q4 2023, released on Wednesday, February 14, showed that the Eurozone is in a state of stagnation. On a quarterly basis, the figures remained at 0%, and on an annual basis, they were at 0.1%, exactly matching forecasts. This statistic did not add optimism, and markets continued to exercise caution, fearing that the Eurozone economy might slip into recession.

Europe faces a significantly sharper choice between supporting the economy and fighting inflation compared to the United States. Isabel Schnabel, a member of the Executive Board of the ECB and a well-known hawk, stated on Friday, February 16, that the regulator's monetary policy must remain restrictive until the ECB is confident that inflation has sustainably returned to the medium-term target level of 2.0%. Furthermore, Ms. Schnabel believes that persistently low labour productivity growth increases the risk that companies may pass their higher labour costs on to consumers, which could delay the achievement of the inflation target.

However, despite such hawkish statements, according to a ZEW survey, more than two-thirds of business representatives still hope for an easing of the ECB's monetary policy within the next six months. The probability of a rate cut for the euro in April is currently estimated by the markets at about 53%.

After all the fluctuations of EUR/USD, the final note of the past week was struck at the level of 1.0776. At the time of writing this review, on the evening of Friday, February 16, 55% of experts voted for the strengthening of the dollar in the near future and the further fall of the pair. 30% sided with the euro, while 15% took a neutral stance. Among the oscillators on D1, 60% are coloured red, 40% in neutral-grey, and none in green. The ratio among trend indicators is different: 60% red and 40% green. The nearest support for the pair is located in the zone of 1.0725-1.0740, followed by 1.0695, 1.0620, 1.0495-1.0515, 1.0450. Bulls will encounter resistance in the areas of 1.0800-1.0820, 1.0865, 1.0925, 1.0985-1.1015, 1.1110-1.1140, 1.1230-1.1275.

Among the events of the upcoming week, the minutes from the last meeting of the Federal Open Market Committee (FOMC) of the US Federal Reserve, which will be published on Wednesday, February 21, are of great interest. The following day, a powerful flow of data on business activity (PMI) in Germany, the Eurozone, and the US will be released. Moreover, on Thursday, February 22, the January figure for the Consumer Price Index (CPI) in the Eurozone and the number of initial jobless claims in the US will be known. Towards the very end of the workweek, on Friday, February 23, data on Germany's GDP, the main engine of the European economy, will arrive. Additionally, traders should keep in mind that Monday, February 19, is a holiday in the United States: the country observes Presidents' Day.

GBP/USD: What's Happening with the UK Economy?

As is known, following the meeting that concluded on February 1, the Bank of England (BoE) announced the maintenance of the bank rate at the previous level of 5.25%. The accompanying statement mentioned that "more evidence is needed that the Consumer Price Index will fall to 2.0% and remain at that level before considering rate cuts."

On February 15, Catharine Mann, a member of the Monetary Policy Committee (MPC) of the regulator, provided the most comprehensive overview of the state of the British economy, including aspects concerning inflation. The key points of her analysis were as follows: "The latest GDP data confirm that the second half of 2023 was weak. However, GDP data is a rearview mirror. On the other hand, the Purchasing Managers' Index (PMI) and other leading indicators look promising. The unemployment rate in the UK remains relatively low, and the labour market continues to be tight. Wage growth is slowing, but the pace remains problematic for the target Consumer Price Index (CPI) indicator. In the UK, goods prices may become deflationary at some point, but not on a long-term basis. Inflation in the UK's services sector is much more persistent than in the EU or the US." Consequently, Catharine Mann's conclusion was: "Mitigating the sources of inflation will be crucial in decision-making" and "Before making a decision on further actions, the Bank of England needs to receive at least one more inflation report."

Referring to specific figures, the latest data from the Office for National Statistics (ONS), published on February 16, showed that retail sales in the UK in January increased by 3.4% against the expected 1.5% and a decline of -3.3% in December (month-on-month). The core figure (excluding automotive fuel retail sales) rose by 3.2% over the month against a forecast of 1.7% and -3.5% in December. On an annual basis, retail sales also showed growth of 0.7% against the expected decline of -1.4% and a December figure of -2.4%.

Labour market data also supports the pound. The unemployment rate fell to 3.8% from 4.2%, against expectations of 4.0%. The reduction in the number of active job seekers in the labour market intensifies competition among employers, which helps maintain a higher wage growth rate. For the three months to December, wage growth was 5.8%. Such strong labour market statistics, complemented by high inflation (CPI 4.0% year-on-year, core CPI 5.1% year-on-year), are likely to push back the anticipated date for easing the Bank of England's monetary policy. Many analysts do not rule out that ultimately, the BoE may be among the last mega-regulators to cut rates this year.

GBP/USD ended the week at the level of 1.2599. According to economists at Scotiabank, the 1.2500 zone represents strong long-term support for it, and a confident move above 1.2610 will strengthen the pound and set GBP/USD on a growth path towards 1.2700. Regarding the median forecast of analysts for the coming days, 65% voted for the pair's decline, 20% for its rise, and the remaining 15% maintained neutrality. Among the oscillators on D1, 75% point south, the remaining 25% look east, with none willing to move north. The situation is different with trend indicators, where there is a slight bias in favour of the British currency – 60% indicate north, while the remaining 40% point south. If the pair moves south, it will encounter support levels and zones at 1.2570, 1.2500-1.2535, 1.2450, 1.2370, 1.2330, 1.2185, 1.2070-1.2090, 1.2035. In case of an increase, the pair will meet resistance at levels 1.2635, 1.2695-1.2725, 1.2775-1.2820, 1.2880, 1.2940, 1.3000, and 1.3140-1.3150.

Thursday, February 22 stands out in the calendar for the upcoming week. On this day, a batch of data on business activity (PMI) in various sectors of the economy of the United Kingdom will be released. The release of other significant macroeconomic statistics in the coming days is not anticipated.

USD/JPY: The Flight Continues

On Tuesday, February 13, USD/JPY reached another local maximum at 150.88. The Japanese currency retreated again, this time against the backdrop of inflation data in the US. The yen also continues to be under pressure due to the Bank of Japan's (BoJ) consistent dovish stance. On February 8, Deputy Governor Shinichi Uchida expressed doubts that the regulator would start to quickly raise its benchmark rate anytime soon. Last Friday, February 16, BoJ Governor Kazuo Ueda spoke in a similar vein. He stated that the issue of maintaining or changing monetary policy, including the negative interest rate, would only be considered "when there is a chance of sustainable and stable achievement of the price level target." Ueda declined to comment on short-term fluctuations in the exchange rate and the factors behind these movements.

In general, there's nothing new. However, many analysts continue to hope that in 2024 the Bank of Japan will finally decide to tighten its monetary policy. "We believe," write economists at the Swiss financial holding UBS, "that the normalization of the Bank of Japan's policy this year will occur against the backdrop of strong negotiations on wage increases and corporate profitability. We still believe that the Japanese yen is likely at a turning point after significant depreciation from 2021 to 2023. Considering that the yield differential between 10-year U.S. and Japanese bonds will narrow over the year, we believe the current entry point for buying yen is attractive."

A similar position is held at Danske Bank, where they forecast a sustainable decrease in USD/JPY below 140.00 on a 12-month horizon. "This is primarily because we expect limited growth in yields in the US," say strategists at this bank. "Therefore, we expect the yield differential to become a tailwind for the yen throughout the year, as the G10 central banks, with the exception of the Bank of Japan, are likely to start rate-cutting cycles."

Regarding the short-term outlook, specialists at Singapore's United Overseas Bank Limited believe that the dollar still has the potential to test 151.00 before weakening. "The risk of the US dollar rising to 152.00 will remain unchanged as long as it stays above 149.55," UOB states. This position is supported by only 25% of experts, with the majority (60%) already siding with the yen, and the remaining 15% preferring to maintain neutrality. Among the trend indicators and oscillators on D1, all 100% point north, however, 25% of the latter are in the overbought zone. The nearest support level is located in the zone of 149.65, followed by 148.25-148.40, 147.65, 146.65-146.85, 144.90-145.30, 143.40-143.75, 142.20, 140.25-140.60. Resistance levels are located at the following levels and zones - 150.65-150.90, 151.70-152.00.

No significant events related to the Japanese economy are scheduled for the upcoming week. Moreover, it is important to note that Friday, February 23, is a public holiday in Japan: the country observes the Emperor's Birthday.

CRYPTOCURRENCIES: Bitcoin Breaks Records

Last week, the price of bitcoin rose above $52,790, setting a new peak since 2021. According to CoinGecko, the market capitalization of the leading cryptocurrency exceeded $1.0 trillion for the first time in two years, and the total market capitalization of the entire crypto market rose above $2.0 trillion for the first time since April 2022.

Much of this bull rally is attributed to the launch of nine leading spot bitcoin ETFs. According to The Block, a month after their launch, their assets exceeded 200,000 BTC (about $10 billion). The new bitcoin ETFs rose to second place in the ranking of US commodity exchange-traded funds by asset volume, becoming a more popular investment instrument than silver ETFs. Observers note BlackRock's statement that "interest in bitcoin among investors remains high," hence the fund is ready to buy even more BTC.

According to Documenting Bitcoin, the net interest from ETF issuers exceeds 12,000 BTC per day. Thus, Wall Street representatives are currently buying 12.5 times more BTC coins daily than the network can produce. Researchers believe this has been a key driver of the price increase for the flagship crypto asset.

Morgan Creek Digital co-founder and partner Anthony Pompliano also highlighted the success of the newly launched spot BTC-ETFs. According to him, the fact that BlackRock and Fidelity managed to attract $3 billion each in record short times was a historic event for exchange-traded funds. "Wall Street is not just in love with bitcoin," the financier wrote. "They are in an active love affair. The daily supply of bitcoins to funds is limited to just 900 BTC, which corresponds to approximately $40-45 million. Meanwhile, the daily net inflow of funds into BTC-ETFs already equals $500 million (max. $651 million). This is a clear indicator of BTC scarcity and its bullish impact on the cryptocurrency's price and the market as a whole," Pompliano stated, noting the imbalance between the market supply of bitcoin and demand from Wall Street companies. The billionaire is optimistic about BTC's future trajectory and asserts that with continued demand from Wall Street, especially considering the upcoming halving, the top-capitalization cryptocurrency could significantly exceed its historical highs.

CryptoQuant noted that, in addition to the demand from BTC-ETFs, the number of active wallets is also significantly increasing. This too indicates a long-term upward trend. "Given the reduction in supply, increased demand, and various economic and social issues, especially ongoing inflation, bitcoin is likely to strengthen its position as a long-term alternative investment asset with an upward trend," analysts conclude.

SkyBridge Capital founder and former White House senior official Anthony Scaramucci also emphasized inflation. Beyond the launch of spot BTC-ETFs and the halving, Scaramucci pointed to the monetary policy of the US Federal Reserve as a driver for Bitcoin's growth. "The US Consumer Price Index (CPI) data released on Tuesday, February 13, signalled that inflation may not be as under control as the Fed would like," the investor writes. "Based on data published by the US Bureau of Labor Statistics, the consumer price index for January showed inflation at 3.1%. The data also sparked speculation that a Federal Reserve interest rate cut in March and May is likely off the table." Delays in rate cuts can cause turbulent trading in the main market but will serve as a boom for the crypto world, as Bitcoin is used as a hedge against inflation. Therefore, according to Scaramucci, the time to invest profitably in digital gold has not yet passed.

Popular blogger and analyst Lark Davis shared a similar position: he believes investors have about 700 days to get rich. Discussing the importance of market cycles and the timely sale of assets, the specialist noted that if traders are attentive, they can make a lot of money in the next two years. According to the expert, 2024 will be the last chance to buy digital assets, and 2025 will be the best time to sell them. The specialist emphasized the importance of not disposing of everything at once but gradually securing profits. Lark Davis also warned that in 2026, a "Great Depression" will begin in the global economy and the cryptocurrency market. And if not sold in time, investments could be lost.

The onset of the "Great Depression" is also predicted by the famous author of "Rich Dad Poor Dad," financier, and writer Robert Kiyosaki. He believes that the S&P 500 index is on the verge of a monumental crash with a potential collapse of a full 70%. He accompanied this statement with his consistent recommendation to invest in assets such as gold, silver, and bitcoins.

Ex-CEO of the cryptocurrency exchange BitMEX, Arthur Hayes, identified another driver for Bitcoin's growth related to the Federal Reserve's monetary policy. Last week, the US banking sector was gripped by fear as New York Community Bancorp (NYCB) reported a colossal quarterly loss of $252 million. The bank's total loan losses increased fivefold to $552 million, fuelled by concerns over commercial real estate. Following the release of this report, NYCB shares fell 40% in one day, leading to a decline in the US Regional Banks Index.

Arthur Hayes recalled the Bitcoin rally triggered by the banking crisis in March 2023, when three major American banks, Silicon Valley Bank, Signature Bank, and Silvergate Bank, went bankrupt within five days. The crisis was caused by an increase in the Federal Reserve's refinancing rate and, as a consequence, the outflow of deposit accounts. Its biggest victims also included Credit Suisse and First Republic Bank. To prevent the crisis from affecting even more banks, global industry regulators, primarily the Fed, intervened to provide liquidity. "Yeah... From rock to bankruptcy, that's the future. And then there will be even more money, printers... and BTC at $1 million," the ex-CEO of BitMEX commented on the current NYCB failure.

Popular analyst on the X platform known as Egrag Crypto believes that by September this year, Bitcoin's market capitalization will reach $2.0 trillion. Based on this, the price of the leading cryptocurrency at that moment will exceed $100,000. "Get ready for the journey of your life," Egrag Crypto urges his followers. "Hold on tight, as you are witnessing a cryptocurrency revolution. Don't blink, or you might miss this historic moment in financial history!"

As of the evening of February 16, when this review was written, the BTC/USD pair is trading in the $52,000 zone. The total market capitalization of the crypto market stands at $1.95 trillion ($1.78 trillion a week ago). The Crypto Fear & Greed Index remains in the Greed zone at a level of 72 points.

– It's worth noting that the Greed zone corresponds to a situation where traders are actively buying an asset that is increasing in price. However, Glassnode warns that many on-chain indicators have already entered the so-called "risk zone". The analysis is based on a group of indicators that consider a wide range of data regarding investor behaviour. Their combination covers both short-term and long-term cycles. In particular, the MVRV indicator, which tracks long-term investors, has approached the critical zone. Such a high value (2.06) has not been observed since the FTX collapse. A similar "high" and "very high" risk status is currently characteristic of six out of the remaining nine metrics. They record a relatively low level of realized profit considering the active price increase in recent weeks. According to observations by Glassnode specialists, a high risk indicator is usually observed in the early stages of a bull market. This is because, having reached a "significant level" of profitability, hodlers may start to secure profits, which, consequently, could lead to a strong correction downwards.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for February 12 - 16, 2024

EUR/USD: Dollar Dips but Promises a Rebound

Last week saw a scarcity of significant macroeconomic data. In anticipation of new drivers, market participants analysed the state of the US labour market and statements from Federal Reserve officials.

Data released on February 2 revealed that the number of new jobs in the US non-farm sector (Non-Farm Payrolls) increased by 353,000 in January, against the expected 180,000. This figure followed a December increase of 333,000. Unemployment remained stable at 3.7%, although experts had forecast a rise to 3.8%. Meanwhile, wage inflation grew to 4.5% on an annual basis, significantly exceeding market expectations of 4.1%. The report, issued on Thursday, February 8, was also robust, showing that the number of US citizens applying for unemployment benefits was 218K, down from 227K previously.

Thus, Federal Reserve Chair Jerome Powell's concerns proved unfounded. Recall that he recently suggested that if the labour market were to cool sharply, easing of monetary policy could occur quite rapidly. However, no cooling has occurred, so the FOMC members may not rush to a dovish pivot until they see convincing evidence of inflation dropping below the 2.0% target.

Subsequent comments from Fed representatives confirmed the low likelihood of an easing of national monetary policy in the near term. For instance, Susan Collins, President of the Federal Reserve Bank of Boston, stated that due to a strong labour market and economic growth, a rate cut is currently not advisable. Her colleague from the Federal Reserve Bank of Richmond, Thomas Barkin, expressed serious doubts about the sustainability of the inflation reduction pace, as price growth continues in the services and rental sectors. As the figures above indicate, wage inflation is also rising.

Against this backdrop of the regulator's representatives' hawkish stance, the probability of a rate cut in March has decreased, and according to the FedWatch Tool, it currently stands at only 15.5%, with May at 54.1%. In such conditions, bulls on the Dollar Index (DXY) feel significantly more confident than bears.

Regarding the euro, the common European currency has been significantly impacted by recent dovish statements from European Central Bank (ECB) officials. Weak statistics from the Eurozone also support the case for an earlier start to monetary policy easing. A comparison of macroeconomic indicators between the Old and New Worlds suffices to illustrate this. Unemployment in the Eurozone stands at 6.4% compared to 3.7% in the US. European GDP in Q4 barely moved from a recessionary level of -0.1% to 0% (in contrast to the US, which saw a +3.3% increase). The service sector activity index dropped from 48.8 to 48.4 points, while the composite indicator, which includes both services and manufacturing, is at 47.9 points. Hence, both these indicators remain in the stagnation zone (below 50.0). In Germany, exports of goods decreased by 4.6% in December, and imports by 6.7%.

On the other hand, the Consumer Price Index (CPI), a crucial inflation indicator, showed a slight increase in consumer prices in Germany from 0.1% to 0.2% month-on-month, offering the euro some support by giving investors hope that the ECB may not be the first to cut rates. As a result, EUR/USD ended the week at 1.0785.    

A number of experts believe that the dollar's weakening last week was a corrective pullback, and the fundamental backdrop continues to favor the American currency. As of the writing of this review, on the evening of Friday, February 9, 70% of experts voted for a strengthening of the dollar in the near future and a further decline of the pair. 15% sided with the euro, and an equal percentage adopted a neutral position. Oscillators on D1 share a similar view: 65% are coloured red, indicating a bearish outlook, 10% green, showing a bullish outlook, and 25% in neutral grey. Among trend indicators, the distribution of forces between red (bearish) and green (bullish) stands at 65% to 35%. The nearest support for the pair is located in the zone of 1.0725-1.0740, followed by 1.0680, 1.0620, 1.0495-1.0515, and 1.0450. Bulls will encounter resistance at levels 1.0800-1.0820, 1.0865, 1.0925, 1.0985-1.1015, 1.1110-1.1140, and 1.1230-1.1275.

The upcoming week's noteworthy events include the publication of the US Consumer Price Index (CPI) data on Tuesday, February 13. Market participants will analyse the latest Eurozone GDP data on February 14, the same day Valentine's Day is celebrated. American statistics on manufacturing activity, unemployment, and retail sales volume will be highlighted on Thursday, February 15. The week will conclude with the release of the US Producer Price Index (PPI) for January on Friday.

GBP/USD: Factors Supporting and Weighing on the Pound

On Friday, February 2, strong data from the US labour market strengthened the dollar and pushed GBP/USD from the upper boundary of the sideways channel at 1.2600-1.2800 to the lower end. The decline continued over the past week, with the pair finding a local bottom at 1.2518 on February 5. It is to the credit of the British currency that it managed to recover its losses and returned to the 1.2600 zone, which shifted from support to resistance.

Analysts believe that the British currency continues to be supported by expectations that the Bank of England (BoE) may be among the last to cut rates this year. It's worth noting that on February 1, the BoE held its meeting and kept the key rate at the previous level of 5.25%. However, the pound received support because two members of the BoE's Monetary Policy Committee continued to vote for a rate hike of 25 basis points (bps). The following day, Catherine Mann explained that she voted for a rate increase because she is not confident that the decline in core inflation will continue in the near term. Another Committee member, Jonathan Haskel, acknowledged that inflationary pressures might be easing but noted that he would need additional evidence of this process before changing his stance on rate hike prospects.

Furthermore, GBP/USD is significantly influenced by market participants' risk appetite, which has been increasing, as evidenced by the quotations of stock indices such as the S&P 500, Dow Jones, and Nasdaq. Consequently, hawkish remarks from Bank of England representatives and improved sentiment regarding risk have helped the pair offset its losses.

Working against the British currency is the fact that inflationary pressures are indeed starting to ease. According to the KPMG and the Recruitment & Employment Confederation's UK Report on Jobs, the wage inflation index decreased from 56.5 points to 55.8 points in January, indicating that wage growth in the country was at its slowest pace since March 2021. Thus, signs of cooling inflation serve as an argument for the Bank of England to begin cutting interest rates. At the regulator's last meeting, as mentioned, two members of the Committee voted for an increase in borrowing costs, eight for keeping the rate unchanged, and only one member voted for a reduction. However, if at the next meeting on March 21, the doves gain not just one but two or three votes, this could trigger active selling of the GBP/USD pair.

The pair concluded the past five-day period at the mark of 1.2630. Regarding the median forecast of analysts for the coming days, 50% voted for the pair's decline, 15% for its rise, and the remaining 35% abstained from commenting. Among the oscillators on D1, 50% indicate a downward direction, the remaining 50% look eastward, with none showing a preference for moving north. The situation with trend indicators is different, where a slight majority favors the British currency – 60% pointing north and the remaining 40% south. Should the pair move southward, it will encounter support levels and zones at 1.2595, 1.2570, 1.2495-1.2515, 1.2450, 1.2330, 1.2210, 1.2070-1.2085. In case of an upward movement, resistance will be met at levels 1.2695-1.2725, 1.2785-1.2820, 1.2940, 1.3000, and 1.3140-1.3150.

Regarding the UK economy, the upcoming week's calendar highlights include a speech by Bank of England Governor Andrew Bailey on Monday, February 12. A significant amount of statistics from the British labour market will be released on Tuesday, February 14. On Wednesday, February 15, the Consumer Price Index (CPI) values will be announced, followed by the country's GDP indicators on February 16. The week's stream of statistics will conclude on Friday, February 16, with the publication of data on retail sales in the UK.

USD/JPY: The Pair's Flight to the Moon Continues

Thanks to the hawkish rhetoric from Federal Reserve representatives, USD/JPY continued to rise last week, coming close to the psychological resistance level of 150.00. It likely would have breached this level, but market participants are exercising caution ahead of the January Consumer Price Index (CPI) data release in the US, which is scheduled for February 13.

The yen continues to be under pressure due to the Bank of Japan's (BoJ) persistent dovish stance. Investors observe that the regulator still has no intention of raising interest rates. On Thursday, February 8, BoJ Deputy Governor Shinichi Uchida stated that "the future course of rates depends on economic and price developments" and that monetary policy conditions in the Japanese economy are on a deeply negative trajectory, with no expectations of aggressive inflation. The following day, BoJ Governor Kazuo Ueda traditionally spoke, stating that "the chances of maintaining accommodative conditions are high even if negative rates are abandoned."

From this, the market concluded that if any changes are to be made to the central bank's monetary policy, they will occur very slowly and it's uncertain when. The investors' reaction is evident in the USD/JPY chart: a local maximum was recorded at 149.57, with the week's final note hitting at 149.25.

Regarding the near-term outlook for USD/JPY, experts' opinions are evenly divided: a third anticipate further growth, another third expect a decline, and the remaining third have chosen to remain neutral. Trend indicators and oscillators on D1 unanimously point north, indicating bullish sentiment, but 25% of the oscillators are in the overbought zone. The nearest support level is located in the zone of 148.25-148.40, followed by 147.65, 146.85-147.15, 145.90-146.10, 144.90-145.30, 143.50, 142.20, and 140.25-140.60. Resistance levels are found at 149.65-150.00, 150.75, and 151.70-151.90.

Among the significant events related to the Japanese economy, the publication of the country's GDP data on Thursday, February 15, stands out. Traders should also be aware that Monday, February 12, is a public holiday in Japan: the country observes National Foundation Day.

CRYPTOCURRENCIES: Why Bitcoin Is Rising


"Halving: Grief or Joy?" was the question we posed in the title of our previous review. The debate on this matter does not subside but, on the contrary, becomes more intense as April approaches.

The process of profit-taking after the approval of bitcoin spot ETFs on January 10 has ended. However, a new threat looms over the market now. And this threat is the miners. Scott Melker, a renowned trader, investor, and host of the podcast "The Wolf of All Streets," writes the following: "The bitcoin halving will occur when the number of mined blocks reaches 840,000 in April 2024, at which point the block reward will decrease from 6.25 to 3.125 BTC. Essentially, this means that the issuance of new coins will be halved. It will become twice as hard for miners to earn money from mining bitcoin."

The halving is tentatively scheduled for April 19, meaning there are roughly two months left. If the price of digital gold does not show significant growth in this period, the majority of miners will face a sharp liquidity shortage. Therefore, to replenish their liquidity, they may start actively selling their BTC holdings, which would exert significant pressure on the market.

According to estimates, bitcoin miners still had about 1.8 million BTC worth approximately $85 billion (at current prices). And now, CryptoQuant has announced that the reserves of these companies have fallen to their lowest level since July 2021. Currently, the wallets of mining pools hold the lowest volume of cryptocurrency since the so-called "Great Migration" of miners from China to other countries in Eurasia and North America. Coins have moved from miners' autonomous wallets to exchanges.

Bitfinex also observes an influx of bitcoins to exchange addresses associated with mining companies. Analysts believe that at some point, a large-scale coin dump could occur, which is concerning. However, miners are holding onto their reserves for the time being, despite reduced transaction fee revenues. According to CryptoQuant, their daily sales have dropped and are now less than 300 BTC.

The situation of mining companies is also complicated by the decline in the production volumes of new coins. According to TheMinerMag, BTC mining by U.S. miners dropped to historical lows in January due to a 29-50% increase in electricity tariffs. High electricity costs are expected to persist until the end of Q1 2024. Therefore, if the trend continues, a certain bitcoin supply deficit will be observed before the halving amid growing demand. And the fact that demand is increasing is confirmed by analysts at Santiment, who note a sharp increase in the number of "whales" owning more than 1,000 BTC. Naturally, this pushes BTC/USD upwards.

From February 7 to 9, bitcoin's price showed a sharp surge, reaching a peak of $48,145. In this rally, in addition to the reasons mentioned, the global increase in risk appetites of major investors likely played the most significant role. The inflow of capital into stock markets also benefited the crypto market. According to IntoTheBlock, the correlation between bitcoin and the S&P 500 index was negative at the end of January but has since returned. Another reason some experts cite for the digital gold's price increase is the approach of the New Year according to the Chinese calendar. It is noted that the price of cryptocurrency always rises in anticipation of this date.

Overall, most forecasts for the entirety of 2024 look quite optimistic, with some being very optimistic. Scott Melker, for instance, believes that the halving could lead to a rise in bitcoin's price to $240,000. "After the previous halving, the BTC price updated its maximum from $20,000 to $69,000, which is a 250% increase," he writes. "Thus, if the situation repeats this time, the next maximum after $69,000 will be $240,000." "I know it might seem like an exaggeration," Melker continues. "This cycle has worked in the past. But until I see it fail [this time], I'm willing to bet that bitcoin will exceed $200,000."

According to ARK Invest CEO Cathy Wood, investors have begun shifting from gold to bitcoin following the launch of spot Bitcoin ETFs. "Bitcoin is growing relative to gold. The substitution of gold with bitcoin is in full swing. And we think this will continue...," she stated.

Echoing Cathy Wood's sentiment is the popular blogger and analyst PlanB. "After the upcoming halving, bitcoin will become scarcer than gold and real estate," he writes. "This implies that the cryptocurrency could reach a price of around $500,000." Based on his Stock-to-Flow model, the expert suggested that the market capitalization of the digital asset might not surpass that of gold – over $10 trillion. However, approaching this mark and a supply limit of 20 million coins would lead to the stated price. PlanB did not specify a timeframe for reaching this price, but he did mention a minimum price level that, in his opinion, the primary cryptocurrency will not fall below. According to PlanB, the BTC price has historically never dropped below the 200-week moving average. (At the time of writing the review, the 200WMA is around $32,000). Another analyst, known by the nickname ali_charts, believes that the critical support level is now $42,560.

Renowned trader, investor, and founder of MN Trading, Michael Van De Poppe, like PlanB, believes that the value of bitcoin could reach $500,000. The expert highlighted that there are numerous factors that will cause explosive growth in the flagship coin's rate. Among these are the current state of the market, the launch of BTC ETFs, inflow of funds from institutional investors, among others. The halving is considered a significant factor, after which a bullish growth of the cryptocurrency market is expected. Van De Poppe suggests that the current cycle might be slightly longer than previous ones, due to the entry of institutional players into the market and changes in the overall direction of industry development.

Van De Poppe believes that a scenario where the value of bitcoin soon reaches the key resistance level of $48,000 is quite plausible. This would be followed by another correction, resulting in a 20% price drop to $38,400. After the halving, the value of BTC will begin to rise again and reach a local peak by the autumn.

Elon Musk's company xAI developed Artificial Intelligence Grok, which has made two predictions regarding Ethereum, the main competitor to the leading cryptocurrency: 1) by the end of 2024, the price of ETH will range from $4,000 to $5,000; 2) within the year, the value of ETH could peak at $6,500. Grok highly values Ethereum's prospects due to the development of this altcoin's ecosystem and the Dencun update. This upgrade will increase the ETH blockchain's scalability level and significantly reduce transaction processing costs. The Dencun deployment took place in the Goerli test network on January 17th, and in the Sepolia test network on January 30th. The launch of Dencun in the main network is scheduled for March 13th. (It's worth noting that this update has already become one of the reasons why large ETH coin holders have started moving their assets from long-inactive wallets. Recently, such a "whale" moved 492 ETH worth over $1.1 million from a wallet that had been dormant for more than eight years).

Grok also considers the potential approval of spot Ethereum ETFs by the end of May as a catalyst for the altcoin's price growth. Six major American companies have submitted applications for these derivatives to the U.S. Securities and Exchange Commission (SEC).

However, the situation is not so straightforward. We have previously quoted SEC Chairman Gary Gensler's statement that positive decisions regarding spot ETFs exclusively concern bitcoin-based exchange products. According to Gensler, this decision "in no way signals a readiness to approve listing standards for crypto assets that are securities." Recall that the regulator still refers to bitcoin as a commodity, while "the vast majority of crypto assets, in his view, are investment contracts (i.e., securities)."

Last week, it was revealed that the SEC had postponed its decision on applications from Invesco and Galaxy. The agency had previously postponed the review date for other applications. "The only date that matters for spot ETH-ETFs at the moment is May 23. This is the deadline for the VanEck application," Bloomberg notes.

Analysts at investment bank TD Cowen believe it is unlikely that the SEC will make any decision before the second half of 2024. "Before approving an ETH-ETF, the SEC will want to gain practical experience with similar investment instruments in bitcoins," commented Jaret Seiberg, head of the TD Cowen Washington Research Group. TD Cowen believes the SEC will return to the discussion of Ethereum ETFs only after the U.S. presidential elections in November 2024.

Senior JP Morgan analyst Nikolaos Panagirtzoglou also does not expect the prompt approval of spot ETH-ETFs. For the SEC to make a decision, it needs to classify Ethereum as a commodity, not a security. However, JP Morgan considers this event unlikely in the near future.

The cryptocurrency market has shown impressive growth over the past week. As of the evening of February 9, BTC/USD is trading in the $47,500 zone, and ETH/USD at $2,500. The total market capitalization of cryptocurrencies is $1.78 trillion (up from $1.65 trillion a week ago). The Crypto Fear & Greed Index has risen to 72 points (from 63 a week ago) and remains in the Greed zone.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for February 05 – 09, 2024

EUR/USD: Dollar Strengthening Prospects Increase


Throughout January, a series of indicators: GDP, employment, and retail sales, consistently highlighted the strength of the US economy. The threat of recession diminished, and it became evident that the high interest rate did not significantly hinder economic performance. Market participants were keenly awaiting the Federal Open Market Committee (FOMC) meeting of the US Federal Reserve, scheduled for Wednesday, January 31, against the backdrop of these positive economic indicators.

As anticipated, the regulator maintained the key rate at its current level (5.50%) but shifted its rhetoric to indicate that its next move would likely be to ease monetary policy. The question on everyone's mind was: when? During the press conference, Fed Chair Jerome Powell sought to temper expectations. He stated that FOMC members wanted to be 100% certain of victory over inflation and that they would not rush into a dovish pivot until convincing evidence of inflation falling below the 2.0% target was seen. Fortunately, the strong economy permits this cautious approach. However, Powell acknowledged that should there be a sharp cooling in the labour market, the easing of monetary policy could occur quite swiftly.

It should be noted that throughout the latter half of January, Fed officials made concerted efforts to temper expectations of a rate cut starting as early as March. And it must be said, they succeeded. The probability of a policy reversal in March dropped from a peak of 90% to 35.5%, while the likelihood of a rate cut in May increased to 61%.

The market's reaction to the outcome of the FOMC meeting was rather muted. The DXY dollar index failed to reach 104.00, and EUR/USD, having dropped to 1.0800 on February 1, reversed direction and climbed back to 1.0900 by Friday, in anticipation of the release of data on the state of the American labour market.

The data published on February 2 revealed that the number of new jobs in the US non-farm sector (Non-Farm Payrolls) increased by 353,000 in January, far exceeding the expected 180,000. This followed a December increase of 333,000. Unemployment remained stable at 3.7%, while wage inflation rose to 4.5% on an annual basis, significantly surpassing market expectations of 4.1%. Thus, Fed Chair Jerome Powell's concerns about a sharp cooling of the labour market were unfounded, which clearly benefited the American currency.

Let's recall that a week earlier, on January 25, the European Central Bank (ECB) held a meeting where the regulator also left the key interest rate unchanged at 4.50%. During the press conference following the meeting, ECB President Christine Lagarde refrained from commenting on the possible timing of rate cuts. According to her, the Governing Council members believe it is too early to discuss easing monetary policy. However, many market participants think that economic challenges may prompt the ECB to initiate this process first. A comparison of macroeconomic indicators between the Old and the New World is enough to support this view.

The unemployment rate in the Eurozone stands at 6.4% compared to 3.7% in the US. European GDP barely moved from a recessionary negative level of -0.1% to 0% in Q4, while the US saw a growth of +3.3%. Moreover, inflation in the Eurozone is close to the target of 2.0%, currently at 2.9%, compared to 3.4% in the US. All these indicators could prompt the European Central Bank to begin easing monetary policy soon. Furthermore, ECB Vice President Francois Villeroy de Galhau recently stated that the rate could be reduced at any moment. Many market participants interpreted this as a signal that a dovish trend might begin within the next two months.

However, analysts at Commerzbank believe that an initial rate cut in March or April might not occur. They note that one negative factor for the euro persists. The bank's strategists think that there is a significant faction within the ECB Governing Council that is merely biding time, to then seize the first opportunity to advocate for a rate cut. "This may even be too soon," Commerzbank warns.

Economists at another bank, the British HSBC, expect the dollar to strengthen slightly in the medium term, especially against the euro and the pound. This is attributed to the continued outperformance of the US economy compared to many other G10 countries, allowing the Federal Reserve to delay easing its policy. "A less aggressive easing path could lead to a decrease in risk appetite, which would support the US dollar," HSBC specialists write.

EUR/USD closed the week at 1.0787. At present, 30% of experts have voted for the dollar to strengthen in the near future, anticipating further decline in the pair. An equal percentage sided with the euro, believing that the pair will at least remain within the 1.0800-1.0900 channel. The remaining 40% have adopted a neutral stance. Indicator readings on the D1 are more definitive. Oscillators are 100% in the red (though 20% of them signal oversold conditions). Among trend indicators, the balance of power is 85% red to 15% green. The nearest support for the pair is located in the 1.0780 zone, followed by 1.0725-1.0740, 1.0620-1.0640, 1.0500-1.0515, and 1.0450. Bulls will encounter resistance in the areas of 1.0820, 1.0890-1.0925, 1.0985-1.1015, 1.1110-1.1140, and 1.1230-1.1275.

Key events for the upcoming week include the release of data on business activity (PMI) in the US services sector on Monday, February 5. The next day, volumes of retail sales in the Eurozone will be disclosed. Thursday traditionally brings information on the number of initial jobless claims in the United States. And towards the very end of the workweek, on Friday, February 9, data on consumer price inflation (CPI) in Germany, the main engine of the European economy, will be released.

GBP/USD: US Labor Market Delivers Blow to the Pound

Last week, on Thursday, February 1, the Bank of England (BoE), like its counterparts across the Channel and the Atlantic, maintained its key interest rate at 5.25%. The Bank of England made no changes to its policy and did not issue any dovish statements. However, the pound received support as two members of the BoE's Monetary Policy Committee continued to vote for a rate hike of 25 basis points. This argument proved to be relatively weak, especially since another committee member voted for a rate cut, while the overwhelming majority, eight members, supported keeping the rate unchanged.

Analysts continue to believe that expectations are on the side of the British currency, speculating that the BoE might be among the last to cut rates this year. However, according to Scotiabank specialists, for further growth of the GBP/USD pair, a breakthrough of the late December peak at 1.2825 is necessary. Yet, there seems to be no foundation for this at the moment. Moreover, strong data from the US labour market strengthened the dollar and prevented the pair from remaining near the upper boundary of the 1.2600-1.2800 sideways channel, where it has been trading for seven weeks.

GBP/USD concluded the past week at 1.2632. According to economists at Internationale Nederlanden Groep (ING), a strong dollar may keep GBP/USD around the 1.2600-1.2700 range in Q1 2024. Regarding the median forecast of analysts for the coming days, 35% voted for the pair falling below the 1.2600 support level, 50% for its rise, and 15% preferred to maintain neutrality. Unlike the experts, trend indicators on D1 show a slight bias towards the American currency, with 60% indicating a strengthening dollar and further decline of the pair, against 40% suggesting its rise. Among oscillators, 65% lean towards the dollar (with 10% indicating oversold conditions), 10% favour the pound, and the remaining 25% hold a neutral position. Should the pair move south, it will encounter support levels and zones at 1.2595-1.2610, 1.2500-1.2515, 1.2450, 1.2330, 1.2210, and 1.2070-1.2085. In case of an upward movement, resistance will be met at levels 1.2695-1.2725, 1.2785-1.2820, 1.2940, 1.3000, and 1.3140-1.3150.

No release of significant macroeconomic data related to the economy of the United Kingdom is anticipated for the upcoming week.

USD/JPY: BoJ Policy Shift: Dreams or Reality?

Strong U.S. labour market statistics dashed the hopes of bulls not only for the euro and the pound but also for the yen. At the beginning of the past week, the Japanese currency was gaining, and USD/JPY was trending downwards, marking a local minimum at 145.89 on Thursday, February 1. A sharp decline in the yield of U.S. Treasuries helped the yen. Specifically, the yield on 10-year U.S. bonds fell to its lowest level since the end of December: 3.9%. It is worth noting the correlation between U.S. securities and USD/JPY. If the yield on ten-year Treasury notes falls, the yen strengthens, and USD/JPY forms a downward trend. This was exactly the case. However, the end of the workweek was characterized by a clear advantage for the American currency, and the pair soared again, concluding at 148.35.

Many market participants continue to harbour hopes for a tightening of monetary policy by the Bank of Japan (BoJ). For instance, analysts at the Canadian Imperial Bank of Commerce (CIBC) expect the BoJ to move away from negative interest rates in April, with additional changes in its Yield Curve Control (YCC) policy to support the Japanese yen in the second half of the year. "We believe," CIBC strategists write, "that USD/JPY has already reached its peak and should [...] decrease to 144.00 in Q2. Following this, we anticipate that rate cuts by the Federal Reserve and the prospect of gradual adjustments to the BoJ's YCC will lead to a decline in USD/JPY to 140.00 in Q3 and 135.00 in Q4 2024."

It's important to note that many experts had anticipated a tightening of the Bank of Japan's (BoJ) monetary policy already in 2023: a topic extensively covered in previous discussions. However, this did not occur. And it might not happen now either.

In January, the Consumer Price Index (CPI) in the Tokyo region unexpectedly fell from 2.4% to 1.6%, and the core CPI, excluding fresh food and energy prices, decreased from 3.5% to 3.1%. Additionally, the growth of industrial production in Japan in December slowed to 1.8%, against a forecast of 2.4%. On a year-over-year basis, industrial production also showed further deceleration: in December, this indicator was -0.7% (year-on-year), an improvement compared to the previous period's -1.4% but still marking a decline.

Such a significant easing of inflationary pressure and a slowdown in economic growth may lead to the BoJ not tightening its policy in the foreseeable future, leaving the interest rate at -0.1%. This forecast was also confirmed by the minutes from the Bank of Japan's December meeting. It was indicated that the Board members agree that "it is necessary to patiently maintain a loose policy."

Regarding the near-term outlook, only 25% of experts expect further strengthening of the dollar and an increase in USD/JPY. In contrast, 75% are siding with the yen, agreeing with CIBC economists that the pair has reached its peak. Trend indicators and oscillators on D1 are all pointing northward, with 100% indicating upward momentum, although 10% of the latter are in the overbought zone. The nearest support level is located in the 147.60 zone, followed by 146.85-147.15, 146.00, 145.30, 143.40-143.65, 142.20, 141.50, and 140.25-140.60. Resistance levels and zones are at 148.55-148.80, 149.85-150.00, 150.80, and 151.70-151.90.

No significant events or statistics related to the Japanese economy are expected in the upcoming week.

CRYPTOCURRENCIES: Halving – Grief or Joy?

Throughout the past week, BTC/USD moved with support at $42,000 without showing any significant results in either direction, drawing special attention to its statistics. Analysts note that the 12-month volatility of the first cryptocurrency has reached its lowest level in 12 years. The indicator has varied significantly over the years but has generally shown a clear downward trend over this period. From 179% in January 2012, it dropped to 45% at the beginning of this year.

A higher volatility figure indicates significant price variability and signals greater market unpredictability. Lower metric values suggest much more stable trading conditions. The decreased volatility could mean a larger number of long-term holders, according to CryptoQuant. The research department at Galaxy Digital predicts that the spot bitcoin ETFs launched in January will further smooth out price fluctuations. "A huge amount of BTC will be held in [investment] advisory accounts. They are not interested in intraday trading," the experts state.

Analysts at Glassnode also spoke about long-term investors. Their report indicates that the overwhelming majority of such BTC holders still do not wish to part with their coins and adhere to a hodling strategy in anticipation of higher spot prices. According to K33 Market Research, the volume of spot trading in bitcoin reached "sustainably high activity following the approval of ETFs." Data from The Block’s Data Dashboard shows that the monthly volume of on-chain transactions in the bitcoin network in January was at a multi-month high, with trading volume for January exceeding $1.11 trillion.

Regarding the Bitcoin ETFs launched in January, the situation has not been as promising as expected. According to several experts, this is a classic case of "buy the rumour, sell the news." Initially, there was an impressive bull rally. Now, however, as these funds have become operational, market participants have begun actively taking profits.

The Grayscale ETF was converted from a trust fund, and by the end of January, it experienced a withdrawal of funds amounting to $2.2 billion. The reason for this is not only the profit-taking by the trust's shareholders in 2023 but also dissatisfaction with high management fees. Grayscale charges a 1.5% fee, whereas other funds have managed to keep their fees between 0.2-0.3%. Among the ETF competitors, BlackRock continues to lead with $2.2 billion, with Fidelity approaching $2 billion. WisdomTree is at the bottom of the ranking with $6.3 million. As for the net inflow of funds since the launch of spot BTC-ETFs, it stands at a modest $760 million.

In addition to profit-taking, another reason putting pressure on the market has been the miners. The halving is scheduled for April 19, leaving roughly 2.5 months. If the price of digital gold does not show significant growth during this period, the majority of miners will face a severe liquidity shortage. Therefore, they have already started to sell off their BTC reserves to replenish liquidity. Since the approval of spot ETFs on January 10, they have sent a record 624,000 BTC to exchanges over the last six years, approximately worth $26 billion. According to estimates, miners still have about 1.8 million BTC left, valued at $76 billion. The sale of these reserves could potentially push bitcoin prices significantly lower.

Analysts at Matrixport have forecasted a drop in BTC/USD to $36,000. They believe that bitcoin might then appreciate in value, but only against a backdrop of favourable macroeconomic conditions and increasing liquidity. (It's worth mentioning that these same analysts had predicted bitcoin would reach $125,000 in 2024 back in December).

Chris Burniske, a partner at the venture firm Placeholder, provided an even more pessimistic forecast. He believes that the price of the leading cryptocurrency will first fall to the $30,000-$36,000 range and then likely reach a local bottom around $20,000. "The consolidation will come lower than most people expect, due to too many variables (e.g., specifics of the crypto market, macroeconomics, adoption, and development of new products)," the expert warned. However, testing the levels around $20,000 will be a "real step" towards reaching previous highs, he believes. "The journey there will be volatile – expect setbacks. And it will take months. As always, your best friend is patience," Burniske emphasized, adding that the decline in other assets will be even deeper than that of bitcoin.

Contrary to Chris Burniske, the forecast by analyst DonAlt appears significantly more optimistic. He cheered his 56,700 YouTube subscribers by noting that bitcoin managed to avoid a total price collapse after the launch of the Bitcoin ETFs. "Digital gold looks strong even after its price dropped below $40,000 last week," he observed. The expert believes that the absence of mass selloffs is a positive sign. "For this reason, I am no longer in the bear camp; now, I am with the bulls," he declared. DonAlt also emphasized that bitcoin is consolidating within a strong upward trend and is likely to regain bullish momentum once it overcomes resistance at the $44,000 level.

Another expert, known by the nickname Rekt Capital, believes traders have one last chance to buy bitcoin at a low price. He analysed historical data and came to the following conclusions:

1. If bitcoin does not become cheaper in the next two weeks, then the coin's price will not significantly fall until the halving. 2. Approximately 60 days before the halving, BTC's price will rise on the wave of hype surrounding the event. 3. After the halving, speculators will rush to sell the cryptocurrency, so bitcoin will depreciate for several weeks, and its value may drop by 20-38%. 4. Then a period of accumulation will begin, lasting up to 150 days, characterized by a relatively low level of BTC price volatility. 5. After this, a phase of parabolic growth in the bitcoin price will start, and its price will reach a new all-time high.

Markus Thielen, Head of Research at 10x Research, is a proponent of Elliott Wave Theory, which suggests that asset prices move in five waves. According to this theory, the first, third, and fifth waves are "impulse waves" that move the asset in the direction of the trend, while the others are corrective "retracement waves." The analyst believes the recent decline in bitcoin's price represents the fourth wave, i.e., a retracement. At present, the fifth wave is beginning, which could push the price upward. "Wave analysis has marked this recovery up to $52,671 potentially by the end of the first quarter of 2024," Thielen announced.

Anthony Scaramucci, the founder of hedge fund SkyBridge Capital, pointed to a similar figure. "Suppose the price [on the day of the halving] is $50,000," he predicts. "Multiply this BTC price by four, and it will reach this level [$200,000] within the next 18 months." Previously, the head of SkyBridge claimed that the BTC rate could reach $100,000 after the halving. As an additional reason for a bullish rally, he cited the reduction of the US Federal Reserve's interest rate.

Regarding the long-term course, Scaramucci forecasts that bitcoin's market capitalization could reach half of gold's, which stands at $14.5 trillion. Therefore, by his calculations, the price per coin would amount to about $345,000.

Peter Schiff, the President of Euro Pacific Capital and a staunch opponent of the first cryptocurrency, made an unexpected long-term forecast. While he typically predicted a complete crash for bitcoin, he has now suggested that by 2031 the price of the coin could reach ... $10 million, albeit under a very hypothetical scenario. According to him, this would only occur if the US dollar were to follow the path of "German paper marks." This term informally referred to the currency introduced in Germany at the start of World War I in 1914 as a replacement for the previous gold-backed mark. In the early 1920s, the paper mark depreciated due to hyperinflation. At that time, companies paid wages several times a day so that workers could make purchases before prices rose again. The money supply grew so rapidly that the state could not print banknotes fast enough and had to enlist private companies for help. The largest denomination issued was a banknote worth 100 trillion marks.

In reality, Peter Schiff does not believe in an economic collapse and the fall of the US dollar. Thus, this forecast of his can be considered mockingly sarcastic towards bitcoin. However, Robert Kiyosaki, the economist and author of the bestseller "Rich Dad Poor Dad," harbours no doubts about such a scenario. He continues to insist that gold, silver, and bitcoin should be part of every investor's portfolio. He is confident that the price of BTC could reach $1 million in the event of a global economic collapse.

As of the evening of February 2, when this review was written, the global economy has not collapsed, BTC/USD has not reached either $1 million or $10 million, and is currently trading around $43,000. The total market capitalization of the crypto market stands at $1.65 trillion (up from $1.61 trillion a week ago). The Crypto Fear & Greed Index has increased to 63 points (from 49 a week ago), moving from the Neutral zone into the Greed zone.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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January 2024 Results: Gold Regains Value in the New Year

NordFX, a brokerage firm, has summarized the trading performance of its clients for January 2024. The effectiveness of social trading services, PAMM and CopyTrading, as well as the profits earned by the company's IB partners, were also evaluated.

- The most successful trader in the first month of the new year was a client from Western Asia, with account number 1740XXX, who achieved a profit of 18,732 USD through transactions with gold (XAU/USD).
- The XAU/USD pair also aided a representative from South Asia, account number 1694XXX, to secure the second step on the podium with a result of 16,355 USD.
- Third place went to a compatriot of the latter, the owner of account number 1595XXX. By trading the same instrument favoured by NordFX traders, gold (XAU/USD), as well as the British pound (GBP/USD), he earned a profit of 12,725 USD.

As for NordFX passive investment services, the situation unfolded as follows:

- In the PAMM service, the Trade and Earn account continues to attract the attention of passive investors. Opened in March 2022, it remained dormant for four months before awakening in November. As a result, during its "active" period, its return exceeded 415%. Unfortunately, at the end of 2023, the account manager made a serious mistake. While for a long time the maximum drawdown did not exceed 17%, in just a few days of December, it approached a dangerous 60%. However, the manager was able to rectify the situation afterwards, leading to a sharp increase in profitability, with the maximum drawdown in January not exceeding 10%.
    
Among startups, the account Kikos2 is noteworthy, showing a profit of 325% in just 72 days. However, given the aggressive trading strategy, it also experienced a significant maximum drawdown of about 60%. This serves as a reminder that investors should exercise utmost caution when investing their money. Past results do not guarantee future performance, so it is important to assess one's financial capabilities and be prepared for potential setbacks.
    
- In CopyTrading, we continue to monitor the signal from yahmat-forex, which has shown a return of 335% over 222 days, with a maximum drawdown of 37%. The startup Fund Manage Global 100 also caught our attention, delivering a 160% return in just 83 days with a relatively moderate drawdown of 20%. Additionally, the signal FX NEW SKY cannot be overlooked. In just two weeks, it achieved not just a sky-high, but a cosmic profit of 1820%. However, it also experienced a cosmic maximum drawdown of 77%. After all, as is well known, journeys to the stars are exceptionally risky and fraught with potential crashes and catastrophes.

Among the IB partners of the brokerage firm NordFX, the top 3 are as follows:
- The largest commission reward in January was credited to a partner from East Asia, with account number 1218XXX, amounting to 8,268 USD;
- is was followed by a colleague from West Asia, account number 1645XXX, who earned 5,746 USD for the month;
- nally, completing the top three is a partner from South Asia, account number 1718XXX, who received 3,842 USD in commissions.
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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Forex and Cryptocurrencies Forecast for January 29 – February 02, 2024

EUR/USD: US Economy Delivers Surprises

The two most significant events last week occurred on Thursday, January 25. On this day, the European Central Bank (ECB) held a meeting, and preliminary GDP data for the US for Q4 2023 was published.

As expected, the ECB left the key interest rate unchanged at 4.50%. The regulator also maintained other critical parameters of its monetary policy. At the press conference following the meeting, ECB President Christine Lagarde refrained from commenting on potential timelines for rate cuts. She reiterated her previous statements, noting that the ECB Governing Council members believe it is premature to discuss policy easing. However, Lagarde highlighted that wage growth is already declining and added that they anticipate further inflation reduction throughout 2024.

Overall, the first event passed without surprises, unlike the second. The preliminary GDP data for Q4 2023 released by the US Bureau of Economic Analysis showed the expected slowdown in American economic growth compared to the extremely high rates of Q3 (4.9%), reaching 3.3% on an annual basis. However, this was significantly above the market consensus forecast, which anticipated a more substantial slowdown to 2.0%. Thus, it turned out that for the entire year of 2023, the country's economy grew by 2.5% (compared to 1.9% in 2022). The data confirmed the national economy's resilience to the most significant interest rate hike cycle since the 1980s – instead of the expected slowdown, it continues to grow at rates above the historical trend (1.8%).

These impressive results were a surprise for market participants. They look particularly 'stellar' compared to the performance of other currency zones. For instance, Japan's GDP continues to crawl back to pre-COVID-19 pandemic levels, and the Eurozone's GDP seems to have been in a state of stagnation for some time. This benefits the dollar, as a stable economy allows the Federal Reserve to delay the start of monetary policy easing and maintain restrictive measures for a while longer. According to CME futures quotes, the probability of an interest rate cut in March is currently 47%, almost half of what was expected a month ago (88%). Many experts believe the Fed will start gradually reducing the cost of federal fund loans no earlier than May or June, waiting for signs confirming the sustainability of the inflation slowdown.

The US Bureau of Labor Statistics also reported on January 25 that the number of initial unemployment claims for the week ending January 20 rose to 214K, exceeding the previous week's figures and forecasts of 200K. Despite the slight increase, the actual value still represents one of the lowest levels since the end of last year.

As mentioned earlier, the economic situation in the Eurozone appears significantly worse, exacerbated by Russia's military actions in Ukraine and the downturn of China's economy, an important partner for Europe. Against this backdrop, the ECB may become the most hasty among the G10 central banks to start reducing interest rates. Such a step would exert strong pressure on the common European currency, placing the euro at a disadvantage in the Carry-trade segment. Additionally, the advantages of the dollar as a safe-haven currency should not be overlooked.

The dollar index DXY found strong support at the 100.00 level at the end of last year, rebounded upwards, and has been consolidating around 103.00 for the past week, seemingly 'sticking' to its 200-day moving average. Market participants are awaiting the Federal Open Market Committee (FOMC) meeting of the US Federal Reserve, scheduled for Wednesday, January 31, amidst strong GDP data and convincing evidence of disinflation. It is likely that, as with the ECB, the interest rate will remain at the current level (5.50%). Moreover, Federal Reserve Chair Jerome Powell's remarks, similar to the ECB's, are expected to be cautious regarding the timelines for rate cuts. However, his more favourable tone regarding inflation reduction may be enough to restore market confidence in the beginning of monetary policy easing as early as March. In this case, DXY could resume its movement towards 100.00. Otherwise, a renewal of the December peak of 104.28 seems quite plausible.

Data on personal consumption expenditures in the US were released at the very end of the workweek, on Friday, January 26. The Core Personal Consumption Expenditures (PCE) Price Index showed a monthly increase from 0.1% to 0.2%, which fully matched forecasts. Year-on-year, the index stood at 2.9%, lower than both the previous value (3.2%) and the forecast (3.0%).

These figures did not significantly impact the exchange rates, and EUR/USD closed the week at 1.0854. Currently, the majority of experts predict the strengthening of the US dollar in the near future. Among them, 80% voted for the dollar's appreciation, 0% sided with the euro, and the remaining 20% held a neutral position. However, in the monthly perspective, the balance of power between bullish (red), bearish (green), and neutral (grey) is evenly distributed: a third for each. Oscillator readings on the D1 timeframe confirm the analysts' forecast: 100% of them are coloured red (15% indicating oversold conditions). Among trend indicators, the balance of power is 65% in favour of the reds and 35% for the greens. The nearest support levels for the pair are located in the zones 1.0800-1.0820, followed by 1.0725-1.0740, 1.0620-1.0640, 1.0500-1.0515, and 1.0450. The bulls will encounter resistance in the areas of 1.0905-1.0925, 1.0985-1.1015, 1.1110-1.1140, 1.1230-1.1275, 1.1350, and 1.1475.

In the upcoming week, in addition to the aforementioned FOMC meeting and subsequent press conference, we are expecting the release of Q4 GDP data for Germany and the Eurozone on Tuesday, January 30. On Wednesday, we will see the retail sales volumes and the Consumer Price Index (CPI) in Germany, as well as the state of employment in the US private sector from ADP. On Thursday, February 1, inflation data (CPI) for the Eurozone and business activity in the US manufacturing sector (PMI) will be published. Additionally, on February 1 and 2, we will traditionally receive a wealth of statistics from the US labor market, including the unemployment rate and the number of new jobs created outside of the agricultural sector (Non-Farm Payrolls, NFP).

GBP/USD: Inflation Continues to Bolster the Pound


The retail sales report released on January 19 in the United Kingdom turned out to be disappointing. Retail sales volumes in December decreased by -3.2% following a 1.4% increase in the previous month, while analysts had expected a -0.5% drop. Year-on-year, this indicator declined by -2.4% after increasing by 0.2% a month earlier (forecast was -1.1%). Sales excluding fuel dropped by -3.3% month-on-month and -2.1% year-on-year, against expert forecasts of -0.6% and -1.3%, respectively.

However, despite this, GBP/USD not only maintains its position within the six-week lateral channel of 1.2600-1.2800 but is even seeking to consolidate in its upper half. Analysts believe that the British currency continues to be supported by expectations that the Bank of England (BoE) will likely be among the last to lower rates this year.

It's worth recalling that the December inflation data showed the Consumer Price Index (CPI) in the United Kingdom rose month-on-month from -0.2% to 0.4% (consensus forecast was 0.2%), and year-on-year reached 4.0% (compared to the previous value of 3.9% and expectations of 3.8%). The core CPI figure remained at the previous level of 5.1% year-on-year. Following the release of this report, which showed rising inflation, UK Prime Minister Rishi Sunak quickly sought to reassure the markets. He stated that the government's economic plan remains sound and continues to work, having reduced inflation from 11% to 4%. However, despite the Prime Minister's optimistic statement, many market participants are now more convinced that the Bank of England will delay the start of easing its monetary policy until the end of the year. "Concerns that the disinflation process may stall have probably increased," Commerzbank economists wrote at the time. "And the market will likely bet that the Bank of England will respond accordingly and, therefore, be more cautious about the timing of the first interest rate cut."

The British currency was also bolstered by preliminary data on business activity in the country, released on Wednesday, January 24. The Manufacturing PMI rose from 46.2 to 47.3, against a forecast of 46.7. Furthermore, the Services PMI and the Composite PMI firmly established themselves in the growth zone (above 50 points). The Services PMI increased from 53.4 to 53.8 (forecast was 53.2), and the Composite PMI went up from 52.1 to 52.5 (forecast was 52.2). From these figures, the market inferred that the country's economy could withstand high interest rates for an extended period.   

GBP/USD concluded the previous week at a level of 1.2701. Regarding the analysts' forecasts for the coming days, the sentiment is similar to that for EUR/USD: 70% voted for the pair's decline, only 10% were in favor of its rise, and 20% preferred to remain neutral. The outlook for the monthly and longer-term horizon is more ambiguous. Among the trend indicators on the D1 timeframe, in contrast to the specialists' opinions, there's a clear preference for the British currency: 80% indicate a rise in the pair, while 20% suggest a decline. Among oscillators, 35% are in favour of the pound, 10% for the dollar, and the remaining 55% maintain a neutral stance. Should the pair move southward, support levels and zones at 1.2595-1.2610, 1.2500-1.2515, 1.2450, 1.2330, 1.2210, 1.2070-1.2085 await it. In case of an upward movement, the pair will encounter resistance at levels 1.2750-1.2765, 1.2785-1.2820, 1.2940, 1.3000, and 1.3140-1.3150.

In addition to the FOMC meeting of the US Federal Reserve, we will also have a meeting of the Bank of England in the upcoming week. It is scheduled for Thursday, February 1st, and according to forecasts, the BoE is also expected to keep the borrowing rate at the current level of 5.25%. Besides this, no other significant events related to the economy of the United Kingdom are anticipated in the near future.

USD/JPY: Does the Drift Towards 150.00 Continue?

The Consumer Price Index (CPI) in the Tokyo region unexpectedly dropped from 2.4% to 1.6% in January, and the figure excluding food and energy prices decreased from 3.5% to 3.1%. Such a significant weakening of inflationary pressure could lead the Bank of Japan (BoJ) to refrain from tightening monetary policy in the foreseeable future.

This forecast is also supported by the monthly economic report of the Japanese government, published on Thursday, January 25. The report states that the consequences of the strong earthquake on the Noto Peninsula in central Honshu, Japan's main island, could reduce the national GDP by 0.5%. These estimates increase the likelihood that the Bank of Japan will maintain its ultra-loose monetary policy at least until mid-2024. Consequently, any speculation about an interest rate hike in April can be disregarded.

The minutes from the Bank of Japan's December meeting reinforce this outlook. It was noted that the Board members agreed that "it is necessary to patiently maintain an accommodative policy." Many members (another quote) "stated that it is necessary to confirm a positive wage-inflation cycle to consider the issue of phasing out negative rates and YCC." "Several members said they do not see the risk of the Central Bank falling behind schedule and can wait for developments at the annual wage negotiations this spring." And so on in the same vein.

Economists at MUFG Bank in Japan believe that the current situation does not hinder the selling of the yen. "Given our view on the strengthening of the US dollar in the near term and the more significant-than-expected drop in inflation data [in Japan]," they write, "we may see an increase in the appetite for Carry-trade positions funded by the yen, which will contribute to the further rise of USD/JPY." MUFG strategists opine that the pair will continue its drift northward, towards 150.00. However, as it approaches this level, the threat of currency interventions by Japanese financial authorities is expected to gradually increase.

In the interest of fairness, it should be noted that there are still those who believe in an imminent shift by the BoJ to a tighter policy. For instance, specialists at the Dutch Rabobank still adhere to a forecast suggesting the regulator could raise rates as early as April. "However," the bank's experts write, "everything will depend on strong wage data from the spring negotiations and evidence of changes in corporate behaviour regarding wages and pricing." "Our forecast, which sees USD/JPY ending the year at 135.00, assumes that the Bank of Japan will raise rates this year," continue the Rabobank economists. However, they add that there is still a possibility of disappointment in the pace of rate hikes.

USD/JPY recorded its peak for the past week at 148.69, finishing slightly lower at 148.11. In the near-term outlook, 30% of experts anticipate further strengthening of the dollar, 30% side with the yen, and 40% hold a neutral position. Regarding the trend indicators and oscillators on the D1 timeframe, all 100% point north, though 10% of them are in the overbought zone. The nearest support level is located in the 146.65-146.85 zone, followed by 146.00, 145.30, 143.40-143.65, 142.20, 141.50, and 140.25-140.60. Resistance levels are positioned at 148.55-148.80, 149.85-150.00, 150.80, and 151.70-151.90.

No significant events related to the Japanese economy are anticipated in the upcoming week.

CRYPTOCURRENCIES: Why Bitcoin Fell

On January 10, the U.S. Securities and Exchange Commission (SEC) approved a batch of all 11 applications from investment companies to launch spot exchange-traded funds (ETFs) based on bitcoin. Against this backdrop, the quotations of the main cryptocurrency momentarily spiked to $47,787, a level last seen in the spring of 2022. However, instead of the expected growth, bitcoin then tumbled and recorded a local minimum of $38,540 on January 23. Thus, in just 12 days, the cryptocurrency lost nearly 20% of its value. According to several specialists, this is a classic case of the "buy the rumour, sell the news" scenario. Initially, there was a significant bull rally fueled by speculations about the launch of bitcoin-based ETFs. Now that these funds are operational, market participants have begun actively taking profits.

However, there are other reasons for the decline, reflected in specific figures. The capital inflow into BTC-ETFs, many of which were launched by major Wall Street players like BlackRock, turned out to be smaller than expected. It appears that investors have become disillusioned with cryptocurrency. According to CoinShares, the 10 new funds had gathered $4.7 billion by the end of Tuesday. Meanwhile, $3.4 billion flowed out of the Grayscale trust, which was considered the world's largest bitcoin holder and has now also been transformed into a BTC-ETF. Logic suggests that a significant portion of the funds likely just shifted from Grayscale investors to the 10 new funds with lower fees. If this is the case, then the net new investment inflow is just $1.3 billion. Moreover, in recent days, this has turned into a net outflow of $25 million.

It's also important to note that since the approval of BTC-ETFs, along with short-term speculators and Grayscale investors, the sell-off has been influenced by the bankruptcy manager of the FTX crypto exchange and especially by miners. Together, they have unloaded $20 billion worth of coins on the market, a large portion of which belongs to the miners. They are particularly concerned about the increasing computational difficulty and the halving in April, which will force many of them out of business. As a result, since January 10, miners have sent a record 355,000 BTC worth $15 billion to crypto exchanges, the highest in six years. In these circumstances, the demand for a spot bitcoin ETF of $4.7 billion (or realistically $1.3 billion) seems modest and unable to compensate for the resulting outflow of funds. Hence, we are witnessing such a significant drop in the price of the main digital asset.

Along with bitcoin, major altcoins, including Ethereum (ETH), Solana (SOL), Cardano (ADA), Avalanche (AVAX), Dogecoin (DOGE), Binance Coin (BNB), and others, also incurred losses. Analysts believe that the improvement in the stock markets has also exerted additional pressure on cryptocurrencies – over the last three weeks, both American and European indices have shown growth.

Peter Schiff, the president of Euro Pacific Capital, did not miss the opportunity to gloat over the buyers of bitcoin ETF shares. He believes that the approval of these funds does not create new demand for cryptocurrency. According to the financier, those investors who previously bought cryptocurrency on the spot market or invested in shares of mining companies and Coinbase are now merely shifting their investments to ETFs. "Shuffling deck chairs won't save the ship from sinking," predicted this advocate of physical gold.

Schiff thinks that the fate of investors in the spot product will be similar to those who invested in the futures ETF BITO, launched in the fall of 2021. Currently, shares of this fund are trading at a 50% discount, implying that bitcoin is also expected to fall to around $25,000. Since January 10, 2024, the share price of BTC-ETFs has already fallen by 20% or more from their peak. The shares of FBTC suffered the most, decreasing in value by 32% in two weeks. "I think VanEck should change the ticker of its ETF from HODL to GTFO [from 'hold' to 'get the heck out']," Schiff sarcastically commented on the situation.

Caroline Mauron, head of OrBit Markets, told Bloomberg that if bitcoin fails to firmly establish itself above $40,000 soon, it could trigger a massive liquidation of positions in the futures market, accompanied by a panic outflow of capital from the crypto sphere.

An analyst using the pseudonym Ali illustrated the price patterns of the last two cycles and, like Caroline Mauron, suggested a further decline in the coin's value. The expert noted that in previous rallies, bitcoin followed a consistent pattern: first reaching the 78.6% Fibonacci level and then correcting to 50%. Thus, according to this model, a drop in the BTC/USD pair to $32,700 (50%) is not ruled out.

Trader Mikeystrades also allowed for a drop to $31,000 and advised against opening long positions. "Save your money until the market begins to demonstrate bullish strength and follows the flow of orders," the expert recommended.

A crypto trader known as EliZ predicted a fall in the bitcoin price to $30,000. "I expect a bearish distribution over the next two to three months, but the second half of 2024 will be truly bullish. These stops are necessary to keep the market in a healthy state," he stated.

Michael Van De Poppe, founder of MN Trading, holds a different view. He emphasized that bitcoin has already collected liquidity and is approaching a local bottom. "Buy at the lows. Bitcoin below $40,000 is an opportunity," the analyst urged. Yann Allemann, co-founder of Glassnode, believes that a bullish rally in the bitcoin market will start in the first half of 2024, with the coin's value increasing to $120,000 by early July. This forecast is based on the dynamics of the asset's value changes in the past after the appearance of a bullish flag pattern on the chart.

Indeed, negative scenarios should not be ignored. However, it's important to consider that current pressures are largely due to temporary factors, while long-term trends continue to favor digital gold. For instance, since the fall of 2021, there has been an increase in the proportion of coins that have remained inactive for over a year. This indicator is now showing a record 70%. An increasing number of people are trusting bitcoin as a tool for inflation protection and savings. The number of cryptocurrency users has reached over half a billion people, about 6% of the Earth's population. According to recent data, the number of Ethereum holders has grown from 89 million to 124 million, while the number of bitcoin owners by the end of the year increased from 222 million to 296 million people.

There is also growing acceptance of this new type of asset among large capital representatives. Last week, Morgan Stanley published a document titled "Digital (De)Dollarization?", authored by the investment bank's COO Andrew Peel. According to the author, there is a clear shift towards reducing dependency on the dollar, simultaneously fuelling interest in digital currencies such as bitcoins, stablecoins, and CBDCs. Peel writes that the recent surge in interest in these assets could significantly alter the currency landscape. According to a recent Sygnum Bank survey, over 80% of institutional investors believe that cryptocurrencies already play an important role in the global financial industry.

As of the evening of January 26, when this review was written, BTC/USD is trading around $42,000. The total market capitalization of the crypto market stands at $1.61 trillion, down from $1.64 trillion a week ago. The Bitcoin Fear & Greed Index remains in the Neutral zone at 49 points, slightly down from 51 a week earlier.
 

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Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for January 22 – 26, 2024

EUR/USD: Reasons Behind the Dollar's Strengthening


The past week was notably sparse in terms of macroeconomic statistics. Consequently, the market participants' sentiment largely depended on the statements made at the World Economic Forum in Davos (WEF). It's worth noting that this event, held annually at a ski resort in Switzerland, gathers representatives of the global elite from over 120 countries. There, amidst the sparkling, crystal-clear snow glistening in the sunlight, the world's power players discuss economic issues and international politics. This year, the 54th edition of the forum took place from January 15 to 19.

Speaking at the World Economic Forum on January 16, the President of the European Central Bank, Christine Lagarde, expressed her confidence that inflation would reach the target level of 2.0%. This statement did not raise any doubts, as the Consumer Price Index (CPI) in the Eurozone shows a steady decline. From a level of 10.6% at the end of 2022, the CPI has now fallen to 2.9%. Isabel Schnabel, a member of the ECB's Executive Board, did not rule out the possibility of a soft landing for the European economy and a return to the target inflation level by the end of 2024.

According to a Reuters survey of leading economists on the future monetary policy of the ECB, the majority expect the regulator to lower interest rates as early as the second quarter, with 45% of respondents believing that this decision will be made at the June meeting. 

On the other hand, inflation in the United States has been unable to surpass the 3.0% mark since July 2023. The figures published on January 11th showed that the annual Consumer Price Index (CPI) increased by 3.4%, which was above the consensus forecast of 3.2% and the previous value of 3.1%. In monthly terms, consumer inflation also rose, registering at 0.3% against a forecast of 0.2% and a previous value of 0.1%.

In light of this, and considering that the U.S. economy appears quite stable, the likelihood of the Federal Reserve lowering interest rates in March started to diminish. This shift in sentiment led to a slight strengthening of the dollar, moving EUR/USD from the 1.0900-1.1000 range to the 1.0845-1.0900 zone. Additionally, the weak performance of the Asian stock markets exerted some pressure on the European currency.

According to economists at the Dutch Rabobank, long positions on the euro may face further challenges. This could happen if Donald Trump continues his movement towards a potential second term in the White House. "Although President Biden's Inflation Reduction Act meant that the past four years were not always easy for Europe, Trump's stance on NATO, Ukraine, and possibly climate change could prove costly for Europe and enhance the appeal of the U.S. dollar as a safe asset," the Rabobank experts write. "Based on this, we see a possibility of EUR/USD falling to 1.0500 in a three-month perspective."

EUR/USD closed last week at 1.0897. Currently, the majority of experts predict a rise in the U.S. dollar in the near future. 60% voted in favour of the dollar's strengthening, 20% sided with the euro, and the remaining 20% took a neutral stance. Oscillator readings on the D1 chart confirm the analysts' forecast: 80% are coloured red, indicating a bearish trend, and 20% are in neutral grey. Among the trend indicators, there is a 50/50 split between red (bearish) and green (bullish) signals.

The nearest support levels for the pair are located in the zones of 1.0845-1.0865, followed by 1.0725-1.0740, 1.0620-1.0640, 1.0500-1.0515, and 1.0450. On the upside, the bulls will face resistance at 1.0905-1.0925, 1.0985-1.1015, 1.1110-1.1140, 1.1230-1.1275, 1.1350, and 1.1475.

Unlike the past week, the upcoming week promises to be more eventful. On Tuesday, January 23, we will see the publication of the Eurozone Bank Lending Survey. Wednesday, January 24, will bring a deluge of preliminary statistics on business activity (PPI) in various sectors of the German, Eurozone, and U.S. economies. The main event on Thursday, January 25, will undoubtedly be the European Central Bank's meeting, where a decision on the interest rate will be made. It is expected to remain at the current level of 4.50%. Investors will therefore be paying close attention to what the ECB leaders say at the subsequent press conference. For reference, the FOMC meeting of the Federal Reserve is scheduled for January 31. Additionally, on January 25, we will learn about the GDP and unemployment data in the United States, and the following day, data on personal consumption expenditures of residents of this country will be released. 

GBP/USD: High Inflation Leads to High Rates and a Stronger Pound

Unlike the United States and the Eurozone, there was a significant amount of important statistics released last week concerning the state of the British economy. On Wednesday, January 17, traders were focused on the December inflation data. The data revealed that the Consumer Price Index (CPI) in the United Kingdom rose from -0.2% to 0.4% month-on-month (against a consensus forecast of 0.2%) and reached 4.0% year-on-year (compared to the previous value of 3.9% and expectations of 3.8%). The core CPI remained at the previous level of 5.1% year-on-year.

Following the release of the report showing inflation growth, UK Prime Minister Rishi Sunak moved quickly to reassure the markets. He stated that the government's economic plan remains correct and continues to work, having reduced inflation from 11% to 4%. Sunak also noted that wages in the country have been growing faster than prices for five months, suggesting that the trend of weakening inflationary pressure will continue.

Despite this optimistic statement, many market participants believe that the Bank of England (BoE) will postpone the start of easing its monetary policy until the end of the year. "Concerns that the disinflation process might slow down have likely intensified as a result of the latest inflation data," economists at Commerzbank write. "The market will probably bet on the Bank of England responding accordingly and, therefore, being more cautious regarding the first interest rate cut."

Clearly, if the BoE does not rush to ease monetary policy, this will create ideal conditions for the long-term strengthening of the British pound. This prospect already allowed the GBP/USD pair to bounce off the lower boundary of its five-week channel at 1.2596 on January 17th, rising to the channel's midpoint at 1.2714.

It is quite possible that GBP/USD would have continued its upward trajectory, but it was hindered by weak retail sales data in the United Kingdom, which were published at the end of the workweek on Friday, January 19th. The data showed a decline in this indicator by 4.6%, from +1.4% in November to -3.2% in December (against a forecast of -0.5%). If the upcoming Purchasing Managers' Indexes and business activity indicators, due to be released on January 24th, paint a similar picture, it could exert even more pressure on the pound. The Bank of England might fear that a stringent monetary policy could overly decelerate the economy and might consider easing it. According to analysts at ING (Internationale Nederlanden Groep), a reduction in the key interest rate by 100 basis points could lead to GBP/USD falling to the 1.2300 zone over a one to three-month horizon.

ING analysts also believe that the UK budget announcement on March 6 will significantly impact the pound, with tax cuts on the agenda. "Unlike in September 2022," the experts write, "we believe this will be a real tax cut, financed by the reduced cost of debt servicing. This could add 0.2-0.3% to the UK's GDP this year and lead to the Bank of England maintaining higher rates for a longer period."

GBP/USD ended the last week at 1.2703. Looking ahead to the coming days, 65% voted for the pair's decline, 25% were in favour of its rise, and 10% preferred to remain neutral. Contrary to the specialists' opinions, the trend indicators on D1 show a preference for the British currency: 75% indicate a rise in the pair, while 25% point to a decline. Among the oscillators, 25% are in favor of the pound, the same proportion (25%) for the dollar, and 50% hold a neutral position. If the pair moves southward, it will encounter support levels and zones at 1.2650, 1.2595-1.2610, 1.2500-1.2515, 1.2450, 1.2330, 1.2210, 1.2070-1.2085. In case of an upward movement, the pair will meet resistance at 1.2720, 1.2785-1.2820, 1.2940, 1.3000, and 1.3140-1.3150.

No significant events related to the United Kingdom's economy are anticipated for the upcoming week, other than the previously mentioned events. The Bank of England's next meeting is scheduled for Thursday, February 1.

USD/JPY: The 'Moon Mission' Continues

According to data published by the Japanese Statistics Bureau on Friday, January 19, Japan's National Consumer Price Index (CPI) for December was 2.6% year-on-year, compared to 2.8% in November. The National CPI, excluding fresh food, was 2.3% year-on-year in December, down from 2.5% the previous month.

Given that inflation is already decreasing, the question arises: why raise the interest rate? The logical answer: there is no need. This is why the market's consensus forecast suggests that the Bank of Japan (BoJ) will leave the rate unchanged at its meeting on Tuesday, January 23rd, maintaining it at the negative level of -0.1%. (It is worth remembering that the last time the regulator changed the rate was eight years ago, in January 2016, when it was lowered by 200 basis points.).

As usual, Japan's Finance Minister Shunichi Suzuki made another round of verbal interventions on Friday, and as usual, he said nothing new. "We are closely monitoring currency movements," "Forex market movements are determined by various factors," "it's important for the currency to move stably, reflecting fundamental indicators": these are statements that market participants have heard countless times. They no longer believe that the country's financial authorities will move from persuasion to real action. As a result, the yen continued to weaken, and USD/JPY continued its upward movement. (Interestingly, this aligns precisely with the wave analysis we provided two weeks ago.)

The past week's high for USD/JPY was recorded at 148.80, with the week closing near that level at 148.14. In the near future, 50% of experts anticipate further strengthening of the dollar, 30% are siding with the yen, and 20% hold a neutral position. As for the trend indicators and oscillators on D1, all 100% point north, though a quarter of the latter are in the overbought zone. The nearest support level is located in the 147.65 area, followed by 146.90-147.15, 146.00, 145.30, 143.40-143.65, 142.20, 141.50, and 140.25-140.60. Resistance levels are set in the following areas and zones: 148.50-148.80, 149.85-150.00, 150.80, and 151.70-151.90.

In addition to the Bank of Japan's meeting, another significant event related to the Japanese economy to note for the upcoming week is the publication of the Consumer Price Index (CPI) data for the Tokyo region, which is scheduled for Friday, January 26.

CRYPTOCURRENCIES: Numerous Predictions, Uncertain Outcome

Last week, the long-awaited regulatory saga finally concluded: as expected, on January 10th, the U.S. Securities and Exchange Commission (SEC) approved a batch of all 11 applications from investment companies to launch spot exchange-traded funds (ETFs) based on bitcoin. This news initially caused a spike in bitcoin's price to around $49,000. However, the cryptocurrency then depreciated by about 15%, falling to $41,400. Experts cite overbought conditions or what is known as "market overheating" as the main reason for this decline. As Cointelegraph reports, the SEC's positive decision was already factored into the market price. In 2023, bitcoin had grown 2.5 times, with a significant part of this growth occurring in the fall when the approval of the ETFs became almost inevitable. Many traders and investors, especially short-term speculators, decided to lock in profits rather than buy the now more expensive asset. This is a classic example of the market adage, "Buy on rumors (expectations), sell on facts."

It cannot be said that this price collapse was unexpected. In the lead-up to the SEC's decision, some analysts had predicted a downturn. For instance, experts at CryptoQuant talked about a potential drop in prices to $32,000. Other forecasts mentioned support levels at $42,000 and $40,000. "Bitcoin failed to break through the $50,000 level," analysts at Swissblock wrote. "The question arises whether the leading cryptocurrency can regain the momentum it has lost."

Our previous review was titled "D-Day Has Arrived. What Next?". More than a week has passed since the approval of the Bitcoin ETF, but judging by the BTC/USD chart, the market still hasn't decided on an answer to this question. According to Michael Van De Poppe, head of MN Trading Consultancy, the price is stuck between several levels. He believes that resistance lies at $46,000, but bitcoin could test support in the range between $37,000 and $40,000. In reality, for almost the entire past week, the primary cryptocurrency moved in a narrow sideways channel: between $42,000 and $43,500. However, on January 18-19, bitcoin experienced another bear attack, recording a local minimum at $40,280.

Evaluating the impact of the launch of spot bitcoin ETFs will require some time. Suitable data for analysis is expected to accumulate around mid-February. However, as noted by Cointelegraph, these funds have already attracted over $1.25 billion. On the first day alone, the trading volume of these new financial market instruments reached $4.6 billion.

Andrew Peel, Head of Digital Assets at investment bank Morgan Stanley, points out that the weekly inflow of funds into these new products already exceeds billions of dollars. He believes that the launch of spot bitcoin ETFs could significantly accelerate the process of de-dollarization of the global economy. He is quoted as saying, "Although these innovations are still in their infancy, they open up opportunities for challenging the hegemony of the dollar. Macro investors should consider how these digital assets, with their unique characteristics and growing adoption, can change the future dynamics of the dollar." Andrew Peel reminds us that the popularity of BTC has been growing steadily over the last 15 years, with over 106 million people worldwide now owning the first cryptocurrency. Meanwhile, Michael Van De Poppe notes that the events of January 10 will change the lives of many people around the world. However, he warns that "this will be the last 'easy' cycle for bitcoin and cryptocurrencies" and that it "will take longer than before."

The impact of the newly launched bitcoin ETFs on the global order has also been a topic of discussion among many influencers at the top of the power pyramid, underscoring the significance of this event. For instance, Elizabeth Warren, a member of the U.S. Senate Banking Committee, criticized the SEC's decision, expressing concerns that it could harm the existing financial system and investors. In contrast, Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), holds a different view. She believes that cryptocurrencies are a class of assets, not money, and it's crucial to make this distinction. Therefore, she argues, bitcoin will not be able to replace the U.S. dollar. Additionally, the IMF head disagrees with those who expect that bitcoin ETFs will contribute to the mass adoption of the first cryptocurrency.

Bitcoin's price is projected to reach $100,000 - $150,000 by the end of 2024 and $500,000 within the next five years, according to Tom Lee, co-founder of the analytics firm Fundstrat, in an interview with CNBC. "In the next five years, supply will be limited, but with the approval of spot bitcoin ETFs, we have potentially huge demand, so I think something around $500,000 is quite achievable within five years," the expert stated. He also highlighted the upcoming halving in the spring of 2024 as an additional growth factor.

ARK Invest CEO Cathy Wood, also speaking on CNBC, predicted a bullish scenario where the first cryptocurrency could reach $1.5 million by 2030. Her firm's analysts calculated that even under a bearish scenario, the price of the digital gold would grow to at least $258,500.

Another forecast was given by Anthony Scaramucci, founder of SkyBridge Capital and former White House Communications Director. "If bitcoin is at $45,000 during the halving, then by mid-to-late 2025, it will be worth $170,000. Whatever the price of bitcoin is on the day of the halving in April, multiply it by four, and it will reach that figure within the next 18 months," said the SkyBridge founder in Davos, ahead of the World Economic Forum.

It's interesting to see how different AI chatbots have provided varied predictions for the price of bitcoin by December 31, 2024. Claude Instant from Anthropic predicted $85,000, while Pi from Inflection expects a rise to $75,000. Bard from Gemini forecasts that the price of BTC will exceed $90,000 by that date, though it cautions that unforeseen economic obstacles could limit the peak to around $70,000. ChatGPT-3.5 from OpenAI sees a price range of $75,000 to $85,000 as plausible but not guaranteed. A more conservative estimate from ChatGPT-4 suggests a range of $40,000 to $60,000, factoring in potential market fluctuations and investor caution, but doesn't rule out a rise to $80,000. Lastly, Bing AI from Co-Pilot creative predicts a price around $75,000, based on the information it has gathered.

These diverse predictions from AI systems reflect the inherent uncertainty and complexity in forecasting cryptocurrency prices, highlighting a range of factors that could influence market dynamics over the next few years.

As of the evening of January 19, BTC/USD was trading around $41,625. The total market capitalization of the cryptocurrency market stood at $1.64 trillion, down from $1.70 trillion a week earlier. The Bitcoin Fear & Greed Index, a measure of market sentiment, has dropped from 71 to 51 points over the week, moving from the 'Greed' zone to the 'Neutral' zone. This shift indicates a change in investor sentiment, reflecting a more cautious approach in the cryptocurrency market.

In conclusion regarding the growing market speculation about the imminent launch of spot ETFs on Ethereum, in our previous review, we cited a statement by SEC Chairman Gary Gensler, who clarified that the regulator's positive decision applies exclusively to exchange-traded products based on bitcoin. According to Gensler, this decision "does not signal readiness to approve listing standards for crypto assets that are considered securities." It's important to note that the regulator still classifies only bitcoin as a commodity, while "the vast majority of crypto assets are seen as investment contracts (i.e., securities)."

Now, analysts from the investment bank TD Cowen have confirmed pessimism regarding ETH-ETFs. Based on the information they have; it seems unlikely that the SEC will begin reviewing applications for this investment instrument in the first half of 2024. "Before approving ETH-ETFs, the SEC will want to gain practical experience with similar investment instruments in bitcoin," commented Jaret Seiberg, head of TD Cowen Washington Research Group. TD Cowen believes that the SEC will revisit the discussion of Ethereum ETFs only after the U.S. presidential elections in November 2024.

Nikolaos Panagirtzoglou, a senior analyst at JP Morgan, also does not expect a quick approval of spot ETH-ETFs. He opines that for the SEC to make a decision, it needs to classify Ethereum as a commodity rather than a security. However, JP Morgan considers such a development unlikely in the near future.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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NordFX: Best News & Analysis Provider 2023

Following the results of the voting on the information portal Forexing.com, the brokerage firm NordFX was acknowledged as the Best News & Analysis Provider 2023. The victory was secured "by a clear margin" with over 75% of the votes cast in favour of NordFX.

Forexing.com is one of the leading portals comprehensively covering news and events in the Forex, CFD, and Crypto industry. Winners of the Forexing Awards were determined by open voting by visitors of this online platform, making this award particularly valuable as it most objectively reflects the opinion of the professional community. We sincerely thank everyone who voted for the high appraisal of the work of the NordFX Analytical Group.

The congratulatory letter of this platform addressed to NordFX states: “We are thrilled to extend our heartiest congratulations to you for being honoured as the 'Best News & Analysis Provider' of the Year 2023. This prestigious award is a testament to your exceptional service and dedication in the brokerage industry. At Forexing.com, we take pride in recognizing and celebrating excellence within the financial sector. Our team reviews, rates, and nominates top companies in the industry. The awards recognize the best-performing retail International and regional Forex Brokers. Your achievement stands out as a significant contribution to the industry.”
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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Forex and Cryptocurrencies Forecast for January 15 – 19, 2024

EUR/USD: Market Anticipates Federal Reserve Rate Cut

We published our global forecast for EUR/USD for the upcoming year in the last week of 2023. Now, moving from long-term projections, we return to our traditional weekly reviews, which have been conducted by the NordFX analytical group for over a decade.

The main event of the past week was undoubtedly the U.S. inflation data. The figures released on Thursday, January 11, showed that the Consumer Price Index (CPI) rose by 3.4% year-on-year, compared to a consensus forecast of 3.2% and a previous value of 3.1%. On a monthly basis, consumer inflation also increased, registering 0.3% against a forecast of 0.2% and a previous figure of 0.1%. On the other hand, the core CPI, which excludes volatile food and oil prices, decreased to 3.9% from a previous value of 4.0% (year-on-year).

Recall that with his dovish remarks at the December press conference, Federal Reserve Chairman Jerome Powell created the impression that he is no longer the staunch inflation fighter he appeared to be earlier. This suggests that the U.S. monetary authorities will now respond more flexibly to changes in this indicator. Consequently, the mixed CPI data further convinced market participants that the Fed will begin to ease its policy by the end of Q1 2024. According to CME Fedwatch, the likelihood of a 25 basis point rate cut in March increased to 68% from 61% prior to the release of the statistics. Meanwhile, strategists at the largest banking group of the Netherlands, ING, expect a significant weakening of the dollar towards the end of Q2: that's when they anticipate EUR/USD will start its rally to 1.1500. Until then, in their view, the currency market will remain quite unstable.

Regarding the Eurozone, statistics released on Monday, January 8, indicated that the situation in the consumer market is bad, but not as dire as expected. Retail sales showed a decline of -1.1% year-on-year. This figure, although higher than the previous value of -0.8%, was significantly below the forecast of -1.5%.

In this context, the statement by European Central Bank (ECB) board member Isabel Schnabel appeared rather hawkish. She opined that economic sentiment indicators in the Eurozone have likely reached their nadir, while the labour market remains stable. Schnabel also did not rule out the possibility of a soft landing for the European economy and a return to the inflation target of 2.0% by the end of 2024. According to her, this is still achievable, but it would require the ECB to maintain a high interest rate. This contrast between the hawkish stance of the pan-European mega-regulator and the dovish comments of its overseas colleagues supported the euro, preventing EUR/USD from falling below 1.0900.

Data on industrial inflation in the U.S., released at the end of the workweek on Friday, January 12, also showed a decline in this indicator, but it did not have a strong impact on the quotes. The Producer Price Index (PPI) was 1.8% year-on-year (forecast 1.9%, previous value 2.0%), and the monthly PPI, like in November, recorded a decrease of -0.1% (forecast +0.1%).

Following the release of this data, EUR/USD closed the workweek at 1.0950.

Currently, experts' opinions regarding the near future of the pair provide no clear direction, as they are evenly split: 50% voted for a strengthening of the dollar, and 50% sided with the euro. Technical analysis indicators also appear quite neutral. Among trend indicators on D1, the balance of power between red and green is 50% to 50%. Among oscillators, 25% have turned green, another 35% are in a neutral grey, and the remaining 40% are red, with a quarter of them signalling that the pair is oversold. The nearest support for the pair is in the zone of 1.0890-1.0925, followed by 1.0865, 1.0725-1.0740, 1.0620-1.0640, 1.0500-1.0515, 1.0450. Bulls will encounter resistance in the areas of 1.0985-1.1015, 1.1185-1.1140, 1.1230-1.1275, 1.1350, and 1.1475.

Next week, notable economic events include the release of Consumer Price Index (CPI) data for Germany on Tuesday, January 16, and for the Eurozone on Wednesday, January 17. Additionally, Wednesday will bring statistics on the state of the U.S. retail market. On Thursday, January 18, the usual figures for initial jobless claims in the United States will be released. The same day, we will learn the value of the Philadelphia Federal Reserve's Manufacturing Business Outlook Survey, and on Friday, the University of Michigan's Consumer Sentiment Index will be published. Furthermore, traders should be aware that Monday, January 15, is a public holiday in the U.S. as the country celebrates Martin Luther King Jr. Day.
 

GBP/USD: Pound Retains Potential for Growth


Before the New Year holidays, GBP/USD reached its highest level since August 2023, touching 1.2827. It then fell by more than 200 points to the lower line of the ascending channel and, bouncing off it, began to rise again. At the time of writing this forecast, it is difficult to confidently say that the pound has returned to a firm upward trend. The dynamics of the last four weeks can be interpreted as a sideways trend. A similar pattern, specifically in the 1.2600-1.2800 zone, was observed in August. Back then, it was merely a temporary respite before the pair's fall continued with renewed vigour. It's possible that we are witnessing a similar scenario now, but with a positive sign instead of a negative one. If this is the case, we could see GBP/USD in the 1.3000-1.3150 zone during the first quarter.

Last week, the British currency was bolstered by data on inflation in the U.S. and forecasts regarding a dovish pivot by the Federal Reserve. The UK's Office for National Statistics (ONS) also supported the pound, reporting on Friday, January 12, that the country's GDP in November grew by 0.3% month-on-month, against a forecast of 0.2% and a decrease of -0.3% recorded in October. Additionally, the volume of manufacturing output rose by 0.4% month-on-month in November (forecast 0.3%, previous value – a decline of -1.2%). At the same time, the British FTSE 100 index rose by 0.8%, reflecting the market's optimistic mood and its participants' appetite for risk.

GBP/USD concluded the week at 1.2753. According to economists at Scotiabank, for the pound to maintain its bullish momentum, it needs to confidently overcome resistance in the 1.2800-1.2820 zone. "However," they write, "the absence of a breakthrough in the 1.2800 area may begin to weary [market participants], and the price actions over the last month are still shaping up as potentially bearish."

Despite the pound retaining potential for growth in the medium term, the experts' forecast for the coming days leans towards the dollar. 60% of them voted for a fall in the pair, 25% for its rise, and 15% preferred to remain neutral. In contrast to the specialists, the indicators almost unanimously favour the British currency: among the oscillators on D1, 90% are on the side of the pound (with 10% neutral), and among trend indicators, all 100% are pointing upwards. If the pair moves south, it will encounter support levels and zones at 1.2720, 1.2650, 1.2600-1.2610, 1.2500-1.2515, 1.2450, 1.2330, 1.2210, 1.2070-1.2085. In the event of a rise, it will face resistance at levels 1.2785-1.2820, 1.2940, 1.3000, and 1.3140-1.3150.

For the upcoming week, notable dates include Tuesday, January 16, when a significant batch of labour market data from the United Kingdom will be released. Consumer Price Index (CPI) data will be published on Wednesday, January 17, and retail sales figures in the UK will be available on Friday, January 19.
 

USD/JPY: U.S. CPI Outperforms Japan's CPI

The Bank of Japan (BoJ) is considering lowering its inflation forecast for the 2024 fiscal year to around the mid-2% range in its upcoming quarterly report, set to be published on January 23. This news was reported by the Jiji agency, citing Reuters, on Thursday, January 11. Japan's real wages fell by 3.0%. With a sharp slowdown in wage growth, Tokyo's Consumer Price Index (CPI) was below forecasts, dropping from 2.7% to 2.4%. Interpreting these data, analysts have begun to speculate that the Bank of Japan might delay tightening its ultra-loose monetary policy. Following this logic, traders were advised to open long positions in the USD/JPY pair.

However, after reaching a peak of 146.41 on January 11, the pair reversed and began to decline: the decrease in U.S. inflation turned out to be much more significant for market participants than the decrease in Japan's inflation. The fact that the interest rate on the yen will remain at a negative level of -0.1% is not so crucial. What is more important is that the rate on the dollar could soon drop by 0.25%.

Mathias Cormann, the Secretary-General of The Organisation for Economic Co-operation and Development (OECD), recently stated that "the Bank of Japan has opportunities to further consider the level of tightening of its monetary policy." However, we have already heard many such vague statements and opinions. In our view, it is much more interesting to present the technical analysis of the current situation performed by economists at the French bank Societe Generale.

"They write that USD/JPY sharply recovered after forming an intermediate low around 140.20 at the end of last month. It has returned to the 200-Day Moving Average (200-DMA) and approached the October low of 146.60-147.40, which acts as an intermediate resistance zone. After an unsuccessful attempt to break through the 50-day moving average at the level of 146.41 on Thursday, January 11, the pair is retreating, indicating the start of an initial pullback. "It will be interesting to see if the pair can hold the 200-DMA around 143.40. Failure would mean the risk of another decline towards 140.20-139.60. A breakthrough above 146.60-147.40 is necessary to confirm the continuation of the rebound [upwards]," they believe at Societe Generale.

USD/JPY ended last week at 144.90. (Interestingly, the current dynamics fully align with the wave analysis we discussed in our previous review). In the near term, 40% of experts anticipate further strengthening of the yen, another 40% are in favour of the dollar, and 20% hold a neutral position. Regarding the trend indicators on D1, 60% are pointing north, while the remaining 40% are looking south. Among the oscillators, 70% are coloured green (with 15% in the overbought zone), 15% are red, and the remaining 15% are neutral grey. The nearest support level is in the zone of 143.75-144.05, followed by 142.20, 141.50, 140.25-140.60, 138.75-139.05, 137.25-137.50, and 136.00. Resistance levels are located at 145.30, 146.00, 146.90, 147.50, 148.40, 149.80-150.00, 150.80, and 151.70-151.90.

No significant events concerning the Japanese economy are expected in the coming week
 

CRYPTOCURRENCIES: Day X Has Arrived. What's Next?

What many have long talked about and dreamed of has finally come to pass. As expected, on January 10, the U.S. Securities and Exchange Commission (SEC) approved a batch of 11 applications from investment companies to launch spot exchange-traded funds (ETFs) based on Bitcoin. As a result, ETFs from Grayscale, as well as from Bitwise and Hashdex, were admitted to the NYSE Arca stock exchange. BlackRock and Valkyrie funds are being launched on Nasdaq. CBOE will host ETFs from VanEck, Wisdom Tree, Fidelity, Franklin Templeton, as well as joint funds from ARK Invest/21 Shares and Invesco/Galaxy.

Contrary to expectations, immediately after the approval, the BTC/USD pair's rate rose only to $47,652 instead of a jubilant surge. The reason for such a tepid reaction is that the market had already priced in this event. Moreover, the day before, hackers breached the SEC's account on social network X (formerly Twitter) and published a fake tweet about the approval of the long-awaited BTC-ETFs. The market then reacted to this false statement with a rise in the main cryptocurrency to the $48,000 mark. After the refutation, the price fell back down, and on January 10, it merely repeated what had happened the day before.

It's important to note that the SEC was not particularly pleased with its decision to approve the applications. The first application for a spot ETF was filed back in 2013 by the Winklevoss brothers (Cameron & Tyler Winklevoss) and was rejected in 2017. Approximately six years have passed since then, but the regulator's aversion to cryptocurrencies remained, and the current approval was granted somewhat reluctantly and under pressure. According to a press release by the agency's chair Gary Gensler, the Commission's decision was based on a ruling by the appellate court in Grayscale's lawsuit regarding the transformation of a trust fund into a spot ETF. The court ruled in favour of Grayscale, stating that the SEC “failed to adequately justify its reasons for refusal.” After this, delaying the approval of similar products was no longer sensible.

However, on January 10, Gensler did not hold back in his negative assessment. "Despite the approval of spot BTC-ETFs," he noted in the press release, "we do not endorse bitcoin. Investors should consider the numerous risks associated with Bitcoin and products whose value is tied to the cryptocurrency. Bitcoin is primarily a speculative, volatile asset that is also used for illegal activities, including ransomware, money laundering, evasion of sanctions, and financing of terrorism. Today, we approved the listing and trading of certain ETP spot bitcoin shares, but we did not approve Bitcoin," concluded the SEC head, making it clear that the battle with digital assets is far from over.

Discussing the short-term perspective, many analysts did not anticipate a significant rally, pointing to $48,500 as a key resistance level. They proved correct: after BTC/USD breached this level on September 11, a "sell the news" phenomenon ensued – a mass closure of buy-orders and profit-taking. Consequently, the price sharply retraced. According to Coinglass, the total sum of liquidations for all cryptocurrency positions was approximately $209 million.

Regarding the long-term impact of the launch of spot bitcoin ETFs, time is needed for a full assessment. About a week is necessary for the funds to commence operations on exchanges, with investment volume data expected around mid-February. If we compare with ETFs for other products, approximately $1.2 trillion has been invested in them over the past two years. Seven years after the 2004 launch of physical gold ETFs, the price of this metal quadrupled, and now over $100 billion is held in gold ETFs.

Concerning digital gold, analysts at Standard Chartered bank consider the approval of bitcoin ETFs a pivotal moment for the asset's acceptance. "Bitcoin will likely see growth akin to gold-linked exchange-traded products," they write. "But this is expected to materialize over a shorter period: not in seven to eight years, as was the case with gold, but within one to two years, considering the swift evolution of the crypto market." The bank forecasts bitcoin's price potentially reaching $200,000 by the end of 2025. Standard Chartered estimates that by the end of 2024, exchange-traded funds could hold between 437,000 BTC and 1.32 million BTC, equating to a market inflow of $50-100 billion, creating a significant price impulse for the primary cryptocurrency.

Venture investor Chamath Palihapitiya also expresses a comparable sentiment. He believes that 2024 could emerge as a landmark year for bitcoin. The billionaire highlighted that the approval of numerous spot exchange-traded ETFs is likely to "revolutionize BTC," potentially leading to its widespread adoption. Palihapitiya remarked that in such a scenario, by the end of 2024, bitcoin could become a staple in traditional financial parlance.

According to CoinDesk data, the 40-day correlation between digital gold and the Nasdaq 100 technology index has dropped to zero. Over the past four years, this price correlation has been positive, varying from moderate (0.15) to strong (0.8), reaching its peak during the bear market of 2022. Now, bitcoin has completely "decoupled" from Nasdaq. This correlation reset may signify bitcoin's potential as an attractive diversification tool for investment portfolios, thereby enhancing its value.

Macro-strategist Henrik Zeberg also anticipates a phenomenal bull market in 2024. He expects the dynamics of digital assets this year, driven by the entry of new players, to be "parabolic." "[Bitcoin] is going to be absolutely explosive – it will shoot up vertically. I think we will reach at least $115,000. That's my most conservative forecast. The $150,000 level is also feasible, and I see the potential for $250,000," the economist notes.

Zeberg added that the first four months of 2024 could be "incredibly impressive" for the crypto market, thanks to institutional and traditional investors entering after the approval of spot bitcoin ETFs. Those who missed out on the first or second bull cycle will now say, "Oh, I missed the first two times, but I'll be in this one." However, he believes that traditional markets are facing "the worst crash since 1929," when the Great Depression began in the U.S.

Renowned analyst known as PlanB believes that the price of bitcoin could soon reach between $100,000 and 1 million. He explains that he doesn't expect a BTC price drop, as its adoption level is currently only 2-3%. According to the logistic S-curve of organizational development and Metcalfe's law, a decrease in asset profitability should not be expected while the adoption level is below 50%. Therefore, the analyst opines, "the main cryptocurrency is set for exponential growth for a couple more years."

Indeed, alongside the optimists, there are many who forecast a downward trend. We discussed some of these views two weeks ago in a special review titled "Forecast 2024: Bitcoin Yesterday, Tomorrow, and the Day After." Currently, it's worth noting the recent statement from TV host and founder of hedge fund Cramer & Co., Jim Cramer. He asserted that bitcoin has reached its peak and further growth should not be expected. This statement was made as bitcoin surpassed the $47,000 mark. Observing bitcoin's performance on January 11-12, it raises the question: "Could Jim Cramer be right?"

As of the evening of January 12, when this review was written, BTC/USD is experiencing a significant drop, trading around $43,000. The total market capitalization of the crypto market is at $1.70 trillion, up from $1.67 trillion a week ago. The Bitcoin Fear & Greed Index over the week has decreased from 72 to 71 points and remains in the Greed zone.

Contrary to bitcoin's performance, the leading altcoin exhibited a much more impressive growth last week. Starting from a level of $2,334 on January 10, ETH/USD reached a weekly high of $2,711 on January 12, showcasing a 16% increase. Interestingly, this surge occurred after the SEC Chairman's statement emphasizing that the regulator's positive decision exclusively pertained to exchange-traded products based on bitcoin. Gary Gensler clarified that this decision "in no way signals readiness to approve listing standards for crypto assets that are securities." It's worth noting that the regulator still regards only bitcoin as a commodity, while considering "the overwhelming majority of crypto assets as investment contracts (i.e., securities)." Therefore, the hope for the imminent arrival of spot ETFs with Ethereum and other altcoins is unfounded.

Yet, against this rather grim backdrop, ETH suddenly soared. The market's reaction is indeed inscrutable. However, towards the end of Friday, January 12, Ethereum followed bitcoin in a downturn, welcoming Saturday in the $2,500 zone.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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USD/JPY: 2023 Review and 2024 Forecast

According to statistics, USD/JPY (US Dollar/Japanese Yen) is among the top three most traded currency pairs in the Forex market. This is facilitated by the pair's high liquidity, which ensures narrow spreads and favourable trading conditions. This means that traders can enter and exit positions with minimal costs. Additionally, the pair exhibits very high volatility, providing excellent profit opportunities, particularly in short-term and medium-term operations.


2023: The Yen of Unfulfilled Hopes

Throughout 2023, the Japanese currency steadily lost ground to the American dollar, and consequently, USD/JPY pair trended upwards. The yearly low was recorded on January 16th at 127.21, while the peak occurred on November 13th, with 1 dollar exchanging for 151.90 yen.

We have repeatedly mentioned that the weakening of the yen is due to the Bank of Japan's (BoJ) persistent ultra-dovish stance. Understandably, the negative interest rate of -0.1% cannot be attractive to market participants, especially against the backdrop of rising global yields and high rates set by the central banks of other leading countries. For investors, it was much more preferable to engage in carry trade: borrowing yen at low interest rates, then converting them to US dollars and Treasury bonds, which yielded a good profit due to the interest rate differential, all without any risk.

The monetary policy conducted by the Japanese Government and the Bank of Japan in recent years clearly indicates that their priority is not the yen's exchange rate, but economic indicators. Until mid-summer, to combat rising prices, regulators in the US, EU, and the UK tightened monetary policy and raised key interest rates. However, the BoJ ignored such methods, even though inflation in the country continued to rise. In June 2023, core inflation reached 4.2%, the highest in over four years. The only action the Bank of Japan took was to switch from strict to flexible targeting of the yield curve of Japanese government bonds, which did not aid the national currency.

Instead of tangible actions, Japan's Finance Minister Shunichi Suzuki, Bank of Japan Governor Kazuo Ueda, and Japan's top currency diplomat Masato Kanda actively engaged in verbal interventions. They and other senior financial officials consistently assured in their speeches that everything was under control. They claimed that the Government was "closely monitoring currency movements with a high sense of urgency and immediacy" and that it "would take appropriate measures against excessive currency movements, not ruling out any options." Here are a few quotes from Kazuo Ueda's speech: "Japan's economy is recovering at a moderate pace. […] Uncertainty regarding Japan's economy is very high. […] The rate of inflation growth is likely to decrease and then accelerate again. [But] overall, Japan's financial system maintains stability." In short, interpret it as you wish.

Winter-Spring 2023. At the beginning of the year, many market participants took the promises to "take immediate measures" quite seriously. They were hopeful for a rate hike, which had been stuck at a negative level since 2016. In January, economists at Danske Bank forecasted that following a rate increase, the USD/JPY pair would fall to 125.00 within three months. Analysts from the French Societe Generale pointed to the same target. Their colleagues from ANZ Bank did not rule out the possibility of the pair reaching around 124.00 by the end of 2023. According to BNP Paribas' projections, a tightening of monetary policy was expected to stimulate the repatriation of funds by Japanese investors, potentially leading the USD/JPY pair to fall to 121.00 by year's end. Economists from the international financial group Nordea anticipated it dropping below 120.00. Potential significant strengthening of the Japanese currency was also suggested by strategists from Japan's MUFG Bank and HSBC, the largest bank in the UK.

Summer 2023. As time passed, nothing significant occurred. Commerzbank, a German bank, stated that the yen is a complex currency to understand, possibly due to the BoJ's monetary policy. Kristalina Georgieva, the Managing Director of the International Monetary Fund (IMF), subtly hinted that it "would be appropriate to bring more flexibility to the monetary policy of the Bank of Japan."

In the first half of the summer, market participants began to adjust their forecasts. Economists at Danske Bank now predicted the USD/JPY rate to be below 130.00 over a 6-12 month horizon. A similar forecast was made by strategists at BNP Paribas, projecting a level of 130.00 by the end of 2023 and 123.00 by the end of 2024. Societe Generale's July forecast also became more cautious. Analysing the pair's prospects, the bank's experts expected that the yield on 5-year U.S. Treasury bonds would fall to 2.66% within a year, allowing the pair to break below 130.00. If the yield on Japanese government bonds (JGB) remains at the current level, the pair might even drop to 125.00.

Wells Fargo's prediction, one of the 'big four' banks in the US, was considerably more modest, with its specialists targeting a USD/JPY rate of 136.00 by the end of 2023 and 129.00 by the end of 2024. MUFG Bank declared that the Bank of Japan might only decide on its first rate hike in the first half of 2024. Only then would a shift towards strengthening the yen occur. Regarding the recent change in yield curve control policy, MUFG believed it was insufficient by itself to trigger a recovery of the Japanese currency. Danske Bank stated that expecting any steps from the BoJ before the second half of 2024 was not advisable.

Autumn-Winter 2023. No one held any hope that the Bank of Japan (BoJ) would change its monetary policy before the end of the year. However, market participants started fearing that the weak yen might eventually mobilize Japanese officials to move from verbal interventions to actual actions.

The USD/JPY pair was eagerly racing towards the critical mark of 150.00. Market participants vividly remembered that in the fall of 2022, when the pair reached a 32-year high at 152.00, Japanese authorities initiated financial interventions. Adding fuel to the fire was a report by Reuters, stating that Japan's chief currency diplomat Masato Kanda had announced the banking authorities were considering intervention to end "speculative" movements.

Then, on October 3, as the quotes slightly exceeded the "magical" height of 150.00, reaching a peak of 150.15, what everyone had been anticipating for so long finally happened. In just a few minutes, the USD/JPY pair plummeted nearly 300 points, halting the slide at 147.28. Japan's Finance Minister, Shunichi Suzuki, refrained from commenting on the event. He vaguely stated that "there are numerous factors determining whether movements in the currency market are excessive." However, many market participants believed this to be a real currency intervention. Although, of course, one cannot rule out the mass automatic triggering of stop-orders at the breakthrough of the key level of 150.00, as such "black swan" events have been observed before.

Whatever the case, the intervention did not significantly help the Japanese currency, and 40 days later, it was trading again above 150.00, at the level of 151.90. It was at this moment, on November 13, that the trend reversed, and the strengthening of the yen became consistent. This happened a couple of weeks after the peak in yields of the ten-year U.S. Treasury bonds when markets became convinced that their decline had become a trend. It's important to recall that there's traditionally an inverse correlation between these securities and the yen. If the yield on Treasuries rises, the yen falls against the dollar, and vice versa: if the yield on the securities falls, the yen strengthens.

The primary reason for the resurgence of the Japanese currency was growing expectations that the Bank of Japan (BoJ) would finally abandon its negative interest rate policy, possibly sooner than expected. Rumours suggested that regional banks in the country, lobbying for an abandonment of yield curve targeting policy, were exerting significant pressure on the regulator.

The yen also benefited from market confidence that the key interest rates of the Fed and the ECB had plateaued, with only a decrease expected thereafter. As a result of this divergence, it was anticipated that investors would unwind their carry trade strategy and reduce the yield spreads between Japanese government bonds and those of the U.S. and Eurozone. According to most analysts, all these factors were expected to bring capital back to the yen.

The fourth quarter's low was recorded on December 28 at 140.24, after which USD/JPY ended the year 2023 at a rate of 141.00.

 
2024 – 2028: Fresh Forecasts

After three years of sharp decline, the yen's value might finally be turning around. This is the view held by market participants surveyed by Bloomberg. Overall, respondents expect the Japanese currency to strengthen next year, with the average forecast for USD/JPY pointing to a level of 135.00 by the end of 2024.

Several banks anticipate the pair trading within the range of 125.00-135.00 (Goldman Sachs at 130.00, Barclays at 135.00, UBS at 132.00, MUFG at 125.00). Currency strategists at HSBC believe the US dollar is currently overvalued and will return to its fair value over the next five years due to declining yields in the US and rising stock markets. HSBC experts expect the exchange rate of the pair to reach 120.00 by mid-2024 and drop to 108.00 by 2028. According to ING Group's forecasts, the rate will fall to around 120.00 only in 2025.

However, there are also those who predict further decline for the Japanese currency and a continued 'flight to the moon' for the pair. For instance, analysts at the Economic Forecasting Agency (EFA) expect USD/JPY to reach 166.00 by the end of 2024, 185.00 by the end of 2025, and 188.00 by the end of 2026. Wallet Investor's forecast suggests that the pair will continue its upward rally, reaching a mark of 208.10 by 2028.

In conclusion, for those who favour graphical analysis, it's noteworthy to mention that the behaviour of USD/JPY throughout 2023 almost perfectly aligns with Elliott Wave Theory. If in 2024 the pair continues to follow the tenets of this theory, we can first expect a bullish corrective wave B. This will be followed by a bearish impulse wave C, which could lead the pair to the levels anticipated by proponents of a strengthening Japanese currency.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Top 3 NordFX Traders Earn Nearly $2.5 Million in 2023

NordFX, a brokerage firm, consistently releases statistics that detail the trading performance of its clients and the profits garnered by the company's IB partners. As a tradition, we compile a summary of the past year's outcomes at the beginning of January.

Throughout 2023, the composition of the top three leaders changed monthly, with traders from various countries and regions occupying places of honour on the podium, sometimes separated by tens of thousands of kilometres. Yet, all trading routes from Southeast, Central, and Western Asia, Africa, and Latin America converged at one point: the accounts of the brokerage firm NordFX.

In total, participants in the top three earned a substantial amount, nearly reaching the $2.5 million mark, with precise earnings of 2,494,466 USD. Notably, this was 1.73 times higher than the 2022 profit of 1,441,457 USD. This increase was partly due to improved trading conditions and services provided to NordFX clients. On average, a trader in the top three in 2023 earned about 69,290 USD per month.

Regarding the trading instruments favoured by the top three, gold (XAU/USD pair) was the clear leader. This aligns with the ancient Greek philosopher Plato's observation over 2000 years ago that like attracts like. The GBP/USD and EUR/USD pairs shared the second spot on the popularity pedestal. The bronze went to the Japanese yen (USD/JPY pair).

The earnings of the top three IB partners of NordFX in 2023 were also impressive, although naturally less than those of the traders. This is expected since the partners do not trade themselves but earn commission for clients they attract. The higher the clients' trading activity, the greater the partner's profit.

Potential earnings for a NordFX IB partner can be explored on the company's website. As for the actual earnings in 2023, the top three members collectively earned 272,607 USD. This means, on average, each partner earned about 7,572 USD per month.
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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Forecast 2024: Bitcoin Yesterday, Tomorrow, and the Day After

The main question, just a few years ago, was when the crypto bubble would burst. Over time, bitcoin gradually earned its place in the minds and portfolios of traders and investors. Competing actively with physical gold and other investment and defensive assets, digital gold emerged as a formidable contender.

In the past year, the merits and drawbacks of bitcoin have been a topic of frequent discussion, encompassing analysis of its rises and falls and presenting views from seasoned Wall Street experts and pseudonymous social network analysts. It's important to note that many predictions from both groups proved quite accurate, despite the ultra-high volatility of this flagship asset. Today's focus is on recalling the 2023 predictions for bitcoin, their forecasts for 2024 and beyond, with a particular emphasis on those specialists who offered specific figures rather than general, vague phrases.


2023: Those Who Hit the Mark or Came Close

Let's recall that the past year was undoubtedly successful for bitcoin. Despite all its highs and lows, BTC/USD, starting the year at $16,515, reached a peak of $44,694 on December 8, demonstrating a 2.7-fold increase. Among the reasons for the coin's bull rally, experts cite the growing network hash rate, anticipation of the Federal Reserve's policy easing, and, of course, the approval by the Securities and Exchange Commission (SEC) of the launch of spot bitcoin ETFs and the bitcoin halving in April 2024. It should be noted that all these events began to influence market sentiment only in the second half of 2023. Therefore, the forecasts made in the first half of the year are particularly interesting.

Alistair Milne, IT Director of Altana Digital Currency Fund, made a nearly bullseye prediction by stating, "By the end of 2023, we should see bitcoin at a minimum of $45,000," which he declared already in January.

Mark W. Yusko, the head of Morgan Creek, in February, precisely identified that the next bull market could start as early as the second quarter of 2023, due to favourable macroeconomic conditions. He noted that it was unlikely for the U.S. Federal Reserve to reduce the key interest rate during this period. However, a slowdown or pause in rate adjustments would be seen as a positive sign for risk assets, including cryptocurrencies. Yusko, emphasizing the upcoming halving, pointed out that the digital asset market's recovery usually starts nine months prior to such events, indicating that this rally should have commenced by the end of summer 2023.

Experts at Matrixport, comparing January's BTC quotes with historical data and anticipating a deceleration in the U.S. Consumer Price Index (CPI) growth, accurately predicted that the flagship cryptocurrency's rate might reach $29,000 by summer and $45,000 by Christmas. This precise hit on the target was made evident by their analysis.

Trader, analyst, and founder of venture company Eight, Michael Van De Poppe, released a video review predicting the coin's rise to $40,000 by year-end, a forecast made at the start of March. Similarly, Mike Novogratz, CEO of Galaxy Digital, projected a rise to $40,000, with the caveat that this level would be achieved only when the U.S. Federal Reserve started reducing the key interest rate. Dave the Wave, a trader known for several accurate predictions, voiced the same $40,000 target in May, emphasizing that this was his conservative estimate.

BTC/USD fell below $25,000 in the first half of June, and the market was yet to learn that in just a few days, major financial institutions would start submitting applications to the SEC for entering the cryptocurrency market through spot bitcoin ETFs. Among the contenders for launching these funds were global asset managers like BlackRock, Invesco, Fidelity, and others. At this point, Business Insider took an interest in expert predictions. Let's look at a few opinions gathered from their survey.

Jagdeep Sidhu, President of Syscoin Foundation, believed that despite several crypto storms, the ecosystem's resilience had become evident. The market had recovered from the ashes of FTX, and if inflation in the U.S. decreased, bitcoin could reach $38,000 by year-end, Sidhu stated. David Uhryniak, Director of Ecosystem Development at TRON, along with Benjamin Cowen, was confident that bitcoin would end the year above $35,000.

A consensus forecast from another survey conducted by Finder.com among 29 analysts pointed to a price of $38,488 by year-end, with bitcoin's peak values in 2023 expected to be around $42,000. Naturally, individual expert predictions varied. Overall, most survey participants (59%) were optimistic about BTC, considering summer a good time to enter the market, 34% advised holding existing cryptocurrency, and 7% recommended selling it.


2023: Above or Below the Target

Certainly, not all predictions were as close to the year's outcomes. Another frequently cited target in forecasts was the $50,000 mark, which, according to the analyst known as CryptoYoddha, experts at TradingShot, and former Goldman Sachs top manager and CEO of Real Vision Raoul Pal, BTC/USD was expected to reach. Legendary trader and analyst Peter Brandt, who accurately predicted BTC's 2018 correction, set his sights even higher this time. He believed the coin would reach its previous highs near $68,000 in the second half of 2023, followed by another correction and a new all-time high.

In late January 2023, the analyst under the pseudonym Plan B predicted that the flagship currency would rise to $100,000 by year-end. Moreover, he estimated that bitcoin could test the $42,000 level as early as March, citing the stock-to-flow (S2F) model he developed, which measured the relationship between an asset's available supply and its production rate. However, as we now know, the $42,000 test occurred only nine months later, in December, and $100,000 remained an unattainable height.

Felix Zulauf, founder of Zulauf Asset Management, speculated that bitcoin would enter a clear bull rally around late spring 2023 and did not rule out the possibility of the asset reaching $100,000 on a sharp upward trend. Credible Crypto experts also issued an optimistic forecast, suggesting that the flagship crypto asset had a good chance of renewing its historical maximum in the $69,000 zone. A CNBC survey among influential industry figures revealed expectations of retesting $69,000 by Tether's CTO Paolo Ardoino, while Marshall Beard, the Strategy Director of cryptocurrency exchange Gemini, pointed to $100,000. Investor and author of the famous book "Rich Dad Poor Dad," Robert Kiyosaki, named an even larger figure, claiming that by the beginning of 2024, bitcoin would reach $120,000.

The market isn't driven solely by bulls. Roaming its expanse, one can encounter bears and even "crypto-gravediggers." For instance, Bloomberg analyst Mike McGlone, in May, anticipated a bitcoin price collapse to a support level of $7,366. This was a stark contrast to his view at the end of the previous year, 2022, when McGlone predicted bitcoin would soar to $100,000.

Strategists from the British multinational financial conglomerate Standard Chartered expected that a liquidity crisis would lead to new bankruptcies of crypto exchanges and companies, resulting in BTC potentially plummeting to $5,000 in 2023. An analyst known as Grinding Poet even declared that "a retest of the 2018 lows is inevitable" and set a new target of $3,150.
 

2024: Optimism and Super Optimism

Bloomberg Intelligence analyst Jamie Coutts has forecasted a rise in bitcoin's price to $50,000 before the halving in April 2024. Eric Balchunas, a senior analyst at Bloomberg, explained that the SEC's approval of BTC-ETF applications would open up bitcoin to a capital market of $30 trillion. Bloomberg anticipates that the approval will occur very soon, around January 8-10. According to predictions by the analytical firm Fundstrat, this could increase daily demand for bitcoin by $100 million. In this scenario, even before the planned halving, the price of BTC could reach up to $180,000.

Adam Back, CEO of Blockstream and one of the earliest developers of BTC, likened the past few years to a biblical plague epidemic. "There was COVID-19, central banks' quantitative easing, wars affecting energy costs, inflation driving people and companies to bankruptcy," he explained. As 2023 came to a close, the effects of many of these events had diminished, according to Back. "The bankruptcies linked to Three Arrows Capital, Celsius, BlockFi, and FTX... all of that is mostly over. I don't think we're in for many big surprises." Back believes 2024 will be a year of recovery for bitcoin, responding to the upcoming halving in April and potentially reaching $100,000 before the event.

Samson Mow, former colleague of Back at Blockstream and now CEO of Jan3, agreed with this assessment. Experts at Seeking Alpha also echoed a similar figure, suggesting that the cryptocurrency should be valued around $98,000 to keep miners afloat post-halving.

Standard Chartered experts, particularly Geoff Kendrick, speak of a similar outlook. According to the bank's economists, the current situation indicates the end of the "crypto winter." However, their forecast is slightly more conservative, with the main cryptocurrency reaching the $100,000 mark only by the end of 2024. Apple co-founder Steve Wozniak also settled on this round figure. Pascal Gauthier, CEO of Ledger, David Marcus, head of Lightspark, and Vijay Ayyar, a top manager at CoinDCX, also anticipate bitcoin's price rise to $100,000.

Investor and bestselling author of "Rich Dad Poor Dad," Robert Kiyosaki, believes that the U.S. economy is on the brink of a serious crisis, and cryptocurrencies, particularly bitcoin, offer investors a safe haven in these turbulent times. Kiyosaki predicts that the halving will be a key event, potentially driving BTC's price to soar to $120,000. Markus Thielen, head of research at the crypto-financial service Matrixport, suggests a similar figure of $125,000. Renowned blogger and analyst Lark Davis believes that this event could lead to bitcoin's price rising to about $150,000, or even up to $180,000. Tom Lee, co-founder of Fundstrat, estimates a rise to $185,000.

According to calculations by Dave the Wave, BTC, post the April 2024 halving, will only rise slightly above its previous high of around $69,000 by mid-2024, but could escalate to $160,000 by year-end. Alistair Milne predicts that by the end of 2024, the BTC rate should reach $150,000-$300,000. However, he cautions, "this may well be the peak opportunity for bulls." Analysts from LookIntoBitcoin advise locking in profits when the coin appreciates to at least $110,000.

And finally, let's consider the fresh perspective of Artificial Intelligence (AI): an increasingly integral voice in such discussions. The experts at Finbold consulted Google Bard, a machine learning system, about the likely value of the flagship cryptocurrency after the much-anticipated 2024 halving. The AI predicted that bitcoin would likely reach a new all-time high, attributing this not only to the halving but also to broader BTC adoption and interest from institutional investors. Google Bard specifically noted that after the halving, bitcoin could surge to $100,000. However, the AI also highlighted factors that could limit the cryptocurrency's growth, not ruling out the possibility of a continued crypto winter in 2024.

In contrast, a scenario from Google Bard’s competitor, ChatGPT, developed by OpenAI, appears more optimistic. It suggests that the main cryptocurrency could climb as high as $150,000. (Interestingly, the illustration accompanying this article was also created using AI, in this case, Microsoft Bing)
 

2024: Moderate Optimism and Moderate Pessimism

Consolidating all the aforementioned scenarios into a consensus forecast, with certain allowances, yields a range from $100,000 to $180,000. While this range is undoubtedly encouraging for investors, there are more conservative and even pessimistic predictions.

Analyst PlanB, having missed his target in 2023, significantly lowered his expectations. "Expect $32,000 for bitcoin before the halving," he writes, "rising to $55,000 during the halving, and then, by the end of the year, the main cryptocurrency might climb to $66,000." Arthur Hayes, former CEO of the cryptocurrency exchange BitMEX, also stated that the first cryptocurrency's quotes would reach only a "modest" goal of $70,000.

A sobering perspective comes from the company CryptoVantage, whose employees surveyed 1,000 crypto investors in the USA. Only 23% of them believe that bitcoin will reach its historical maximum of $68,917 in the upcoming year. 47% think that the coin's price will rise to this mark within five years. 78% are confident that BTC will eventually return to its historical maximum, but at an undefined future date. However, 9% believe this will never happen again.

BBC World analyst Glen Goodman joined the chorus of sceptics. He commented that the $120,000 figure "seems more like a number plucked out of thin air than a realistically grounded prediction." Goodman argues that authors of such predictions favor market bulls and overlook several key factors. The most crucial, according to him, is that U.S. financial regulators are relentlessly targeting the crypto industry with lawsuits and investigations. Against this backdrop, experts from JP Morgan believe that in 2024 the main cryptocurrency will trade around $45,000, considering this price as an upper limit indicating the asset's limited potential.
 

2025 and Beyond: $1,000,000 to $10,000,000. Who Predicts Higher?

"Looking too far into the future is not far-sighted," a saying attributed to Sir Winston Churchill, the Prime Minister of the United Kingdom during 1940-1945 and 1951-1955. While we might heed the advice of the esteemed British leader, some influencers still dare to make long-term predictions without fearing being seen as short-sighted.

An average result from a survey of 29 experts conducted by Finder.com indicates that BTC's price may reach $100,000 not in 2024, but only by the end of 2025, and could ascend to $280,000 by the end of 2030. An analyst known as Trader Tardigrade believes that bitcoin is following the same price structure as it did from 2013 to 2018. If his model is accurate, the beginning price "boom" could lead to bitcoin rising to $400,000 by 2026.

Venture capitalist Tim Draper, a third-generation venture capitalist and co-founder of Draper Fisher Jurvetson, is optimistic about 2025. He believes that the halving will significantly impact the main cryptocurrency's price, eventually reaching $250,000. Previously, he predicted that BTC would hit this mark by the end of 2022. When his prediction did not materialize, he extended the timeline to mid-2023. Now, Draper has revised his forecast again, stating with certainty that the main cryptocurrency will reach the targeted price by the end of June 2025. According to him, one of the growth drivers will be the adoption of BTC by women, suggesting that housewives using bitcoin for shopping could become a significant factor in the coin's widespread adoption.

Mike Novogratz, CEO of Galaxy Digital, believes that the demand for alternative financial instruments will continue to grow, with bitcoin being one of these instruments. He predicts that in the long term, bitcoin's price could reach $500,000. Doubling this estimate, Arthur Hayes, former CEO of the cryptocurrency exchange BitMEX, and Max Keiser, a former trader and TV host who is now an advisor to the president of El Salvador, have both cited a figure of $1 million per coin. Michael Saylor, the founder of MicroStrategy, has a more polarized view, stating that "bitcoin will either plummet to zero or skyrocket to $1 million."

Cathy Wood, CEO of ARK Invest, forecasts a significant increase in the total market capitalization of cryptocurrencies, reaching $25 trillion by 2030, which is an increase of more than 2100%. ARK Invest's baseline scenario envisages bitcoin's price rising to $650,000 during this period, while a more optimistic scenario projects a climb to $1,500,000. Yassine Elmandjra, an analyst at ARK Invest and a colleague of Wood, acknowledged that such a prediction for the coin's growth may seem improbable, but added that it is "quite reasonable" when considering the history of cryptocurrency development.

Larry Lepard, Managing Partner at the Boston-based investment company Equity Management Associates, has also provided a long-term forecast. He believes that over the next decade, the dollar will devalue, and people will increasingly invest in cryptocurrencies, gold, and real estate. Given bitcoin's limited supply, the digital asset will become a highly sought-after investment tool and will benefit from the collapse of fiat currency. "I believe the price of bitcoin will rise sharply. I think it will first reach $100,000, then $1 million, and eventually rise to $10 million per coin. I'm confident that my grandchildren will be shocked at how wealthy people who own just one bitcoin will become," Lepard stated.

The Artificial Intelligence ChatGPT offers a slightly more modest scenario. It suggests that the main cryptocurrency might rise to $500,000 by 2028, reach $1 million by 2032, and escalate to $5 million by 2050. However, this AI prediction comes with several conditions. Such growth is possible only if: cryptocurrency is widely adopted; bitcoin becomes a popular means for capital saving; and the coin is integrated into various financial systems. If these conditions are not met, then, according to AI calculations, by 2050, the value of the coin could range from $20,000 to $500,000.
 

Funeral Squad for Bitcoin: $0.0000. Who Predicts Lower?

According to Newton's Third Law, every action has an equal and opposite reaction. Although this law was formulated in 1689, it seems to apply even to 21st-century cryptocurrencies. If there are those eager to drive up the value of bitcoin, there will inevitably be others prepared to bury it deeper.

Warren Buffett, the billionaire and stock market legend, famously described bitcoin as "rat poison squared." His steadfast partner, Charles Munger, Vice Chairman of the holding company Berkshire Hathaway, is equally critical. Despite turning 100 years old on January 1, 2024 (congratulations to him), he continues to actively oppose this digital "evil."

Munger has called on the U.S. authorities to destroy bitcoin, equating investment in it to gambling. In an interview with The Wall Street Journal, he stated that the cryptocurrency industry undermines the stability of the global financial sector and argued that BTC cannot be considered an asset class as it holds no intrinsic value. He believes that it should be subject to such stringent regulatory measures that would ultimately suffocate the industry. "It's the dumbest investment I've ever seen," the renowned investor exclaimed. "I'm not proud of my country for allowing this nonsense. It's laughable that someone buys it. It's not good. It's insane. It's only harmful." The billionaire labelled everyone who disagrees with him as idiots and branded bitcoin a "spoiled product" and a "venereal disease."

Steve Hanke, a professor of economics at Johns Hopkins University, has also criticized bitcoin, asserting that the fundamental value of the first cryptocurrency is zero. He has labelled BTC as an extremely speculative asset with no economic value or utility.

Peter Schiff, President of Euro Pacific Capital and a gold enthusiast, believes that "there is nothing more inferior than cryptocurrencies" and that "bitcoin is nothing." He has compared holders of the asset to a cult. "Nobody needs bitcoin. People buy it only after being persuaded by others. Once they acquire [BTC], they immediately try to draw others into it. It's like a cult," Schiff wrote. Back in 2017, he predicted that the coin would soon become worthless. Despite the years that have passed, the entrepreneur has not changed his stance. He recently reiterated that "bitcoin's journey to zero just got a bit delayed. In the end, bitcoin will implode.".

Jamie Dimon, the head of the American banking giant JPMorgan, has also heavily criticized digital gold. During a CNBC broadcast, he expressed skepticism about the supposed 21 million coin limit of bitcoin's issuance. "How do you know? It might reach 21 million, and a picture of Satoshi [Nakamoto] might pop up and laugh at all of you," he speculated about the future.

Jim Cramer, host of CNBC's "Mad Money," also focused on the risks. He believes that no one really knows what the major players in the industry are hiding and that there are no guarantees of their honesty with their clients. According to him, any new scandal could cause a sharp decline in bitcoin's value, putting investor assets at risk. Referring to the opinion of Carley Garner, senior commodity strategist & broker at DeCarley Trading, he recommended staying away from virtual currencies.

Discussing the prospects of the flagship cryptocurrency, Dieter Wermuth, economist and partner at Wermuth Asset Management, stated that the economy would be better and simpler without bitcoin. In his view, it makes sense to abandon bitcoin altogether: it could be beneficial for overall prosperity, as investments in cryptocurrency are wasteful and divert funds from overall economic growth. Moreover, bitcoin creates social inequality, facilitates money laundering, tax evasion, and is highly energy-intensive due to mining. Dieter Wermuth even called bitcoin "the main killer of the climate."

Jenny Johnson, CEO of the investment firm Franklin Templeton, which manages assets worth $1.5 trillion, also expressed scepticism about the primary cryptocurrency. She claimed that bitcoin is the biggest distraction from real innovation. The head of Franklin Templeton is convinced that bitcoin can never become a global currency, as the U.S. government will not allow this to happen. "I can tell you that if bitcoin becomes so significant that it threatens the dollar as the reserve currency, the U.S. will limit its use," she stated.

Indeed, Mrs. Johnson's statement did not come out of nowhere. Over the past year, there has been a lot of discussion about regulatory pressure on the crypto industry, legal disputes, and astronomical fines. Gary Gensler, Chairman of the Securities and Exchange Commission (SEC) compared the current state of the crypto industry to the wild early 20th century. At that time, the agency undertook stringent measures, which he believes are necessary now to intimidate businessmen and keep the industry in check. John Reed Stark, a former SEC official, echoes Gensler's sentiments. "Cryptocurrency prices are rising for two reasons," he explains, "firstly, due to gaps in regulation and potential market manipulation; secondly, because of the possibility to sell inflated, overvalued cryptocurrency to an even bigger fool."

Such statements are not only made by U.S. authorities but also by many other government representatives worldwide. For instance, the European Central Bank declared in December 2022 that bitcoin had lost its relevance. However, the ECB later revised its assessment, noting that cryptocurrency could still serve as an alternative to fiat currency.

***

It's noteworthy that since the inception of bitcoin, its demise has been proclaimed 474 times. The death counter of the main cryptocurrency is maintained on the platform 99bitcoins. This information resource tallies what are known as "bitcoin obituaries" – statements from notable individuals, news portals, and other media outlets with significant readership, unequivocally asserting that the asset has depreciated or is about to depreciate. In 2021, there were 47 such "obituaries," in 2022 – 27, and in 2023, BTC was declared "dead" only seven times. This figure is the lowest in the last decade, indicating that bitcoin is not only alive but also continues to thrive, despite the scepticism of its detractors.

To conclude this extensive overview, let's look at some interesting statistics. According to research by DocumentingBTC, an investor who put $100 into real gold exactly 10 years ago would now have only $134 in their account. Investing in Google would have yielded $504, Facebook – $818, Amazon – $830, Netflix – $1,040, and Microsoft – $1,111. Apple investors could have seen their investment grow to $1,208. Tesla claims the third spot on the profitability podium with an increase from $100 to $4,475. NVIDIA shares rank second, growing to $8,599. However, had you invested your $100 in digital gold, bitcoin, you would now have an impressive $25,600! This is why bitcoin is often hailed as the best investment of the decade. The conclusion is yours to draw.

Happy New Year!
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forecast: What to Expect from the Euro and Dollar in 2024

Traditionally, we publish currency forecasts from leading global financial institutions at the turn of the outgoing and incoming years. Having maintained this practice for several years, it enables us to not only peer into the future but also to reflect on past predictions by experts and evaluate their accuracy.
 

2022: The Beginning

Just as the world had adapted to living under coronavirus-induced quarantine conditions, war entered the planet's life. Russia's armed invasion of Ukraine in February 2022 and the ensuing anti-Russian sanctions exacerbated economic problems and spurred inflation growth in many countries, even those far from this region.

The proximity of EU countries to the conflict zone, their strong dependence on Russian natural energy resources, the nuclear threat, and the risks of the conflict spreading to their territories dealt a serious blow to the Eurozone economy. In such circumstances, the European Central Bank (ECB) had to act with utmost caution to avoid a complete collapse. The United States found itself in a significantly more advantageous position, which allowed the Federal Reserve, aiming to reduce inflationary pressure, to begin a cycle of interest rate hikes on March 16. This acted as a catalyst for the strengthening of the dollar, and on July 14, EUR/USD fell below the parity line of 1.0000 for the first time in 20 years, reaching a low of 0.9535 on September 28. In mid-July, the European Central Bank also began to gradually increase the euro rate. As a result, EUR/USD entered the new year, 2023, at a level of 1.0700.


2023: Whose Forecasts Proved More Accurate

The coronavirus pandemic began to subside, and on May 5, the WHO declared that COVID-19 was no longer a global emergency. Gradually, various countries started to relax quarantine restrictions. The military actions in Ukraine turned into a prolonged conflict. The fight against inflation slowly started showing signs of success, and the economy managed to adapt to rising interest rates and high energy prices. A global catastrophe was averted, and voices predicting a soft landing, especially for the U.S. economy and possibly the Eurozone, grew louder.

In 2022, the maximum range of fluctuations for EUR/USD exceeded 1,700 points, but in 2023, this figure was halved to 828 points. The pair reached its peak on July 18, climbing to 1.1275. It found its bottom at 1.0447 on October 3 and is ending December in the 1.0900-1.1000 range (as of the writing of this review), not far from the January values.

So, what forecasts did experts give for 2023? The furthest from reality was the forecast by Internationale Nederlanden Groep. ING was confident that all the pressure factors of 2022 would persist into 2023. High energy prices would continue to heavily burden the European economy. Additional pressure would come if the U.S. Federal Reserve halted its printing press before the ECB. According to analysts from this major Dutch banking group, a rate of 0.9500 euros per dollar was expected in Q1 2023, which could then rise, reaching parity at 1.0000 in Q4.

The Agency for Economic Forecasting's experts were accurate regarding the EUR/USD dynamics in Q1: they predicted a rise to 1.1160 (in reality, it rose to 1.1033). However, they expected the pair to then undergo a steady decline, reaching 1.0050 by the end of Q3 and finishing the year at 0.9790. Here, they were significantly mistaken.

But it wasn't just the bears who were wrong; the bulls on the euro/dollar pair also erred. For example, the French financial conglomerate Societe Generale voted for a weakening dollar and a rising pair. However, their forecast of a climb above 1.1500 by the end of Q1 was too radical. Strategists at Deutsche Bank allowed for fluctuations in the 1.0800-1.1500 range. However, in their view, the pair's rise to the upper limit was only possible if the Fed began to ease its monetary policy in the second half of 2023. (We now know that no easing occurred, but the rate was frozen at 5.50% from July onwards).

The most accurate predictions came from Bank of America and the German Commerzbank. According to Bank of America's base scenario, the U.S. dollar was expected to remain strong in early 2023 and then start to gradually weaken, leading the EUR/USD pair to rise to 1.1000 after the Fed's pause. Commerzbank supported this scenario, stating, "Considering the expected change in the Fed's interest rate and assuming that the ECB refrains from lowering interest rates [...], our target price for EUR/USD for 2023 is 1.1000," was the verdict of strategists from this banking conglomerate.
 

2024: What to Expect in the New Year

What awaits the euro and dollar in the upcoming year of 2024? It's important to note that forecasts vary significantly due to the numerous "surprises" life has presented recently and the many unresolved issues it has left for the future. Questions remain about the geopolitical situation, the direction and pace of the monetary policies of the Federal Reserve (Fed) and the European Central Bank (ECB), the state of the economy and labour markets, the extent to which inflation and energy prices can be controlled, who will be elected President of the United States in November, the outcomes of Russia's war in Ukraine and the ongoing conflict between Israel and Hamas, and the balance of power in the U.S.-China rivalry. The answers to these and other questions are yet to be discovered. With many factors of uncertainty, experts have not reached a consensus.

Recent dovish remarks by Fed Chair Jerome Powell and moderately hawkish statements by ECB President Christine Lagarde have led markets to believe that the Fed will lead in easing monetary policy and lowering interest rates in 2024. If the market does not receive a countersignal, the U.S. dollar will remain under pressure. Societe Generale believes the Dollar Index (DXY) could drop from the current 102.50 to below 100, possibly as low as 97 points. A Reuters poll of analysts also indicates that the U.S. dollar should weaken in the coming year. An Investing.com review suggests that EUR/USD could potentially reach 1.1500, subject to various geopolitical and macroeconomic conditions.

According to the base scenario outlined by UBS Wealth Management, a slowdown in U.S. economic growth, falling inflation, and expectations of lower interest rates should support stocks and bonds. Regarding the EUR/USD pair, UBS sees it at a level of 1.1200. German Commerzbank's forecasts also include a peak of 1.1200. Analysts there expect a temporary strengthening of the euro against the dollar before a subsequent weakening. They anticipate the rate will rise to 1.1200 by June 2024, then decrease to 1.0800 by March 2025.

ING economists calculate that in the second half of 2024, the EUR/USD rate will still be rising towards 1.1800. However, they caution that this forecast is based solely on the possible trajectory of Fed and ECB policies. They note, "The rate differential is not the only factor determining the EUR/USD course." Low growth rates in the Eurozone and political uncertainty regarding the reintroduction of the Stability and Growth Pact suggest that EUR/USD will end this year close to 1.0600, with its peak levels in 2024 closer to 1.1500 than to 1.1800.

Fidelity International, JPMorgan, and HSBC economists do not rule out a scenario where other regulators, such as the ECB and the Bank of England, might take the lead in easing ahead of the Fed.

Goldman Sachs strategists believe that while the dollar's prospects may worsen in 2024, the strong and stable U.S. economy will limit the fall of the currency. They write that the dollar is still highly valued, and investors lean towards it, which will remain "strong for a long time," and any decline will be insignificant. The U.S. economy is too strong to cause a rate cut of a full 150 basis points in 2024.

Danske Bank, Westpac, and HSBC also believe that by the end of 2024, the dollar will strengthen against the euro and the British pound. ABN Amro's forecast for the end of next year suggests a rate of 1.0500, and the Agency for Economic Forecasting predicts 1.0230.

***

The ancient Chinese military treatise "The Thirty-Six Stratagems" states, "He who tries to foresee everything loses vigilance." Indeed, it is impossible to foresee everything. But one thing can be said for sure: the upcoming twelve months, like the previous ones, will be full of unexpected surprises. So, remain vigilant, and fortune will be on your side.

Happy upcoming New Year 2024! It promises to be very interesting.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for December 18 – 22, 2023

EUR/USD: Dovish Fed Reversal


The fate of EUR/USD was determined by two events last week: the FOMC (Federal Open Market Committee) meeting of the US Federal Reserve and the meeting of the Governing Council of the European Central Bank (ECB), which took place a day later. As a result, the euro emerged victorious: for the first time since November 29, the pair rose above 1.1000.

The Federal Reserve left its key interest rate unchanged at 5.5%. Meanwhile, the regulator's leadership acknowledged that it is discussing easing its monetary policy. The FOMC's forecast for the foreseeable future turned out to be significantly lower than market expectations. It is planned that by the end of 2024, the rate will be reduced at least three times: to 4.6% (instead of the expected 5.1%), and by the end of 2025, there are plans for four more stages of reduction, ultimately bringing the cost of borrowing down to 3.6% (expectations were 3.9%). In a three-year perspective, the rate will drop to 2.9%, after which in 2027 it will be 2.0-2.25%, while inflation will stabilize at the target level of 2.0%. Following the meeting, the market expects the Fed to take its first step towards easing as early as March. According to the FedWatch Tool, the likelihood of this scenario is currently estimated at 70%.

In addition to forecasts of a sharper rate cut, additional pressure on the dollar continues to be exerted by the declining yields of Treasuries, which also indicates an imminent change in the direction of monetary policy in the USA. Another confirmation of the dovish pivot was the reaction of the stock markets. Lower rates are good news for stocks. They lead to cheaper financing, and easier economic conditions stimulate domestic demand. As a result, last week the stock market indices S&P 500, Dow Jones, and Nasdaq soared again.

It is known that ECB President Christine Lagarde was previously involved in synchronized swimming. This time, she acted in sync with the Fed: the pan-European regulator also left the interest rate unchanged, at the previous level of 4.50%. However, the ECB expects the Eurozone's GDP to grow by only 0.6% in 2023, compared to the previously forecasted 0.7%, and by 0.8% in 2024 instead of 1.0%. Inflation in 2024 is forecasted at 5.4%, in 2024 at 2.7%, and in 2025 it is expected to almost reach the target mark of 2.1% (two years earlier than in the US).

The desynchronization with the Fed occurred following the Governing Council's meeting. In their comments, the ECB leadership did not mention the timing of the start of rate cuts. Moreover, it was stated that the European Central Bank's goal is to suppress inflation, not to avoid a recession, so borrowing costs will be kept at peak values as long as necessary. This stance benefited the pan-European currency and strengthened the euro relative to the dollar.

Given the Fed's dovish rhetoric and the ECB's moderately hawkish stance, EUR/USD may retain potential for further growth. It's worth noting that this pivot by the Fed surprised not only the markets. According to an insider report from Financial Times, Jerome Powell's comments following the FOMC meeting also caught the ECB Governing Council off guard. As a result, during her speech, Madame Lagarde threw several stones into the garden of her American colleague.

Currently, it appears that the Fed will lead in easing monetary policy. If the market does not receive a contrary signal, the dollar will remain under pressure. However, it's important to consider that the reality of 2024 may not necessarily align with statements made in December 2023. Objectively, the ECB has significantly more reasons for loosening its financial grip. The European economy is poorly adapted to high rates, it appears weaker than the American economy, its GDP volume has already been revised downward, and the reduction in inflation in the Eurozone is occurring much more rapidly than in the USA. Based on this, economists from Fidelity International, JPMorgan, and HSBC do not rule out that everything may change, and other regulators such as the ECB and the Bank of England may be the first to embark on a path of easing. However, we will not receive signals about this today or tomorrow, but only in the next year.

Regarding the past week, after the release of disappointing business activity data (PMI) in Europe on December 15th and mixed results in the US, EUR/USD ended the week at 1.0894.

According to economists from MUFG Bank, a sharp further rise in EUR/USD is on shaky ground. "The situation in the Eurozone and globally does not seem favourable for a further sustainable rally in EUR/USD," they write. "Fundamental factors as a driving force over the next few weeks during the Christmas and New Year period are never reliable, but if this rally continues during this period, we expect a reversal as we move towards the first quarter of next year."

At present, expert opinions regarding the near future of the pair are divided as follows: 40% voted for a strengthening dollar, 30% sided with the euro, and 30% remained neutral. Among trend indicators on D1, 100% are voting for the euro and the pair's rise. With oscillators, 60% are in favour, 30% are looking south, and 10% are pointing east. The nearest support for the pair is located around 1.0800-1.0830, followed by 1.0770, 1.0725-1.0740, 1.0620-1.0640, 1.0500-1.0520, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0925, 1.0965-1.0985, 1.1020, 1.1070-1.1110, 1.1150, 1.1230-1.1275, 1.1350, and 1.1475.

Next week, both Europe and the United States will be summarizing the year and preparing for Christmas. Notable economic events include the release of inflation data (CPI) in the Eurozone on Tuesday, December 19. On Wednesday, December 20, the U.S. Consumer Confidence Index will be published. The following day, the U.S. GDP volume for the third quarter and the number of initial jobless claims will be announced. The work week concludes on Friday, December 22, with a comprehensive package of data on the U.S. consumer market.

GBP/USD: BoE Refrains from Feeding Doves

Just as with the Fed and the ECB, the situation with the Fed and the Bank of England (BoE) is completely aligned. A simple copy-paste of the earlier discussion applies here. In its meeting, the British regulator also left the interest rate unchanged at 5.25%. And like the ECB, it did not provide any reason that could spur dovish expectations for 2024. BoE Governor Andrew Bailey noted that the Bank of England still has a path to tread, and three out of the nine members of the Monetary Policy Committee even voted for a further increase in the rate.

The economic indicators for the United Kingdom are varied. According to statistics, the real wage growth, adjusted for inflation, continues to increase annually. However, while the economy was forecasted to grow by 0.1%, it actually contracted by 0.3%, following a growth of 0.2% the previous month. Additionally, industrial production volumes in October decreased by 0.8%, and the annual figure dropped from 1.5% to 0.4%, significantly worse than the market's expectation of 1.1%. Data released on Friday, December 15th, showed a significant improvement in service sector activity in December. The PMI index reached 52.7, exceeding expectations of 51.0 and marking the best figure in the last five months. However, on the other hand, manufacturing activity in November decreased to 46.4 from 47.2, even though markets were expecting it to rise to 47.5.

Meanwhile, "the inflation genie is still out of the bottle." Based on this, the Bank of England is unlikely to abandon its strict monetary policy, which remains the only barrier to further inflation growth. Experts agree on this point. The only open question is when the regulator will finally be able to reduce the rate.

The last chord of the past week for GBP/USD sounded at the level of 1.2681. According to economists at ING, the 1.2820-1.2850 area poses strong resistance for GBP/USD. If this is breached, they believe, the pair could reach the heights of 1.3000, which would be a huge Christmas gift for the bulls. However, the team at Japan's Nomura Bank is quite sceptical about the growth prospects of the pair, believing that in both Q1 and Q2 of 2024, the pair will trade around 1.2700 and 1.2800.

At the time of writing this forecast, the median forecast of analysts offers no clear guidance: 25% voted for the pair's rise, another 25% for its fall, and 50% simply shrugged their shoulders. Among trend indicators on D1, as in the case of the previous pair, 100% point north. Among the oscillators, 65% look up, 30% down, and the remaining 15% maintain neutrality. In the event of the pair moving south, it will encounter support levels and zones at 1.2600-1.2625, 1.2545-1.2575, 1.2500-1.2515, 1.2450, 1.2370, 1.2330, 1.2210, 1.2070-1.2085, 1.2035. In case of an increase, the pair will meet resistance at levels 1.2710-1.2535, then 1.2790-1.2820, 1.2940, 1.3000, and 1.3140.

The upcoming week's calendar highlights Wednesday, December 20, as a significant day, when the United Kingdom's Consumer Price Index (CPI) will be published. On Friday, December 22, the day will be shorter in the UK due to Christmas preparations. However, that morning will see the release of significant economic macrostatistics, including data on retail sales and GDP.

USD/JPY: Yen's Triumph Scheduled for 2024

On November 13, USD/JPY reached a high of 151.90. However, within a mere five weeks, the Japanese yen succeeded in regaining over 1000 points from the dollar. Thursday, December 7, marked a significant triumph for the yen, as it strengthened across the entire market, moving the dollar down by about 225 points. At that moment, the pair's minimum was recorded at 141.62. In the past week, it followed the lead of the Fed and the Dollar Index DXY, ending the five-day stretch at a level of 142.14.

The primary reason for this yen rally has been growing expectations that the Bank of Japan (BoJ) will finally abandon its negative interest rate policy, and this is anticipated to happen sooner than expected. Rumours suggest that regional banks in the country, lobbying for a departure from yield curve control policy, are pressuring the regulator. Seemingly to confirm these rumours, the BoJ conducted a special survey in early December among market participants to discuss the consequences of moving away from ultra-loose monetary policy and the side effects of such a step.

The yen is also being favoured by the outcomes of the recent meetings of the Fed and the ECB, which have reinforced market confidence that interest rates for the dollar and euro have plateaued and are only expected to decrease going forward. This divergence allows for the prediction that investors will unwind their carry trade strategies and reduce the yield spreads between Japanese government bonds and their counterparts in the US and Eurozone. Such developments should lead to a return of capital to the yen.

The Bank of Japan's (BoJ) final meeting of the year is scheduled for Tuesday, December 19. However, it is likely that the regulator will keep its monetary policy parameters unchanged at this meeting. Economists at Japan's MUFG Bank expect the BoJ to end its YCC (Yield Curve Control) and NIRP (Negative Interest Rate Policy) at its January meeting. This is partially already factored into the quotes, but the tone of the Bank of Japan at the December meeting could further fuel expectations for a tightening of policy in 2024. MUFG believes that the yen has the greatest potential for growth among G10 currencies next year. "The global inflationary shock is reversing direction, and this has the most significant implications for the JPY," say the bank's strategists.

In the near term, 30% of experts anticipate further strengthening of the yen, 10% favour the dollar, and a substantial majority (60%) hold a neutral position. Regarding trend indicators on D1, there's again an absolute dominance of the red color, 100%. Among the oscillators, the same 100% are colored red, but 25% of them signal oversold conditions. The nearest support level is located in the 141.35-141.60 zone, followed by 140.60-140.90, 138.75-139.05, 137.25-137.50, 135.90, 134.35, and 131.25. Resistance levels and zones are situated at 143.75-144.05, followed by 145.30, 146.55-146.90, 147.65-147.85, 148.40, 149.20, 149.80-150.00, 150.80, 151.60, and 151.90-152.15.

Apart from the Bank of Japan's meeting on December 19 and the subsequent press conference by its leadership, no other significant events concerning the Japanese economy are expected in the coming week.

CRYPTOCURRENCIES: Will Bitcoin ETFs Replace Binance?

By the end of Friday, December 8, the leading cryptocurrency, bitcoin, reached a height of $44,694. It last traded above $40,000 in April 2022. Just two days later, on the morning of December 11, surprised investors found bitcoin at the $40,145 mark, leading to immense disappointment.

The rapid price decline lasted no more than 5 minutes. Several theories explain this event. One theory is that the trigger was the strong U.S. labour market data released on December 8. Another possibility is that it was either a nervous reaction or a technical error in trade volume, possibly made by a trading bot or a trader, leading to a cascade of protective stop executions in the futures market. According to Coinglass, over 24 hours, more than $400 million in long positions were liquidated, including $85.5 million in bitcoin.

Our analysis suggests that the most realistic explanation is as follows: since mid-August, bitcoin had grown by about 85% and more than 160% since the beginning of the year. It appears that some major players, in anticipation of the year's end, decided to lock in profits. Notably, two days before this incident, DecenTrader's head, known as FibFilb, had warned: "We have grown significantly this year, and a correction is expected. [...] It has been long overdue," he stated on December 9.

The negative sentiment may have been amplified by news that a $4.3 billion fine had not resolved the issues the crypto exchange Binance is facing. The U.S. Securities and Exchange Commission (SEC) continues to press charges against the exchange for illegal trading of securities and other violations.

U.S. Department of Justice officials intend to thoroughly scrutinize the trading platform's operations to determine compliance with legislative standards. The exchange will be compelled to grant continuous access to all its documents and records, including information related to the company's employees, agents, intermediaries, consultants, partners, and contractors, as well as traders, to representatives of the Department of Justice, the Financial Crimes Enforcement Network, and all other financial regulators and law enforcement agencies.

Last week, former SEC head John Reed Stark published an opinion on the potential demise of Binance, referencing the U.S. government's official demands to the platform. The list of these demands alone spanned 13 pages of typescript, including procedures that have never before been applied to companies. This led Stark to sardonically refer to the situation as a "financial colonoscopy."

It is noteworthy that attacks on Binance in 2023 led to a decline in its share of the spot market from 55% to 32%. In the derivatives market, its share is 47.7%, marking the worst performance since October 2020.

Discussing the intensification of regulatory pressure, JPMorgan CEO Jamie Dimon stated that if he were the U.S. government, he would "damn well ban all digital currencies for aiding fraudsters and terrorists." Yet, the U.S. authorities haven't taken such measures. Why?

There's a famous saying attributed to the Italian thinker, politician, and philosopher Niccolò Machiavelli: "If you can't beat the crowd, lead it." He voiced it about 500 years ago, but it remains relevant today. For instance, despite all prohibitions, the Chinese continue to be a significant and active part of the crypto industry. The U.S. seems to have considered that instead of banning digital assets, cutting off the internet, and confiscating computers and smartphones, it's easier to lead and control this process. Hence, experts believe, the idea of exchange-traded spot bitcoin ETFs was born. Such funds will allow for monitoring crypto investors, studying their transactions, and not only collecting taxes from them but also determining the legality of these transactions. Therefore, the logic of the officials here is quite clear. And in this rare case, millions of small investors also applaud this process, hoping that their investments will significantly increase thanks to BTC-ETFs and regulatory pressure.

Returning to the events of December 11, trader, analyst, and founder of the venture company Eight, Michael Van De Poppe, urged the community "not to worry." He explained that corrections happen, especially deep ones in the illiquid altcoin market. In light of what occurred, the analyst made his forecast for the change in bitcoin's price. According to his analysis, the key support zone on higher time frames is currently in the $36,500-38,000 range. "Bitcoin's momentum is gradually coming to an end, and Ethereum will easily take the lead in the next quarter," he added.

Crypto expert William Clemente is also unworried about the decrease in bitcoin's price, deeming it inevitable. In his view, such a correction serves as a solid foundation for the start of the next bullish trend, as it eliminates long positions opened by greedy traders using leverage.

Eli Taranto, Director at EQI Bank, agrees with Van De Poppe's prediction and also foresees a decline in bitcoin's value. "As traders lock in profits and await decisions on ETF applications, bitcoin's price will continue to fluctuate, subject to the butterfly effect [a phenomenon where a small change in a system can have large and unpredictable consequences, even in a completely different location]. A drop in BTC price to $39,000 is clearly possible," noted Taranto.

Indeed, the Director of EQI Bank is correct: bitcoin did continue to "fluctuate in the wind," as evident from the BTC/USD chart before and after the last week's Fed meeting in the U.S. As a result, aided by a weakening dollar, the pair moved upwards again, reaching a high of $43,440 on Wednesday, December 13.

As of writing this review, on the evening of December 15, it is trading around $42,200. The total market capitalization of the crypto market stands at $1.61 trillion, down from $1.64 trillion a week ago. The Crypto Fear & Greed Index has dropped from 72 to 70 points and remains in the Greed zone.

Regarding the near future of digital gold, investment banking giant Goldman Sachs' experts recently published a new report suggesting that bitcoin's quotations could continue to rise in the near term. CryptoQuant analysts have entertained the possibility of bitcoin breaking the $50,000 level at the start of 2024. This forecast is based on an analysis of BTC holder activity and also takes into account the dynamics of transaction volume, market capitalization, and Metcalfe's Law in the context of cryptocurrencies. "Bitcoin could be targeting the $50,000-$53,000 range," the experts noted.

However, CryptoQuant believes that the market is currently approaching an "overheated bullish phase," which historically is accompanied by pauses and corrections. The analysts emphasized that the volume of "in the money" coin supply exceeds 88%. This indicates potential selling pressure and, therefore, probable short-term corrections. According to their observations, such high levels of unrealized profit "historically coincided with local peaks."

To conclude, let's reflect on another historic event – a time when digital gold was trading at $0.20. Thirteen years ago, on December 12, 2010, the creator of the first cryptocurrency, known by the pseudonym Satoshi Nakamoto, published his last post on a forum before disappearing from the public eye. The message did not hint at the departure of this enigmatic figure. It contained a description of an update and code for Denial-of-Service (DoS) management elements. Some experts believe that the blockchain founder had planned to leave the team due to disputes and disagreements within the developer collective and criticism for excessive control over the project and unilateral decision-making.

Regardless, as one user on the BitcoinTalk forum noted while recalling the last post of the cryptocurrency's creator, "Satoshi's contribution to decentralization and his fight against financial dictatorship is more than just a technological marvel. It's a movement for economic freedom and sovereignty. [...] His disappearance is not just an act of self-preservation but also a reminder that not everything in life revolves around personal fame."
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for December 11 – 15, 2023

EUR/USD: Continuation of the Rate War

The labour market and inflation: these are the factors that Central Banks closely monitor when making decisions regarding monetary policy and interest rates. It is sufficient to recall the significant shift that occurred after the publication of October's inflation data in the United States. In November, the dollar weakened significantly, and the classical portfolio of stocks and bonds yielded the highest profit in 30 years! EUR/USD, starting at 1.0516, reached a monthly peak on November 29 at 1.1016.

Regarding the labour market, crucial indicators were released on Friday, December 8, including the unemployment rate and the number of new non-farm payrolls (NFP) in the United States. The first indicator revealed a decline in unemployment: in November, the rate dropped to 3.7%, surpassing both the forecast and the previous value of 3.9%. The second indicator showed an increase in the number of new jobs: 199K were created in a month, surpassing both the October figure of 150K and the market expectations of 180K. It cannot be said that such statistics significantly supported the dollar. However, at the very least, it did not harm it.

Two to three months ago, the market's reaction to such data would have been more intense, as there were still hopes for further increases in the Federal Reserve's interest rates in 2023. Now, those expectations are nearly reduced to zero. The discussions revolve not around how the key rate will rise, but rather how long it will be maintained at the current level of 5.50% and how actively the regulator will reduce it.

An economist survey conducted by Reuters revealed that just over half of the respondents (52 out of 102) believe that the rate will remain unchanged at least until July. The remaining 50 respondents expect the Federal Reserve to start cutting before that. 72 out of 100 respondents believe that by 2024, the rate will gradually be reduced by a maximum of 100 basis points (bps), possibly even less. Only 5 experts still hold hope for further rate increases, even if it's just by 25 bps. It's worth noting that Reuters' survey results do not align with the immediate market expectations, which forecast five rate cuts of 25 bps each starting from March.

A Citi economist, as part of the Reuters survey, noted that an increase in core inflation would disrupt the narrative of the Federal Reserve lowering interest rates and delay this process. The upcoming inflation data in the United States will be available on Tuesday, December 12, and Wednesday, December 13, with the release of the November Consumer Price Index (CPI) and Producer Price Index (PPI), respectively. Following this, on Wednesday, we can expect the Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve, where decisions on interest rates will be made. Market participants will undoubtedly focus on the economic forecasts presented by the FOMC and the comments from the leadership of the Federal Reserve.

However, it's not only the Federal Reserve that influences the EUR/USD pair; the European Central Bank (ECB) also plays a significant role, and its meeting is scheduled for next week on Thursday, December 14. Currently, the base rate for the euro stands at 4.50%. Many market participants believe it is too high and could push the fragile economy of the region into recession.

Deflation in the Eurozone is considerably outpacing that in the United States. Last week, Eurostat reported that, according to preliminary data, the Harmonized Index of Consumer Prices (HICP) fell to its lowest level since June 2021, at 2.4% (y/y), which is lower than both October's 2.9% and the expected 2.7%. This is very close to the target level of 2.0%. Hence, to support the economy, the ECB may soon initiate the process of easing its monetary policy.

Market forecasts suggest that the first cut in the key rate could occur in April, with a 50% probability even a month earlier in March. There is a 70% probability that by 2024, the rate will be reduced by 125 bps. However, the consensus estimate among Reuters experts is more conservative, anticipating a decrease of only 100 bps.

So, the rate war between the Federal Reserve and the European Central Bank will continue. While the one who previously prevailed was the one with faster advancing rates, now the advantage will be with the one whose retreat occurs more slowly. It is entirely possible that investors will receive some information regarding the regulators' plans after their meetings next week.

As for the past week, EUR/USD concluded at the level of 1.0760. Currently, expert opinions regarding the pair's immediate future are divided as follows: 75% voted for the strengthening of the dollar, while 25% sided with the euro. Among trend indicators on D1, the distribution is the same as with experts: 75% for the dollar and 25% for the euro. For oscillators, 75% favor the red side (with a quarter of them in the overbought zone), while 10% point in the opposite direction, and 15% remain neutral.

The nearest support for the pair is situated around 1.0725-1.0740, followed by 1.0620-1.0640, 1.0500-1.0520, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0800-1.0820, 1.0865, 1.0965-1.0985, 1.1020, 1.1070-1.1110, 1.1150, 1.1230-1.1275, 1.1350, and 1.1475.

In addition to the events mentioned earlier, the economic calendar highlights the release of the summary data on the U.S. retail market on Thursday, December 14th. On the same day, the number of initial claims for unemployment benefits will be traditionally published, and on December 15th, the preliminary values of the Purchasing Managers' Index (PMI) in the manufacturing and services sectors of the United States will be released. Additionally, on Friday, preliminary data on business activity in Germany and the Eurozone as a whole will be disclosed.

GBP/USD: Should We Expect a Surprise from the BoE?

The Bank of England (BoE) conducted its quarterly survey on December 8. It turns out that inflation expectations for the UK population in November 2024 are 3.3%, which is lower than the previous quarter's figure of 3.6%. Meanwhile, 35% of the country's population believes that they would personally benefit from a decrease in interest rates. In other words, the majority (65%) is not concerned about this indicator. However, it is a matter of concern for market participants.

The BoE meeting will also take place next week, on Thursday, December 14, shortly before the ECB meeting. What will be the decision on the interest rate? Lately, the hawkish rhetoric of the Bank of England's leadership has verbally supported the British currency. For instance, BoE Governor Andrew Bailey recently stated that rates should rise for longer, even if it may negatively impact the economy. However, experts predict that the regulator will likely maintain the status quo at the upcoming meeting, keeping the key interest rate at 5.25%, which is already the highest level in the last 15 years.

Expectations for the rate in 2024 imply an 80 bps decrease to 4.45%. If the Federal Reserve lowers its rate to 4.25%, it would give the pound some hope for strengthening. However, this is a matter of the relatively distant future. Last week, the dollar actively recouped November losses, resulting in the GBP/USD pair finishing the five-day period at 1.2548.

Speaking of its immediate future, 30% voted for the pair's rise, another 30% for its fall, and 40% remained indifferent. Among trend indicators on D1, 60% point north, while 40% point south. Among oscillators, only 15% are bullish, 50% bearish, and the remaining 35% remain neutral. In the event of the pair moving south, it will encounter support levels and zones at 1.2500-1.2520, 1.2450, 1.2370, 1.2330, 1.2210, 1.2070-1.2085, and 1.2035. In case of an upward movement, the pair will face resistance at levels 1.2575, then 1.2600-1.2625, 1.2695-1.2735, 1.2800-1.2820, 1.2940, 1.3000, and 1.3140.

Among the important events in the upcoming week, in addition to the Bank of England meeting, the release of a comprehensive set of data from the United Kingdom labour market is scheduled for Tuesday, December 12. Additionally, the country's GDP figures will be published on Wednesday, December 13.

USD/JPY: Is the Bank of Japan Losing Caution?

The strengthening of the Japanese currency has taken on a sustained character since the beginning of November. This occurred a couple of weeks after the peak in yields of U.S. ten-year Treasury bonds when the markets were convinced that their decline had become a trend. It's worth noting that there is traditionally an inverse correlation between these securities and the yen. If Treasury yields rise, the yen weakens against the dollar. Conversely, if bond yields fall, the yen strengthens its positions.

A significant moment for the Japanese currency was on Thursday, December 7, when it strengthened across the market spectrum, gaining approximately 225 points against the U.S. dollar and reaching a three-month peak. USD/JPY recorded its minimum at that moment at the level of 141.62.

The main reason for the yen's advance has been the growing expectations that the Bank of Japan (BoJ) will finally abandon its negative interest rate policy, and this is expected to happen sooner than anticipated. Rumours suggest that regional banks in the country are pressuring the regulator, advocating for a departure from the yield curve control policy.

As if to confirm these rumours, the BoJ conducted a special survey of market participants to discuss the consequences of abandoning the ultra-loose monetary policy and the side effects of such a move. Additionally, the visit of the BoJ Governor, Kadsuo Ueda, to the office of Prime Minister Fumio Kishida, added fuel to the fire.

The yen is also benefiting from market confidence that the key interest rates of the Federal Reserve (FRS) and the European Central Bank (ECB) have reached a plateau, and further reductions are the only expectation. As a result of such a divergence, an accelerated narrowing of yield spreads between Japanese government bonds on one side and similar securities from the US and Eurozone on the other can be predicted. This is expected to redirect capital flows into the yen.

Furthermore, the Japanese currency might have been supported by the slowdown in the growth of stock markets over the past three weeks. The yen is often used as a funding currency for purchasing risky assets. Therefore, profit-taking on stock indices such as S&P500, Dow Jones, Nasdaq, and others has additionally pushed USD/JPY lower.

Graphical analysis indicates that in October 2022 and November 2023, the pair formed a double top, reaching a peak at 151.9. Therefore, from this perspective, its retracement downward is quite logical. However, some experts believe that a definitive reversal on the daily timeframe (D1) can only be discussed after it breaks through support in the 142.50 zone. However, at the time of writing this review, on the evening of Friday, December 8th, thanks to strong US labor market data, USD/JPY rebounded from a local low, moved upward, and concluded at 144.93.

In the immediate future, 45% of experts anticipate further strengthening of the yen, 30% side with the dollar, and 25% remain neutral. As for indicators on D1, the advantage is overwhelmingly in favour of the red colour. 85% of trend indicators are coloured red, 75% of oscillators are in the red, and only 25% are in the green.

The nearest support level is located in the 143.75-144.05 zone, followed by 141.60-142.20, 140.60, 138.75-139.05, 137.25-137.50, 135.90, 134.35, and 131.25. Resistances are positioned at the following levels and zones: 145.30, 146.55-146.90, 147.65-147.85, 148.40, 149.20, 149.80-150.00, 150.80, 151.60, and 151.90-152.15.

Except for the release of the Tankan Large Manufacturers' Index on December 13 for Q4, there is no anticipation of other significant macroeconomic statistics regarding the state of the Japanese economy.

CRYPTOCURRENCIES: Rational Growth or Speculative Frenzy?


Late in the evening on December 8, the flagship cryptocurrency reached a peak of $44,694. The last time BTC traded above $40,000 was in April 2022, before the Terra ecosystem crash triggered a massive crypto market collapse. Among the reasons for the sharp rise in BTC, growing network hash rate, investor optimism about the U.S. economic recovery, and expectations of a Federal Reserve policy easing are mentioned. However, the main reason for the current bull rally is undoubtedly the potential approval of spot Bitcoin ETFs in the U.S.

Twelve companies have submitted applications to the Securities and Exchange Commission (SEC) to create ETFs, collectively managing over $20 trillion in assets. For comparison, the entire market capitalization of bitcoin is $0.85 trillion. These companies will not only offer existing clients the opportunity to diversify their assets through cryptocurrency investments but also attract new investors, significantly boosting BTC capitalization. Franklin Templeton CEO Jenny Johnson, overseeing $1.4 trillion in assets, recently explained the increased institutional interest, stating, "The demand for bitcoin is evident, and a spot ETF is the best way to access it." Bloomberg analyst James Seyffart believes that the approval of these fund launches is 90% likely to occur from January 5 to 10.

According to Bitfinex experts, the current active supply of bitcoin has dropped to a five-year low: only 30% of the coins have moved in the past year. Consequently, approximately 70% of bitcoins, or "unprecedented" 16.3 million BTC, remained dormant over the year. At the same time, 60% of the coins have been in cold wallets for two years. Simultaneously, as noted by Glassnode, the average deposit amount on cryptocurrency exchanges has approached absolute highs, reaching $29,000. Considering that the number of transactions is continuously decreasing, this indicates the dominance of large investors.

Alongside the bitcoin rally, stock prices of related companies have also surged. In particular, shares of Coinbase, MicroStrategy, miners Riot Platforms, Marathon Digital, and others have seen an increase.

Senior Macro Strategist at Bloomberg Intelligence, Mike McGlone, believes that bitcoin is currently demonstrating much greater strength than gold. He noted that on December 4, the price of gold reached a record high, after which it decreased by 5.1%, while bitcoin continued to rise, surpassing $44,000. However, the analyst warned that bitcoin's volatility could hinder it from being traded as reliably as physical gold during "risk-off" periods. According to McGlone, for bitcoin to compete with precious metals as an alternative asset, it must establish key reliability indicators. This includes a negative correlation of BTC with the stock market and achieving a high deficit during periods of monetary expansion.

McGlone's warning pales in comparison to the forecast of Peter Schiff, President of the brokerage firm Euro Pacific Capital. This well-known crypto sceptic and advocate for physical gold is confident that the speculative frenzy around BTC-ETF will soon come to an end. "This could be the swan song... The collapse of Bitcoin will be more impressive than its rally," he warns investors.

Former SEC official John Reed Stark echoes his sentiments. "Cryptocurrency prices are rising for two reasons," he explains. "First, due to regulatory gaps and possible market manipulation; second, due to the possibility of selling inflated, overvalued cryptocurrency to an even bigger fool [...] This also applies to speculation about a 90% probability of approving spot ETFs."

In the interest of fairness, it should be noted that the current surge is not solely the fault of spot BTC-ETFs. The excitement around them gradually started building up since late June when the first applications were submitted to the SEC. Bitcoin, on the other hand, began its upward movement from early January, growing more than 2.6 times during this period.

Several experts point out that the current situation remarkably mirrors previous BTC/USD cycles. Currently, the drawdown from the all-time high (ATH) is 37%, in the previous cycle for the same elapsed time, it was 39%, and in the 2013-17 cycle, it was 42%. If we measure from local bottoms instead of peaks, a similar pattern emerges. (The first rallies are an exception, as young Bitcoin grew significantly faster in the nascent market.)

According to Blockstream CEO Adam Back, the price of bitcoin will surpass the $100,000 level even before the upcoming halving in April 2024. The industry veteran noted that his forecast doesn't take into account a potential bullish impulse in the event of SEC approval of spot bitcoin ETFs. Regarding the long-term movement of digital gold quotes, the entrepreneur agreed with the opinion of BitMEX co-founder Arthur Hayes, forecasting a range of $750,000 to $1 million by 2026.

For reference: Adam Back is a British businessman, a cryptography expert, and a cypherpunk. It is known that Back corresponded with Satoshi Nakamoto, and a reference to his publication is included in the description of the bitcoin system. Previously, Adam Back did not make public price forecasts for BTC, so many members of the crypto community paid close attention to his words.

The CEO of Ledger, Pascal Gauthier, the head of Lightspark, David Marcus, and the top manager of the CoinDCX exchange, Vijay Ayyar, also anticipate the bitcoin exchange rate to reach $100,000 in 2024. They shared this information in an interview with CNBC. "It seems that 2023 was a year of preparation for the upcoming growth. Sentiments regarding 2024 and 2025 are very encouraging," said Pascal Gauthier. "Some market participants expect a bullish trend sometime after the halving, but considering the news about ETFs, we could very well start the rise before that," believes Vijay Ayyar. However, unlike Adam Back, in his opinion, "a complete rejection of ETFs could disrupt this process."

Renowned bitcoin maximalist, television host, and former trader Max Keiser shared unconfirmed rumors that the sovereign wealth fund of Qatar is preparing to enter the crypto market with massive investments and plans to allocate up to $500 billion in the leading cryptocurrency. "This will be a seismic shift in the cryptocurrency landscape, allowing bitcoin to potentially surpass the $150,000 mark in the near future and go even further," stated Keiser.

Unlike the television host, we will share not rumors but absolutely accurate facts. The first fact is that as of the review writing on the evening of December 8, BTC/USD is trading around $44,545. The second fact is that the total market capitalization of the crypto market is $1.64 trillion ($1.45 trillion a week ago). And finally, the third fact: the Crypto Fear and Greed Index has risen from 71 to 72 points and continues to be in the Greed zone.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for December 04 – 08, 2023

EUR/USD: December – A Formidable Month for the Dollar

Who will start loosening the grip on their monetary policies earlier, the Federal Reserve (FRS) or the European Central Bank (ECB)? The discussion on this topic remains active, as clearly seen in the quotes' charts. The statistics from the past week did not allow EUR/USD to solidify above the significant level of 1.1000. It all began on Wednesday, November 29, with the publication of inflation data in Germany. The preliminary Consumer Price Index (CPI) in annual terms amounted to 3.2%, which is lower than both the forecast of 3.5% and the previous value of 3.8%. In monthly terms, the German CPI went even deeper into the negative territory, reaching -0.4% (against a forecast of -0.2% and 0.0% the previous month).

These data marked the beginning of the euro's retreat. EUR/USD continued its decline after the release of the Harmonized Index of Consumer Prices (HICP) for the Eurozone. Eurostat reported that, according to preliminary data, the HICP fell to the lowest level since June 2021, amounting to 2.4% (y/y), which is lower than both the 2.9% in October and the expected 2.7%. The monthly indicator was -0.5%, decreasing from 0.1% in the previous month.

All these data have shown that deflation in the Eurozone significantly outpaces the American one. As a result, many market participants, including strategists at the largest banking group in the Netherlands, ING, have started talking about the imminent victory of the ECB over inflation. They have concluded that the European Central Bank will be the first to ease its monetary policy, including lowering interest rates and engaging in monetary expansion. According to forecasts, this process may begin in April, and with a 50% probability, even a month earlier, in March. The likelihood that the key interest rate will be reduced by 125 basis points (bps) during 2024, from 4.50% to 3.25%, is estimated at 70%. Indirectly, the move towards a more dovish policy was recently confirmed by a member of the ECB's Executive Board and the head of the Bank of Italy, Fabio Panetta, who spoke about the "unnecessary harm" that can be caused by persistently high-interest rates.

As for the United States, FOMC officials speak not of harm but, on the contrary, of the benefits of high-interest rates. For instance, John C. Williams, the President of the Federal Reserve Bank of New York, stated that it is appropriate to keep borrowing costs on a plateau for an extended period. According to him, this would allow for a complete restoration of the balance between demand and supply and bring inflation back to 2.0%. Williams predicts that the Personal Consumption Expenditures (PCE) Index will decrease to 2.25% by the end of 2024 and stabilize near the target level only in 2025.

Therefore, it is unlikely that we should expect the hawks of the Federal Reserve to turn into doves in the near future. Especially considering that the U.S. economy allows maintaining such a position: stock indices are rising, and the GDP data published on November 29 showed a growth of 5.2% in Q3, surpassing both market expectations of 5.0% and the previous value of 4.9%.

Given this situation, it's not surprising that EUR/USD experienced a decline.

On Friday afternoon, it reached a local low at the level of 1.0828 and would have continued to decline further if it were not for the head of the Federal Reserve. Jerome Powell spoke at the very end of the workweek and stated that he considers premature the discussion of when the U.S. central bank can begin to ease its monetary policy. He hinted that the Fed will keep the interest rate unchanged at the current level of 5.50% at the December meeting. Powell also noted that the core inflation in the U.S. is still significantly higher than the target of 2.0%, and the Federal Reserve is ready to continue tightening its policy if necessary. In general, he said the same things as John Williams. However, if the words of the President of the New York Fed strengthened the dollar, somehow similar words from the Fed Chair weakened it: during Powell's speech, the DXY Index lost about 0.12%. Market reactions are truly unpredictable! As a result, the final chord of the week sounded at the level of 1.0882.

What awaits us in December? Following the logic mentioned above, the dollar should continue its advance against the euro. However, a seasonal factor may intervene, indicating a bearish movement for the dollar in December against a range of currencies. According to economists at Societe Generale, the average decline of the Dollar Index (DXY) over the last 10 years in December is 0.8%. Seasonally, the euro (EUR), Swedish krona (SEK), British pound (GBP), and Swiss franc (CHF) tend to rise, while the movements of the Australian dollar (AUD), Canadian dollar (CAD), Japanese yen (JPY), and Mexican peso (MXN) can be considered mixed.

Specialists at the Japanese MUFG Bank also confirm bullish indicators for EUR/USD in the last month of the year. "The seasonal tendency in December," they write, "is quite convincing: over the last 20 years, December has seen EUR/USD rise 14 times, with an impressive average gain of 2.6% over these 14 years. If we exclude December 2008 (+10.1%), the average gain in the other 13 cases was still significant at +2.0%. Moreover, in 8 out of 11 cases when EUR/USD rose in November, it was followed by a rise in December" (and it rose indeed!). "But this does not mean," caution MUFG, "that we can ignore fundamental factors." It is relevant to remind here that based on such factors, the Federal Reserve (FRS) and the European Central Bank (ECB) will make decisions at their meetings on December 13 and 14, respectively.

At the moment, experts' opinions on the near future of EUR/USD are divided as follows: 50% voted for the strengthening of the dollar, 30% sided with the euro, and 20% remained neutral. Regarding technical analysis, 50% of oscillators on the D1 chart are coloured green, 30% are in a neutral grey, and only 20% are red. Interestingly, half of these 20% are already signalling oversold conditions. Among trend indicators, 65% favour the bullish side, while 35% point in the opposite direction.

The nearest support for the pair is located in the area of 1.0830-1.0840, followed by 1.0740, 1.0620-1.0640, 1.0480-1.0520, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0900, 1.0965-1.0985, 1.1070-1.1110, 1.1150, 1.1230-1.1275, 1.1350, and 1.1475.

A substantial flow of data is anticipated from the American labour market in the upcoming week of December 5 to 8. The highlight will be on Friday, December 8, when crucial indicators such as the unemployment rate and the number of new non-farm jobs (NFP) will be published. Additionally, on Tuesday, December 5, we will learn about business activity (PMI) in the U.S. service sector. Data on retail sales in the Eurozone will be available on Wednesday, December 6, and the following day, we will find out about GDP. Finally, on Friday, December 8, revised data on consumer inflation (CPI) in Germany will be released.

GBP/USD: Three Reasons in Favor of the Pound

The likelihood that the US Federal Reserve has likely concluded its cycle of monetary restriction and interest rates have plateaued has been mentioned earlier. Similar sentiments were expressed regarding the historical seasonal advantages of the British pound over the dollar in December.

Verbal support for the British currency was provided by the rhetoric of the Bank of England (BoE) leadership, which currently has no plans to adjust its current monetary policy trajectory. As known, this trajectory is aimed at tightening. Deputy Governor of the BoE, Dave Ramsden, stated that monetary policy should continue to be restrictive to curb inflation. A similar hawkish position was taken by BoE Governor Andrew Bailey, who emphasized that rates should rise for longer, even if it negatively affects the economy.

Currently, the key interest rate for the pound is at a 15-year high of 5.25%. Its last increase occurred on August 3, after which the Bank of England took a pause. However, this does not necessarily mean that they won't resume and increase the rate by 25 basis points at their December or January meeting.

Similar hawkish statements from the leaders of the Bank of England contribute to bullish sentiments for the pound. Even despite the dollar's rise in the second half of the past week, GBP/USD couldn't breach the support at 1.2600. According to economists from the Singaporean United Overseas Bank (UOB), as long as this strong level remains unbroken, there is a possibility for the pair to move slightly higher in the next 1-3 weeks before an increased risk of a pullback. UOB believes that, at the moment, the likelihood of the pound rising to the resistance level of 1.2795 is not substantial.

Following Jerome Powell's remarks, GBP/USD settled at the level of 1.2710 at the conclusion of the past week. Regarding its immediate future, 20% are in favour of further ascent, while the majority of surveyed analysts (55%) have taken the opposite position, and the remaining 25% remain neutral. On the D1 chart, all trend indicators and oscillators unanimously point north, with the latter indicating overbought conditions at 15%.

In the event of a southward movement, the pair will encounter support levels and zones at 1.2600-1.2635, followed by 1.2570, 1.2500-1.2520, 1.2450, 1.2370, 1.2330, 1.2210, and 1.2040-1.2085. In case of an upward movement, resistance awaits at levels 1.2735-1.2755, then 1.2800-1.2820, 1.2940, 1.3000, and 1.3140.

No significant economic events related to the United Kingdom are anticipated for the upcoming week.

USD/JPY: Caution, More Caution, and Even More Caution


We mentioned in the previous overview that the dynamics of USD/JPY in the coming weeks would be almost entirely dependent on the dollar's performance. Additionally, its volatility would be influenced by the oversold condition of the yen: in mid-November, the pair reached a peak at 151.90, a level not seen since October 2022, and before that, 33 years ago in 1990. The result of the synergy between these two factors was observed last week. Following the Dollar Index (DXY), the pair initially dropped by 300 points, from 149.67 to 146.67, then rose in two waves to 148.51. On December 1, it responded with a significant red candle to the statement from the head of the Federal Reserve, finishing at 146.79.

The influence of the United States on the dynamics of USD/JPY is consistently evident. However, will the Bank of Japan (BoJ) impact the strength of its national currency? Hopes for this are diminishing. BoJ board member Toyoaki Nakamura made comments on Thursday, November 30, expressing his opinion on the possibility of transitioning from an ultra-easy monetary policy. He stated that tightening it prematurely is risky, and for now, it is necessary to patiently maintain the current course. As for the timing of when this can be done, according to the official, it is currently challenging to determine. 'We can change our policy when the Japanese economy sees sustainable growth in wages and inflation,' Nakamura explained. 'Now is the time to exercise caution in our policy.'

One might think, was the Bank of Japan not cautious before this? Judging by its monetary policy, BoJ can confidently contend for the title of the 'Most Cautious Central Bank in the World.'.

According to economists at the Singaporean United Overseas Bank (UOB), in the next 1-3 weeks, USD/JPY is likely to trade in a range between 146.65 and 149.30, then start declining. Regarding the median forecast, in the near term, only 20% of experts anticipate further strengthening of the dollar, while 60% are in favour of the yen, and 20% have refrained from making any predictions. As for trend indicators on D1, 85% favour the yen, recommending buying the pair in only 15% of cases. All oscillators are in the red, with 100%, and a quarter of them are in the oversold zone. The nearest support level is located in the 146.65 zone, followed by 145.90-146.10, 145.30, 144.45, 143.75-144.05, and 142.20. The closest resistance is at 147.25, then 147.65-147.85, 148.40, 149.20, 149.80-150.00, 150.80, 151.60, 151.90-152.15, 152.80-153.15, and 156.25.

Among the events in the upcoming week's calendar, it is worth noting Tuesday, December 5, when data on consumer inflation in the Tokyo region will be released, and Friday, December 8, when the GDP volume of Japan for Q3 2023 will be announced.

CRYPTOCURRENCIES: A Year Between a Bear Past and a Bull Future

December is upon us, making it a fitting time not only to review the week's outcomes but also to assess the entire passing year. Apparently, 2023 has the potential to serve as a transition between the bear 2022 and the bull 2023, supported by an impressive 11% growth in the leading cryptocurrency in November and a staggering 130% increase since the beginning of the year.

The share of potentially profitable bitcoins has reached 83.7% of the total supply, marking the highest level since November 2021. According to analysts at Bitfinex, the balance between short-term and long-term holders of digital gold is tilting in favour of the latter. The active supply of bitcoin has dropped to a five-year low, with only 30% of coins moving over the year. Consequently, approximately 70% of bitcoins, or an "unprecedented" 16.3 million BTC, remained stagnant throughout the year. Moreover, 60% of these coins have been motionless for two years. According to Bitfinex experts, these metrics indicate that the market is in a "relatively strong position" as coin holders are experiencing positive returns on their investments and are not rushing to liquidate assets in anticipation of even greater profits.

Positive sentiments have increased, especially among large investors (those with investments of $1 million or more). Over the first 11 months of 2023, they have increased their investments in crypto funds by 120%, bringing the total to $43.3 billion. Bitcoin remains the leader in this regard, with its volume growing to $32.3 billion, a 140% increase. Among altcoins, Solana has also attracted institutional interest. However, Ethereum had been showing negative dynamics for a while, although it has recently started to recover.

The rise in optimism in the market is attributed to: 1) the resolution of the issues between the U.S. authorities and the crypto exchange Binance, 2) the anticipation of the imminent launch of spot bitcoin ETFs, and 3) the upcoming bitcoin halving in April next year.

Regarding point 1, as a result of a settlement agreement between the U.S. authorities and Binance, bitcoin is now expected to exceed $40,000 by the end of the year, according to Matrixport. Various estimates suggested that Binance could face fines of up to $10 billion and might be accused of unauthorized appropriation of user funds or market manipulation. However, on November 21, an agreement was reached that Binance would pay a $4.3 billion fine, cease operations in the U.S., and its CEO, Changpeng Zhao, stepped down and posted a $175 million bail to remain free. This outcome is considered by Matrixport experts as a 'turning point in the crypto industry,' indicating that Binance will maintain its position among the largest crypto exchanges for at least the next two to three years.

In light of this news, bitcoin initially experienced a temporary correction but then bounced back from $36,000. This confirmed a strong trend, and according to Matrixport experts, a rise above $40,000 in December appears 'inevitable.' However, they assess the probability of this 'inevitable' outcome at 90%, acknowledging that unforeseen events could still impact the situation.

According to some experts, the "peaceful" withdrawal of Binance from the U.S. market should ease tensions and facilitate the approval by the Securities and Exchange Commission (SEC) of applications for the creation of exchange-traded funds (ETFs) for spot bitcoin. In November, the SEC held a series of meetings with applicants to allow them to edit their submissions in accordance with the regulator's requirements. The presence of this dialogue was viewed as a positive factor. It is not ruled out that by January 10, 2024, the Commission will approve a significant portion, if not all, of the applications for launching bitcoin ETFs. This date marks the deadline for approving the joint application from ARK Invest and 21Shares. If the regulator makes a negative decision, it risks getting involved in legal proceedings again. The SEC has already lost a legal battle with an investment giant like Grayscale, with the court deeming the SEC's actions "arbitrary and capricious." So, is it worth stepping on the same rake again and risking similar humiliations?

Trader, analyst, and founder of the venture company Eight, Michael Van De Poppe, expects the first bitcoin ETFs to be approved by the SEC in the next five to six weeks. Consequently, the price of BTC could rise in December as investors try to profit from the potential rally. The expert forecasts its growth to $48,000. However, after approval, according to Van De Poppe, BTC/USD could sharply decline. The lower target of this potential pullback is the 200-week exponential moving average (EMA) line, which is currently around $26,500. This downward trend may continue even after the upcoming halving, Van De Poppe believes. The analyst suspects that it is then that traders will actively accumulate coins, triggering the next bullish rally with a target ranging from $300,000 to $400,000.

The strategists at Standard Chartered believe that BTC could reach $50,000 by the end of this year and $120,000 by the end of 2024. The bank's initial forecast indicated a possible rise to $100,000 but was later increased. The price of $120,000 is three times higher than the current level. This optimism from Standard Chartered experts is linked to the increased profitability of mining when selling a smaller quantity of tokens to maintain the same cash flow volume, leading to price growth.

The Managing Partner and CEO of 10T Holdings, Dan Tapiero, is confident in the inevitable growth of the first cryptocurrency and believes that bitcoin is becoming an increasingly attractive means of savings. However, in his opinion, the next bullish trend will not occur in 2024 but in 2025. "And we will see bitcoin surpass $100,000," predicts Tapiero, adding that this is a rather conservative estimate. The businessman believes that negative interest rates on US Treasury bonds will be a special "mega-bull signal" for BTC.

(Note that the former CEO of the crypto exchange BitMEX, Arthur Hayes, intends to withdraw the funds he invested in US Treasury bonds and invest them in cryptocurrency in the near future, without waiting until 2025.)

We have repeatedly noted earlier that the leading cryptocurrency has "decoupled" from both stock indices and the dollar exchange rate, disrupting direct and inverse correlations. However, now analysts at the Santiment analytical company are observing an increase in the correlation between the crypto and stock markets. In November, bitcoin, Ethereum, and the S&P 500 index grew on average by 9.2%. The strengthening connection was recorded after bitcoin traded in a narrow price range in late October to early November, showing no significant fluctuations. "If bitcoin continues to grow, surpassing stocks," say the analysts at Santiment, "this will once again disrupt the correlation, which, according to historical data, is one of the factors for the formation of a bullish crypto market.

BTC/USD set a new high for 2023 on Friday, reaching $38,950, aided by the surge in risk assets, including cryptocurrencies, mentioned in this review by the Federal Reserve Chair Jerome Powell in his speech. As of the evening of December 1, BTC/USD is trading around $38,765. The overall market capitalization of the crypto market is $1.45 trillion ($1.44 trillion a week ago). The Crypto Fear and Greed Index rose from 66 to 71 points and still remains in the Greed zone.

So, December has arrived, and many members of the crypto community are once again talking about the "Bitcoin Santa Rally." This phenomenon mirrors the historical "Santa Claus Rally" in the stock market when stocks rise between Thanksgiving and Christmas. On the crypto market, a similar rally first occurred at the end of November 2013 when the price of BTC was less than $1,000. Throughout December, the price of bitcoin steadily rose, reaching a peak of $1,147 by December 23. The next significant surge happened four years later during the holiday season of 2017. Bitcoin embarked on a steep upward trajectory, surpassing $19,000 by mid-December and touching $20,000 for the first time. However, in 2021, Santa Claus didn't bring joy to traders; the result was the opposite. On November 10, the asset reached an all-time high, approaching $69,000, but in December, the price was influenced by volatility and low trading volumes during the holiday days. By the end of the year, bitcoin was trading in the $46,000 range.

Naturally, this year, members of the crypto community are hoping for a convincing rise in digital gold. It remains to be seen whether Santa Claus will fulfil these hopes.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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November 2023 Results: NordFX's Top 3 Traders Set Records with Profits of $470,000

NordFX Brokerage Company Summarizes Client Trading Performance for November 2023. Additionally, an evaluation was conducted on the social trading services – PAMM and CopyTrading, along with the profits generated by the company's IB partners.

- The client from Western Asia with account number 1691XXX secured the highest profit this month, reaching $351,521. This remarkable achievement was attained through trading in gold (XAU/USD), euro (EUR/USD), and the British pound (GBP/USD).

- Similarly, fellow countryman with account number 1692XXX claimed the second position on the podium of distinction, accruing a profit of $91,650. The same currency pairs – XAU/USD, EUR/USD, GBP/USD, along with USD/JPY, contributed to this impressive outcome.

- The third spot is occupied by the account holder with number 1733XXX from Southeast Asia. Utilizing the favoured NordFX trading instrument – gold (XAU/USD), they achieved a profit of $26,713.

In NordFX's passive investment services, the following situation has developed:

- In the PAMM service, the Trade and Earn account continues to attract attention. It was opened 631 days ago but remained dormant, awakening only in November 2022. Over 13 months, its profitability approached 210% with a relatively small maximum drawdown of less than 17%. Undoubtedly, the manager of this account can take pride in such performance.
    
Two long-standing accounts on the PAMM service's showcase have persevered, previously mentioned in our past reviews – KennyFXPRO-The Multi 3000 EA and TranquilityFX-The Genesis v3. Recall that on November 14, 2022, they suffered significant losses, with the drawdown at that moment approaching 43%. However, PAMM managers decided not to give up, and by November 30, 2023, the profit on the first of these accounts exceeded 118%, and on the second, 78%.
    
- In CopyTrading, noteworthy is the signal yahmat-forex, which, over 160 days, demonstrated a profitability of 190% with a maximum drawdown of 37%. Also catching attention is the startup with the original name $20 - ⟩ $1,000,000. One can reasonably guess that the provider of this signal intends to increase the deposit from $20 to $1 million. Currently, in its 37 days of existence, the profit stands at 101% with a moderate drawdown of less than 18%.
    
Undoubtedly, such profitability appears very attractive and far exceeds the returns on bank deposits. However, subscribers must always remember that past successes do not guarantee the same results in the future. Therefore, as usual, we urge investors to exercise maximum caution when investing their money.

Among the IB partners of the NordFX brokerage company, the top three are as follows:
- The largest commission reward once again was credited to a partner from Western Asia, account number 1645XXX. This time it amounted to $10,525.
- Next is their colleague from South Asia, account number 1675XXX, who earned $6,510 in November.
- Finally, another partner from South Asia, account number 1700XXX, closes the top three leaders, receiving $5,034 in commissions.

***

Attention! On January 5, 2024, just a month away, NordFX will host the New Year draw of its super lottery. A multitude of cash prizes ranging from $250 to $5,000 will be up for grabs among the company's clients.

There's still time to become a participant and have a chance to win one or even several of these prizes. All details are available on the NordFX website.
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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NordFX Super Lottery $100,000

Participation in the NordFX Super Lottery is a great opportunity to improve your financial situation by winning one or even several large cash prizes. The total prize pool is $100,000. 60 prizes of $250 and 15 prizes of $1000 to $5000 will be drawn on January 5. 

The organizer of the Super Lottery is NordFX, an international brokerage company with 15 years of experience in financial markets, which is trusted by clients from 188 countries around the world. All information about the terms of the Super Lottery can be found on the broker's official website.

As early as 1748, Benjamin Franklin, whose portrait adorns the $100 bill, formulated one of the main financial laws: Time is Money. So, hurry up and don't waste time: the sooner you participate in the lottery (which is not difficult at all), the more likely you are to win there!
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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Forex and Cryptocurrencies Forecast for November 27 – December 01, 2023

EUR/USD: Day of Thanksgiving and Week of Contradictions

Reminder that the American currency came under significant pressure on November 14 following the release of the Consumer Price Index (CPI) report in the USA. In October, the Consumer Price Index (CPI) decreased from 0.4% to 0% (m/m), and on an annual basis, it dropped from 3.7% to 3.2%. The Core CPI for the same period decreased from 4.1% to 4.0%: reaching the lowest level since September 2021. These figures caused a tumble in the Dollar Index (DXY) from 105.75 to 103.84. According to Bank of America, this marked the most significant dollar sell-off since the beginning of the year. Naturally, this had an impact on the dynamics of the EUR/USD pair, which marked this day with an impressive bullish candle of almost 200 pips, reaching resistance in the 1.0900 zone.

DXY continued to consolidate near 103.80 last week, maintaining positions at the lows from the end of August to the beginning of September. Meanwhile, the EUR/USD pair, transforming 1.0900 from resistance to a pivot point, continued its movement along this line.

Market reassurance, besides Thanksgiving Day, was also influenced by the uncertainty regarding what to expect from the Federal Reserve (FRS) and the European Central Bank (ECB). Following the release of the inflation report, the majority of investors believed in the imminent conclusion of the hawkish monetary policy of the American central bank. Expectations that the regulator would raise interest rates at its meeting on December 14 plummeted to zero. Moreover, among market participants, the opinion circulated that the FRS might shift towards easing its monetary policy not in mid-summer but already in the spring of the following year.

However, the minutes of the latest Federal Open Market Committee (FOMC) meeting were published on November 21, and their content contradicted market expectations. The minutes indicated that the leadership of the regulator considered the possibility of additional tightening of monetary policy in case of inflation growth. Furthermore, FRS members concluded that it would be prudent to keep the rate high until inflation reaches the target.

The content of the minutes slightly supported the American currency: EUR/USD crossed the 1.0900 horizon from top to bottom, dropping from 1.0964 to 1.0852. However, overall, the market reaction was restrained since the formulations mentioned above were quite vague and lacked specificity regarding the future monetary policy of the United States.

If in the United States, market expectations clashed with the FRS protocols, in Europe, the ECB protocols contradicted the subsequent rhetoric of individual leaders of this regulator. In its latest protocol, the Governing Council of the European Central Bank left the door open for the resumption of the monetary restriction cycle and urged policymakers to avoid unwarranted easing of financial conditions. A similar sentiment was expressed by the ECB President, Christine Lagarde, in her speech on Friday, November 24, stating that the fight against inflation is not yet over. However, a little earlier, the head of the Bank of France, Francois Villeroy de Galhau, stated that interest rates would not be raised anymore.

So, the question of what the future monetary policy of the ECB will be remains open. In favour of hawks, it is noted that wage growth in the Eurozone accelerated in Q3 from 4.4% to 4.7%, and purchasing managers highlighted an increase in inflationary pressure. On the other hand, the Eurozone's economy continues to experience stagflation. Business activity (PMI) has been below the critical 50-point mark for the sixth consecutive month, indicating technical recession.

A glimmer of light in the darkness came from macro statistics from Germany, some indicators of which gradually improved. PMI dropped to a minimum of 38.8 points in July and then began to grow slowly. Preliminary data published on Thursday, November 23rd, showed that this index rose to 47.1 (though still below 50.0). The economic sentiment index from the ZEW Institute returned to the positive territory for the first time in half a year, sharply rising from -1.1 to 9.8. According to some economists, this growth is likely linked to a noticeable decrease in inflation (CPI) in Germany over the last two months: from 6.1% to 3.8%.

However, only desperate optimists can claim that the country's economy has rebounded and transitioned to recovery. Germany's recession is far from over. For the fourth consecutive quarter, GDP is not growing; worse yet, it is contracting: GDP for Q3 2023 decreased by 0.1% and compared to the same quarter of the previous year, it declined by 0.4%. According to Bloomberg, the budget crisis in Germany could lead to many infrastructure and environmental projects not receiving funding. As a result, economic growth may slow down by 0.5% next year.

In general, the prospects for both currencies, the dollar and the euro, are shrouded in the fog of uncertainty. As economists from the Japanese MUFG Bank note, "the window for the dollar to reach the highs set in October and/or beyond may already be closed. However, the growth prospects in the Eurozone also do not indicate significant opportunities for EUR/USD."

For the second consecutive week, EUR/USD concluded near the 1.0900 level, specifically at 1.0938. Currently, expert opinions regarding its near future are divided as follows: 40% voted for the strengthening of the dollar, 40% sided with the euro, and 20% remained neutral. In terms of technical analysis, all trend indicators and oscillators on the D1 timeframe are in green, but one-third of the latter are in overbought territory. The nearest support for the pair is located around 1.0900, followed by 1.0830-1.0840, 1.0740, 1.0620-1.0640, 1.0480-1.0520, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0965-1.0985, 1.1070-1.1090, 1.1150, 1.1260-1.1275, and 1.1475.

In the upcoming week, preliminary inflation (CPI) data for Germany and the GDP for the United States for Q3 will be released on Wednesday, November 29. The following day will reveal the CPI and retail sales volumes for the Eurozone as a whole, along with the Personal Consumption Expenditures (PCE) Index and the number of initial jobless claims in the United States. The workweek will conclude on Friday, December 1st, with the publication of the Purchasing Managers' Index (PMI) for the manufacturing sector in the United States and a speech by the Federal Reserve Chair, Jerome Powell.

GBP/USD: First Came the Word. But Will There Be Deeds?

Recent macroeconomic data indicates that the UK's economy is on the mend, contributing to the strengthening of the British pound. Business activity in the country is rebounding, with the Services PMI and Composite PMI indices showing growth, although they remain in contraction territory after three months of decline. The Manufacturing PMI is also below the threshold value of 50.0, indicating contraction/growth, but it rose from 44.8 to 46.7, surpassing forecasts of 45.0. The growth in business activity is supported by a decrease in core inflation. According to the latest CPI data, it decreased from 6.7% to 4.6%, and despite this, the economy managed to avoid a recession, with GDP remaining at 0%.

Against this backdrop, according to several analysts, unlike the Federal Reserve (FRS) and the European Central Bank (ECB), there is a significant likelihood of another interest rate hike by the Bank of England (BoE). This conviction has been fuelled by recent hawkish comments from the regulator's head, Andrew Bailey, who emphasized that rates should be raised for a longer period, even if it may have a negative impact on the economy.

The Chief Economist of the BoE, Hugh Pill, also stated in an interview with the Financial Times on Friday, November 24, that the Central Bank would continue to combat inflation, and it cannot afford to weaken its tight monetary policy. According to Pill, key indicators, namely inflation in service prices and wage growth, remained persistently high throughout the summer. Therefore, even though "both of these measures have shown a slight – but welcome – sign of coming down, they remain at very high levels."

Such hawkish statements from Bank of England leaders contribute to bullish sentiments for the pound. However, according to economists at Commerzbank, despite Andrew Bailey's efforts to convey a hawkish stance with his comments, it is not necessarily guaranteed that real actions, such as an interest rate hike, will follow. "Even in the case of positive surprises from the real sector of the UK economy, the market always keeps in mind the rather indecisive approach of the Bank of England. In this case, the potential for sterling to rise in the near future will be limited," warns Commerzbank.

Despite Thanksgiving Day in the United States, some preliminary data on the state of the American economy was still released on Friday, November 24. The S&P Global PMI for the services sector increased from 50.6 to 50.8. The composite PMI remained unchanged in November at the previous level of 50.7. However, the manufacturing sector's PMI in the country showed a significant decline – despite the previous value of 50.0 and expectations of 49.8, the actual figure dropped to 49.4, reflecting a slowdown in growth. Against this backdrop, taking advantage of the low-liquidity market, pound bulls pushed the pair higher to a height of 1.2615.

As for technical analysis, over the past week, GBP/USD has surpassed both the 100-day and 200-day moving averages (DMA) and even breached the resistance at 1.2589 (50% correction level from the July-October decline), marking the highest level since early September. The week concluded with the pair reaching 1.2604.

Economists at Scotiabank believe that "in the short term, the pound will find support on minor dips (to the 1.2500 area) and looks technically poised for further gains." Regarding the median forecast of analysts in the near future, only 20% supported Scotiabank's projection for pound growth. The majority (60%) took the opposite position, while the remaining analysts maintained a neutral stance. All trend indicators and oscillators on the D1 timeframe point north, with 15% of the latter signalling overbought conditions. In the event of a southward movement, the pair will encounter support levels and zones at 1.2570, followed by 1.2500-1.2520, 1.2450, 1.2370, 1.2330, 1.2210, and 1.2040-1.2085. In the case of an upward movement, resistance awaits at levels such as 1.2615-1.2635, 1.2690-1.2710, 1.2785-1.2820, 1.2940, and 1.3140.

One notable event in the upcoming week's calendar is the scheduled speech by the Bank of England Governor Andrew Bailey on Wednesday, November 29. As of now, there are no other significant events related to the United Kingdom's economy expected in the coming days.

USD/JPY: The Near Future of the Yen Lies in the Hands of the Fed

The momentum gained by USD/JPY after the release of the U.S. inflation report on November 14th proved to be so strong that it continued into the past week. On Tuesday, November 21, the pair found a local bottom at the level of 147.14. Once again, news from the other side of the Pacific, specifically the release of the Federal Reserve's minutes, served as a signal for a northward reversal.

As the primary catalyst for the yen revolves around speculations about changes in the Bank of Japan's (BoJ) policy, markets awaited the release of national inflation data on Friday, November 24th. It was anticipated that the core CPI would increase by 3.0% (year-on-year) compared to the previous value of 2.8%. However, it grew less than expected, reaching 2.9%. The rise in the overall national CPI was 3.3% (year-on-year), exceeding the previous figure of 3.0% but falling short of forecasts at 3.4%. As a result, this had little to no impact on the Japanese yen's exchange rate.

According to economists at Commerzbank, the inflation indicators suggest that the Bank of Japan is unlikely to aim for an exit from its ultra-easy monetary policy in the foreseeable future. The dynamics of USD/JPY in the coming weeks will likely depend almost entirely on the movement of the dollar.

This stance is probably acceptable to the Japanese central bank, reflecting the market's low expectations regarding a tightening of its passive and dovish policy. This sentiment was reaffirmed by Japan's Prime Minister Fumio Kishida, who addressed Parliament on Wednesday, November 22nd. Kishida stated that the BoJ's monetary policy is not aimed at directing currency rates in a particular direction. From this, it can be inferred that the country's leadership has entrusted the Federal Reserve of the United States with this function.

The closing note of the week for USD/JPY settled at the level of 149.43, maintaining its position above the critical 100- and 200-day SMAs. This suggests that the broader trend still leans towards bullish sentiments, despite recent local victories for bears. Regarding the immediate prospects of the pair, only 20% of experts anticipate further strengthening of the dollar, another 20% side with the yen, while the majority (60%) refrain from making any forecasts. As for the technical analysis on the daily chart (D1), the forecast remains uncertain. Among trend indicators, the ratio is evenly split between red and green (50% each). Among oscillators, 60% favour red, 20% favour green, and 20% are neutral-grey. The nearest support level is located in the zone of 149.20, followed by 148.90, 148.10-148.40, 146.85-147.15, 145.90-146.10, 145.30, 144.45, 143.75-144.05, and 142.20. The nearest resistance is at 149.75, followed by 150.00-150.15, 151.70-151.90, then 152.80-153.15 and 156.25.

There is no planned release of any significant statistics regarding the state of the Japanese economy next week.

CRYPTOCURRENCIES: "Modest" Fine of $7,000,000,000


From the events of the past week, one stands out. It has been reported that the largest crypto exchange, Binance, reached a global settlement with the US Department of Justice, the Commodity Futures Trading Commission, the Office of Foreign Assets Control, and the Financial Crimes Enforcement Network, related to their investigations into registration issues, compliance, and violations of anti-Russian sanctions.

As part of the agreement, on November 21, 2023, CZ (Changpeng Zhao) stepped down as the CEO of the exchange. Additionally, under the agreement, Binance will pay regulators and law enforcement substantial amounts (around $7 billion) in the form of fines and compensations to settle charges and claims against them. In addition to the financial settlement, Binance has agreed to completely withdraw from the US markets and will "comply with a set of stringent sanction requirements." Furthermore, the exchange will be under a five-year observation by the US Treasury with open access to its accounting books, records, and systems.

The $7 billion payouts are a substantial amount that will significantly impact the company. Can it survive this? After news of these fines, a wave of panic sentiments swept through the market. According to DeFiLlama data, Binance's reserves decreased by $1.5 billion in two days, with an outflow of $710 million during the same period. These are substantial losses. However, looking at history, such withdrawal rates are not extraordinary. In June, after the SEC filed a lawsuit, the outflow exceeded $1 billion in a day, and in January, amid the BUSD stablecoin scandal, the outflow reached a record $4.3 billion for 2023. So, there is likely no catastrophe, and the exchange will face local difficulties.

Representatives of Binance stated that they firmly believe in the crypto industry and the bright future of their company. Many experts view the exchange's agreement with US authorities as a positive event, considering Binance's leading role in the crypto industry. Confirmation of this was the bitcoin dynamics: in the first hours, BTC/USD dropped by 6%, but then rebounded: on Friday, November 24, it even broke through resistance in the $38,000 zone, reaching a high of $38,395.

According to several experts, the fundamental indicators of the leading cryptocurrency have never looked better. For example, 70% of the existing BTC supply has not moved from one wallet to another during this year. "This is a record level in bitcoin's history: such withdrawal rates are extraordinary for a financial asset," summarizes a group of analysts led by Gautam Chhugani.

Glassnode, an analytical company, also notes a consistent outflow of BTC coins from exchanges. The total supply of the leading cryptocurrency is becoming increasingly scarce, and the circulating supply is currently at an all-time low.

In a recent Glassnode report, it is stated that 83.6% of all circulating bitcoins were acquired by current owners at a lower cost than the current value. If this figure surpasses the 90% mark, it could indicate the beginning of the euphoria stage, where almost all market participants have unrealized profits.

According to analysts, statistical data can help determine the current market stage. For instance, when less than 58% of all BTC coins are profitable, the market is in the bottoming formation stage. Once the indicator surpasses the 58% mark, the market transitions into the recovery stage, and above 90%, it enters the euphoria stage.

Glassnode believes that over the last ten months, the market has been in the second of these three stages, recovering from a series of negative events in 2022, such as the collapse of the Luna project and the bankruptcy of the crypto exchange FTX.

So, the chances of entering the New Year 2024 on an upward trajectory are increasing. Positive expectations are reinforced by the upcoming halving in April. It may reduce the monthly selling pressure from miners from $1 billion to $500 million (at the current BTC rate). Additionally, the potential approval of bitcoin exchange-traded funds (ETFs) in the U.S. is a positive catalyst, easing access to cryptocurrency for major investors. According to experts at Bernstein, against this backdrop, by the beginning of 2025, the price of the first cryptocurrency could rise to $150,000.

Can one expect a significant downward correction from bitcoin in the near future? The crypto market is known for its unpredictability and volatility. However, according to renowned analyst Willy Woo, this is unlikely. He examined blockchain data reflecting the average purchase price of BTC by investors, concluding that the primary cryptocurrency is unlikely to drop below $30,000 again.

Woo shared a chart with readers, showing a dense grey band representing the price around which a significant portion of bitcoin's supply fluctuated. According to the expert, this reflects "strong consensus price." Woo claims that since the inception of bitcoin, this band has acted as a reliable price support. The chart demonstrates that such bands formed eight times throughout bitcoin's existence, always supporting its price.

However, it's important to acknowledge that not everyone trusts Woo's calculations. An analyst using the pseudonym TXMC reminded that Woo made a similar forecast in 2021, stating that bitcoin would never drop below $40,000. Yet, the next year saw exactly that happen: on November 20, 2022, BTC/USD reached a minimum in the $15,480 range.

Since that tragic date, bitcoin has appreciated by more than 2.4 times. As of the evening of Friday, November 24, BTC/USD is trading around $37,820. The total market capitalization of the crypto market is $1.44 trillion (compared to $1.38 trillion a week ago). The Crypto Fear and Greed Index has risen from 63 to 66 points and continues to be in the Greed zone.

As for the U.S. Securities and Exchange Commission (SEC), it remains proactive. Following the resolution with Binance, it has now filed charges against the cryptocurrency trading platform Kraken. According to the SEC, the platform operated as an unregistered exchange for securities, broker, dealer, and clearing agency. The SEC lawsuit alleges that since September 2018, Kraken has earned hundreds of millions of dollars by unlawfully facilitating the buying and selling of securities in crypto assets. It remains to be seen how much it will cost Kraken to settle its issues with U.S. authorities.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for November 13 - 17, 2023

EUR/USD: How Mr. Powell Aided the Dollar

The past week witnessed few significant events, which reflected in EUR/USD pair's fluctuations around 1.0700. Notably, there was a slight increase in the Dollar Index (DXY), starting at 105.05 and reaching a peak of 105.97 by Friday, November 10. This growth was primarily attributed to the "hawkish" comments made by the Chair of the Federal Reserve.

On Thursday, November 09, Jerome Powell, participating in a discussion on monetary policy organized by the International Monetary Fund, affirmed that decisions at each Federal Reserve meeting are made "based on the totality of incoming data and its impact on the outlook for economic activity and inflation." Powell expressed uncertainty about the Fed's success in implementing sufficiently restrictive policies to gradually reduce inflation to 2%. Additionally, he noted the rapid growth of the U.S. GDP, suggesting that further economic acceleration could undermine the progress achieved in stabilizing the labor market.

Powell's comments were validated by the data on initial claims for unemployment benefits for the week ending November 04, totaling 217K, slightly below the previous figure of 220K. While the decrease is modest, it signifies a decline rather than an increase in unemployment.

Market interpretation of Powell's remarks hinted at the regulator's intention to raise the key interest rate once again. Consequently, the yield on 10-year U.S. Treasury bonds increased by almost 3%, surpassing the 4.6% mark, providing support to the dollar.

Downward pressure on EUR/USD was also exerted by macroeconomic statistics from the EU. In Germany, month-on-month inflation (CPI) showed a decrease from 0.3% to 0%. Retail sales volumes in the Eurozone as a whole declined by 0.3% in September after a 0.7% decrease in August. However, on an annual basis, this indicator dropped from -1.8% to -2.9%. Many analysts considered that such a decline in consumer activity ahead of the Christmas and New Year holidays could indicate the onset of a technical recession in the Eurozone before the end of the current year.

According to CME Group FedWatch data, markets are still pricing in a 90% probability that the Federal Reserve will leave the interest rate unchanged in December 2023. Economists at Finland's Nordea Bank believe that the U.S. Central Bank will maintain the federal funds rate at the current level of 5.50% even in 2024.

However, it seems that the interest rate hike cycle for the Euro has likely come to an end. According to strategists at Wells Fargo, one of the largest banks in the U.S., the bleak growth prospects for the Eurozone suggest that the tightening of the ECB's monetary policy is likely over. The recent successes in reducing inflation strengthen their belief that the peak of rate hikes [4.50%] has already been reached.

Both Nordea and Wells Fargo agree that the ECB will likely be compelled to start reducing borrowing costs in the early summer of next year. "We do not anticipate the first ECB rate cut until the June 2024 meeting, although thereafter, it will consistently cut the deposit rate by 150 basis points to 2.50% from mid-2024 to early 2025. Overall, we believe the risk of rate cuts by the ECB will be higher than previously expected or more aggressive."

Factors such as improved global risk appetite and a slowdown in the U.S. economy could support the Euro. However, the divergence in monetary policy between the Federal Reserve and the ECB will continue to exert downward pressure on EUR/USD. This applies to the currencies of other major countries as well – if their central banks keep current interest rates unchanged or, more so, begin to lower them, the dollar may further strengthen its positions.

EUR/USD concluded the past week at the level of 1.0684. Currently, expert opinions regarding its immediate future are divided as follows: 25% voted for the strengthening of the dollar, 60% sided with the euro, and 15% maintained neutrality.

In terms of technical analysis, 85% of oscillators on the D1 chart are colored green, and 15% are neutral-gray. Among trend indicators, the ratio is 70% to 30% in favor of green.

The nearest support for the pair is located around 1.0620-1.0640, followed by 1.0480-1.0520, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0740, then 1.0800, 1.0865, 1.0945-1.0975, and 1.1065-1.1090, 1.1150, and 1.1260-1.1275.

Unlike the past, rather calm week, the upcoming one is expected to be more eventful. On Tuesday, November 14, data on Consumer Price Index (CPI) in the USA will be released, along with preliminary data on Eurozone GDP for Q3. The next day will bring statistics regarding retail sales volumes and Producer Price Index (PPI) in the United States. On Thursday, November 16, as usual, data on the number of initial claims for unemployment benefits in the U.S. will be reported. Finally, on Friday, a crucial inflationary indicator, Eurozone Consumer Price Index (CPI), will be disclosed.

GBP/USD: Dangerous Proximity to 1.2200

Recall that on November 3, the British currency received a strong bullish impulse following the release of U.S. labor market data. At that moment, GBP/USD literally surged upwards. On Monday, November 6, the pound rose again, reaching a height of 1.2427. However, it decided that it was time for the bulls to stop celebrating and that it was time for GBP/USD to return to the 1.2200 zone.

The trend reversal to the south was aided by statistics from the United Kingdom. In October, business activity in the country's construction sector increased only slightly, from 45.0 to 45.6. Meanwhile, orders in this sector have been declining for the fourth consecutive month, and they are already 20% lower than a year ago. The average mortgage rate now exceeds 8%, and the number of approved mortgage loans has been declining for the fourth consecutive month. Therefore, expecting a significant increase in business activity here is unlikely.

Although the GDP of the United Kingdom grew slightly in September, from 0.1% to 0.2%, it is likely to show a decline in the third quarter, from 0.2% to 0.0%, and remain at 0.6% on an annual basis. In such conditions, the Bank of England (BoE) is unlikely to raise interest rates in the near future. But it won't lower them either. BoE Chief Economist Hugh Pill recently stated that there is no need to raise rates to contain inflation but it is necessary to ensure the restrictive nature of monetary policy. In other words, the rate will remain the same, at 5.25%. As mentioned earlier, in such a situation, the advantage is likely to remain on the side of the dollar. This was clearly demonstrated by the market's reaction after the speech by Federal Reserve Chair Jerome Powell on November 9. As soon as he made a vague hint about rates, GBP/USD rapidly plummeted.

The past week concluded with the pair settling at the level of 1.2225. According to economists at Scotiabank, the 1.2200 zone may serve as a short-term support point; however, weakness below this level indicates the risk of continued losses and a retest of the 1.2000-1.2100 area. Regarding the median forecast for the near future, 60% of analysts voted for a new upward move of the pair, 20% voted for a downward movement, and 20% took a neutral position. Among the D1 oscillators, 50% indicate a southward direction, 15% indicate northward, and the remaining 35% indicate eastward. Among trend indicators, only 15% point upward, while the overwhelming majority (85%) signal a downward trend. In the event of a southward movement, the pair will encounter support levels and zones at 1.2040-1.2085, 1.1960, and 1.1800-1.1840, 1.1720, 1.1595-1.1625, 1.1450-1.1475. In the case of an upward movement, resistance levels will be at 1.2290-1.2335, 1.2430-1.2450, 1.2545-1.2575, 1.2690-1.2710, 1.2785-1.2820, 1.2940, and 1.3140.

Noteworthy in the upcoming week's economic calendar for the United Kingdom is Tuesday, November 14. On this day, a comprehensive set of data on the country's labor market will be released. Moving on to Wednesday, November 15, when the value of the British Consumer Price Index (CPI) for October will be disclosed. Finally, rounding off the week on Friday, November 17, we anticipate the announcement of retail sales volumes in the United Kingdom.  

USD/JPY: Tough Times for the Yen Now, Good Times Ahead

The Bank of Japan (BoJ), in its meeting on October 31, decided to keep its monetary policy parameters unchanged, a stance it has maintained for a very long time. The regulator not only retained the negative interest rate at -0.1% but also kept the yield on 10-year government bonds (JGB) at the existing level. Some market participants were hopeful that, following inflation growth data, the BoJ would raise the yield ceiling from 1% to at least 1.25%. (It's worth noting that the yield on similar U.S. securities exceeded 4.6% on November 9.) However, instead of adjusting to clear signs of increasing inflationary pressure, the Bank of Japan continued to ignore them. This pushed USD/JPY to a peak of 151.71. It would have remained there if not for the U.S. labor market data on November 3, which brought it down to 149.34.

Many analysts believed that officials from the Ministry of Finance and the Bank of Japan (BoJ), with their verbal interventions and incantations, would keep the USD/JPY pair at these levels. If real yen purchases by the authorities were to occur, the pair was expected to continue its decline. However, this did not happen, and on November 10, the pair once again rose to the height of 151.59, concluding the five-day period not far from it at 151.51.

"Hardly surprising is USD/JPY upward trend," commented strategists at Commerzbank. "At current exchange rates, investments in the Japanese yen are simply not particularly attractive for foreign (and domestic) investors. [...] As long as Japan's monetary policy does not undergo a radical change, USD/JPY is likely to test another high soon. The Ministry of Finance will probably react again with the threat of interventions. However, if the Bank of Japan cannot resist making 'dovish' comments, and if the Ministry of Finance indeed intervenes, it will likely only temporarily prevent the rise in currency rates."

According to Dutch Rabobank, the slow pace of Japan's monetary policy normalization suggests that USD/JPY may continue trading above the 150.00 level in the coming weeks. However, the fear of actual interventions from the Japanese Ministry of Finance may impede its upward movement, and the market is likely to be very reluctant to push the pair towards 152.00 and beyond.

Meanwhile, analysts at the Singaporean United Overseas Bank (UOB) believe that the risk of the pair breaking above last week's peak near 151.80 has increased. This level is not far from last year's peak around 151.95, and if the dollar can breach this resistance zone, it is likely to continue its ascent to the 152.50 level in the next 1-3 weeks.

Despite forecasts of growth, experts, echoing officials from the Ministry of Finance and the Bank of Japan, persist in stating that the current weakness of the yen is unjust. "Any increase in rate hike speculation will allow USD/JPY to move lower next year," predicts Rabobank. "We believe," they write, "that in the second half of 2024, the pair could return below the 145.00 level." "Fair value, based on spreads, equity yields, and trading conditions [...] suggests that the dollar is significantly overvalued and should trade closer to 144.50," according to economists at Scotiabank.

However, the question of when this "fairness" will be restored remains open. Soon, according to Societe Generale. In their view, the yen will undoubtedly continue to disappoint for some time, but the downward reversal in USD/JPY is getting closer and closer.

In discussing the near-term prospects of the pair, 55% of analysts anticipate the strengthening of the yen, while 10% have taken a neutral stance. About 35% voted for the pair breaking above 152.00 at the time of the review. Technical analysis supports the latter group, with 100% of trend indicators and oscillators on D1 painted in green.

The closest support level is situated in the 150.00-150.15 zone, followed by 148.45-148.80, 146.85-147.30, 145.90-146.10, 145.30, 144.45, 143.75-144.05, and 142.20. The nearest resistance lies at 151.70-151.90 (October 2022 high), followed by 152.80-153.15 and 156.25.

Aside from the release of preliminary GDP data for Japan's Q3 on Wednesday, November 15, no other significant statistics regarding the state of the Japanese economy are scheduled for the upcoming week.

CRYPTOCURRENCIES: Market Scandals and Records


The past week was marked by two events: the Ethereum scandal and the subsequent rise of bitcoin and the overall crypto market. Let's start with the scandal.

Former Ethereum platform consultant, lawyer Steven Nerayoff, accused Vitalik Buterin and Joseph Lubin of fraudulent activities. He believes that the ETH co-founders were involved in machinations that exceed the scale of crimes committed by FTX CEO Sam Bankman-Fried (whom, by the way, the jury found guilty, facing up to 110 years in prison).

"Buterin's claims of attempting to create a decentralized currency are fake. It was centralized from the beginning, and today, this influence is even more concentrated," Nerayoff writes. "A small circle of ETH investors controls about 75% of all protocol assets. So now it's easy to manipulate the price or even set its upper or lower limit. Most of the trading you see on exchanges is fake or fictitious to create the appearance of liquidity," he continues with his revelations.

Nerayoff also suspects the existence of a secret agreement between the Ethereum network administration and high-ranking US officials, such as SEC Chairman Gary Gensler and former SEC Chairman Jay Clayton, which was concluded during the initial stages of the altcoin's launch. Earlier, the lawyer speculated that the full-scale attack on Ripple by US regulatory bodies could have been sponsored by influential ETH holders. In his opinion, Ripple's adversaries may include individuals connected to the SEC, the Department of Justice, the FBI, and even some Ripple employees.

Interestingly, crypto investigator Truth Labs made similar revelations. However, unlike Steven Nerayoff, they believe that it is not the US but the Chinese conglomerate Wangxian Group that has decisive influence over the Ethereum network, and organizations close to the Communist Party of China (CPC) control almost 80% of mined ETH. Truth Labs also claims that Wangxian was one of the early sponsors of the Ethereum network in 2015. This group is also credited with creating Buterin's original wallets.

Whether Nerayoff and Truth Labs can substantiate their accusations is a big question. For now, the price of ETH is rising and reached a maximum of $2,130. As for the leading cryptocurrency, on Thursday, November 9, BTC/USD broke through the $37,000 resistance and set a local high at $37,948: it last traded there in May 2022.

The development of the bullish trend in BTC has led to the updating of annual and historical indicators. The net capital inflow into the crypto market over the last 30 days reached $11 billion, a record for 2023. Institutions added $767 million to crypto funds over the last six weeks, surpassing last year's record of $736 million and reaching the level at the end of 2021. Open interest in bitcoin futures on the Chicago CME Exchange is also at the December 2021 level ($3.7 billion). Long-term holders continue to accumulate bitcoins, bringing their holdings to 14.9 million BTC (more than 70% of the total BTC issuance). The volume of their purchases exceeded 25,000 coins per month. Short-term investors and speculators have also become more active, influenced by the FOMO (Fear of Missing Out) effect.

The list of records could go on, but what concerns everyone more is what comes next. If the current dynamics continue, demand for digital gold will keep growing, and supply will continue to decline. In that case, new local or even historical records and highs may be on the horizon.

We've repeatedly listed the factors contributing to the current BullRally. The key ones include the anticipated approval of SEC Bitcoin spot ETFs, the halving in April 2024, and the potential reversal of the Federal Reserve's monetary policy. Markus Thielen, Head of Research at Matrixport, reminded that after the end of the Fed's tightening cycle in January 2019, digital gold increased fivefold. However, Thielen cautioned against expecting a repeat of such dynamics but agreed that the leading cryptocurrency could "move significantly" in 2023 and 2024. According to his calculations, bitcoin tends to grow on average by 23% during the pre-Christmas period of November-December this year.

In addition to the growth drivers mentioned earlier, MicroStrategy founder Michael Saylor identified several factors that, in the medium term, could lead to a tenfold increase in the price of Bitcoin. According to Saylor, a positive development will be the soon-to-come new rules for accounting for Bitcoin reserves by companies in the United States. "In perspective, this will open the door for corporations to adopt Bitcoin as a treasury asset and create shareholder value," Saylor believes.

The entrepreneur also pointed to the positive effect of regulatory and law enforcement actions by authorities, including the trial of the former CEO of the collapsed FTX exchange. According to Saylor, "all these early crypto cowboys, tokens being unregistered securities, unreliable custodians" were passively benefiting bitcoin. To take the crypto industry to a new level, it needs "parental supervision." MicroStrategy's founder also thinks there is a need to "move away from the 100,000 tokens" that are merely used for speculation, back to bitcoin. "When the industry shifts its focus away from small shiny coins that distract attention and destroy shareholder value, I believe it will move to the next level, and we will get a 10x increase from the current level," Saylor concluded.

Note that this is not the most impressive forecast. CEO of ARK Investment, Catherine Wood, believes that in the next decade, the price of digital gold will exceed $1 million. (Note: Charlie Munger, Warren Buffett's longtime partner, recently criticized Bitcoin again, calling it a "tainted product" and adding to his previous descriptions like "the most foolish investment," "rat poison," and a "venereal disease.")

If we talk about the forecast for the near future, according to Rachel Lin, CEO of the SynFutures exchange, by the end of November, the first cryptocurrency could reach $47,000. "The past weeks have strengthened October's reputation as Uptober, with bitcoin gaining almost 29%. Even more interesting is that historically November outperforms October with an average bitcoin return of over 35%. If this November brings a similar profit, the asset will reach around $47,000," she calculated.

As an additional positive factor, Lin noted the growth in the number of users and transactions. In her opinion, the surge in spot trading volume with a noticeable increase in the number of payments over $100,000 is particularly noteworthy. "This is a clear indicator of increased institutional interest. Large players are consolidating positions in digital assets, especially in BTC," the specialist believes.

Despite the prevailing optimism, the analyst under the alias Doctor Profit believes that investors should be prepared for corrections and the emergence of "black swans," similar to those before the 2020 halving amid the COVID-19 outbreak. The expert does not exclude the possibility that bitcoin may drop to $26,000 before the upcoming April 2024 halving.

As of the writing of this review on Friday, November 10, BTC/USD is trading at $37,320. The total market capitalization of the crypto market is $1.42 trillion, compared to $1.29 trillion a week ago. The Crypto Fear & Greed Index has increased from 65 to 70 points and continues to remain in the Greed zone.

In conclusion of the review, let's delve into our irregular segment of crypto life hacks. So, what do you do if you've lost the password to your crypto wallet? The answer comes from Rain Lõhmus, co-founder of Estonian LHV Bank. During the ICO in July 2015, he acquired 250,000 ETH for $75,000. On November 10, 2021, when the price of Ethereum reached an all-time high of around $4,800, Lõhmus's holdings grew to $1.22 billion. Even now, they are valued at over $500 million. Throughout this time, the coins remained dormant. At some point, the businessman discovered that he had lost the wallet password and now intends to recover it using artificial intelligence. "My plan," he stated, "is to create an AI version of Rain Lõhmus and see if it can retrieve its memories." The banker shared his plans. (By the way, the artificial intelligence ChatGPT predicted that the value of Ethereum by the beginning of 2024 would range from $3,000 to $10,000. If this happens, Lõhmus could become a billionaire again—assuming he finds the wallet password.)
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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NordFX Wins Again in the Best Crypto Broker Category at the AllForexRating Awards

Starting from 2017, the brokerage firm NordFX has received numerous awards for achievements and innovations in the field of cryptocurrency trading. These awards were given by both authoritative professional juries and through open voting by traders. This time, based on the results of voting by visitors to the AllForexRating portal, NordFX has once again achieved a resounding victory in the category of Best Crypto Broker. Receiving this award for the second year in a row underscores the high level and safety of the financial services that the company's clients receive.

The recent years have been quite challenging for the crypto industry. Factors such as the COVID-19 pandemic, a series of bankruptcies among major industry players, pressure from the U.S. Securities and Exchange Commission (SEC), the monetary policies of the Federal Reserve (FRS), and central banks of other leading countries have all had a significant impact on the cryptocurrency market capitalization, volatility, and digital asset quotes. In these conditions, NordFX clients have highly appreciated the reliability of the services offered, the opportunity to profit not only from the rise but also from the decline of cryptocurrencies, and the advantages of margin trading that allow for substantial profits even with a relatively small starting capital. For example, traders only need $150 to open a position of 1 Bitcoin, $15 to open a position of 1 Ethereum, $0.3 to open a position of 1 EOS, $0.02 to open a position of 1 Ripple, and $0.001 to open a position of 1 Doge.

The NordFX Savings Account has also gained significant popularity among traders and investors. It is a unique innovation based on DeFi technology. The benefits of DeFi allow account holders not only to earn passive income of up to 35% annually but also to increase their profits through independent trading on financial markets. You can easily take an instant trading loan at just 3% against the funds held in the Savings Account. The account balance can be in USD, BTC, ETH, USDT, DAI, BUSD, or other stablecoins.
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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Forex and Cryptocurrencies Forecast for November 06 - 10, 2023

EUR/USD: A Bad Week for the Dollar

Throughout the week, the Dollar Index DXY, along with EUR/USD, appeared to be riding the waves, moving up and down. At the beginning of the week, preliminary data for Europe was released. In terms of annual growth, the GDP of the Eurozone in the third quarter was only 0.1%, which fell short of both the forecast of 0.2% and the previous figure of 0.5%. In addition, inflation took a downward turn – in October, the Consumer Price Index (CPI) stood at 2.9% (year-on-year), missing the forecast of 3.1% and the previous month's 4.3%.

The European Central Bank meeting took place on October 26, during which the members of the Governing Council unsurprisingly left the interest rate unchanged at 4.50%. Now, market participants were eagerly anticipating the decision of the Federal Open Market Committee (FOMC) of the Federal Reserve, scheduled for Wednesday, November 1. On the eve of the FOMC meeting, the dollar, regarded as a safe-haven asset, received support due to increased geopolitical tensions in the Middle East. Additionally, strong macroeconomic data from the United States favoured the American currency. The country's GDP in the third quarter surged by 4.9%, significantly surpassing the previous figure of 2.1%. Another surprise came from the ADP private sector employment data: the change in the number of employed individuals in the private sector reached 113K, compared to 89K the previous month.

Market participants had a sense that in such a situation, the Federal Reserve (FOMC) might well continue tightening monetary policy, especially since inflation is still far from the target level of 2.0%. Against this backdrop, the yield on 10-year Treasury bonds once again approached the 5.0% level, and the Dollar Index (DXY) rose to 107.00.

However, November 1 brought complete disappointment to the dollar bulls. For the second consecutive month, the FOMC left the key interest rate unchanged at 5.50%. What's worse is that if after the September meeting, the market believed that the cost of borrowing would rise to 5.75% by the end of this year, the probability of such an increase has now plummeted to 14%. The Dollar also received no support from the rhetoric of Federal Reserve Chairman Jerome Powell during the press conference following the current meeting.

The situation could have been rectified by the data from the U.S. Bureau of Labor Statistics (BLS), traditionally published on the first Friday of the month, which was on November 3. However, the number of non-farm payroll (NFP) employees in the country only increased by 150K in October. This figure turned out to be lower than both the market's expectations of 180K and the revised September growth, which was adjusted from 336K to 297K. The unemployment rate rose during the same period from 3.8% to 3.9%. The annual inflation, measured by the change in the average hourly wage, decreased from 4.3% to 4.1%. As a result of this disappointing data for Dollar bulls, the Dollar Index (DXY) plummeted to 105.09, while EUR/USD reached a six-week high at 1.0718.

Towards the end of the workweek, the publication of the ISM Services PMI index revealed that business activity in the U.S. services sector was growing at a slower pace in October. The PMI declined to 51.8 from 53.6 in September. This value was below the market's expectation of 53.0. More detailed data showed that the index of service prices (the inflation component) decreased slightly from 58.9 to 58.6, and the employment index dropped from 53.4 to 50.2. As a result, the Dollar continued its descent, and the final note of the week for the currency pair was heard at the level of 1.0730.

According to strategists at the Canadian Scotiabank, in the short term, EUR/USD could rise to 1.0750. In general, expert opinions regarding the near future of the currency pair are divided as follows: 45% voted for a stronger Dollar, while 60% sided with the Euro. As for technical analysis, 35% of the D1 oscillators are pointing south, while 65% are pointing north, although a third of them signal overbought conditions for the pair. Among trend indicators, priorities are clearer: 85% are looking north, with only 15% looking south. The nearest support for the pair is located around 1.0675-1.0700, followed by 1.0600-1.0620, 1.0500-1.0530, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0745-1.0770, then 1.0800, 1.0865, 1.0945-1.0975, and 1.1090-1.1110.

Unlike the past five days, the economic calendar for the upcoming week anticipates significantly fewer important events. On Wednesday, November 8, data on inflation (CPI) in Germany and retail sales in the Eurozone will be released. Additionally, on this day, Federal Reserve Chairman Jerome Powell is scheduled to give a speech. He can also be heard again on Thursday, November 9. As is customary, Thursday will also bring data on the number of initial jobless claims in the United States.

GBP/USD: A Good Week for the Pound

Looking at the results of central bank meetings in many countries, there is a sense that the global trend of tightening monetary policy has come to an end. Both the ECB and the Fed left interest rates unchanged. The Bank of England (BoE) also did the same on November 2 at its meeting, leaving the key rate unchanged for the second consecutive time at 5.25%. According to the regulator, such a decision should support the recovery of the economy and employment levels in the United Kingdom. The short-term inflation forecast was revised upwards. However, the central bank leaders noted that inflation in the third quarter had decreased to 6.7%, which was better than expected in August, and its target level of 2.0% is likely to be reached by the end of 2025.

Despite the BoE keeping the rate unchanged, the market perceived this decision as hawkish because three out of nine members of the bank's leadership voted for an increase. Furthermore, the Governor of the Bank of England, Andrew Bailey, emphasized during a press conference that considering a rate cut would be premature. He stated, "Monetary policy is likely to remain restrictive for an extended period." Investors are aware that central banks use such forward guidance as a tool to influence the market, so it is unlikely that the regulator will switch to a soft monetary policy anytime soon. Of course, there are no guarantees that the BoE will stick to its promises if inflation does not move towards the target level. However, at the moment, the market believes Andrew Bailey, which has supported the British currency.

The pound received its strongest bullish impulse after the release of US labor market data on November 3. At that moment, GBP/USD surged upwards, continued its ascent, and closed the week at 1.2380. According to Scotiabank economists, the short-term trading model for the British currency looks promising. They note an increase in demand for the pound amid its weakening since mid-July and do not rule out a rise of GBP/USD to the 1.2450 level. As for the median forecast for the near future, 35% of analysts voted for the pair's rise, 50% believe that the pair will resume its movement towards the 1.2000 target, and the remaining 15% remain neutral. On the D1 timeframe, 75% of trend indicators point to a pair's rise and are coloured green, while the remaining 25% are red. Oscillators show the same readings: 75% point upwards (a quarter of them are in the overbought zone), and 25% voted for a decline. In case the pair moves south, it will encounter support levels and zones at 1.2330, 1.2210, 1.2145, 1.2040-1.2085, 1.1960, and 1.1800-1.1840, 1.1720, 1.1595-1.1625, 1.1450-1.1475. In the event of an upward movement, the pair will face resistance at levels 1.2390-1.2425, 1.2450-1.2520, 1.2575, 1.2690-1.2710, 1.2785-1.2820, 1.2940, and 1.3140.

The speech by the Governor of the Bank of England, Andrew Bailey, scheduled for November 8, and the release of preliminary GDP data for the country for Q3 on November 10 can be highlighted in the events of the upcoming week related to the United Kingdom's economy.

USD/JPY: A Middling Week for the Yen

If the ECB, the Federal Reserve, and the Bank of England have left interest rates unchanged, what could be expected from their Japanese counterparts? Of course, the Bank of Japan (BoJ) made the decision to maintain the parameters of its monetary policy during its meeting on Tuesday, October 31. They have been in this position for a very long time. The regulator not only retained the interest rate at a negative level of -0.1% but also kept the yield on 10-year government bonds (JGB) unchanged. Some market participants had hoped that after the inflation growth data, BoJ would raise their yield ceiling from 1% to at least 1.25%. (It's worth noting that the yield on similar US securities is close to 5.0%). However, instead, the Bank of Japan continued to ignore obvious signs of increasing inflationary pressure. Although in the Tokyo region, the CPI rose from 2.8% to 3.3% (YoY) in October. Additionally, despite assurances from high-ranking officials about the priority of industrial production growth, this indicator declined from -4.4% to -4.6% in annual terms.

All of this pushed USD/JPY to a high of 151.71. It would have likely remained there if not for the results of the Federal Reserve's meeting and US labor market data. As a result, it started the week at 149.63 and finished at 149.34. Considering the pair's high volatility, the outcome can be considered neutral.

Economists from the largest banking group in the Netherlands, ING, believe that the pair will end the year not far from 150.00. Regarding its near-term prospects, 65% of analysts expect the yen to strengthen, 35% take a neutral position, and there were no votes for it to rise above 151.00 at the time of writing this review. Technical analysis indicators appear quite mixed this time. On the D1 timeframe, 50% of trend indicators are in green, and the same percentage is in red. Among oscillators, one-third voted for the pair's rise, one-third for its fall, and one-third remained neutral-gray. The nearest support level is located in the range of 148.45-148.80, then 146.85-147.30, 145.90-146.10, 145.30, 144.45, 143.75-144.05, and 142.20. The closest resistance is 150.00-150.15, followed by 150.40-150.80, 151.90 (October 2022 high), and 152.80-153.15.

There is no significant economic data regarding the state of the Japanese economy scheduled for release in the coming week.

CRYPTOCURRENCIES: Important Insights into the Past and Future


First, a few words about the past month. Firstly, on Tuesday, October 31, bitcoin celebrated its birthday. It was on this day in 2008 that someone using the pseudonym Satoshi Nakamoto published (or it was published) a document titled "Bitcoin: A Peer-to-Peer Electronic Cash System." At the same time, it's worth noting that bitcoin itself emerged as a cryptocurrency on the market only on January 3, 2009. On that day, a block was mined, in which the date and a brief excerpt from an article in The Times were written: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." On January 12, 2009, Nakamoto made the first transaction on the network, sending cryptocurrency to developer Hal Finney. In the same year, bitcoin was listed on the New Liberty Standart exchange. On it, you could buy 1309 BTC for just $1 (which is nearly $55 million today).

The second significant event was not the last day of October but the entire month. We are talking about the "Uptober effect" (a term formed from the English words "up" and "October"). According to observations by CoinGecko experts, in eight of the last ten years, the cryptocurrency market has shown growth in October compared to the previous month. On average, the "Uptober effect" led to a 14% increase in the total capitalization of digital assets, ranging from 7.3% in 2022 to 42.9% in 2021. The exceptions were 2014 and 2018 when the market fell by 12.7% and 8.3% in one month, respectively.

This year, starting at $27,000 on October 1, bitcoin tested the $35,000 level on October 24, showing an increase of approximately 30%. The final note of October placed the flagship cryptocurrency at $34,545. Several altcoins like Solana (SOL) and Chainlink (LINK) also demonstrated significant rallies. All these cryptocurrencies, paired with USD, are available for trading on the NordFX broker.

We have already mentioned that lately bitcoin has lost its inverse and direct correlation and has "decoupled" from both the US dollar and major risk assets. This was the case in the past week as well. Digital gold rose along with the US dollar's ascent and didn't react to the rise of stock indices like the S&P500. As a result, BTC/USD showed modest growth over the course of seven days.

According to Michael Van De Poppe, the founder of the venture company Eight and CEO of MN Trading, bitcoin has officially entered a bull market phase. The expert believes that the asset is ready for a rally to $50,000, followed by a correction, and then a new all-time high (ATH). Van De Poppe noted that bitcoin might face resistance at $38,000 but is likely to continue its rise and reach $45,000-50,000 in January 2024. However, the specialist also points out that a drop below $33,000 is still possible, and he sees it as an excellent opportunity to open long positions. The creators of the information resource Look Into Bitcoin also believe that after surpassing the $34,000 price level, the early phase of a bull market has begun. The next targets are $41,900 and $65,050.

What events in the near and not-so-distant future could have a significant impact on the crypto market? Let's list the most important ones, noting that many of them are happening or will happen in the United States.

First, of course, is the monetary policy of the Federal Reserve (FRS). The "golden times" for digital gold were during the peak of the COVID-19 pandemic when the regulator literally flooded the market with streams of cheap money to support the economy, some of which went to risky assets like cryptocurrencies. Starting at $6,500 in March 2020, a year later in April 2021, BTC/USD reached a high of $64,800, showing a 900% increase. Then, the American regulator shifted towards tightening its policy and raising interest rates, and by 2022, the pair was trading around $16,000. Now, crypto investors are waiting for the Federal Reserve to pivot towards easing again and hope that this will happen in the next year.

The US government regulatory bodies have lately been exerting significant negative pressure on the crypto industry. Perhaps something will change with the arrival of a new president in the White House in 2024. At least some of the candidates for this position promise support for the industry. For now, all the attention is focused on the SEC (Securities and Exchange Commission). The head of the SEC, Gary Gensler, has repeatedly stated that he is willing to recognize only bitcoin as a commodity, and in his opinion, all altcoins should be regulated under securities laws. Under this pressure, Ethereum, for example, significantly lagged behind bitcoin in terms of price dynamics. This year, at the time of writing this review, ETH has gained about 52%, while BTC has grown by twice as much, around 102%.

Legal battles between the SEC and representatives of the crypto industry are also drawing attention. Recently, Reuters and Bloomberg reported that the Commission will not appeal a court decision in favor of Grayscale Investments. There is also information that the SEC is ending its legal process against Ripple and its executives. However, the cold war with major crypto exchange Binance and its leadership continues. As a result, Binance's share in the spot market has already fallen from 55% to 34% this year. If the US Department of Justice joins forces with more severe charges on the SEC's side, it could deal a significant blow to the crypto market.

The appearance of spot BTC-ETFs also depends on the SEC. According to JPMorgan bank experts, a positive decision by the SEC on registering the first such funds can be expected "within months." "The timing of approval [...] remains uncertain, but it is likely to happen [...] before January 10, 2024 - the final deadline for the applications of ARK Invest and 21 Co. This is the earliest of the various final deadlines that the SEC must respond to," note JPMorgan experts. At the same time, experts also emphasize that the Commission, by supporting fair competition, may approve all applications at once.

The anticipation of the imminent launch of spot BTC-ETFs in the US is fuelling institutional interest in cryptocurrency. According to some estimates, this interest is around $15 trillion, which could eventually lead to BTC/USD rising to $200,000. Skybridge Capital's strategists even mention a larger figure of $250,000. However, due to obstacles from the SEC, according to Ernst & Young analysts, institutional interest is mainly deferred.

Peter Schiff, the CEO of Euro Pacific Capital and a prominent gold bug, holds the opposite view. According to him, the final approval of spot bitcoin ETFs will mark the end of the bull run for the leading cryptocurrency. Currently, bitcoin is trading around $35,000 because speculators are driving up the price, betting on a positive regulator decision. When the decision is made, there will be no more room for such speculation, which could mark the peak of the rally if bitcoin doesn't crash before that. In Schiff's opinion, cryptocurrency traders may start selling their coins and taking profits even before the SEC makes any decision.

Something that doesn't depend on the regulator is the halving. Recall that in April 2024, the block reward will be halved, reducing from 6,250 BTC to 3,125 BTC, which is expected to lead to reduced issuance. According to some experts, this is a powerful deflationary factor that creates supply shortages and contributes to the rise in the value of bitcoin. Since the coin supply is limited, co-founder of Morgan Creek Digital, Anthony Pompliano, not only expresses optimism about a bull run for bitcoin but also calls it the "most disciplined central bank in the world." According to an optimistic forecast from Ark Invest, BTC could rise to $1.5 million by 2030.

However, the CEO of MN Trading, Van De Poppe, predicts that before bitcoin starts setting new highs, there will first be consolidation and sideways movement for an extended period after the April halving. Even more pessimism is added by a trader and analyst with the pseudonym Rekt Capital, who expects a sharp drop in BTC/USD by March 2024. After the halving, this specialist also anticipates consolidation, but in a very low range of $24,000-30,000, and only after that, in his opinion, the pair will enter a parabolic growth phase towards six-figure levels.

At the time of writing this review, on Friday, November 3, BTC/USD is trading at $34,590. The total market capitalization of the crypto market is $1.29 trillion ($1.25 trillion a week ago). The Crypto Fear & Greed Index remains in the Greed zone, though it has dropped from 72 to 65 points.

To conclude this review, in our irregular crypto life hacks section, we have an interesting tip. Where can you use the heat generated from cryptocurrency mining? The answer is in a sauna. A sauna in Brooklyn, New York, has started using the heat generated by mining equipment as a source of water heating. Saunas are becoming increasingly popular among Americans, and this twist benefits miners as it provides an additional argument in discussions about the public utility or significance of such entrepreneurial activities. And this is in New York, near the 40th parallel. Just imagine how useful this life hack could be in northern countries like Norway!
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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October Results: Top 3 NordFX Traders' Profit Nears 400,000 USD

NordFX brokerage company has summarized the trading performance of its clients for October 2023. Additionally, the social trading services and the profit earned by the company's IB partners were evaluated.

The past month proved highly fruitful for the company's clients. The undisputed leader was a trader from Western Asia, account [You must be registered and logged in to see this link.], with a profit amounting to 185,095 USD. This remarkable result was achieved from trades involving gold (XAU/USD), the euro (EUR/USD), and the British pound (GBP/USD).

- Taking the second spot on the podium with an impressive profit of 129,150 USD was a representative from South Asia, account No.1720XXX. Their profit was derived from trading currency pairs GBP/USD, EUR/USD, and USD/JPY.

- Gold (XAU/USD) enabled another trader from Western Asia, account No.1696XXX, to earn 83,980 USD, securing a spot among the top three.  

In the PAMM service, the "Trade and earn" account continues to attract the attention of passive investors. It was opened 601 days ago but remained dormant until it was revived in November 2022. Since then, the account's yield has exceeded 205% with a relatively small drawdown of less than 17%. It's worth noting that past performance does not guarantee similar returns in the future. As always, we urge investors to exercise utmost caution when investing their funds.

On the PAMM service showcase, two long-standing accounts remain, which we've frequently mentioned in previous reports. These are "KennyFXPRO-The Multi 3000 EA" and "TranquilityFX-The Genesis v3". Recall that on November 14, 2022, they faced significant losses, with drawdowns nearing 43%. However, the PAMM managers chose to persevere, and by October 31, 2023, the first account's profit surpassed 116%, and the second's reached 78%

The top 3 IB partners of NordFX for October are as follows:

- The highest commission of 13,469 USD was credited to a partner from South Asia, account No.1576XXX.
- Second place went to the holder of account No.1645XXX from Western Asia, who received 11,869 USD. Remarkably, this partner has been among the top three for six consecutive months. Over this period, thye accumulated earnings of approximately 70,000 USD.
- Lastly, rounding off the top 3 is another partner from South Asia with account No.1700XXX, who received a reward of 7,124 USD.
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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Forex and Cryptocurrencies Forecast for October 30 - November 03, 2023

EUR/USD: Awaiting the Pair at 1.0200?


Having started the past week on a positive note, EUR/USD approached a significant support/resistance level at the 1.0700 zone on Tuesday, October 24, before reversing and sharply declining. According to several analysts, the correction of the DXY Dollar Index that began on October 3rd, which correspondingly drove EUR/USD northward, has come to an end.

The trigger for the trend reversal was disappointing data on business activity (PMI) in Germany and the Eurozone, which fell short of forecasts and dropped below the key 50.0-point mark, indicating a deteriorating economic climate. These figures, remaining at a five-year low, starkly contrasted with similar indicators from the United States, which were released on the same day and exceeded both forecasts and the 50.0-point level. (As noted by proponents of technical analysis, the decline was also facilitated by the fact that as EUR/USD approached 1.0700, it hit its 50-day MA.)

In addition to PMI, preliminary U.S. GDP data for Q3, released on Thursday, October 26, served as further evidence that the American economy is coping well with a year and a half of aggressive monetary tightening. The annualized figures were significantly higher than both previous values and forecasts. Economic growth reached 4.9% compared to 2.1% and 4.2%, respectively. (It's worth noting that despite this growth, experts from the Wall Street Journal predict a GDP slowdown to 0.9%, which has led to a drop in the yield of U.S. Treasury bonds and slightly stalled the rise of the DXY.).

Also on Thursday, October 26, a European Central Bank (ECB) meeting took place, where the Governing Council members were expected to decide on the Eurozone interest rate. According to the consensus forecast, the rate was expected to remain at the current level of 4.50%, which indeed occurred. Market participants were more interested in the statements and comments made by the European Central Bank's leadership. From ECB President Christine Lagarde's remarks, it was inferred that the ECB is conducting "effective monetary policy, particularly in the banking sector." Nevertheless, the situation in Europe is not ideal. "Interest rates have likely reached their peak, but the Governing Council does not rule out an increase," she stated. Now more than ever, a data-dependent policy should be adopted. Inaction is sometimes also an action.

Apart from raising rates and maintaining the status quo, there is a third option: lowering rates. Madam Lagarde dismissed this route, stating that discussing a rate cut at this time is premature. However, market sentiment suggests that the ECB will formally announce the end of the current rate-hiking cycle at one of its upcoming meetings. Furthermore, derivatives indicate that the easing of the European regulator's monetary policy could start as early as April, with the likelihood of this happening by June being close to 100%. All of this could lead to a long-term depreciation of the European currency.

Certainly, the U.S. dollar benefits from a higher current interest rate (5.50% vs. 4.50%), as well as different economic dynamics and resilience to stress between the U.S. and Eurozone economies. Furthermore, the dollar is attractive as a safe-haven asset. These factors, along with expectations that the European Central Bank (ECB) will turn dovish before the Federal Reserve does, lead experts to predict a continuing downtrend for EUR/USD. However, considering the likelihood of a significant slowdown in U.S. GDP growth, some analysts believe the pair may stabilize within a sideways channel in the short term. For instance, economists at Singapore's United Overseas Bank (UOB) anticipate that the pair will likely trade in the range of 1.0510-1.0690 over the next 1-3 weeks.

Looking at forecasts for the end of the year, strategists from the Japanese financial holding company Nomura identify several other catalysts driving down EUR/USD: 1) deteriorating global risk sentiment due to rising bond yields; 2) widening yield spreads between German and Italian bonds; 3) reduced political uncertainty in the U.S., as the likelihood of a government shutdown diminishes; and 4) geopolitical tensions in the Middle East serving as a potential trigger for rising crude oil prices. Nomura believes that recent positive news about China's economic growth is unlikely to sufficiently offset these factors, keeping market participants bearish on the euro. Based on these elements, and even assuming that the Federal Reserve keeps interest rates unchanged next week, Nomura forecasts that the EUR/USD rate will fall to 1.0200 by year's end.

Strategists from Wells Fargo, part of the "big four" U.S. banks, expect the pair to reach the 1.0200 level slightly later, at the beginning of 2024. A bearish sentiment is also maintained by economists from ING, the largest banking group in the Netherlands.

Following the release of data on U.S. personal consumption expenditure, which aligned perfectly with forecasts, EUR/USD closed the past week at a level of 1.0564. Expert opinions on its near-term outlook are mixed: 45% advocate for a strengthening dollar, 30% favour the euro, and 25% maintain a neutral position. In terms of technical analysis, the D1 chart oscillators provide no clear direction: 30% point downward, 20% upward, and 50% remain neutral. Trend indicators offer more clarity: 90% look downward, while only 10% point upward. Immediate support levels for the pair are around 1.0500-1.0530, followed by 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Resistance for the bulls lies in the ranges of 1.0600-1.0620, 1.0740-1.0770, 1.0800, 1.0865, and 1.0945-1.0975.

The upcoming week promises to be packed with significant events. On Monday, October 30, we'll receive GDP and inflation (CPI) data from Germany. On Tuesday, October 31, retail sales figures from this engine of the European economy will be released, along with preliminary data on Eurozone-wide GDP and CPI. On Wednesday, November 1, employment levels in the U.S. private sector and Manufacturing PMI data will be published. The day will also feature the most critical event: the FOMC (Federal Open Market Committee) meeting, where an interest rate decision will be made. The consensus forecast suggests that rates will remain unchanged. Therefore, market participants will be particularly interested in statements and comments from the leaders of the U.S. Federal Reserve.

On Thursday, November 2, we'll find out the number of initial jobless claims in the U.S. The torrent of labour market data will continue on Friday, November 3. As is traditional on the first Friday of the month, we can expect another round of key macro statistics, including the unemployment rate and the number of new non-farm jobs created in the United States.

GBP/USD: Awaiting the Pair at 1.1600?

Last week's published data indicated that although the UK's unemployment rate fell from 4.3% to 4.2%, the number of jobless claims amounted to 20.4K. This figure is significantly higher than both the previous value of 9.0K and the forecast of 2.3K. The Confederation of British Industry's (CBI) October data on major retailers' retail sales revealed that the Retail Sales Index dropped from -14 to -36 points, marking its lowest level since March 2021. Furthermore, analysts fear that the situation could deteriorate in November as households face pressure from high prices, leading them to significantly cut back on spending.

According to ING's forecast, in the short-term, risks for the pound remain skewed towards a decline to the key support level of 1.2000. Transitioning to medium-term expectations, Wells Fargo economists believe that not just the European but also the British currency will trend downward. "Europe's poor performance compared to the U.S. should exert pressure on both currencies," they write. "The ECB and the Bank of England have signalled that interest rates have likely reached their peak, which weakens the currencies' support from interest rates. Against this backdrop, we expect the pound to weaken [...] in early 2024, targeting a minimum for GBP/USD around 1.1600."

The Bank of England (BoE) is scheduled to hold a meeting on Thursday, November 2, following the Federal Reserve meeting earlier in the week. According to forecasts, the British regulator is expected to leave its monetary policy parameters unchanged, maintaining the interest rate at 5.25%, similar to the actions taken by the ECB and the Fed. However, given the high inflation rates in the United Kingdom, which exceed those of its main economic competitors, the BoE's rhetoric could be more hawkish than that of Madame Lagarde. In such a case, the pound may find some support against the European currency, but this is unlikely to offer much help against the dollar.

GBP/USD closed the past week at a level of 1.2120. When polled about the pair's near-term future, 50% of analysts voted for its rise. Only 20% believe the pair will continue its movement towards the target of 1.2000, while the remaining 30% maintain a neutral stance. Trend indicators on the D1 chart are unanimously bearish, with 100% pointing to a decline and coloured in red. Oscillators are slightly less conclusive: 80% indicate a decline (of which 15% are in the oversold zone), 10% suggest a rise, and the remaining 10% are in a neutral grey colour. In terms of support levels and zones, should the pair move downward, it would encounter support at 1.2000-1.2040, 1.1960, and 1.1800-1.1840, followed by 1.1720, 1.1595-1.1625, and 1.1450-1.1475. If the pair rises, it will meet resistance at 1.2145-1.2175, 1.2190-1.2215, 1.2280, 1.2335, 1.2450, 1.2550-1.2575, and 1.2690-1.2710.

Aside from the aforementioned Bank of England meeting on November 2, no other significant events concerning the British economy are anticipated for the upcoming week.

USD/JPY: Awaiting the Pair at 152.80?

The Japanese yen remains the weakest among the currencies of developed nations. USD/JPY  has been rising throughout the year, and on Thursday, October 26, it reached a new annual high of 150.77. The primary reason for this trend, as we have frequently emphasized in our reviews, is the disparity in monetary policies between the Bank of Japan (BoJ) and other leading central banks. The BoJ shows no signs of relinquishing its ultra-accommodative monetary policy, maintaining its interest rate at a negative -0.1%. With the Federal Reserve's rate standing at +5.50%, a simple carry-trade operation exchanging yen for dollars provides substantial returns due to this rate difference.

The yen is also not helped by the easing control over the yield curve of Japanese government bonds. Currently, the yield on 10-year bonds can deviate from zero by no more than 0.5%. At its July meeting, the BoJ decided that this range would be more of a guideline than a hard boundary. However, subsequent experience has shown that any notable deviation from this range triggers the BoJ to buy bonds, which again leads to yen weakening.

Even the currency interventions conducted on October 3, when USD/JPY exceeded the 150.00 mark, failed to support the yen. The pair was temporarily brought down to 147.26, but it quickly rebounded and is now once again approaching the 150.00 level.

Leaders of Japan's Ministry of Finance and the Central Bank continually attempt to bolster their currency with reassuring yet rather vague statements, asserting that Japan's overall financial system remains stable and that they are closely monitoring exchange rates. However, as evident, their words have had limited impact. On the past Friday, October 27, Hirokazu Matsuno, the Chief Cabinet Secretary, added to the ambiguity. According to him, he expects the Bank of Japan to conduct appropriate monetary policy in line with objectives for achieving stable and sustainable price levels. While this sounds very good, understanding its implications is also very challenging. What exactly constitutes "appropriate" policy? And where does this elusive "target price level" stand?

According to experts at Germany's Commerzbank, "not everything in Japan's monetary and foreign exchange policy is always logical." "The market is likely to continue testing higher levels in USD/JPY," forecast the bank's economists. "Then there are two possible scenarios: either the Ministry of Finance conducts another intervention, or the yen's depreciation accelerates as the market starts to price out the risk of intervention."

"In the medium to long term," Commerzbank analysts continue, "an intervention won't be able to prevent a depreciation of the currency, especially if the Bank of Japan keeps exerting pressure on the yen by maintaining its ultra-expansionary monetary policy. Therefore, the only logical response would be, at the very least, a gradual normalization of monetary policy, possibly through further easing of the yield curve control (YCC). However, there is no certainty that easing the YCC would be sufficient, nor is there any certainty that the Bank of Japan will change anything in its meeting on Tuesday [October 31]."

As a result, analysts at the French bank Societe Generale believe that current dynamics favour a continuation of the upward movement. The next potential hurdles, in their opinion, lie at the 151.25 level and in the zone of last year's highs of 152.00-152.80. A key support zone is at 149.30-148.85, but overcoming this area would be necessary to confirm a short-term decline.

USD/JPY closed the past trading week at a level of 149.63. When discussing its near-term prospects, analysts are evenly split: 50% predict the pair will rise, and 50% anticipate a decline. Trend indicators on the D1 chart show 65% in green, indicating bullishness, and 35% in red, signalling bearishness. Among oscillators, there is unanimous lack of sentiment for a downward move. 50% point north, and the remaining 50% indicate a sideways trend. The nearest support levels are situated in the zones of 148.30-148.70, followed by 146.85-147.30, 145.90-146.10, 145.30, 144.45, 143.75-144.05, and 142.20. The closest resistance lies at 150.00-150.15, then 150.40-150.80, followed by 151.90 (October 2022 high) and 152.80-153.15.

No significant economic data pertaining to the state of the Japanese economy is scheduled for release in the upcoming week. Naturally, attention should be paid to the Bank of Japan's meeting on Tuesday, October 31, although no major surprises are expected. Traders should also be aware that Friday, November 3, is a public holiday in Japan as the country observes Culture Day.

A bit of reassuring information for proponents of the Japanese currency comes from Wells Fargo. They anticipate that "if the Federal Reserve does indeed cut rates, and even if the Bank of Japan continues to gradually tighten monetary policy, the yield differential should shift in favour of the yen in the long term." Wells Fargo strategists forecast that "by the end of next year, USD/JPY could be heading toward 146.00."

This American bank's outlook may instil optimism in traders who opened short positions at 150.00. However, what course of action should be taken by those who pressed 'Sell' in January 2023 when the pair was trading at 127.00?

CRYPTOCURRENCIES: Start of a Bull Rally or Another Bull Trap?

Today's cryptocurrency market review is decidedly optimistic, and for good reason. On October 23-24, bitcoin surged to $35,188 for the first time since May 2022. The rise in the leading cryptocurrency occurred amid a mix of tangible events, speculative buzz, and fake news related to the U.S. Securities and Exchange Commission (SEC).

For instance, Reuters and Bloomberg reported that the SEC will not appeal a court ruling in favour of Grayscale Investments. Additionally, news emerged that the SEC is discontinuing its lawsuit against Ripple and its executives. Speculation also abounded regarding potential SEC approval of an Ethereum ETF and rumours of a spot BTC-ETF approval for BlackRock. Last week, BlackRock confirmed that the latter news was false. However, the short squeeze triggered by this fake news facilitated the coin's rise, shaking up the market. The initial local trend was amplified by a cascade of liquidations of short positions opened with significant leverage. According to Coinglass, a total of $161 million in such positions was liquidated.

While the news was fake, the saying goes, "Where there's smoke, there's fire." BlackRock's spot bitcoin exchange-traded fund, iShares Bitcoin Trust, appeared on the Depository Trust and Clearing Corporation (DTCC) list. BlackRock itself informed the SEC about its plans to initiate a test seed round in October for its spot BTC-ETF, potentially already beginning its cryptocurrency purchasing. This too fuelled speculation and rumours that the approval of its ETF is inevitable.

Moreover, according to some experts, technical factors contributed to the rise in quotes. Technical analysis had long pointed to a possible bull rally following an exit from the sideways trend.

Some analysts believe that another trigger for bitcoin's surge was the decline of the Dollar Index (DXY) to monthly lows on October 23. However, this point is debatable. We have previously noted that bitcoin has recently lost both its inverse and direct correlations, becoming "decoupled" from both the U.S. currency and stock market indices. The chart shows that on October 24, the dollar reversed its trend and began to rise. Risk assets like the S&P 500, Dow Jones, and Nasdaq Composite indices responded to this with sharp declines. But not BTC/USD, which shifted to a sideways movement around the Pivot Point of $34,000.

While the S&P 500 has been in a bearish trend for 13 weeks, BTC has been rising since August 17 despite challenges. During this period, the leading cryptocurrency has gained approximately 40%. Looking at a more extended timeframe, over the last three years, bitcoin has grown by 147% (as of October 20, 2023), while the S&P 500 has increased by only 26%.

Last week, the average BTC holder returned to profitability. According to calculations by analytics agency Glassnode, the average acquisition cost for investors was $29,800. For short-term holders (coins with less than 6 months of inactivity), this figure stands at $28,000. As of the writing of this review, their profit is approximately 20%.

The situation is somewhat different for long-term hodlers. They rarely react to even significant market upheavals, aiming for substantial profits over a multi-year horizon. In 2023, over 30% of the coins they held were in a drawdown, but this did not deter them from continuing to accumulate. Currently, holdings for this investor category amount to a record 14.9 million BTC, equivalent to 75% of the total circulating supply. The most notable and largest among such "whales" is MicroStrategy Incorporated. The company purchased its first batch of bitcoin in September 2020 at a price of $11,600 per coin. Subsequent acquisitions occurred during both market upswings and downturns, and it now owns 158,245 BTC, having spent $4.7 billion on the asset. Therefore, MicroStrategy's unrealized profit stands at approximately $0.65 billion, or roughly 13.6%.

The anticipation of the imminent launch of spot BTC ETFs in the U.S. is fuelling institutional interest in cryptocurrency. However, due to regulatory hurdles posed by the SEC, this interest is mostly deferred, according to analysts at Ernst & Young. By some estimates, this pent-up demand amounts to around $15 trillion, which could potentially drive BTC/USD to $200,000 in the long term. What can be said for certain is that open interest in futures on the Chicago Mercantile Exchange (CME) has surpassed a record 100,000 BTC, and daily trading volume has reached $1.8 billion.

Another driver of increased activity, according to experts, is the inflationary concerns in the U.S. and geopolitical risks such as the escalating situation in the Middle East. Zach Pandl, Managing Director of Grayscale Investments, explained that many investors view bitcoin as "digital gold" and seek to minimize financial risks through it. According to CoinShares, investments in crypto funds increased by $66 million last week; this marks the fourth consecutive week of inflows.

According to experts at JPMorgan, a positive decision from the SEC on the registration of the first spot bitcoin ETFs can be expected "within months." The specialists noted the absence of an SEC appeal against the court decision in the Grayscale case. The regulator has been instructed not to obstruct the transformation of the bitcoin trust into an exchange-traded fund. "The timelines for approval remain uncertain, but it is likely to happen [...] by January 10, 2024, the final deadline for the ARK Invest and 21 Co. application. This is the earliest of various final deadlines by which the SEC must respond," noted the experts at JPMorgan. They also emphasized that the Commission, in the interest of maintaining fair competition, may approve all pending applications simultaneously.

The future price behaviour of bitcoin is a topic of divided opinion within the crypto community. Matrixport has published an analytical report discussing the rising FOMO (Fear of Missing Out) effect. Their analysts rely on proprietary indicators that enable them to make favourable predictions for digital assets. They believe that by year-end, bitcoin could reach $40,000 and may climb to $56,000 if a bitcoin ETF is approved.

Many market participants are confident that a positive news backdrop will continue to support further cryptocurrency growth. For instance, Will Clemente, co-founder of Reflexivity Research, believes that the coin's behaviour should unsettle bears planning to buy cheaper BTC. A trader and analyst known as Titan of Crypto predicts the coin to move towards $40,000 by November 2023. Optimism is also shared by Michael Van De Poppe, founder of venture company Eight, and Charles Edwards, founder of Capriole Fund.

However, there are those who believe that BTC will not make further gains. Analysts Trader_J and Doctor Profit, for example, are certain that after reaching a new local maximum, the coin will enter an extended correction. Their forecast does not rule out a decline of BTC/USD to $24,000-$26,000 by year-end. A trader known as Ninja supports this negative bitcoin outlook. According to him, the technical picture, which includes an analysis of gaps on CME (the space between the opening and closing prices of bitcoin futures on the Chicago Mercantile Exchange), suggests the likelihood of BTC falling to $20,000.

As of the time of writing this review, on Friday, October 27, BTC/USD is trading at $33,800. The overall market capitalization of the crypto market stands at $1.25 trillion, up from $1.12 trillion a week ago. The Crypto Fear & Greed Index has risen over the week from 53 points to 72, moving from the Neutral zone into the Greed zone. It recorded its 2023 peak before slightly retreating and currently stands at 70 points. It's worth noting that just a month ago, the Index was in the Fear zone. Similar explosive rises in market sentiment were previously recorded in mid-2020 and mid-2021, correlating with price increases.

In conclusion of this generally optimistic overview, let's introduce a bit of pessimism from Peter Schiff, President of Euro Pacific Capital. This long-time critic of the leading cryptocurrency stated that bitcoin is "not an asset, it's nothing." He also likened bitcoin holders to a cult, saying, "No one needs bitcoin. People buy it only after someone else convinces them to do so. After acquiring [BTC], they immediately try to draw others into it. It's like a cult," wrote Schiff.

However, it's worth noting that this is a very large and rapidly growing "cult." If in 2016 the number of BTC holders was just 1.2 million, by May 2023, according to various sources, global ownership is estimated at 420 million, or 5.1% of the world's population.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for October 23 - 27, 2023

EUR/USD: No Interest Rate Hikes from the Fed and ECB in the Near Future?

Starting from the last days of September, the U.S. Dollar Index (DXY) has been trading within a sideways channel. Macroeconomic data released last week did not provide a clear advantage to either the U.S. or the European currency. On Tuesday, October 17, U.S. retail sales data was published, showing a monthly increase of 0.7%. Although this figure was lower than the previous 0.8%, it substantially exceeded the market's average forecast of 0.3%. On the same day, the ZEW Economic Sentiment Index for the Eurozone was also released, outperforming expectations with a reading of 2.3, considerably better than the forecast of -8, and marking a full rebound from the previous negative figure of -8.9.

On Wednesday, October 18, revised data on consumer inflation in the Eurozone was released. The September Consumer Price Index (CPI) matched the forecast and was ultimately assessed at 4.3% year-on-year (YoY), compared to 5.2% the previous month. On Thursday, October 19, the number of initial jobless claims in the U.S. came in at 198K, surpassing expectations and falling below both the prior figure of 211K and the market forecast of 212K.

Taking a broader view of the U.S. economy, we generally observe strong employment and GDP growth rates, a deceleration in inflation, increased consumer activity, and a real estate market that remains relatively stable despite rising mortgage rates. All these factors point to the appropriateness of another rate hike, which should, in turn, push the DXY higher. However, based on statements from Federal Reserve officials, it seems unlikely that a rate hike will occur at the upcoming Federal Open Market Committee (FOMC) meeting on November 1.

Specifically, Patrick Harker, President of the Federal Reserve Bank of Philadelphia, stated that economic pressure should not be created by increasing borrowing costs. Echoing Harker's sentiments, Lorie Logan, President of the Federal Reserve Bank of Dallas, noted that although "desired progress is being observed in the fight against inflation, it is still too high." She added that "the economy continues to demonstrate strong performance, and labour markets remain tight," yet "the Fed still has some time to observe the economy and markets before making a decision on monetary policy.".

Jerome Powell's speech at the New York Economic Club on Thursday, November 19, did not meet the expectations of dollar hawks, leading EUR/USD to rise above 1.0615. According to economists at Rabobank, the Federal Reserve Chairman attempted to keep the door open for various options while maintaining a neutral stance. Rabobank believes that U.S. economic indicators are likely to sustain the possibility for further rate hikes. However, with less than a week and a half remaining until the next FOMC meeting, the current "neutral dynamics provide no basis to expect a rate hike on November 1st." Nonetheless, they note that "this option remains open for the December meeting." Despite that, economists at the bank still expect "the bond market to do the Fed's job, making further rate hikes redundant. However, if economic data remain strong, the FOMC will eventually have to resume the rate hike cycle at some point."

Analysts at the Netherlands' largest banking group, ING, opined that while the Fed Chairman's comments were perceived as dovish and led to some weakening of the U.S. currency, the dollar appears more inclined to rise than to further fall in the short term. Economists at Germany's Commerzbank characterized the mood among Fed officials as cautiously hawkish rather than dovish. They also see little chance for another rate hike in the current climate. "Indeed, it seems that the Fed has reached its peak, although Jerome Powell did not rule out the possibility of another rate hike depending on incoming data. However, monetary policy currently plays a secondary role for the market. Geopolitical risks have taken the forefront, and the dollar continues to be in demand as a safe haven," they commented. The bank's experts forecast that although it may be challenging for the dollar to continue rising in such a scenario, high oil prices will provide support.

At France's Societe Generale, it is believed that "the narrative about a higher rate over a longer term, both from the Fed and the ECB, points to a gradual decline of the euro." According to the bank's experts, "data from the Eurozone is not brilliant, and the divergence between growth forecasts in the U.S. and the Eurozone suggests that a slow movement toward parity [1.000], but not beyond it, appears likely.".

As of the time of writing this review, EUR/USD has evidently not reached parity and concluded the past week at 1.0593. Expert opinions on its near-term future are divided as follows: 50% voted for a stronger dollar, 35% foresee the pair trending upward, and 15% have adopted a neutral stance.

Turning to technical analysis, the outlook is also mixed. Among the trend indicators on the D1 chart, the ratio stands at 1:1: 50% in favour of reds (bearish) and 50% on the side of greens (bullish). Oscillators show 40% siding with the European currency, a mere 15% in favour of the dollar, with the remaining 45% taking a neutral position. The immediate support levels for the pair are situated around 1.0550, followed by 1.0485-1.0510, 1.0450, 1.0375, 1.0255, 1.0130, and 1.0000. Bulls will encounter resistance in the 1.0600-1.0620 zone, then at 1.0670-1.0700, 1.0740-1.0770, 1.0800, 1.0865, and 1.0945-1.0975.

The upcoming week promises to be highly eventful. On Tuesday, October 24, a slew of Purchasing Managers' Index (PMI) data will be released across various sectors of the German, Eurozone, and U.S. economies. The following day, October 25, will bring U.S. housing market data, along with remarks from Federal Reserve Chair Jerome Powell. On Thursday, the European Central Bank (ECB) will hold its meeting where Governing Council members are expected to make a decision on the euro interest rate, which according to consensus forecasts, is likely to remain at its current level of 4.50%. Importantly, not only the decision itself but also subsequent statements and comments from the ECB leadership will be of significance. On the same day, the U.S. will release durable goods orders data as well as preliminary GDP figures for Q3 of the current year. The workweek will conclude on October 27 with the release of U.S. personal consumption expenditure data.

GBP/USD: Will the BoE Rate Remain Unchanged as Well?

At the beginning of this month, specifically on October 4, GBP/USD trended upwards, moving from a level of 1.2037 to reach 1.2337 within a week. However, resistance around the 1.2320 zone and a trendline clearly visible on the D1 and W1 timeframes halted the bullish momentum, sending the pair back downwards. As a result, the British currency has lost approximately 7.5% against the dollar since mid-July. The driving factors behind this are not merely technical analysis but also the prevailing economic and geopolitical landscape.

Amid tensions in the Middle East and the ongoing escalation of armed conflict between Israel and Hamas, investors are turning back to the dollar, viewing it as a safe-haven currency. Naturally, the rising cost of energy commodities is also affecting prices in the United Kingdom, which will undoubtedly put pressure on the country's economy and its currency, often considered by investors to be a riskier asset.

It's worth noting that at the beginning of the year, experts predicted that the United Kingdom would slide into a recession. So far, those forecasts have not materialized, although the economy is teetering on the edge, with the current annual GDP growth rate at 0.6% (compared to 2.1% in the United States). The situation could deteriorate by year-end, as high energy prices amid winter cold spells could further fuel inflation. It's already observable that the country's inflation slowdown has stalled, and the Consumer Price Index (CPI) has been hovering around 6.8-6.7% year-on-year for the third consecutive month.

In such a scenario, the Bank of England (BoE) might very well opt to focus on supporting the economy over combating inflation. Although some representatives of the central bank have stated that the issue of raising interest rates remains open, the recent interview given by BoE Governor Andrew Bailey to the Belfast Telegraph appeared rather dovish, neutralizing the effect of Jerome Powell's similarly dovish comments. Mr. Bailey indicated that he expects "a noticeable decrease" in inflation in the coming month. "Looking at September's inflation data, we can say that core inflation has dropped a bit compared to our expectations, which is quite encouraging," added Bailey, sending GBP/USD into a minor knockdown.

Pressure on the pound was also exerted by the UK retail sales data released on Friday, October 20. According to the Office for National Statistics, retail sales declined by -0.9% month-on-month in September, significantly below the -0.1% forecast and the previous 0.4% value.

At the moment, the situation for the pound remains complicated. It's unclear how the BoE will react to the latest data. Most likely, until the upcoming meeting on November 2, the central bank will adopt a "close your eyes and hope for the best" approach. Meanwhile, analysts from Bank of America, Deutsche Bank, Goldman Sachs, and RBC are in agreement that the rate hike cycle in the United Kingdom has likely come to an end. At the very least, the probability of a rate hike in the upcoming BoE meeting is estimated to be below 50%.

The weekly low for GBP/USD was recorded at 1.2089, while the week closed at 1.2163. When polled about the near-term future of the pair, 40% of analysts voted for its rise. The majority (60%), however, believe that the pair will continue its move toward the 1.2000 target. On the D1 timeframe, trend indicators are unanimously (100%) pointing to a decline, displayed in red. Oscillators are less decisive: 65% indicate a decline, 15% point to a rise, and the remaining 20% are neutral.

In terms of support levels and zones, if the pair continues to move southward, it will encounter 1.2085-1.2130, 1.2040, 1.1960, and 1.1800. On the flip side, if the pair rises, it will face resistance at 1.2190-1.2215, 1.2270, 1.2330, 1.2450, 1.2510, 1.2550-1.2575, and 1.2690-1.2710 levels.

Tuesday, October 24 is noteworthy in the economic calendar for the upcoming week. Data on the UK labor market and business activity will be released on this day.

USD/JPY: Amidst Prolonged Uncertainty

Many times have we heard these reassuring statements from Japanese officials about everything and... nothing! Let's take, for example, some quotes from Friday, October 20. First, from Bank of Japan (BoJ) Governor Kazuo Ueda: "The Japanese economy is recovering at a moderate pace. […] Uncertainty regarding Japan's economy is very high. […] Inflation rates will likely slow down and then pick up again. [But] overall, Japan's financial system remains stable."

Next, from Finance Minister Shunichi Suzuki: "It is important for currencies to move stably and reflect fundamental indicators. […] Exchange rates are influenced by various factors. I will not comment on currency levels in the Forex market. [And] I will not comment on our response to the currency market situation."

And, as the cherry on top, a quote from the Bank of Japan's latest report, also published on October 20: "Although the country's financial system is generally stable, the 'stress period may be further prolonged due to the ongoing tightening of central banks' monetary policy and concerns about slowing economic growth rates in foreign countries." In summary, Japan, on one hand, is doing well, but on the other, is experiencing stress caused by other central banks that are tightening their monetary policy and raising interest rates.

As experts note, the BoJ continues to maintain an ultra-accommodative monetary policy, persistently ignoring the risks of rising inflationary pressures in the country. On Tuesday, October 17, Bloomberg reported that the Bank of Japan's new core CPI forecast for the 2023 fiscal year is likely to approach 3.0%, compared to 2.5% previously.

The fact that interest rates in Japan remain very low due to yield curve control policy should lead to a further decline in the yen against the dollar. This decline could cease under two conditions: if the dollar interest rates decline or if the Bank of Japan abandons its YCC (Yield Curve Control) policy. Both could potentially begin to happen as early as mid-2024, but certainly not now. (Although one should not forget the possibility of currency interventions by the Japanese Ministry of Finance).

According to strategists at Societe Generale, "if we see further increases in yields in the U.S. and no more than a change in the inflation forecast by the Bank of Japan at its meeting on October 31, then another surge [in USD/JPY] above 150.00 is practically inevitable." "The yen has every chance of becoming one of the most successful currencies in 2024," Societe Generale believes, "but predicting when USD/JPY will peak is as easy or difficult as determining when the yield on 10-year U.S. Treasury bonds will peak."

Amid a prolonged atmosphere of uncertainty, USD/JPY ended the previous trading week at 149.85. When it comes to the pair's short-term outlook, a mere 15% of experts foresee a renewed push towards the 150.00 mark. An additional 20% predict a downward correction, while the majority, 65%, remain noncommittal. On the D1 timeframe, all trend indicators are unanimously signalling 'buy' with a green coloration. Likewise, 100% of oscillators are green, although 40% indicate that the pair may be overbought. Immediate support can be found in the 149.60 area, followed by zones at 148.30-148.65, 146.85-147.25, 145.90-146.10, 145.30, 144.45, 143.75-144.05, and finally 142.20. On the upside, resistance is present at 150.00-150.15, then at 150.40, followed by the October 2022 high of 151.90, and 153.15.

No significant economic data concerning the state of the Japanese economy is scheduled for release in the upcoming week. The only noteworthy item is the publication of the Tokyo Consumer Price Index on Friday, October 27.

CRYPTOCURRENCIES: The Real Market Surge Triggered by Fake News About BTC-ETF


Undoubtedly, the most significant day of the past week was Monday, October 16. On this day, the bitcoin price soared to $30,102 before plummeting to $27,728. Following BTC, other digital assets also saw a sharp price increase, followed by a steep decline. According to Coinglass data, the price surge led to the liquidation of over 33,000 trading positions, with traders incurring losses totalling $154 million. Of this amount, bitcoin accounted for $92.0 million in losses, Ethereum for $22.7 million, and Solana for $4.6 million.

The surge in quotations occurred after Cointelegraph published news that the U.S. Securities and Exchange Commission (SEC) had approved BlackRock's application for a spot bitcoin exchange-traded fund (ETF). It was later revealed that the news was fake. Cointelegraph's editorial team apologized for publishing the false news. The publication clarified that one of their staff had seen the news about the SEC's approval of the BTC-ETF on Platform X (previously Twitter) and decided to publish it as quickly as possible without fact-checking or obtaining editorial approval. Representatives from the Commission also noted that "the best source of information about the SEC is the SEC itself" and advised users to "be cautious about what they read online.".

To understand this issue more deeply, it's helpful to look back to its origins in 2021. That year, a series of companies submitted applications to create such funds. Three years ago, Bitwise Chief Investment Officer Matt Hougan explained that cryptocurrency futures ETFs are not particularly suitable for long-term investors due to high ancillary costs. It is only when spot bitcoin exchange-traded funds become available that institutional investors will begin large-scale capital inflows.

For clarification: A spot BTC-ETF is a fund whose shares are traded on an exchange, and which tracks the market, or spot price, of bitcoin. The primary idea behind such ETFs is to give institutional investors access to bitcoin trading without physically owning the asset, through a regulated and financially familiar product.

All applications submitted to the SEC in 2021 were rejected, leading to a hiatus that was interrupted on June 15, 2023. On that day, the situation dramatically changed: the financial world was abuzz with the news that investment giant BlackRock had submitted its application for a spot bitcoin trust. In an interview with Bloomberg, Hougan heralded the dawn of a new era. He stated, "We now have BlackRock raising the flag and declaring that bitcoin matters: that it is an asset institutional investors want to invest in. I believe we have entered a new era in cryptocurrency, which I call the foundational era, and I expect a multi-year bull trend that is just beginning."

Under the banner raised by BlackRock, seven more leading financial institutions also submitted similar applications to the SEC. Among them were global asset managers like Invesco and Fidelity, who, experts believe, have the capacity to absorb trillions of dollars. The ninth on the list was the asset management company GlobalX. They, along with several other financial giants, had entered the ETF race back in 2021, but were then thwarted by the SEC. Now, in August 2023, GlobalX made another attempt.

Owing to the initiatives of these investment titans, bitcoin experienced a meteoric rise starting in the latter half of June. It shattered the $25,000 resistance barrier, soared beyond $30,000, and peaked at $31,388 on June 23. This resulted in a weekly gain exceeding 26%. Following bitcoin's lead, altcoins like Ethereum also saw significant upward movement, registering approximately a 19% increase during the same period. However, due to subsequent regulatory pressures from the SEC and actions by the U.S. Federal Reserve, along with other negative news, the BTC/USD trading pair began to decline. It reached a low point of $24,296 on August 17.

And now, two months later, we see another surge and subsequent drop. What's next? It's a pertinent question, as the approval of spot bitcoin ETFs is expected to unleash a significant wave of adoption of this asset class by institutional investors. According to analysts at CryptoQuant, this could quickly propel the market capitalization of the crypto space by $1 trillion. In their opinion, the odds of this happening have significantly increased following the legal victories of Ripple and Grayscale against the SEC. Bloomberg analysts currently estimate these odds at 90%.

It's worth noting that the deadline for the SEC's decisions on the applications from BlackRock and other companies will arrive in March 2024. However, Mike Novogratz, the CEO of Galaxy Investment, believes that spot bitcoin ETFs could become a reality as early as this year. Larry Fink, the head of BlackRock, declined to comment on the status of their application but added that the October 16 rally was driven not so much by rumours of its approval but rather by a desire among people to use quality assets, which he believes includes bitcoin, gold, and Treasury bonds.

Anthony Scaramucci, founder of SkyBridge Capital and former White House Communications Director, believes that the leading cryptocurrency is "in many ways even more valuable than gold," and could "easily" achieve a market capitalization of $15 trillion. According to his calculations, such a capitalization would propel the price of bitcoin to approximately $700,000.

Scaramucci asserts that the current financial system is "broken." "Strange things could happen when you see countries that are hostile to the U.S. trading in bitcoin or other assets to distance themselves from the dollar. This is because the United States has used its currency to assert its own geopolitical will," he said.

Opinions within the crypto industry regarding the near-term future of bitcoin (BTC) are divided. A study conducted by Finbold revealed that a substantial number of experts do not rule out the possibility of BTC/USD climbing to $100,000 or even $200,000. Finbold specialists also sought forecasts from the artificial intelligence PricePredictions. According to AI calculations, after the approval of a bitcoin ETF, the flagship crypto asset could swiftly reach the $100,000 range. PricePredictions noted that additional factors like mainstream bitcoin adoption, institutional investor actions, regulatory activity, and overall macroeconomic conditions will be significant.

Trader, analyst, and founder of venture firm Eight, Michael Van De Poppe, believes that the October 16th fake news will not hinder the cryptocurrency's growth. According to his observations, the coin has already entered a phase of positive momentum. "The trend is already upward. The lows we're seeing now offer a buying opportunity. A bitcoin ETF will eventually enter the market; it's just not happening today," said the Eight CEO.

Authors of the analytical channel Root in X (formerly known as "Twitter") also think that the fake news did not exert significant pressure on the cryptocurrency. In their opinion, the coin's pump, despite the subsequent correction, has actually helped improve its position. However, there is also a sizable portion of the crypto community that supports a bearish outlook, suggesting the coin could drop to the $19,000-$23,000 range.

On Friday, October 20, BTC/USD made another attempt to breach the $30,000 mark, reaching a high of $30,207 before retreating. At the time of writing this overview, it is trading at $29,570. The overall market capitalization of the crypto market stands at $1.120 trillion, up from $1.046 trillion a week ago. The Crypto Fear & Greed Index has risen over the week from 44 to 53 points, moving from the 'Fear' zone into the 'Neutral' zone.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for October 16 - 20, 2023

EUR/USD: Inflation Drives Trends


At the beginning of last week, the Dollar Index (DXY) continued its decline that began on October 3, while global equity markets experienced growth. The dovish stance of Federal Reserve officials and the falling yields on U.S. Treasury bonds were driving factors. In recent days, the regulators have been actively persuading the market of the likelihood of a "soft landing" for the U.S. economy, suggesting a potentially prolonged pause in the cycle of monetary tightening. For instance, on Wednesday, October 11, Christopher Waller, a member of the Federal Reserve Board of Governors, stated that "tightening in financial markets is doing some of our work for us," allowing the central bank to maintain a wait-and-see approach.

On the same day, the minutes of the September meeting of the Federal Open Market Committee (FOMC) were released. The document, if not dovish, was certainly not hawkish. It is worth noting that the Committee left the interest rate unchanged in September. As for future prospects, the minutes indicated that Fed leaders acknowledge "high uncertainty" regarding the future of the U.S. economy and recognize the need to maintain a cautious approach to monetary policy.

Market sentiment began to gradually shift following the publication of the U.S. Producer Price Index (PPI). The Bureau of Labor Statistics reported that the PPI rose by 0.5% in September, exceeding the forecast of 0.3%. The core PPI (MoM) increased by 0.3%, compared to the expected 0.2%. On an annual basis, it reached 2.2%, surpassing the forecast of 1.6% and the previous figure of 2%. This unexpected surge in industrial inflation led to speculation that consumer inflation could also exceed expectations.

This indeed materialized. Data released on Thursday, October 12, showed that inflation in September increased by 0.4%, higher than the 0.3% forecast. On an annual basis, the Consumer Price Index (CPI) also exceeded expectations, coming in at 3.7% against a forecast of 3.6%. Market participants concluded that such inflationary growth could prompt Federal Reserve officials to shift from a dovish to a hawkish stance, potentially raising the interest rate by another 25 basis points (bps) to 5.75% in the upcoming FOMC meeting. Amidst such sentiment, the dollar, along with the yields on U.S. government bonds, sharply increased, while equity markets declined. The DXY reached a new local peak, hitting 106.35. Yields on 10-year Treasuries rose to 4.65%, and 2-year yields reached 5.05%. EUR/USD reversed course, dropping from a high of 1.0639 to 1.0525 in just a few hours.

Germany's CPI was also released on Wednesday, September 11, showing an annual consumer inflation of 4.3% and a monthly figure of 0.3%, both of which were fully in line with forecasts and previous data. Joachim Nagel, a member of the ECB's Governing Council and the head of Bundesbank, stated that inflation in Germany has reached its peak. By 2025, he projects that the tightening of monetary policy will steer inflation in the Eurozone down to 2.7%, according to his opinion. "Until we have defeated high inflation rates, we will not rest," he assured.

The minutes from the ECB's September meeting revealed that a solid majority of the Governing Council members supported a 25 basis point interest rate hike for the euro. In their view, any pause might signal that the tightening cycle has come to an end or that the Governing Council is more concerned about the state of the economy and a possible recession than about excessive inflation. These minutes were published on Thursday, October 12.

Some Council members advocate keeping the key rates at their current level, notably François Villeroy de Galhau, the President of the Bank of France. In his opinion, patience in monetary policy currently holds more importance than activity, stating that it would be much better to achieve the goal through a "soft landing" rather than a "hard one."

With a high degree of probability, the European Central Bank will raise the interest rate to 4.75% at its next meeting on October 26. Even after this increase, the rate will still remain below that of the Federal Reserve. Combined with the apparent weakness of the Eurozone economy, this will continue to exert pressure on the euro. The situation is further complicated by a potential spike in energy prices due to the ongoing military actions in Ukraine and the recent escalation of the Israeli-Palestinian conflict as winter approaches.

EUR/USD closed at a level of 1.0507 last week. As of the evening of October 13, when this review was written, experts were divided on its near-term prospects: 80% favoured a northward correction for the pair, while 20% took a neutral stance. The number of votes in favor of further dollar strengthening stood at 0%.

Regarding technical analysis, among the trend indicators on the D1 chart, 100% sided with the bears. A majority (60%) of oscillators continue to favor the U.S. currency and are coloured in red. 30% sided with the euro, with the remaining 10% taking a neutral stance.

Near-term support for the pair is located around 1.0450, followed by 1.0375, 1.0255, 1.0130, and 1.0000. Bulls will encounter resistance in the area of 1.0600-1.0620, then 1.0670-1.0700, 1.0740-1.0770, 1.0800, 1.0865, and 1.0895-1.0930.

The upcoming week's economic calendar highlights several key events. On Tuesday, October 17, data on U.S. retail sales will be released. The Eurozone's Consumer Price Index (CPI) is scheduled for publication on Wednesday. Thursday, October 19, will feature the release of the Philadelphia Fed Manufacturing Index and the customary data on initial jobless claims in the United States. A speech by Federal Reserve Chairman Jerome Powell is also planned for the evening of that Thursday.

GBP/USD: It Was Tough, and It Will Be Tough

Overall, the GBP/USD chart closely resembled that of EUR/USD: rising until Thursday, followed by a reversal and decline after the release of consumer inflation data in the United States. In addition to the prospect of tighter U.S. monetary policy, the British pound faced additional pressure from UK industrial production data.

According to the latest figures from the Office for National Statistics (ONS), published on Thursday, the country's industrial sector activity declined again in August. Manufacturing output fell by -0.8%, compared to a forecast of -0.4% and a -1.2% decline in July. The overall industrial production dropped by -0.7%, against expected -0.2% and -1.1% in the previous month. On an annual basis, although manufacturing output did increase by 2.8% in August, it fell short of the expected 3.4%. The overall volume of industrial production also missed expectations, increasing only by 1.3% instead of the anticipated 1.7%.

Despite the fact that the UK's GDP, after contracting by -0.6% in July, increased by 0.2% in August, the risks of economic growth deceleration have heightened. This is largely due to developments in Israel – escalating tensions in the Middle East could disrupt the global supply chain, and rising prices for natural energy resources, primarily oil, will increase inflationary pressures.

Moreover, British companies have not only slowed their production growth rate due to weakened demand but have also postponed their plans for capacity expansion due to higher interest rates on loans.

This situation poses a dilemma for officials at the Bank of England (BoE), who are caught between trying to tame inflation and preventing the economy from slipping into a deep recession. Speaking at the annual meeting of the Institute of International Finance in Morocco on Friday, October 13, BoE Governor Andrew Bailey stated that "the last decision was a difficult one" and that "future decisions will also be difficult." It's worth noting that the interest rate was left unchanged at 5.25% in September. The next BoE meeting is scheduled for November 2, and whether the regulator will opt to raise the rate even by a few basis points remains a significant question.

GBP/USD closed the past week at a mark of 1.2143. Analyst opinions on its near-term future were surprisingly unanimous, with 100% forecasting an increase for the pair. (It's appropriate to remind that even such unanimity offers no guarantees regarding the accuracy of the forecast). On the contrary, trend indicators on the D1 chart are entirely bearish: 100% of them point to a decline and are coloured in red. Oscillators indicate a fall for the pair at 50%, an increase at 40%, with the remaining 10% maintaining a neutral stance. Should the pair trend downwards, it will encounter support levels and zones at 1.2100-1.2115, 1.2030-1.2050, 1.1960, and 1.1800. If the pair rises, it will meet resistance at levels of 1.2205-1.2220, 1.2270, 1.2330, 1.2450, 1.2510, 1.2550-1.2575, 1.2690-1.2710, 1.2760, and 1.2800-1.2815.

Notable events for the upcoming week include Tuesday, October 17, when data on the state of the UK labour market will be released. On Wednesday, October 18, consumer price index (CPI) data will be published for both the Eurozone and the United Kingdom. (Particularly high volatility can be expected for EUR/GBP on this day). Also of interest is Friday, October 20, when retail sales data for the United Kingdom will be made available.

USD/JPY: Coming Full Circle

What's going on in Japan? Well, the situation remains largely as usual. After plummeting to a level of 147.24 on October 3, USD/JPY resumed its upward trajectory, marking the week's high at 149.82, just shy of the key 150.00 level. It has been noted multiple times that the divergence in monetary policies between the U.S. Federal Reserve and the Bank of Japan (BoJ) will consistently push the pair upwards. Any currency interventions by Japanese financial authorities could only result in a temporary strengthening of the yen.

According to the Bank of Japan, producer inflation has been slowing for the ninth consecutive month. Producer prices, which rose by 3.3% in August with a September forecast of 2.3%, actually increased by a minimal 2.0% year-over-year, the lowest since March 2021. However, with regard to consumer inflation, the BoJ is considering raising the target for the core Consumer Price Index (CPI) for the 2023/24 fiscal year from 2.5% to around 3%. This was reported on Tuesday, October 10, by the Kyodo news agency, citing informed sources.

Evaluating the state of Japan's economy and its monetary policy, S&P Global rating agency believes that "interest rates in Japan will start rising from 2024." However, the agency's view contradicts statements made by Bank of Japan (BoJ) officials. For instance, BoJ board member Asahi Noguchi stated on Thursday, October 13th, that "an interest rate hike would be triggered by achieving the target inflation rate of 2%," and that this target is still far from being reached. According to him, "there's no need to rush," and "there's no urgent need to adjust the Yield Curve Control (YCC) policy." From Noguchi's statements, one could infer that the Japanese regulator would not even be contemplating the topic of interest rates, keeping them at a negative level of -0.1%, were it not for the monetary policy of the Federal Reserve. Noguchi stated that rate hikes "don't necessarily reflect inflation expectations in Japan, but rather U.S. interest rates.".

USD/JPY ended the trading week at the level of 149.53. While the vast majority of experts predict a weakening of the dollar against the euro and pound, only 25% of those surveyed agreed with this view when it comes to the yen. A significant 75% forecast further weakening of the yen and strengthening of the U.S. currency. All 100% of trend indicators remain in the green. Among oscillators, slightly fewer, 80%, stay green, 10% have turned red, and the remaining 10% are in a neutral gray. The nearest support level is located at 149.15, followed by 148.15-148.40, 146.85-147.25, 145.90-146.10, 145.30, 144.45, 143.75-144.05, 142.20, 140.60-140.75, 138.95-139.05, and 137.25-137.50. The closest resistance is at 149.70-150.15, then 150.40, 151.90 (the October 2022 high), and 153.15.

No significant economic data pertaining to the state of the Japanese economy is scheduled for release in the upcoming week.

CRYPTOCURRENCIES: Where Will Bitcoin Fly Next?

Last week, bitcoin began charting its own course, detaching itself from its "big brothers" and disregarding both direct and inverse correlations. Despite rising stock indices and a weakening dollar, the leading cryptocurrency fell and moved into a sideways trend when the dollar started to gain strength.

BTC/USD has been trading within a range of $24,300-$31,300 since mid-March. Over the last eight weeks, its upper boundary has dipped even further, settling into a $28,100-$28,500 zone. As this range has narrowed, short-term speculators and retail traders have become less active, causing the realized capitalization indicator to hover near zero. Long-term holders, also known as "hodlers," are adding to their BTC wallets rather than depleting them, purchasing around 50,000 coins per month.

Historically, such market stagnation has preceded significant price movements. Many investors are now speculating that triggers for another bull rally could include the upcoming 2024 halving event and the potential approval of spot bitcoin ETFs. MicroStrategy, an American technology company, has accumulated 158,245 BTC, which is worth approximately $4.24 billion. In addition, investment giant BlackRock submitted an application for a spot bitcoin ETF in June and acquired $400 million worth of shares in leading miners.

The Bull Run could potentially commence right now; however, Bloomberg strategist Mike McGlone believes that stringent U.S. policies, particularly those by the Securities and Exchange Commission (SEC), are the main obstacles hindering bitcoin's growth. ChatGPT CEO Sam Altman also shares disappointment over the U.S. government's approach towards the crypto industry. "The war on cryptocurrencies seems endless, and the authorities appear keen on taking everything under their control," stated the Artificial Intelligence entrepreneur. Altman, along with U.S. presidential candidate Robert F. Kennedy Jr., thinks that the government's hostility towards independent digital assets is partly due to their desire to introduce their own Central Bank Digital Currency (CBDC). Should this wish materialize, it would provide the state with another surveillance tool over its citizens.

Another pressure point on virtual assets comes from the monetary policy of the U.S. Federal Reserve. Analyst Nicholas Merten opines that bitcoin could take a significant hit due to the Fed's actions, potentially leading to a prolonged economic downturn in the United States. If commodity prices, such as oil, natural gas, and uranium, start to stabilize or decline, this could signal an impending short-term recession. In such a scenario, Merten believes, stock prices could drop by approximately 33%, similar to the correction that occurred in October 2022. Bitcoin, in response, would likely plummet to a range of $15,000-$17,000.

The analyst is convinced that a sustained bull trend in the market is unlikely until the Federal Reserve begins to inject more liquidity into the economy. "Bitcoin thrives when there is an increase in the money supply and when investors are risk tolerant. At present, neither of these conditions is met," explained Nicholas Merten.

The current dynamics of bitcoin seem to align with what was observed before and after the halvings in 2016 and 2020. Following its summer peak, the coin is experiencing a downward correction; however, this isn't surprising. Typically, around 200 days before a halving, the leading cryptocurrency could lose up to 60-65% of its value but then would resume its growth trajectory.

Many experts predict a significant surge in bitcoin prices in 2024. Investor optimism is also fuelled by the current price trend of this digital gold: despite the pullback from its summer high, investments in bitcoin have yielded more than 60% returns since the beginning of the year.

JP Morgan experts forecast a price rise to $45,000 in 2024, while Standard Chartered predicts it will reach $100,000. Author and investor Robert Kiyosaki and cryptographer Adam Back also target the $100,000 mark. Fundstrat Research founder Tom Lee envisions bitcoin at $180,000, while venture capitalist Tim Draper predicts a $250,000 valuation. Billionaire Mike Novogratz and ARK Invest CEO Cathy Wood project the coin's rise to $500,000 and $1 million, respectively, for the next year.

Former BitMEX CEO Arthur Hayes has set a "modest" target of $70,000 for bitcoin next year. As for the $750,000 to $1 million range, Hayes believes BTC/USD will only reach that level by 2026. He justifies his forecast based on the asset's limited supply, the prospect of spot bitcoin ETF approvals, and geopolitical uncertainty. "I think this will be the greatest financial markets boom in human history. Bitcoin will soar to absurd levels, Nasdaq will rise to absurd levels, and the S&P 500 will climb to absurd levels," stated Hayes.

Charlie Munger, Warren Buffett's partner and the Vice Chairman of American holding company Berkshire Hathaway, has predicted a dire future for digital assets. In his view, the majority of investments in these assets will eventually become worthless. "Don't get me started on bitcoin. It's the dumbest investment I've ever seen," the 99-year-old investor expressed during the Zoomtopia online conference. 

As of the time of writing this review, on the evening of Friday, October 13, the total market capitalization of the crypto market stands at $1.046 trillion, down from $1.096 trillion a week ago. bitcoin's share in the overall market has increased from 39.18% at the beginning of the year to 49.92%. Analyst Benjamin Cowen believes the crypto market is entering "one of its most brutal" phases. According to the expert, bitcoin's dominance is rising amid falling altcoin prices and decreased investor interest in this asset class. Utilizing Fibonacci retracement levels, Cowen anticipates that this dominance figure will likely peak at 60%, as it did in the last cycle, but will probably not rise to 65% or 70% due to the stablecoin market. BTC/USD closed at $27,075 on October 13th. The Crypto Fear & Greed Index for bitcoin has dropped from 50 to 44 points over the week, moving back from the Neutral zone to the Fear zone.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for October 09 - 13, 2023

EUR/USD: Will the Pair Reach 1:1 Parity?

Throughout 2023, the U.S. economy has effectively withstood aggressive interest rate hikes. The market-anticipated recession has yet to materialize, allowing the Federal Reserve to maintain its hawkish monetary stance. This has led to a sharp increase in Treasury yields and significant strengthening of the U.S. dollar. The yield on 10-year Treasuries plummeted 46% since March 2020, doubling the previous decline witnessed in 1981 amid aggressive monetary tightening by the U.S. central bank. As for the Dollar Index (DXY), it has remained above the critical level of 100.00 throughout the year, while EUR/USD has dropped 6.5% from its July highs.

On Tuesday, March 3, the yield on 10-year U.S. Treasury bonds reached 4.88%. Many market participants believe that a 5.0% yield could be a tipping point for the U.S. economy, forcing the Federal Reserve into a dovish pivot. However, these are merely expectations that may be far from reality. On the same Tuesday, Loretta J. Mester, President of the Federal Reserve Bank of Cleveland, stated that inflation is only expected to reach the target level of 2.0% by the end of 2025. She indicated that there are no immediate plans to lower interest rates and, furthermore, she is likely to support an interest rate increase at the next Federal Open Market Committee (FOMC) meeting if the current economic situation remains stable.

The U.S. macroeconomic data released in the first half of the past week appeared somewhat lacklustre. The ADP report revealed the weakest employment growth in the private sector since January 2021, coming in at a mere 89K, against a forecast of 153K (and down from 180K the previous month). While business activity in the services sector did continue to grow for the ninth consecutive month, it decelerated in September, with the PMI index falling from 54.5 to 53.6. As for the manufacturing sector, business activity remained in contraction territory, with a PMI of 49.0. Although this was an improvement over the previous 47.6, it still fell below the 50.0 threshold, indicating economic contraction. As a result, Treasury yields declined, and stock indices (S&P 500, Dow Jones, and Nasdaq) along with EUR/USD turned upwards. Traders opted to liquidate their short positions on the pair in anticipation of the U.S. September labour market report, traditionally scheduled to be published on the first Friday of the following month, which in this case was October 6. More on this below.

If the latest U.S. statistics appeared unimpressive, the Eurozone's figures were even worse. According to official data from Eurostat published on Wednesday, October 4, retail sales in August contracted by 1.2% month-on-month, compared to a 0.1% decline in July. The market consensus had projected a decrease of only 0.3%. On an annual basis, the volume of retail sales fell by 2.1%, exceeding both July's 1.0% decline and the market forecast of 1.2%. Monthly Producer Price Inflation (PPI) in the Eurozone rose from 0.5% in July to 0.6% in August.

Assessing the inflation outlook in the Eurozone, the European Central Bank (ECB)'s Chief Economist, Philip Lane, cautiously stated that "we will not reach our 2% inflation target as quickly as we would the 4% mark." ECB Governing Council member Peter Kazimir was slightly more optimistic. "Core Eurozone inflation confirms our expectations," the official noted. "We are on a downward trajectory. [However], deflating inflation is taking a bit more time." Kazimir believes that September's 25 basis point rate hike in the Euro was the last one.

We have previously noted that there is no consensus within the ECB's leadership regarding future monetary policy. This was further confirmed by ECB Governing Council member Isabel Schnabel, who countered Peter Kazimir by stating that further rate hikes may eventually be necessary. She added that although the ECB currently does not foresee a deep downturn, "we cannot rule out a recession" going forward.

If the prospect of higher Euro borrowing costs remains uncertain, a rate reduction at this stage is definitely not on the table. This was confirmed on Thursday, October 5th, by ECB Vice-President Luis de Guindos, who stated that discussions about rate cuts are premature. Since the Federal Reserve also has no plans to turn dovish from its hawkish stance, the current interest rate differential of 5.50% for the dollar and 4.50% for the Euro gives a certain advantage to the American currency. The Reuters expert consensus forecast expects EUR/USD to further decline to $1.0400 within October, with 1 out of 20 surveyed specialists anticipating a 1:1 parity. Nonetheless, analysts predict that EUR/USD will rise by approximately 6% over the next year.

The highlight of the past week was the U.S. employment report. Bloomberg experts had anticipated that the number of new non-farm payroll jobs (NFP) created in September would be lower than in August: 70K compared to 187K the previous month. In reality, the figure came in at 336K, almost twice as high as the forecast. Meanwhile, the unemployment rate remained unchanged at 3.8%.

Following the release of this data, which attests to the health of the American job market, EUR/USD initially declined but then quickly regained its footing and even advanced. As a result, the pair closed the trading week at the 1.0585 level. As of the evening of October 6th, when this overview was written, experts are equally divided on its near-term future, just like a week ago: a third are predicting further strengthening of the dollar and a decline in EUR/USD, another third anticipate an upward correction, and the final third are neutral.

As for technical analysis, among the trend indicators on the D1 chart, 65% favour the downside (red), and 35% are bullish (green). Most oscillators (60%) continue to side with the U.S. currency and are coloured red. Just 10% favour the euro, and half of those indicate overbought conditions. The remaining 30% hold a neutral stance.

Immediate support for the pair is found in the 1.0550-1.0560 area, followed by 1.0490, 1.0450, 1.0375, 1.0255, 1.0130, and 1.0000. Resistance for the bulls is situated around 1.0600-1.0615, followed by 1.0670-1.0700, 1.0745-1.0770, 1.0800, 1.0865, and 1.0895-1.0930.

In the upcoming week, on Wednesday, October 11, inflation data for Germany (CPI) and the U.S. (PPI) will be released. On the same day, the minutes from the last FOMC meeting will be published, offering investors insights into the committee members' views on future monetary policy. Thursday, October 12th, is likely to experience increased volatility, as consumer inflation data (CPI) for the United States will be announced. Additionally, the traditional weekly report on initial jobless claims in the U.S. will be released on Thursday. The week will wrap up with the publication of the University of Michigan's Consumer Confidence Index on October 13 Traders should also be aware that Monday, October 9th, is a public holiday in the U.S., in observance of Columbus Day.

GBP/USD: Worst Currency of September

The British pound emerged as the worst performing G10 currency in September. Fuelling speculation about its future, the Bank of England (BoE) released a report on Thursday, October 5, indicating a significant rise in wages in the country. Expectations for wage growth over the next year also increased compared to August.

Certainly, the recent moderation in inflation is a positive development. However, economists at Germany's Commerzbank suggest that the wage growth dynamics indicate that inflation may be more stubborn than the Bank of England anticipates.

Survey results, also released on October 5, suggest that many market participants believe the BoE is not taking sufficient measures to combat rising prices. On the other hand, strategists at Japan's MUFG Bank argue that the "Bank of England has already gone too far in tightening policy." They write, "We see the potential for lower rates compared to other leading developed economies." There are clearly differing opinions, but one thing both camps agree on is that the British currency will continue to remain under pressure. At least until there is compelling evidence of sustainable declines in the inflation rate.

GBP/USD began the past week at a level of 1.2202 and returned almost to the same point ahead of the release of the U.S. employment report on Friday, October 6. The robust Non-Farm Payroll (NFP) data temporarily strengthened the dollar. The week concluded with the European currency gaining the upper hand, closing the pair at 1.2237. However, the chart of the past two weeks still suggests a sideways trend. Analyst opinions on the pair's immediate future are as follows: 40% are bullish, another 40% are bearish, and the remaining 20% hold a neutral stance. Among trend indicators on the D1 chart, 65% are red, while 35% are green. As for the oscillators, 40% point to a decline in the pair, 10% point to an increase (all in the overbought zone), and the remaining 50% are neutral.

In a downward movement, the pair will find support levels and zones at 1.2195-1.2205, 1.2100-1.2115, 1.2140-1.2150, 1.2085, 1.2040, 1.1960, and 1.1800. If the pair rises, it will encounter resistance at levels of 1.2270, 1.2330, 1.2440-1.2450, 1.2510, 1.2550-1.2575, 1.2600-1.2615, 1.2690-1.2710, 1.2760, and 1.2800-1.2815.

Fresh GDP data for the United Kingdom is expected to be released on Thursday, October 12. After experiencing a decline of -0.5% in July, the indicator is anticipated to show a 0.2% growth on a monthly basis for August. No other significant economic events related to the country are expected for the upcoming week.

USD/JPY: Was There Really an Intervention?


We suggested in our previous review that the "magic" number of 150.00 would serve as a signal to Japanese financial authorities to initiate currency interventions. Indeed, after USD/JPY slightly crossed this threshold on Tuesday, October 3, reaching a high of 150.15, the long-anticipated event occurred, within a matter of minutes, the pair plummeted nearly 300 points, halting its freefall at 147.28.

The prevailing market sentiment is that the Bank of Japan (BoJ) has finally moved from verbal interventions to actual ones. Interestingly, the country's Finance Minister, Shunichi Suzuki, declined to comment on whether there was indeed a currency intervention. He merely obfuscated the issue by stating that "many factors determine whether movements in the currency market are excessive," and that "no changes have been made in how the government will address these issues." In short, interpret it as you will.

Of course, one cannot rule out the mass triggering of stop-orders upon breaching the key level of 150.00 (such "black swans" have been observed before). However, we believe that the episode was unlikely to have occurred without intervention from Japan's financial authorities.

After the sharp decline, the price has rebounded and is now approaching the ascending trend line from below. Whether the Bank of Japan's intervention (if it indeed occurred) has achieved its goal is difficult to say. Recalling similar scenarios from last autumn, the impact of such actions seemed to be only temporary, with market conditions reverting back to their previous state within a couple of months. However, could this latest move serve as a significant deterrent for USD/JPY bulls and allow the Japanese currency to regroup? The chances are there, particularly if the regulator actively intervenes to prevent the pair from rising back to the 150.00 level or higher.

The pair concluded the trading week at the 149.27 level. All 100% of the surveyed experts, invigorated by the events of October 10, voted for further yen strengthening and a downward movement for the pair. (It is worth noting here that even such unanimity offers no guarantees concerning the accuracy of the forecast.) Trend indicators on the D1 chart hold the opposite view—all 100% are still coloured in green. Among the oscillators, slightly fewer, 90%, remain in the green zone, with 10% having turned red. The nearest support level lies in the 149.15 area, followed by 148.80, 148.30-148.45, 147.95-148.05, 146.85-147.25, 145.90-146.10, 145.30, 144.45, 143.75-144.05, 142.20, 140.60-140.75, 138.95-139.05, and 137.25-137.50. Immediate resistance is at 149.70-150.15, followed by 150.40, 151.90 (the October 2022 high), and 153.15.

No significant economic data related to the state of the Japanese economy is scheduled for release in the upcoming week. Additionally, the country will be observing a public holiday on Monday, October 9, in celebration of National Sports Day.

CRYPTOCURRENCIES: Uptober's Target is $30,000

As Q3 closed on September 30, the BTC/USD trading pair saw a 12% drop. Despite setbacks in July and August, bitcoin experienced its first profitable September since 2016, increasing from $26,012 to $26,992 within the month. TradingView data also highlighted a 6.1% rise in the market capitalization of the cryptocurrency sector, moving from approximately $1.029 trillion at the beginning of September to $1.092 trillion by month's end.

Ran Neuner, the founder of Crypto Banter and a seasoned trader, underscored the importance of bitcoin's positive performance in September. He noted that in a year prior to a halving event, such as in 2015, a profitable September has historically been followed by a 70% surge in Q4. Analysts at Bitfinex echoed this sentiment, suggesting that a green September often presages a bullish trend in October.

The Bitfinex Alpha report further substantiated an optimistic forecast for October, citing futures market indicators. The data revealed that the current price is being maintained by a balance between short-term and long-term holders, implying that experienced long-term investors are steadfast in holding their coins. Furthermore, bitcoins that have been held for 6 to 12 months are predominantly dormant, and the supply of BTC that is over three years old has remained inactive since February 2023.

Santiment, a network analytics firm, reported that larger wallets, known as whales and sharks, holding between 10 and 10,000 BTC, have been quietly stockpiling both bitcoin and Tether (USDT) for the last six weeks. Their collective holdings have now reached a 2023 high of 13.03 million BTC, pointing to a promising long-term outlook for bitcoin.

It's well known that October follows September, and many investors have high hopes for this month. According to statistics, in the last eight years, bitcoin has only ended the month of October in the red once, in 2018. In other years, the monthly gains ranged from 5.5% to 48.5%. If we consider the entire history of the leading cryptocurrency, October has been a profitable month in eight out of ten instances, with an average gain of 22%. This seasonal phenomenon has been dubbed "Uptober."

The early days of October provided hope that the tradition of "Uptober" would continue in 2023. On Monday, October 2, bitcoin reached a local peak of around $28,562. However, disappointment set in later that same day as traders began to lock in profits, causing the coin to drop to the $27,500 zone. Bloomberg strategist Mike McGlone believes that this pullback was inevitable. Pressure tends to build when the digital currency gains value aggressively. Increased volatility is accompanied by heightened seller activity, as they aim to capitalize on the asset's surge.

McGlone is sceptical that bitcoin will reach $30,000 in the near future. The main factor hindering further growth of bitcoin is the strict policies of U.S. authorities. The repressive actions of the Securities and Exchange Commission (SEC) are deterring institutional investors from entering the crypto space. Global recession risks are also dampening risk appetite. In such a scenario, stock markets will not be able to grow, emphasizes the Bloomberg strategist, adding that digital currencies will also suffer as a result.

Analysts at QCP Capital also believe that the resistance level for BTC/USD will be between $29,000 and $30,000. They warn that, despite the positive seasonality, the possibility of retesting the $25,000 level should not be ruled out.

However, not everyone agrees with this view. For example, a trader going by the handle "Bluntz" is confident that bitcoin has "officially" entered bullish territory and that all predictions of a drop to the $24,000 level are unfounded. In his opinion, the coin's rise above $27,000 confirms that bitcoin is currently in a bull market. "I think it's time to shed any bearish biases," wrote Bluntz.

Another well-known trader, analyst, and founder of the venture firm Eight, Michael Van De Poppe, is optimistic not only about October but also about Q4 2023 as a whole. The expert anticipates that growth in the final quarter could push the flagship cryptocurrency up to the $40,000 mark. However, it's worth noting that while historical data overwhelmingly favors October, the quarterly dynamics of bitcoin are not so clear-cut. For instance, the digital asset appreciated by 142.2% in 2017, but the following year it lost almost half its value over three months.

In our previous review, we reported that the Artificial Intelligence from CoinCodex had forecasted the flagship cryptocurrency to reach a value of $29,703 by Halloween (October 31). This time, another AI, the machine learning algorithm from the forecasting platform PricePredictions, has given a similar result. According to its analysis, the price of bitcoin will hover around the psychologically significant mark of $30,403 on October 31. This forecast was made using several key technical indicators, including the Moving Average Convergence Divergence (MACD), the Relative Strength Index (RSI), Bollinger Bands (BB), among others.

Concerning Ethereum, the primary competitor to bitcoin, an analyst known as Dave the Wave anticipates that Ethereum will sustain its depreciation against bitcoin at least through the end of 2023. Dave the Wave has published a trend chart for ETH/BTC, highlighting a descending triangle indicative of a price drop for the altcoin.

Drawing a comparison with trends from 2017 to 2018, Dave the Wave posits that Ethereum is poised for a significant devaluation relative to bitcoin, particularly due to a robust bitcoin rally. The potential for Ethereum to gain value appears limited to the so-called "altcoin season," which is projected to begin after bitcoin achieves its peak price.

As of the time of writing this review, on the evening of Friday, October 6, BTC/USD is trading in the area of $27,960, ETH/USD at $1,640, and ETH/BTC at 0.0588. The total market capitalization of the cryptocurrency market stands at $1.096 trillion, up from $1.075 trillion a week ago. The Crypto Fear & Greed Index for bitcoin has risen by 2 points over the week and currently sits squarely in the Neutral zone, at a score of 50.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for October 02 - 06, 2023

EUR/USD: Correction is Not a Trend Reversal Yet

The dynamics of the EUR/USD pair in the past week were atypical. In a standard scenario, combating inflation against the backdrop of a strong economy and a healthy labour market leads to an increase in the central bank's interest rate. This, in turn, attracts investors and strengthens the national currency. However, this time the situation unfolded quite differently.

U.S. macroeconomic data released on Thursday, September 28, indicated strong GDP growth in Q2 at 2.1%. The number of initial unemployment claims was 204K, slightly higher than the previous figure of 202K, but less than the expected 215K. Meanwhile, the total number of citizens receiving such benefits amounted to 1.67 million, falling short of the 1.675 million forecast.

This data suggests that the U.S. economy and labour market remain relatively stable, which should prompt the U.S. Federal Reserve to increase interest rates by 25 basis points (bps). It's worth noting that Neil Kashkari, President of the Federal Reserve Bank of Minneapolis, recently confirmed his full support for such a move, as combating high inflation remains the central bank's primary objective. Jamie Dimon, CEO of JPMorgan, went even further, stating that he does not rule out the possibility of rate hikes from the current 5.50% to as high as 7.00%.

However, these figures and forecasts failed to make an impression on market participants. Especially since the rhetoric from Fed officials proved to be quite contradictory. For instance, Thomas Barkin, President of the Federal Reserve Bank of Richmond, does not believe that U.S. GDP will continue to grow in Q4. He also pointed out that there's a wide range of opinions regarding future rates and that it's unclear if additional changes in monetary policy are required. Austin Goolsbee, President of the Federal Reserve Bank of Chicago, noted that overconfidence in the trade-off between inflation and unemployment carries the risk of policy mistakes.

Such statements have tempered bullish sentiment on the dollar. Amid this murky and contradictory backdrop, yields on U.S. Treasury bonds, which had been supporting the dollar, fell from multi-year highs. Uncertainty surrounding the U.S. federal budget and the threat of a government shutdown also weighed on the dollar. Furthermore, September 28 and 29 marked the last trading days of Q3, and after 11 weeks of gains, dollar bulls began closing long positions on the DXY index, locking in profits.

As for the Eurozone, inflation has clearly started to wane. Preliminary data indicates that the annual Consumer Price Index (CPI) growth in Germany has slowed from 6.4% to 4.3%, reaching its lowest point since the onset of Russia's military invasion of Ukraine. The overall Eurozone CPI also fell—despite a previous rate of 5.3% and a forecast of 4.8%, it declined to 4.5%.

This reduction in CPI led to a rescheduling of the European Central Bank's (ECB) anticipated dovish policy shift from Q3 2024 to Q2 2024. Moreover, the likelihood of a new interest rate hike has significantly diminished. In theory, this should have weakened the euro. However, concerns over the fate of the dollar proved to be more impactful, and after bouncing off 1.0487, EUR/USD moved upward, reaching a high of 1.0609.

According to analysts at Germany's Commerzbank, some traders were simply very dissatisfied with levels below 1.0500, so neither macro data nor statements from Fed officials could exert any significant influence on this. However, the rebound does not indicate either a trend reversal or the complete end of the dollar rally. Commerzbank analysts believe that since the market has clearly bet on a soft landing for the U.S. economy, the dollar is likely to react particularly harshly to data that does not confirm this viewpoint.

Analysts at MUFG Bank also believe that the 1.0500 zone has finally become a strong level that served as a catalyst for the reversal. However, in the opinion of the bank's economists, the correction is primarily technical in nature and could soon fizzle out.

On Friday, September 29, traders awaited the release of the Personal Consumption Expenditures Index (PCE) in the U.S., which is a key indicator. Year-on-year, it registered at 3.9%, precisely matching forecasts (the previous figure was 4.3%). The market reacted with a minor increase in volatility, after which EUR/USD closed the trading week, month, and quarter at 1.0573. Strategists at Wells Fargo, part of the "big four" U.S. banks, believe that Europe's low metrics compared to the U.S. should exert further downward pressure on the euro. They also believe that the European Central Bank (ECB) has already concluded its current cycle of monetary tightening, as a result of which the pair may drop to the 1.0200 level by early 2024.

Shifting from the medium-term outlook to the near-term, as of the evening of September 29, expert opinions are evenly split into three categories: one-third foresee further dollar strengthening and a decline in EUR/USD; another third expect an upward correction; and the last third take a neutral stance. As for technical analysis, both among trend indicators and oscillators on the D1 chart, the majority, 90%, still favor the U.S. dollar and are coloured red. Only 10% side with the euro. The pair's nearest support levels are around 1.0560, followed by 1.0490-1.0525, 1.0375, 1.0255, 1.0130, and 1.0000. Bulls will encounter resistance in the area of 1.0620-1.0630, then 1.0670-1.0700, followed by 1.0745-1.0770, 1.0800, 1.0865, 1.0895-1.0925, 1.0985, and 1.1045.

Data releases pertaining to the U.S. labour market are anticipated throughout the week spanning from October 3 to October 6. The week will culminate on Friday, October 6, when key indicators, including the unemployment rate and the Non-Farm Payroll (NFP) figures, are set to be disclosed. Earlier in the week, specifically on Monday, October 2, insights into the U.S. manufacturing sector's business activity (PMI) will be unveiled. Federal Reserve Chair Jerome Powell is also scheduled to speak on this day. On Wednesday, October 4, information regarding the business activity in the U.S. services sector as well as Eurozone retail sales will be made public.

GBP/USD: No Drivers for Pound Growth

According to the latest data published by the UK's National Statistics Office, the country's Gross Domestic Product (GDP) increased by 0.6% year-over-year in Q2, exceeding expectations of 0.4% and up from 0.5% in the previous quarter. While this positive trend is certainly encouraging, the UK's 0.6% growth rate is 3.5 times lower than the comparable figure in the United States, which stands at 2.1%. Therefore, any commentary on which economy is stronger is unnecessary.

Strategists from ING, the largest banking group in the Netherlands, believe that GBP/USD rose in the second half of the past week solely due to a correction in the U.S. dollar. According to them, there are no tangible catalysts related to the United Kingdom that would justify a sustained increase in the British currency at this stage.

Analysts at UOB Group anticipate that GBP/USD could fluctuate within a fairly broad range of 1.2100-1.2380 over the next 1-3 weeks. However, Wells Fargo strategists expect the pair to continue its decline, reaching the 1.1600 zone in early 2024, where it last traded in November 2022. The likelihood of such a move is corroborated by signals from the Bank of England suggesting that the interest rate on the pound may have peaked.

GBP/USD closed the past week at the 1.2202 mark. Analyst opinions on the pair's near-term future are split, offering no clear direction: 40% are bullish on the pair, another 40% are bearish, and the remaining 20% have adopted a neutral stance. Among trend indicators and oscillators on the daily chart (D1), 90% are painted in red, while 10% are in green. Should the pair move downward, it will encounter support levels and zones at 1.2120-1.2145, 1.2085, 1.1960, and 1.1800. Conversely, if the pair rises, it will face resistance at 1.2270, 1.2330, 1.2440-1.2450, 1.2510, 1.2550-1.2575, 1.2600-1.2615, 1.2690-1.2710, 1.2760, and 1.2800-1.2815.

No significant events related to the United Kingdom's economy are anticipated for the upcoming week.

USD/JPY: Awaiting the Breach of 150.00

"Appropriate measures will be taken against excessive currency movements, not ruling out any options," "We are closely monitoring currency exchange rates." Do these phrases sound familiar? Indeed, they should: these are words from yet another verbal intervention conducted by Japan's Finance Minister Shunichi Suzuki on Friday, September 29. He added that "the government has no specific target level for the Japanese yen that could serve as a trigger for currency intervention."

One can agree with the last statement, especially considering that USD/JPY reached the 149.70 level last week, a height it last achieved in October 2022. Moreover, amid large-scale global bond selloffs, the Bank of Japan (BoJ) took measures to curb the rising yields of 10-year JGBs and announced an unscheduled operation to purchase these bonds on September 29. In such a scenario, if not for the global dollar correction, it's highly likely that this operation could have propelled USD/JPY to break through the 150.00 mark.

As we've already noted above, according to many experts, the dollar's sell-off is most likely related to profit-taking in the final days of the week, month, and quarter. Therefore, this trend may soon dissipate, making the breach of the 150.00 level inevitable.

Could 150.00 be the "magic number" that triggers Japan's financial authorities to commence currency interventions? At the very least, market participants view this level as a potential catalyst for such intervention. This is all the more plausible given the current economic indicators. Industrial production remained unchanged in August compared to July, and core inflation in Japan's capital slowed for the third consecutive month in September. Under these conditions, economists at Mizuho Securities believe that although currency interventions may have limited impact, "the government would lose nothing politically by demonstrating to the Japanese public that it is taking the sharp rise in import prices seriously, caused by the weakening yen.".

The week concluded with USD/JPY trading at the 149.32 mark. A majority of surveyed experts (60%) anticipate a southern correction for the USD/JPY pair, possibly even a sharp yen strengthening due to currency intervention. Meanwhile, 20% predict the pair will confidently continue its northward trajectory, and another 20% have a neutral outlook. On the D1 timeframe, all trend indicators and oscillators are painted in green; however, 10% of the latter are signalling overbought conditions. The nearest support levels are situated at 149.15, followed by 148.45, 147.95-148.05, 146.85-147.25, 145.90-146.10, 145.30, 144.45, 143.75-144.05, 142.20, 140.60-140.75, 138.95-139.05, and 137.25-137.50. The closest resistance stands at 149.70-150.00, followed by 150.40, 151.90 (October 2022 high), and 153.15.

Apart from the release of the Tankan Large Manufacturers Index for Q3 on October 2, no other significant economic data concerning the state of the Japanese economy is scheduled for the upcoming week.

CRYPTOCURRENCIES: Hopes on Halving and Halloween


In the first half of the week, BTC/USD trended downward, succumbing to the strengthening U.S. dollar. However, it managed to hold within the $26,000 zone, after which the dynamics shifted: The Dollar Index (DXY) began to weaken, giving the bulls an opportunity to push the pair back to the support/resistance area around $27,000.

It's clear that the stringent monetary policy of the Federal Reserve will continue to exert pressure on bitcoin, as well as the broader cryptocurrency market. While the U.S. regulator opted not to raise the refinancing rate at the end of September, it did not rule out such a move in the future. Adding to the market's uncertainty is the SEC's pending decisions on spot bitcoin ETF applications.

Mark Yusko, CEO of Morgan Creek Capital, believes that a favourable decision by the SEC on these applications could trigger an inflow of $300 billion in investments. In such a scenario, both the market capitalization and the coin's value would significantly increase.

However, the key word here is "if." Anthony Scaramucci, the founder of SkyBridge Capital, acknowledged at the Messari Mainnet Conference in New York the existence of "headwinds" for bitcoin in the form of high interest rates set by the Federal Reserve and the hostility of SEC Chairman Gary Gensler. Nevertheless, this investor and former White House official is confident that bitcoin offers greater prospects than gold. If the bitcoin ETF applications are eventually approved, it would lead to widespread adoption of digital assets. Scaramucci believes that the worst is already behind us in the current bear market. "If you have bitcoin, I wouldn't sell it. You've weathered the winter. [...] The next 10-20 years will be incredibly bullish," he stated. According to the financier, the younger generation will mainstream the first cryptocurrency, just as they did with the internet.

Amid uncertainties surrounding the actions of the Federal Reserve and the SEC, the primary hope for the growth of the crypto market lies in the forthcoming halving event scheduled for April 2024. This event is almost certain to occur. However, even here, opinions vary. A number of experts predict a decline in bitcoin's price before the halving.

An analyst known as Rekt Capital compared the current market situation to the BTC price dynamics in 2020 and speculated that the coin's price could fall within a descending triangle, potentially reaching as low as $19,082.

Well-known trader Bluntz, who accurately predicted the extent of bitcoin's fall during the 2018 bear trend, also foresees a continuing downward trajectory. He doubts that the asset has hit its bottom because the descending triangle pattern forming on the chart appears incomplete. Consequently, Bluntz anticipates that bitcoin could depreciate to around $23,800, thereby completing the third corrective wave.

Benjamin Cowen, another renowned analyst, is also bearish in his outlook. He believes that the BTC price could plummet to the $23,000 level. Cowen bases his prediction on historical patterns, which suggest that the price of the flagship cryptocurrency usually experiences a significant slump before a halving event. According to Cowen, past cycles indicate that BTC and other cryptocurrencies do not exhibit strong performance in the period leading up to this crucial event.

In the event of a downturn in digital asset prices, the upcoming halving could spell financial ruin for many miners, some of whom have already succumbed to the competitive pressures of 2021-2022. Currently, miners are operating on thin margins. At present, block rewards constitute 96% of their income, while transaction fees make up just 4%. The halving will cut the block mining rewards in half, and if this occurs without a corresponding increase in the coin's price, it could lead to financial catastrophe for many operators.

Some companies have started to connect their mining farms directly to nuclear power plants, bypassing distribution networks, while others are looking to renewable energy sources. However, not everyone has such options. According to Glassnode, the industry-average cost to mine one bitcoin currently stands at $24,000, although this varies significantly from country to country. CoinGecko data shows the lowest cost of mining in countries like Lebanon ($266), Iran ($532), and Syria ($1,330). In contrast, due to higher electricity costs, the U.S. sees costs soar to $46,280. If bitcoin's price or network fees do not significantly increase by the time of the halving, a wave of bankruptcies is likely.

Is this a bad or good development? Such bankruptcies would lead to a reduction in the mining of new coins, creating a supply deficit, and ultimately driving up their price. As it is, the crypto exchange reserves have already decreased to 2 million BTC, nearing a six-year low. Market participants are opting to hold their reserves in cold storage, anticipating a future surge in prices.

Research firm Fundstrat has speculated that against the backdrop of the halving, BTC prices could surge by more than 500% from current levels, reaching the $180,000 mark. Financial corporation Standard Chartered projects that the price of the flagship cryptocurrency could rise to $50,000 this year and to $120,000 by the end of 2024. The Bitcoin Rainbow Chart by the Blockchain Center also recommends buying; BTC/USD quotes on their chart are currently in the lower zone, suggesting a rebound is due.

According to Michael Saylor, the CEO of MicroStrategy, the inherent supply limitation of bitcoin capped at 21 million coins makes it the best asset for preserving and growing capital. The billionaire compared the depreciation rate of fiat currencies with the dynamics of inflation. He argued that individuals could see their savings erode if held in traditional currencies, citing that over the past 100 years, funds held in U.S. dollars would have lost about 99% of their value.

As of the time of writing this review, on the evening of Friday, September 29, BTC/USD has neither fallen to $19,000 nor risen to $180,000. It is currently trading at $26,850. The overall market capitalization of the cryptocurrency market stands at $1.075 trillion, up from $1.053 trillion a week ago. The Crypto Fear & Greed Index has increased by 5 points, moving from 43 to 48, transitioning from the 'Fear' zone to the 'Neutral' zone.

In conclusion, a forecast for the upcoming month. Experts have once again turned to artificial intelligence, this time to predict the price of the flagship cryptocurrency by Halloween (October 31). AI from CoinCodex posits that by the specified date, bitcoin will increase in price and reach a mark of $29,703.

Interestingly, there is even a term in the crypto market known as "Uptober." The idea is that every October, bitcoin sees significant price gains. Looking at the 2021 figures, bitcoin was trading near $61,300 on October 31, marking an increase of over 344% compared to 2020. This phenomenon remained relevant even in the past year, 2022, following the high-profile crash of the FTX exchange. On October 1, 2022, the asset was trading at $19,300, but by October 31, the coin had reached a mark of $21,000. Let's see what awaits us this time.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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September 2023 Results: South Asian Traders Lead at NordFX

Brokerage firm NordFX has summarized the trading performance of its clients for September 2023. The company also evaluated its social trading services and the profits earned by its IB partners.

Gold, specifically the XAU/USD pair, continues to be one of the most popular trading instruments, helping NordFX traders secure positions in the Top 3. Notably, this time all three podium spots were taken by compatriots from South Asia.

- The highest profit in the first month of autumn was earned by a client from South Asia, account number 1679XXX. Trading exclusively on the XAU/USD pair, the client managed to earn 46,138 USD.

- The second spot on the September podium went to their compatriot, with account number 1599XXX. A result of 21,598 USD was achieved through trading with gold (XAU/USD), as well as with the euro (EUR/USD) and the British pound (GBP/USD).

- The precious metal also assisted another representative from South Asia (account number 1702XXX) in entering the Top 3 for September with a profit of 18,766 USD. In addition to XAU/USD, this trader's portfolio included pairs such as EUR/USD, GBP/USD, GBP/JPY, and many others.  

In the PAMM service, the "Trade and Earn" account continues to attract the attention of passive investors. Although it was opened 570 days ago, the account remained dormant until reactivating in November of last year. As a result, over the last 11 months, its yield reached 199% with a relatively small drawdown of less than 17%.

It's important to note that past performance does not guarantee future returns. Therefore, as always, we urge investors to exercise the utmost caution when investing their funds.

The Top 3 IB partners of NordFX for September are as follows:
- The highest commission amount of 14,042 USD was credited to a partner from Western Asia, account number 1645XXX. It's worth noting that this partner has led the Top 3 for five consecutive months. Over this period, they have earned just under 60,000 USD in total;
- Second place went to the holder of account number 1618XXX from South Asia, who received 9,923 USD;
- And finally, rounding out the Top 3 is a partner from Southeast Asia with account number 1361XXX, who received a commission of 7,127 USD.
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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Forex and Cryptocurrencies Forecast for September 25 - 29, 2023

EUR/USD: Verbal Interventions by the Federal Reserve Support the Dollar

In previous reviews, we extensively discussed the verbal interventions made by Japanese officials who aim to bolster the yen through their public statements. This time, similar actions have been taken by FOMC (Federal Open Market Committee) officials, led by the Chairman of the Federal Reserve, Jerome Powell. At their meeting on September 20th, the FOMC decided to maintain the interest rate at 5.50%. This was largely expected, as futures markets had indicated a 99% probability of such an outcome. However, in the subsequent press conference, Mr. Powell indicated that the battle against inflation is far from over, and that the 2.0% target may not be achieved until 2026. Therefore, another rate hike of 25 basis points is very much in the cards. According to the Fed Chairman, there is no recession on the horizon, and the U.S. economy is sufficiently robust to sustain such high borrowing costs for an extended period. Furthermore, it was revealed that 12 out of 19 FOMC members anticipate a rate hike to 5.75% within this year. According to the Committee's economic forecast, this rate level is expected to persist for quite some time. Specifically, the updated forecast suggests that the rate could only be lowered to 5.1% a year from now (as opposed to the previously stated 4.6%), and a decrease to 3.9% is expected in a two-year outlook (revised from 3.4%).

Market participants have mixed beliefs about these prospects, but the fact remains that the hawkish assertions from officials have bolstered the dollar, despite the absence of tangible actions. It's possible that the Federal Reserve has learned from the mistakes of their European Central Bank (ECB) counterparts, who have led market players to believe that the monetary tightening cycle in the Eurozone has concluded. As a reminder, ECB President Christine Lagarde made it clear that she considers the current interest rate level to be acceptable, while the Governor of the Bank of Greece, Yannis Stournaras, stated that, in his opinion, interest rates have peaked, and the next move will likely be a reduction. A similar sentiment: that the September act of monetary tightening was the last, was also expressed by Stournaras's colleague, Boris Vujčić, the Governor of the National Bank of Croatia.

As a result of the Federal Reserve's verbal intervention, the Dollar Index (DXY) soared from 104.35 to 105.37 within just a few hours, while EUR/USD declined to a level of 1.0616. Economists at Oversea-Chinese Banking Corporation (OCBC) believe that, given the Fed's decision to retain flexibility concerning another rate hike, it is not advisable to anticipate a dovish turn in the foreseeable future.

Danske Bank strategists opine that "the Fed was as hawkish as it could be without actually raising rates." However, they contend that "despite the ongoing strengthening of the dollar, there may be some upside potential for EUR/USD in the near term." Danske Bank further states, "We believe that peak rates, improvements in the manufacturing sector compared to the service sector, and/or a reduction in pessimism towards China could support EUR/USD over the next month. However, in the longer term, we maintain our strategic position favouring a decline in EUR/USD, expecting a breakthrough below 1.0300 within the next 12 months."

Data on U.S. business activity released on Friday, September 22, presented a mixed picture. The Manufacturing PMI index rose to 48.9, while the Services PMI declined to 50.2. Consequently, the Composite PMI remained above the 50.0 threshold but showed a slight dip, moving from 50.2 to 50.1.

Following the PMI release, EUR/USD concluded the week at 1.0645. Seventy percent of experts favoured further strengthening of the dollar, while 30% voted for an uptrend in the currency pair. In terms of technical analysis, not much has changed over the nearly completed week. All trend indicators and oscillators on the D1 timeframe are still unanimously supporting the American currency and are coloured red. However, 15% of them are signalling the pair's oversold condition. The nearest support levels for the pair lie in the 1.0620-1.0630 range, followed by 1.0490-1.0525, 1.0370, and 1.0255. Resistance levels will be encountered in the 1.0670-1.0700 zone, then at 1.0745-1.0770, 1.0800, 1.0865, 1.0895-1.0925, 1.0985, and 1.1045.

As for the upcoming week's events, Tuesday, September 26 will see the release of U.S. real estate market data, followed by durable goods orders in the U.S. on Wednesday. Thursday, September 28 promises to be a busy day. Preliminary inflation (CPI) data from Germany as well as U.S. GDP figures for Q2 will be disclosed. Additionally, the customary U.S. labour market statistics will be released, and the day will conclude with remarks from Federal Reserve Chairman Jerome Powell. On Friday, we can also expect a slew of significant macroeconomic data, including the Eurozone's preliminary Consumer Price Index (CPI) and information regarding personal consumption in the United States.

GBP/USD: BoE Withdraws Support for the Pound


The financial world doesn't revolve around the Federal Reserve's decisions alone. Last week, the Bank of England (BoE) also made its voice heard. On Thursday, September 21, the BoE's Monetary Policy Committee left the interest rate for the pound unchanged at 5.25%. While a similar decision by the Federal Reserve was expected, the BoE's move came as a surprise to market participants. They had anticipated a 25 basis point increase, which did not materialize. As a result, the strengthening dollar and weakening pound drove GBP/USD down to 1.2230.

The BoE's decision was likely influenced by encouraging inflation data for the United Kingdom published the day before. The annual Consumer Price Index (CPI) actually declined to 6.7%, compared to the previous 6.8% and a forecast of 7.1%. The core CPI also fell from 6.9% to 6.2%, against a forecast of 6.8%. Given such data, the decision to pause and not burden an already struggling economy appears reasonable. This rationale is further supported by the United Kingdom's preliminary Services Purchasing Managers' Index (PMI) for September, which hit a 32-month low at 47.2, compared to 49.5 in August and a forecast of 49.2. The Manufacturing PMI was also reported at 44.2, significantly below the critical level of 50.0.

According to economists at S&P Global Market Intelligence, these "disheartening PMI results suggest that a recession in the United Kingdom is becoming increasingly likely. [...] The sharp decline in production volumes indicated by the PMI data corresponds to a GDP contraction of more than 0.4% on a quarterly basis, and the broad-based downturn is gaining momentum with no immediate prospects for improvement.".

Analysts at one of the largest banks in the United States, Wells Fargo, believe that the BoE's decision signals a loss of rate-based support for the British pound. According to their forecast, the current rate of 5.25% will mark the peak of the cycle, followed by a gradual decline to 3.25% by the end of 2024. Consequently, they argue that "in this context, a movement of the pound to 1.2000 or lower is not out of the question."

Their counterparts at Scotiabank share a similar sentiment. New lows and strong bearish signals on the oscillator for short-term, medium-term, and long-term trends indicate an elevated risk of the pound dropping to 1.2100-1.2200.

Economists at Germany's Commerzbank do not rule out the possibility of a slight recovery for the pound if inflation outlooks significantly improve. They believe that the Bank of England has left the door open for another rate hike. The vote for maintaining the current rate was surprisingly close at 5:4, meaning four members of the Monetary Policy Committee voted in favour of a 25 basis point increase. This underscores the high level of uncertainty. Nevertheless, due to the weakness in the UK economy, the outlook for the pound remains bearish.

GBP/USD closed the past week at 1.2237. Analyst opinions on the pair's immediate future are evenly split: 50% expect further downward movement, while the other 50% anticipate a correction to the upside. All trend indicators and oscillators on the D1 chart are coloured in red; moreover, 40% of these oscillators are in the oversold zone, which is a strong signal for a potential trend reversal.

If the pair continues its downward trajectory, it will encounter support levels and zones at 1.2190-1.2210, 1.2085, 1.1960, and 1.1800. On the other hand, if the pair rises, it will face resistance at 1.2325, 1.2440-1.2450, 1.2510, 1.2550-1.2575, 1.2600-1.2615, 1.2690-1.2710, 1.2760, and 1.2800-1.2815.

In terms of economic events impacting the United Kingdom for the upcoming week, the highlight will be the release of the country's GDP data for Q2, scheduled for Friday, September 29.

USD/JPY: Lacklustre Meeting at the Bank of Japan

Following their counterparts at the Federal Reserve and the Bank of England, the Bank of Japan (BoJ) held its meeting on Friday, September 22. "It was a lacklustre meeting," commented economists at TD Securities. "All members unanimously voted to keep policy unchanged. The statement was largely similar to the one issued in July, and no changes were made to the forward guidance." The key interest rate remained at the negative level of -0.1%.

The subsequent press conference led by BoJ Governor Kazuo Ueda also disappointed yen bulls. Ueda did not speak against the weakening of the national currency; instead, he reiterated that the exchange rate should reflect fundamental indicators and remain stable. The central bank's head also noted that the regulator "could consider the possibility of ending yield curve control and altering the negative interest rate policy when we are confident that achieving the 2% inflation target is near."

Japan's Finance Minister Shunichi Suzuki's speech was also a typical form of verbal intervention for him. "We are closely monitoring currency exchange rates with a high sense of urgency and immediacy," the minister declared, "and we do not rule out any options for responding to excessive volatility." He added that last year's currency intervention had its intended effect but did not indicate whether similar steps could be expected in the near future.

Ten-year U.S. Treasury bonds and the USD/JPY currency pair are traditionally directly correlated. When the yield on the bonds rises, so does the dollar against the yen. This week, following hawkish statements from the Federal Reserve, rates on 10-year Treasuries soared to their highest peak since 2007. This propelled USD/JPY to a new high of 148.45. According to economists at TD Securities, considering the rise in U.S. yields, the pair could break above 150.00. Meanwhile, at the French bank Societe Generale, target levels of 149.20 and 150.30 are being cited.

The last note of the five-day trading session sounded at the 148.36 mark. A majority of surveyed experts (70%) agreed with the views of their colleagues at TD Securities and Societe Generale regarding the further rise of USD/JPY. A correction to the downside, and possibly a sharp drop due to currency interventions, is expected by 20% of analysts. The remaining 10% took a neutral stance. All 100% of trend indicators and oscillators on the D1 timeframe are coloured green, although 10% of the latter are signalling overbought conditions. The nearest support level is in the 146.85-147.00 zone, followed by 145.90-146.10, 145.30, 144.50, 143.75-144.05, 142.20, 140.60-140.75, 138.95-139.05, and 137.25-137.50. The nearest resistance is at 148.45, followed by 148.45, 148.85-149.20, 150.00, and finally, the October 2022 high of 151.90.

No significant economic data related to the state of the Japanese economy is scheduled for release in the upcoming week. However, traders may want to mark Friday, September 29 on their calendars, as consumer inflation data for the Tokyo region will be published on that day.

CRYPTOCURRENCIES: Battle for $27,000

On Monday, September 18, the price of the leading cryptocurrency began to soar, pulling the entire digital asset market upward. Interestingly, the reason behind this surge was not directly related to bitcoin, but rather to the U.S. dollar. Specifically, it was tied to the Federal Reserve's decisions regarding interest rates. High dollar rates limit the flow of investments into riskier assets, including cryptocurrencies, as large investors prefer stable returns. In this case, ahead of the upcoming Federal Reserve meeting, market participants were confident that the regulator would not only refrain from raising rates but would also keep them unchanged until year-end. Riding on these expectations, BTC/USD surged, reaching a peak of $27,467 on August 19, adding more than 10% since September 11.

However, although the rate did indeed remain unchanged, it became clear following the meeting that the fight against inflation would continue. Therefore, any hopes of a shift away from the Fed's hawkish stance should be set aside for now. As a result, the price of bitcoin reversed course. After breaking through the support zone at $27,000, it returned to its starting positions.

Despite the recent pullback, many in the crypto community remain confident that the digital gold will continue to rise. For instance, an analyst going by the alias Yoddha believes that bitcoin has a chance to refresh its local high in the short term and reach $50,000 by year-end. After which, he suggests, a correction to $30,000 may occur in early 2024, ahead of the halving event. Blogger Crypto Rover also anticipates that troubles in the U.S. economy will fuel BTC's growth. If the pair manages to firmly establish itself above $27,000, he expects the price to move towards $32,000.

Analyst DonAlt is of the opinion that bitcoin stands a chance to stage a new impressive rally and update its 2023 high. "If we rise and overcome the resistance we are currently battling," he writes, "the target, I believe, could be $36,000. [...] I won't rule out missing a good entry at $30,000 because if the price takes off, it may rise too quickly. [But] we have enough compelling reasons to also move downward. In the worst case, I'll take a minor hit if it plunges into the $19,000 to $20,000 range.".

Trader and analyst Jason Pizzino believes that bitcoin's bullish market cycle began forming around January, and this process is still not complete despite the recent price consolidation. According to the expert, bitcoin will confirm its bullish sentiment if it crosses a key level at $28,500. "This market has seldom seen sub-$25,000 levels. I'm not saying it can't go down, but for six months now, the weekly closings have been above these levels. So far, so good, but we're not in bull territory yet. Bulls need to see closings above $26,550 at least occasionally," states Pizzino. "Bulls still have much to do. I'll start talking about them once we cross the white line at the $28,500 level again. This is one of the key levels for bitcoin to start moving upwards and then try to break $32,000.".

John Bollinger, the creator of the Bollinger Bands volatility indicator, does not rule out the possibility that the leading crypto asset is preparing for a breakout. The indicator uses the standard deviation from the simple moving average to determine volatility and potential price ranges for an asset. Currently, BTC/USD is forming daily candles that touch the upper band. This could indicate a reversal back to the central band or, conversely, an increase in volatility and upward movement. Narrow Bollinger Bands on the charts suggest that the latter scenario is more likely. However, Bollinger himself comments cautiously, believing that it is still too early to draw definitive conclusions.

PlanB, the well-known creator of the S2FX model, has reaffirmed his forecast made earlier this year. He noted that the November 2022 low was the bottom for bitcoin, and its ascent will begin closer to the halving event. PlanB believes that the 2024 halving will drive the leading cryptocurrency up to $66,000, and the subsequent bull market in 2025 could push its price above the $100,000 mark.

Investor and best-selling author of "Rich Dad Poor Dad," Robert Kiyosaki, has high hopes for the halving event as well. According to the expert, the U.S. economy is on the verge of a serious crisis, and cryptocurrencies, particularly bitcoin, offer investors a safe haven during these turbulent times. Kiyosaki predicts that the price of bitcoin could soar to $120,000 next year, and the 2024 halving will serve as a key catalyst for the rally.

In conclusion, to balance out the optimistic forecasts mentioned earlier, let's introduce some pessimism. According to popular analyst and host of the DataDash channel, Nicholas Merten, the crypto market could experience another downturn. He cites the declining liquidity of stablecoins as an indicator. "It's a good metric for identifying trends in the cryptocurrency market. For instance, from April 2019 to July 2019, bitcoin rose from $3,500 to $12,000. During the same period, the liquidity of stablecoins increased by 119%. Then we see a period of consolidation where liquidity also remained at a constant level. When bitcoin rose from $3,900 to $65,000 in 2021, the liquidity of stablecoins surged by 2,183%," the expert shares his observations.

"Liquidity and price growth are interconnected. If liquidity is declining or consolidating, the market is likely not going to grow. This is true for both cryptocurrencies and financial markets. For market capitalization to grow, you need liquidity, but what we are seeing is a constant decline in liquidity, which makes a price drop for cryptocurrencies more probable," Nicholas Merten states.

As of the time of writing this review, Friday evening, September 22, BTC/USD is trading around $26,525. The overall market capitalization of the crypto market has remained virtually unchanged, standing at $1.053 trillion (compared to $1.052 trillion a week ago). The Bitcoin Crypto Fear & Greed Index has dropped by 2 points, moving from 45 to 43, and remains in the 'Fear' zone.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for September 18 - 22, 2023

EUR/USD: ECB Triggers Euro Collapse

The past week was marked by two significant events. The first was the release of Consumer Price Index (CPI) data in the United States on September 13. The second was the meeting of the European Central Bank's (ECB) Governing Council on September 14.

Regarding the first event, the annual CPI in the United States rose from 3.2% in July to 3.7% in August, surpassing market forecasts of 3.6%. On a monthly basis, the CPI increased from 0.2% to 0.6%, precisely in line with market expectations. Financial markets reacted relatively tepidly to this data. According to CME Group, there is a 78.5% likelihood that the Federal Open Market Committee (FOMC) will maintain the key interest rate at its current level of 5.50% per annum during its meeting on September 20. However, the CPI statistics provide the regulator some room for manoeuvre in terms of tightening monetary policy in the future. If inflation in the United States continues to rise, there is a high probability that the Federal Reserve will increase the refinancing rate by another 25 basis points (bps). This is especially likely given that the U.S. economy is demonstrating stable growth and the national labor market remains robust. The published number of initial unemployment claims was 220K, which was lower than the forecasted 225K.

The second event triggered a considerably more volatile response. On Thursday, September 14, the ECB raised its key interest rate for the euro by 25 basis points (bps) for the tenth consecutive time, moving it from 4.25% to 4.50%. This is the highest it has reached since 2001. Experts had varying opinions on the move, labelling it as either hawkish or dovish. However, in theory, an interest rate increase should have supported the common European currency. Contrarily, EUR/USD fell below the 1.0700 mark, recording a local low at 1.0631. The last time it reached such depths was in the spring of 2023.

The decline in the euro was attributed to dovish comments made by the ECB's leadership. One could deduce from these that the central bank had already brought rates to levels that, if sustained over an extended period, should bring inflation within the Eurozone down to the target 2.0%. ECB President Christine Lagarde's statement, "I'm not saying we are at the peak of rates," failed to impress investors. They concluded that the current hike to 4.50% is likely the last step in this tightening cycle of monetary policy. As a result, with the backdrop that the Federal Reserve may still raise its rate to 5.75%, bears in EUR/USD have gained a noticeable advantage.

Bearish momentum increased even further following Thursday's release of data indicating that U.S. retail sales for August increased by 0.6% month-over-month (MoM), significantly exceeding the 0.2% forecast. At the same time, the Producer Price Index (PPI) for August rose by 0.7%, also surpassing expectations and the previous reading of 0.4%.

"We anticipate that the relative strength of the U.S. economy will continue to put pressure on EUR/USD in the coming months, as the growth differential will play a leading role. We maintain our forecast for the cross to be at the 1.0600-1.0300 range over the next 6-12 months," comment strategists at Danske Bank, one of Northern Europe's leading banks. They continue: "Given that it's hard to envision a sharp shift in the current U.S. dollar dynamics, and with commodity prices currently rising, we may reach our 6-month forecast for the cross earlier than expected."

HSBC strategists predict an even faster decline for the pair, anticipating that it will reach the 1.0200 level by the end of this year. According to specialists at ING, the pair could drop to the 1.0600-1.0650 area around the time of the Federal Reserve meeting in the upcoming week. "We believe that, at this stage, the EUR/USD rate will be increasingly influenced by the dollar," they write. "Markets have recognized that the ECB has most likely reached its peak interest rate, which means that Eurozone data should become less relevant. We might see EUR/USD rise again today [September 15], but a return to the 1.0600/1.0650 area around the date of the Federal Reserve meeting seems highly likely.".

As of the time of writing this review, on the evening of Friday, September 15, the pair indeed rose and ended the five-day trading period at the 1.0660 mark. 55% of experts are in favour of a continued upward correction, while 45% agree with ING economists' opinion and voted for a decline in the pair. As for technical analysis, almost nothing has changed over the past week. Among the trend indicators and oscillators on the D1 timeframe, 100% are still favouring the U.S. currency and are coloured in red. However, 25% of the latest indicators signal that the pair is oversold. Immediate support for the pair is located in the 1.0620-1.0630 area, followed by 1.0515-1.0525, 1.0480, 1.0370, and 1.0255. Bulls will encounter resistance in the 1.0680-1.0700 zone, then at 1.0745-1.0770, 1.0800, 1.0865, 1.0895-1.0925, 1.0985, and 1.1045.

The upcoming week will be quite eventful. On Tuesday, September 19, consumer inflation data (CPI) for the Eurozone will be released. Undoubtedly, the most significant day of the week, and perhaps even the upcoming months, will be Wednesday, September 20, when the FOMC meeting of the Federal Reserve will take place. In addition to the interest rate decision, investors expect to glean valuable information from the FOMC's long-term forecasts as well as during the press conference led by the Federal Reserve's management. On Thursday, September 21, the traditional initial jobless claims data will be published in the United States, along with the Federal Reserve Bank of Philadelphia's Manufacturing Activity Index. Friday promises a deluge of business activity statistics, with the release of PMI data for Germany, the Eurozone, and the United States.  

GBP/USD: Awaiting the Bank of England Meeting

According to recent statistics, the UK economy is going through a challenging period. Some of the more emotional analysts even describe its condition as dire. GBP/USD continued to decline against the backdrop of disappointing GDP data for the country. According to the latest figures released by the Office for National Statistics (ONS) on Wednesday, September 13, the British economy contracted by -0.5% on a monthly basis, compared to an expected decline of -0.2%.

The day before, on Tuesday, the ONS published equally disheartening data concerning the labor market. The unemployment rate for the three months through July rose to 4.3%, compared to the previous figure of 4.2%. Employment decreased by 207,000 jobs, while the economy lost 66,000 jobs a month earlier. The market consensus forecast had been for a reduction of 185,000 jobs.

The Bank of England's (BoE) efforts to combat inflation appear to be rather modest. Although the annual rate of price growth in the UK has decreased from 7.9% to 6.8% (the lowest since February 2022), inflation remains the highest among the G7 countries. Moreover, the core Consumer Price Index (CPI) remained unchanged from the previous month at 6.9% year-on-year, only 0.2% below the peak set two months earlier.

Sarah Briden, the Deputy Governor of the BoE, believes that the "risks to inflation [...] are currently to the upside," and that it will only reach the target level of 2% two years from now. Meanwhile, according to quarterly survey data, only 21% of the country's population is satisfied with what the Bank of England is doing to control price growth. This marks a new record low.

Analysts at Canada's Scotiabank believe that the decline of GBP/USD could continue to 1.2100 in the coming weeks, and further to 1.2000. Economists at the French bank Societe Generale hold a similar view. According to them, while a fall to 1.1500 seems unlikely, the pair could very well reach 1.2000.

GBP/USD concluded the past week at a mark of 1.2382. The median forecast suggests that 50% of analysts expect the pair to correct upwards, 35% anticipate further movement downwards, and the remaining 15% point eastward. On the D1 chart, 100% of trend indicators and oscillators are coloured red, with 15% indicating that the pair is in oversold territory. If the pair continues to move south, it will encounter support levels and zones at 1.2300-1.2330, 1.2270, 1.2190-1.2210, 1.2085, 1.1960, and 1.1800. In the event of an upward correction, the pair will face resistance at 1.2440-1.2450, 1.2510, 1.2550-1.2575, 1.2600-1.2615, 1.2690-1.2710, 1.2760, and 1.2800-1.2815.

Among the key events related to the UK economy, the publication of the Consumer Price Index (CPI) on Wednesday, September 20, stands out. This inflation indicator will undoubtedly impact the Bank of England's decision on interest rates (forecasted to rise by 25 bps, from 5.25% to 5.50%). The BoE meeting will take place on Thursday, September 21. Additionally, toward the end of the workweek, data on retail sales and the UK's Purchasing Managers' Index (PMI) will be released.

USD/JPY: No Surprises Expected from the Bank of Japan Yet

Since the beginning of this year, the yen has been gradually losing ground to the U.S. dollar, with USD/JPY returning to November 2022 levels. It's worth noting that it was a year ago at these heights that the Bank of Japan (BoJ) initiated active currency interventions. This year, however, the BoJ has so far engaged only in verbal interventions, although quite actively: high-ranking Japanese officials are frequently making public comments.

In a recent interview with Yomiuri newspaper, BoJ Governor Kazuo Ueda stated that the central bank might abandon its negative interest rate policy if it concludes that sustainable inflation targets of 2% have been achieved. According to Ueda, by year-end, the regulator will have sufficient data to assess whether conditions are ripe for a policy shift.

This verbal intervention had an impact: markets responded with a strengthening of the yen. However, the "magic" was short-lived, and USD/JPY soon resumed its upward trajectory, closing the five-day trading period at 147.84.

Economists at Danske Bank believe that the global environment favours the Japanese yen and forecast a decline in USD/JPY to 130.00 over a 6-12 month horizon. "We believe that yields in the U.S. are peaking or close to it, which is the primary argument for our bearish stance on USD/JPY," they state. "Additionally, under current global economic conditions, where growth and inflation rates are declining, history suggests that these are favourable conditions for the Japanese yen." Danske Bank also anticipates that a recession could begin in the United States within the next two quarters, prompting the Federal Reserve to cut dollar interest rates. Until the Federal Reserve concludes its easing cycle, the Bank of Japan is expected to maintain its monetary policy unchanged. Therefore, any action from the BoJ before the second half of 2024 is unlikely.

As for short-term forecasts, Societe Generale does not rule out the possibility that following the FOMC decision by the Federal Reserve on September 20, USD/JPY could move closer to the 150.00 mark. As for the Bank of Japan's meeting on Friday, September 22, no surprises are expected, and it will likely involve another round of verbal intervention. Meanwhile, the vast majority of surveyed experts (80%) believe that if the Federal Reserve rate remains unchanged, USD/JPY has a high likelihood of correcting downward. Only 10% expect the pair to continue its upward trajectory, while another 10% take a neutral stance. All trend indicators and oscillators on the D1 time frame are coloured green, although 10% of these are signalling overbought conditions.

The nearest support levels are located in the 146.85-147.00 zone, followed by 145.90-146.10, 145.30, 144.50, 143.75-144.05, 142.90-143.05, 142.20, 141.40-141.75, 140.60-140.75, 138.95-139.05, and 137.25-137.50. The nearest resistance is at 147.95-148.00, followed by 148.45, 148.85-149.10, 150.00, and finally, the October 2022 high of 151.90.

We have already mentioned the Bank of Japan's meeting on September 22. No significant economic data concerning the state of the Japanese economy is scheduled for release in the coming week. Traders should be aware, however, that Monday, September 18, is a public holiday in Japan as the country observes Respect for the Aged Day.

CRYPTOCURRENCIES: Death Cross and Bitcoin Paradoxes


A "Death Cross," indicated by the intersection of the 50-day and 200-day moving averages, has appeared on bitcoin's daily chart. This pattern last emerged in mid-January 2022, and was followed by a nearly threefold decrease in bitcoin's price by November, which is cause for concern. Interestingly, a similar Death Cross was observed in July 2021, but did not result in a price decline, offering some reassurance.

The current week in the cryptocurrency market has been marked by high volatility, with trading volumes for the leading cryptocurrency reaching $15 billion. Such levels of activity are typically only seen around major macroeconomic events. In this case, they include the release of U.S. inflation data on Wednesday, September 13, and the upcoming Federal Reserve meeting on September 20.

The BTC/USD weekly chart showed the following trends. On Monday, September 11, the price of bitcoin fell below $25,000, despite a weakening dollar and rising stock indices. This decline was fueled by rumors that the controversial FTX exchange was planning to sell digital assets as part of a bankruptcy proceeding. On Tuesday, investors resumed buying at lower levels, pushing the coin's price above $26,500. On Thursday, following the ECB's decision on interest rates, bitcoin continued to strengthen its position, reaching a high of $26,838. This occurred even as the dollar was strengthening.

In fact, the recent price dynamics are quite paradoxical. Imagine BTC/USD as a set of scales. When one side becomes heavier, it goes down while the other goes up. Yet, we witnessed both sides simultaneously descending and ascending. According to some analysts, there was no fundamental rationale behind these bitcoin movements. With low liquidity and falling market capitalization, the asset was merely being "shifted" from one group of speculators to another.

Even the testimony of Gary Gensler, the Chairman of the U.S. Securities and Exchange Commission (SEC), before the U.S. Senate did not spook market participants. He stated that the overwhelming majority of cryptocurrencies fall under the jurisdiction of his agency. Consequently, all intermediaries in the market, exchanges, brokers, dealers, and clearing agencies, are required to register with the SEC.

Gensler compared the current state of the crypto industry to the "wild west" years of the early 20th century, when securities market legislation was still being developed. During those years, the agency took a series of strict enforcement actions to rein in the industry, and many cases ended up in court. Similar measures are needed today, not only to serve as a deterrent to businesses but also to protect investors, the SEC Chairman stated. (It's worth noting that, according to Ripple CEO Brad Garlinghouse, the SEC is to blame for the U.S. becoming one of the "worst places" to launch cryptocurrency projects.)

But aside from the SEC, there are other regulators, such as the Federal Reserve. It's clear that the Fed's decisions and forecasts, which will be announced on September 20, will impact the dynamics of risky assets, including cryptocurrencies. Mike McGlone, Senior Macro Strategist at Bloomberg Intelligence, has already warned investors that the near future for the crypto sector looks challenging. According to him, digital assets gained popularity during a period of near-zero interest rates. However, as monetary policy shifts, challenges could arise for the industry. McGlone pointed out that the yield on U.S. Treasury bonds is expected to reach 5.45% by November, based on futures contracts. In contrast, from 2011 to 2021, this yield was only about 0.6% annually, a period during which bitcoin and other digital assets saw significant growth. Therefore, a liquidity outflow from cryptocurrencies would not be surprising.

Once again, many analysts are offering positive medium- and long-term forecasts but negative short-term outlooks. Michael Van De Poppe, founder of venture firm Eight, predicts a final price correction for the leading cryptocurrency before an impending bull rally. According to him, if bears manage to breach the exponential moving average line, currently at $24,689, the coin could drop to as low as $23,000 in a worst-case scenario. Van De Poppe believes this upcoming correction represents the last chance to buy bitcoin at a low price.

Dan Gambardello, founder of Crypto Capital Venture, predicts that the next bull cycle could be the most impressive in the cryptocurrency market. However, he also reminds investors that the crypto market follows cycles and appears to be in an accumulation phase. Given this, Gambardello warns that there's a possibility that bitcoin's price could drop to $21,000 in the coming weeks. He attributes this potential decline to market manipulation by major players who may be driving down prices to accumulate coins in anticipation of the next bull run.

According to a popular expert known as CrypNuevo, the flagship cryptocurrency could soon reach a $27,000 mark. However, the analyst emphasized that this is likely to be a false move, and a dip down to around $24,000 should be expected thereafter. (It's worth noting that on August 17, the BTC price broke through the ascending trend line that started in December 2022 and settled below it, indicating a high risk of a prolonged bearish trend.)

As for the short-term prospects of the leading altcoin, they also appear to be less than optimistic. Analysts at Matrixport have warned that if ETH drops to $1,500, the path to $1,000 would be open: a level the experts consider justifiable based on their revenue projections for the Ethereum blockchain ecosystem. Matrixport notes that ETH is not a "super sound money" capable of resisting inflation, as the number of coins minted last week exceeded the amount burned by 4,000. This represents a deviation from the deflationary model that the blockchain adopted with the consensus algorithm transition from Proof of Work (PoW) to Proof of Stake (PoS).

Analyst Benjamin Cowen sets an even lower target. He claims that Ethereum is on the brink of "extreme volatility," potentially plummeting to a range between $800 and $400 by the end of the year. The reason remains the same: a possible decline in the profitability of blockchain platforms built on ETH smart contract technologies. According to Cowen, both ETH bulls and bears "have crashed and failed to execute their strategies," which will result in both parties locking in their losses by the end of 2023.

With three and a half months remaining until the end of the year, the current state of the market at the time of writing this review, Friday evening, September 15, shows ETH/USD trading around $1,620 and BTC/USD at $26,415. The total market capitalization of the crypto market stands at $1.052 trillion, up from $1.043 trillion a week ago. The leading cryptocurrency accounts for 48.34% of the market, while the primary altcoin makes up 18.84%. The Crypto Fear & Greed Index for bitcoin remains in the 'Fear' zone at 45 points, albeit inching closer to the 'Neutral' zone (it was 46 points a week ago).
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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Forex and Cryptocurrencies Forecast for September 11 - 15, 2023

EUR/USD: September 13 and 14 - Key Days of the Week

For the eighth consecutive week, the U.S. Dollar Index (DXY) is rising, while EUR/USD is declining. The currency pair has retreated to levels last seen three months ago, settling in the 1.0700 zone. It was only the dollar bulls starting to lock in accumulated gains on Friday, September 8, that prevented further declines.

The fundamental backdrop continues to favour the U.S. currency. Business activity, as measured by the Services PMI, shows consistent growth; it rose from 52.7 to 54.5 against a forecast of 52.5. Additionally, data released on September 8th indicated that the U.S. labour market is performing at least adequately. The number of initial jobless claims came in at 216K, lower than both the forecast of 234K and the previous figure of 229K.

On the same day, European statistics appeared decidedly weak. For instance, in Q2, the EU economy grew by a mere 0.1%, despite Q1 growth and market expectations being at 0.3%. In annual terms, with a forecast of 0.6%, the actual growth rate was also lower at 0.5%. Germany's industrial production volume decreased by -0.8% in July, compared to a forecast decline of -0.5%. Meanwhile, despite efforts to reduce it, inflation in Germany remains stable. The Consumer Price Index (CPI) published on Friday, September 8, stayed at 0.3% month-over-month (m/m) and 6.4% year-over-year (y/y).

According to many analysts, the European Central Bank (ECB) finds itself in a predicament. On one hand, to combat inflation, interest rates need to be raised; on the other hand, to assist the economy, they should be lowered. It is quite possible that in its meeting on Thursday, September 14, the regulator will take a pause and leave the key interest rate unchanged at 4.25%. Currently, the likelihood of such a decision is estimated at 35%.

As for the Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve scheduled for September 20th, market participants are confident that the regulator will also leave interest rates unchanged. However, the reason in this case is different. While the Eurozone teeters on the edge of recession and stagflation, the U.S. is undergoing a "soft landing." As assured by John C. Williams, President of the Federal Reserve Bank of New York, "monetary policy is in a good place." Of course, the balance could tip one way or the other after inflation data for the United States becomes available on Wednesday, September 13.

That said, a pause in September does not mean the end of the monetary tightening cycle. According to CME FedWatch, the odds of a 25 basis point (b.p.) rate hike in November are at 37%. Even if this hike doesn't materialize, it is unlikely to harm the dollar. Much of the negative sentiment is already priced into the USD, as markets have long been betting on a recession in the U.S. economy and a corresponding easing of the Federal Reserve's monetary policy. Now, it has become clear that a dovish shift is unlikely, and the key interest rate will, at a minimum, remain at the peak level of 5.5% for an extended period.

EUR/USD pair began its descent from a high of 1.1275 eight weeks ago, on July 18, ending the past trading week at 1.0699, shedding 576 points. As of the evening of September 8, when this review was written, 45% of experts predict a rise for the pair in the near term, another 45% foresee a decline, and 10% hold a neutral stance. Regarding technical analysis, nothing has changed over the past week. All trend indicators and oscillators on the D1 timeframe continue to be 100% in favor of the U.S. currency and are coloured red. However, already 30% of the most recent indicators signal the pair is oversold. Immediate support for the pair is located around 1.0680, followed by 1.0620-1.0635, 1.0515-1.0525, 1.0480, 1.0370, and 1.0255. Bulls will encounter resistance around 1.0730-1.0745, followed by 1.0780-1.0800, 1.0835-1.0865, 1.0895-1.0925, 1.0985, 1.1045, 1.1090-1.1110, 1.1150-1.1170, 1.1230, and 1.1275-1.1290.

It's essential to note Wednesday, September 13 in the calendar for the upcoming week, when consumer inflation data (CPI) for the U.S. will be released. On Thursday, September 14, the European Central Bank (ECB) will announce its decision on interest rates. Of course, the subsequent central bank leadership press conference will also be of great interest. On the same day, the number of initial jobless claims in the U.S. will traditionally be published, along with retail sales data and the Producer Price Index (PPI) for the country.

GBP/USD: Peak Rate Continues to Lower

At present, the central question for many central banks, including the Bank of England (BoE), is what takes precedence: taming inflation or preventing the economy from slipping into recession? Indeed, the British economy seems to be heading in the latter direction. The Purchasing Managers' Index (PMI) for the country's manufacturing sector in August stood at a mere 43.0, with the headline PMI dropping to a 39-month low. According to recent data, the PMI in the services sector has declined to 49.5, dipping below the 50.0 threshold into contraction territory for the first time since January.

So, what about inflation? Although the annual inflation rate in the UK decreased from 7.9% to 6.8% (the lowest since February 2022), it remains the highest among G7 countries. Moreover, the core Consumer Price Index (CPI) remained at 6.9% year-over-year, only 0.2% below the peak set two months earlier.

According to the latest survey conducted by the Bank of England's Monthly Decision Maker Panel (DMP) on Thursday, September 7th, British businesses anticipate that the CPI will decline to 4.8% year-over-year within the next year. It is worth noting that the regulator itself aims to bring the CPI closer to 5.0% by the end of this year.

Surveys indicate that under the current circumstances, the country's leadership is prioritizing economic salvation over the battle against inflation. Huw Pill, the Bank of England's Chief Economist, stated that while there is no room for complacency concerning inflation, he would prefer to keep the interest rate stable for a longer period. He added that in the upcoming BoE meeting on September 21, he will vote to maintain the rate at its current level of 5.25%.

According to Reuters, markets are currently pricing in an 85% likelihood that the BoE's final interest rate, after one or two hikes by year's end, will be 5.75%. This projection is significantly lower than July's, when a peak rate of 6.5% was anticipated. It is worth noting that the future 5.75% for the pound is just 25 basis points higher than the current 5.50% for the dollar, a gap that clearly does not favour the British currency. Moreover, the U.S. Federal Reserve's rate could potentially rise by an additional 25-50 basis points.

GBP/USD closed last week at a rate of 1.2465. Economists from Singapore's United Overseas Bank Limited (UOB) anticipate that the pair may test strong support at the 1.2400 level over the next 1-3 weeks. However, they believe that short-term oversold conditions could decelerate the pace of further decline. Expert forecasts are evenly divided, much like those for EUR/USD: 45% predict a northward correction, 45% foresee a continued southward trend, and the remaining 10% point to an eastward move. Among the oscillators on the D1 chart, 100% are coloured in red, with 15% indicating oversold conditions. Trend indicators show a 90% to 10% ratio favouring red. If the pair trends downward, it will encounter support levels and zones at 1.2445, 1.2370-1.2390, 1.2300-1.2330, 1.2270, 1.2190-1.2210, 1.2085, 1.1960, and 1.1800. In case of upward movement, resistance can be expected at levels 1.2510, 1.2560-1.2575, 1.2600-1.2615, 1.2690-1.2710, 1.2760, 1.2800-1.2815, 1.2880, 1.2940, 1.2995-1.3010, 1.3060, and 1.3125-1.3140, as well as 1.3185-1.3210.

In terms of key economic data for the United Kingdom, the unemployment figures set to be released on Tuesday, September 12, are of particular interest. Additionally, the country's July GDP numbers, which will be disclosed on Wednesday, September 13, are also noteworthy.

USD/JPY: Bulls Wary as Bears Anticipate Currency Interventions


As for Japan, the question of "economy or inflation" is not up for debate; the answer is unequivocally the economy. On Wednesday, September 6, Kyodo News, citing anonymous sources, reported that the Japanese government apparently plans to roll out new economic stimulus measures in October. Reuters, quoting Japanese media outlets, identified the primary goals of the stimulus as "supporting wage increases within companies and mitigating electricity costs." "It is expected that Prime Minister Fumio Kishida will task [the responsible parties] with preparing a draft […] to allocate additional budget resources for these measures," the report stated. Reuters also presented an analysis indicating that the country's debt burden will increase due to the announced stimulus measures. According to estimates, Japan's debt, which is already twice its GDP, will hit a record level of 112 trillion yen (760 billion dollars) in the next fiscal year.

It becomes clear that under such circumstances, inflation will continue to rise. Meanwhile, USD/JPY continues its upward movement, reaching a level of 147.86 on September 7, marking a 10-month high. On Friday, September 8, Japan's Finance Minister Shunichi Suzuki reiterated once again that the country's authorities "are not ruling out any options to combat excessive currency fluctuations." However, no market participants believe in a rate hike anymore, given that it has been stuck at a negative level of -0.1% for many years. Concerns are growing among investors that the Ministry of Finance and the Bank of Japan (BoJ) may finally resort not to verbal, but to actual currency interventions, as was the case last fall. According to the same Reuters report, Japan's chief currency diplomat, Masato Kanda, stated that Japanese banking authorities are considering the possibility of intervention to put an end to "speculative" movements.

Against the backdrop of the DXY Dollar Index holding around 105.00, its highest level since March, only currency interventions by the Bank of Japan could help the yen strengthen its position somewhat. However, according to some analysts, the main reason for the yen's weakness lies in the disagreements among the country's politicians regarding its monetary policy.

The final point of the past trading week was marked at 147.79. Strategists at UOB Group anticipate that the continuation of the upward momentum could push USD/JPY towards an assault on the 149.00 level in the coming weeks. As for the consensus forecast, only 20% of analysts still believe in the dollar's potential and the pair's further growth. Bears have gained the favour of 80%. (It's worth noting that even a 100% consensus does not guarantee the accuracy of the forecast, especially when it comes to the Japanese yen.) As for the trend indicators and oscillators on the D1 chart, all 100% are coloured green, although 40% of these are signalling overbought conditions. The nearest support level lies in the 146.85-147.00 zone, followed by 146.10, 145.55-145.70, 145.30, 144.90, 144.50, 143.75-144.05, 142.90-143.05, 142.20, 141.40-141.75, 140.60-140.75, 139.85, 138.95-139.05, 138.05-138.30, and 137.25-137.50. The nearest resistance stands at 148.45, followed by 148.85-149.10, 150.00, and finally, the October 2022 peak at 151.90.

No significant economic data concerning the state of the Japanese economy is scheduled for release in the upcoming week.

CRYPTOCURRENCIES: Fear and Doubt in the Market

For the third week, the market has been in a state of apathy. According to observations by crypto-millionaire William Clemente, the total trading volume for digital assets has fallen to its lowest levels since 2020. The BTC/USD chart on the H1 and H4 timeframes mostly resembles an ant trail, where these insects move in a thin, unbroken line.

The situation was invigorated by a court decision in the Grayscale case. This world-leading investment firm in cryptocurrency asset management won an appeal against the U.S. Securities and Exchange Commission (SEC). As a result, on August 29, bitcoin surged from $26,060 to $28,122 within three hours, showing its best growth rate in the last 12 months. However, the excitement was short-lived, as the SEC struck back by deciding to postpone until October the consideration of applications for spot bitcoin ETF registrations. Consequently, the flagship cryptocurrency returned to the support zone of $25,500.

Turning to technical analysis, this support corresponds to the Fibonacci level of 0.382. A break below this level could potentially lead to a fall to $21,700: the Fibonacci level of 0.618. Experts from Fairlead Strategies note that at the end of August, the digital gold's monthly chart confirmed an exit from the overbought zone on the stochastic oscillator, which could signal disappointment for bitcoin bulls. Analysts believe that this formed signal often indicates the passing of a local peak, as seen at the end of 2017 and the beginning of 2021. "The decline [in the stochastic oscillator] suggests that the bottom formation process may be prolonged. This is especially true when considering the Ichimoku cloud overhead, which serves as resistance (~$31,900)," said the report from Fairlead Strategies.

According to an analyst going by the nickname Tolberti, the BTC chart is forming a "head and shoulders" pattern, which threatens further price declines. Another argument supporting the bearish trend is that bitcoin is trading below its 200-week moving average (MA). As a result, Tolberti speculates that the leading cryptocurrency could fall to $10,000, with a possible reversal occurring in March 2024.

Negative forecasts are also coming from analysts at Cointelegraph. The fact is that bitcoin derivatives have started to show bearish tendencies. The BTC price chart leaves no doubt that investor sentiment has not improved following Grayscale's victory. Therefore, experts anticipate that the leading cryptocurrency's quotes could decline to $22,000 in the coming weeks.

Cointelegraph believes that not only the postponement of the launch of spot bitcoin ETFs is pressuring the market, but also U.S. regulatory actions against exchanges like Binance and Coinbase. Multiple sources claim that the U.S. Department of Justice (DOJ) is likely to charge the world's largest trading platform and initiate a criminal investigation. The allegations involve money laundering assistance and violation of sanctions against Russian companies.

Currently, market participants are in a state of limbo and are uncertain about what to expect. Regulatory uncertainty is favouring the bears. The derivatives market is ridden with fear and doubt, which benefits those betting on a decline, according to Cointelegraph.

We have previously noted that powerful catalysts for market growth in the medium and long term could be the launch of spot bitcoin ETFs and the bitcoin halving event scheduled for April 2024.

Recall that this summer, eight major financial institutions submitted applications to the SEC to enter the cryptocurrency market through spot bitcoin ETFs. Among them, in addition to BlackRock, are global asset managers like Invesco and Fidelity. According to some estimates, in the first six months after the ETF launch, new demand for the cryptocurrency could amount to $5-10 billion, and the value of BTC could rise to $50,000-120,000 per coin.

Despite the SEC's decision to postpone the review of applications until mid-autumn, the chances of approval are quite high. After all, BlackRock is not some small fish but a global investment giant, and it is in good standing with U.S. authorities. It's worth mentioning that when the Federal Reserve decided in 2020 to buy securities through ETFs to support the American economy, half of the volume went to BlackRock funds.

Interestingly, the company itself highly estimates the chances of application approval. This is evident from its purchasing of both bitcoin and shares of mining companies. In mid-August, it became known that BlackRock acquired shares of four major mining companies, spending a total of over $400 million. Larry Fink, BlackRock's CEO, has referred to bitcoin as digital gold and an international asset that potentially offers inflation protection.

Alistair Milne, the Chief Investment Officer of the Altana Digital Currency Fund, believes that the price of bitcoin could reach $100,000 even without the approval of spot bitcoin exchange-traded funds (ETFs). In his view, the ETF topic merely distracts market participants. Milne is confident that issues within the U.S. banking sector, the stabilization of risky assets following the end of the Federal Reserve's interest rate hikes and increasing profitability in the crypto-mining sector will drive the coin's price upward.

Arthur Hayes, the co-founder of the crypto exchange BitMEX, also thinks that due to issues in the banking sector, bitcoin is poised for substantial growth. According to him, the bull phase began after the Federal Reserve initiated a $25 billion program to stabilize the banking sector, notably including the "rescue" of Silicon Valley Bank. Hayes asserts that this situation has prompted traders to focus on assets with limited supply, such as bitcoin. While only a small fraction of market participants are currently taking this into account, he is convinced that their number will increase, and over the next 6-12 months, the leading cryptocurrency will experience a new surge.

As for the second driver, the halving, well-known blogger and analyst Lark Davis believes that this event could lead to a 500-600% increase in bitcoin's current price, potentially reaching around $150,000 to $180,000. However, with more than seven months to go before the halving, there are two upcoming events that could significantly influence investors' appetite for risky assets. These are the publication of U.S. inflation data on Wednesday, September 13, and the Federal Reserve meeting on September 20.

As of the time of writing this review, on the evening of Friday, September 8, BTC/USD is trading at around $25,890. The total market capitalization of the cryptocurrency market stands at $1.043 trillion, slightly down from $1.048 trillion a week ago. The Crypto Fear & Greed Index for bitcoin remains in the 'Fear' zone, registering at 46 points, up from 40 points a week earlier, though it is edging closer to the 'Neutral' zone.

In conclusion, another forecast comes from Artificial Intelligence. Utilizing several technical indicators, including Moving Average Convergence Divergence (MACD), Relative Strength Index (RSI), Bollinger Bands (BB), and others, the AI on the PricePredictions platform has calculated that the price of bitcoin should reach $26,228 by September 30. We don't have long to wait to see whether such intelligence can be trusted.
 

NordFX Analytical Group
 

Notice: These materials are not investment recommendations or guidelines for working in financial markets and are intended for informational purposes only. Trading in financial markets is risky and can result in a complete loss of deposited funds.

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August 2023 Results: NordFX Trading Leaders Opt for XAU/USD Once Again

NordFX Brokerage has summarized the trading performance of its clients for August 2023. The company has also evaluated its social trading services, CopyTrading and PAMM, as well as the profits earned by its IB partners.

- In August, a client from Western Asia, with account number 1692XXX, ascended to the top "golden" tier of the honour podium. This individual earned 85,598 USD through trades involving gold (XAU/USD) and the British pound (GBP/USD).

- Their compatriot, with account number 1683XXX, took second place, also trading in gold (XAU/USD) and earning 44,329 USD from these transactions.

- Completing the top three is a trader from South Asia, with account number 1691XXX, who earned a profit of 43,458 USD. Similar to the first two cases, this impressive result was achieved through trades involving XAU/USD.

The situation in NordFX's passive investment services is as follows:

- In August, the signal Ok my trade within the CopyTrading startups caught attention. In just 10 days, it delivered a 510% profit. What's more significant is that its maximum drawdown did not exceed 16%. Given the aggressive trading strategy, this can be considered an accomplishment. However, it's important to reiterate that aggressiveness and a short lifespan are key risk factors that require special caution when subscribing to such signals.

- In the PAMM service, we continue to monitor the Trade and Earn account. While it was opened over a year ago, it remained dormant until awakening in November. As a result, over the past 10 months, it has achieved a return of 175% with a relatively low maximum drawdown of less than 17%.

The top three IB partners of NordFX received the following rewards in August:

- The highest commission of 12,328 USD was awarded to a partner from Western Asia, with account number 1645XXX, who has led the top three for four consecutive months. Over this period, they have earned just under 45,000 USD in total;

- Following in second place is a partner from South Asia, with account number 1507XXX, who received 9,324 USD;

- Finally, rounding out the top three is another partner from South Asia, with account number 1531XXX, who received a reward of 5,512 USD.
 

Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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