Daily Market Analysis from NordFX

Forex and Cryptocurrencies Forecast for August 28 – September 01, 2023

EUR/USD: Mr. Powell and Mrs. Lagarde - Much Talk, Little Substance


Last week's business activity data from both sides of the Atlantic proved to be exceptionally weak. The euro came under selling pressure due to a decline in Germany's Services PMI from 52.3 to 47.3, which in turn pulled down the Composite Business Activity Indexes not only for Germany but for the entire Eurozone. The former dropped from 48.5 to 44.7, while the latter declined from 48.6 to 47.0. The GDP data for Germany for Q2, released on Friday, August 25, further confirmed that the economy of the united Europe is stagnating. On a quarterly basis, this metric stood at 0%, and on an annual basis, it showed a decline of -0.6%.

American macroeconomic data also failed to please investors. Preliminary business activity data for the United States published on Wednesday, August 23, fell short of expectations. Specifically, the Manufacturing PMI dropped from 49.0 to 47.0, and for the Services sector, it decreased from 52.3 to 51.0. The Composite Index also weakened from 52.0 to 50.4. (Note that a score above 50.0 indicates an improving economic situation, while below 50.0 signifies deterioration.) The published data for U.S. durable goods orders also turned out to be fairly weak. While they had increased by 4.4% in June, they unexpectedly fell by -5.2% in July.

Despite the fact that both European and American statistics were considered dismal by several experts, the DXY Dollar Index continued its bullish rally initiated six weeks prior, while EUR/USD maintained its southerly course. Not even the hawkish rhetoric from Deutsche Bundesbank President Joachim Nagel could bolster the euro. Nagel advocated for the continuation of interest rate hikes to control inflation. In contrast, Nagel's Portuguese colleague, Mario Centeno, called for caution to avoid negatively impacting the Eurozone economy.

This discord among members of the ECB's Governing Council, set against a backdrop of persistently weak economies in Q1 and Q2 and the potential for GDP contraction in Q3 of 2023, has sown doubt among market participants. These circumstances have led to scepticism about whether the regulator will proceed with further rate hikes in September.

The positions of U.S. representatives, speaking on the sidelines of the global central bank symposium in Jackson Hole, appeared more unified. Boston Federal Reserve Bank President Susan Collins and Philadelphia Federal Reserve Bank President Patrick Harker stated that the Fed could maintain interest rates at a stable level through the end of the year. However, they refrained from commenting on the timeline for a shift in monetary policy for the following year. Furthermore, according to Susan Collins, the resilience of the U.S. economy to aggressive monetary tightening suggests that the Fed may have to do more than it has already done. Her comments were interpreted as a clear hint towards further tightening of the American regulator's policy, leading market participants to speculate that Federal Reserve Chairman Jerome Powell might also adopt a relatively hawkish stance.

Two pivotal speeches were scheduled for the evening of Friday, August 25, at the Jackson Hole global central bank symposium. These addresses held the potential to either disrupt or amplify existing financial trends. Federal Reserve Chairman Jerome Powell was set to speak first, followed by ECB President Christine Lagarde just two hours before the markets closed.

If Powell had confirmed that interest rates would remain unchanged through the year's end, it could have triggered selling pressure on the dollar. Conversely, the ongoing dollar rally might have accelerated if Powell had indicated the possibility of another rate hike. Data from the FedWatch Tool indicated a 39% likelihood of another 25-basis-point rate hike by the end of 2023 ahead of the speech.

In the previous year at Jackson Hole, Powell warned that any rate hikes would inflict "some pain" upon the U.S. economy, a statement that led to a rapid downturn in the U.S. stock market. This time, the U.S. equities market didn't wait for Powell's remarks. Major indices such as the S&P 500, Dow Jones, and Nasdaq saw sharp declines as early as August 24.

So, what did Jerome Powell say this time? Essentially the same message he delivered last year. Quote: "At last year's Jackson Hole symposium, my message was brief and direct. The substance of my remarks this year remains the same: The Federal Reserve's task is to bring inflation down to our 2% target, and we will achieve this," the Fed Chairman assured his audience. He then laid out two potential future scenarios: either maintaining the current rate or raising it. "While inflation has come down from its peak, which is a welcomed development, it remains too high," he said. "We are prepared to raise rates further if necessary and will maintain a restrictive policy stance until we are confident that inflation is sustainably moving toward our target level."

The head of the U.S. central bank also noted that core PCE (Personal Consumption Expenditures) inflation reached 4.3% in July, up from 4.1% the previous month. (July's PCE data will officially be released on August 31.) Overall, Powell's rhetoric was, as is often the case, fairly ambiguous: leaving both possible outcomes open for consideration.

Madam Lagarde's remarks were perhaps even more elusive. "Profound shifts in the functioning of the global economy [...] could lead to greater inflation volatility and more persistent price pressures," she stated. According to the ECB President, "at this stage, it is unclear whether all these various shifts will be permanent. [...] While these changes may still prove to be temporary, central banks need to be prepared for some of them to be more enduring."

In summary, while Powell presented two options, either maintaining or raising the interest rate, Madam Lagarde simply declared that interest rates will remain elevated for as long as necessary to combat inflation. As a result, the daily candle for EUR/USD, after some hesitation, returned to the central part of its range.

Starting the five-day trading week at 1.0872, EUR/USD closed it with an advantage for the dollar, settling at 1.0794. At the time of writing this analysis, on the evening of August 25th following the speeches at Jackson Hole by the heads of the Fed and the ECB, analysts were evenly split: 50% favoring a rise in the pair and 50% expecting a decline. Among the trend indicators and oscillators on the D1 chart, 100% are leaning towards the American currency and are coloured in red. However, 15% of these are signalling that the pair is oversold. Immediate support for the pair is located in the 1.0765-1.0775 range, followed by 1.0740, 1.0665-1.0680, 1.0620-1.0635, and 1.0525. Bulls will encounter resistance in the areas of 1.0845-1.0865, followed by 1.0895-1.0925, then 1.0985, 1.1045, 1.1090-1.1110, 1.1150-1.1170, 1.1230, and 1.1275-1.1290.

The upcoming week will see the release of a significant amount of diverse economic data. The week will kick off on Tuesday, August 29, with the U.S. Consumer Confidence Index and the job openings data. On Wednesday, August 30, preliminary Consumer Price Index (CPI) data from Germany will be released, along with U.S. labour market statistics and GDP figures. Thursday will bring preliminary CPI numbers for the Eurozone, retail sales data from Germany, as well as U.S. unemployment levels and the Core Personal Consumption Expenditures Price Index (Core PCE Price Index), a critical inflation indicator. On Friday, September 1, another substantial set of U.S. labour market information will be released, including the highly important Non-Farm Payrolls (NFP) data. The week will conclude with the release of the U.S. Manufacturing Purchasing Managers' Index (PMI).

GBP/USD: Will the Rate Finally Rise?

Inflationary pressure in the United Kingdom is easing, although it remains the highest among the G7 countries. We have previously noted that while the annual rate of price growth has decreased from 7.9% to 6.8% (the lowest since February 2022), inflation remains elevated. Furthermore, the core CPI metric has remained steady at 6.9% year-on-year, just 0.2% below the peak set two months prior. A surge in energy prices threatens another inflationary spike.

These data and prospects exert significant pressure on the British currency. According to some analysts, they will push the Bank of England (BoE) toward further interest rate hikes. This will likely occur despite rising unemployment rates and the threat of an economic recession. This possibility cannot be ruled out, as preliminary business activity data released on Wednesday, August 23, showed that the UK's Manufacturing PMI dropped from 45.3 to 42.5 within a month, the Services PMI fell from 51.5 to 48.7, and the Composite PMI declined from 50.8 to 47.9. Thus, all three indicators fell below 50.0, signalling a sharp deterioration in the economic landscape.

A number of experts believe that the key interest rate could peak around 6% (currently at 5.25%). Due to accelerating inflationary pressures, the BoE may be compelled to maintain this peak level for an extended period, even in the face of pressure from populist politicians. Should this occur, the pound would have an opportunity to improve its position relative to the dollar.

However, concerning near-term prospects, specialists at Scotiabank do not rule out a further decline of GBP/USD to 1.2400 after breaking the 1.2620 support level. They add that "a rebound above 1.2600 could provide short-term support for the pound, especially considering that the selloff appears to be overstretched." Experts at ING, the largest banking group in the Netherlands, believe that the pair could find support around 1.2500 if the dollar strengthens. Their colleagues at Singapore's United Overseas Bank anticipate that GBP/USD will trade in a range of 1.2580-1.2780. "Going forward," they write, "as long as the pound remains below the strong resistance level [of 1.2720], it is likely to weaken to 1.2530 and possibly even to 1.2480."

After the Jackson Hole speeches on Friday, August 25, GBP/USD settled at 1.2578. The near-term consensus among experts is divided as follows: 60% are in favour of a bullish trend, 20% lean bearish, and the remaining 20% are neutral. On the D1 timeframe, 60% of the oscillators are painted red, with a third of these suggesting the pair is oversold; the remaining 40% are in a neutral grey zone. As for trend indicators, 85% are coloured red, suggesting a bearish bias, compared to 15% in green.

If the pair trends downwards, it will likely find support at various levels and zones: 1.2540, 1.2500-1.2510, 1.2435-1.2450, 1.2300-1.2330, 1.2190-1.2210, 1.2085, 1.1960, and 1.1800. Conversely, if the pair moves upwards, it will encounter resistance at 1.2630, 1.2675-1.2690, 1.2760, 1.2800-1.2815, 1.2880, 1.2940, 1.2980-1.3000, 1.3050-1.3060, 1.3125-1.3140, and 1.3185-1.3210.

Regarding key economic data for the United Kingdom, no major releases are expected in the upcoming week. The focus will be on developments across the Atlantic. However, traders should note that Monday, August 28, is a bank holiday in the UK.

USD/JPY: Higher and Higher

The Governor of the Bank of Japan (BOJ), Kazuo Ueda, is scheduled to speak in Jackson Hole on Saturday, August 26, by which time this review will already have been written. Frankly, we do not expect any groundbreaking statements from him. At this point, we can only rely on the comments from the country's Finance Minister, Shunichi Suzuki. On Friday, August 25, he stated that he is "closely monitoring the impact of the Jackson Hole discussions on the global economy." He added that he cannot offer any specific details regarding the formation of an additional budget to finance economic measures.

It's worth noting that the Bank of Japan (BoJ) recently took a "revolutionary" decision, at least by its own standards, and shifted from rigid yield curve targeting of Japanese Government Bonds (JGBs) to a more flexible approach. However, it set certain boundaries, drawing a "red line" at a yield of 1.0% and declaring that it would carry out purchases to ensure that yields do not exceed this level. Less than a week after this move, the yield on JGBs reached nine-year highs, approaching the 0.65% mark. Consequently, the central bank had to intervene by buying these securities to prevent further increases.

In the Japanese media, Nikkei Asia believes that the budgetary expenses for such operations are expected to rise. Unlike the Finance Minister, they provided a specific figure: 110 trillion yen (over 753 billion dollars) for the year 2024. According to the Nikkei Asia report, the budget request is expected to be submitted by the end of August, meaning within the coming week.

As previously mentioned, the change in yield curve regulation for securities is indeed an extraordinary move for the Bank of Japan (BoJ). However, according to Japan's MUFG Bank, this is insufficient to trigger a yen recovery. Regarding interest rate hikes, MUFG believes that the Bank of Japan may only decide on its first increase in the first half of next year. Only then is a shift towards strengthening the national currency expected.

The yen had an opportunity to slightly strengthen its position last week. Responding to weak economic activity data, U.S. Treasury yields dropped by more than 1.5%. As is well-known, there is an inverse correlation between their yields and the yen. That is, if Treasury yields fall, the Japanese currency rises, and USD/JPY forms a downward trend. This is exactly what we observed in the middle of the week, on August 23, the pair found a local low at the 144.53 level.

However, the joy for yen investors was short-lived, as the pair reached a new high of 146.62 on August 25. As for the close of the trading week, it settled at the 146.40 level. According to strategists at Credit Suisse, the pair will eventually climb higher and reach its primary and long-term target at 148.57.

Regarding the near-term outlook, the consensus among experts appears as follows: A significant majority (60%) anticipate a downward correction for the pair. Meanwhile, 20% expect USD/JPY to continue its upward movement, and another 20% opted to abstain from commenting. On the D1 time frame, all trend indicators are coloured green, while 90% of the oscillators are also green (with 10% in the overbought zone); the remaining oscillators maintain a neutral stance. The closest support level lies at 146.10, followed by 145.50-145.75, 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 immediate resistance is at 146.90-147.15, followed by 148.45-148.60, 150.00, and finally, the October 2022 high at 151.95.

There are no scheduled releases of any significant statistics concerning the state of the Japanese economy for the upcoming week.

CRYPTOCURRENCIES: The Shock is Not Over Yet

It appears that the crypto market is still reeling from the shock of August 17, when bitcoin took a sharp nosedive, hitting a low of $24,296. The Crypto Fear & Greed Index, which had long been in the neutral zone, moved into the fear territory. The leading cryptocurrency dragged the entire crypto market down with it, shrinking it by 10% from $1.171 trillion to $1.054 trillion, barely holding above the psychological level of $1 trillion. On August 17 alone, traders collectively lost over $1 billion across all instruments, marking the biggest loss since the crash of the FTX exchange.

This is a brief description of the recent tragedy. Now let's delve into the causes. We already highlighted the main theories in our last review, and they turned out to be accurate, although they now merit a more comprehensive analysis. Two major news events triggered the downturn. The first was the publication of the July meeting minutes from the Federal Reserve, where the majority of the FOMC (Federal Open Market Committee) members expressed the possibility of raising the key interest rate in 2023. A higher rate boosts the yield on the dollar and government bonds, resulting in capital flight from riskier assets.

The second catalyst was an article in The Wall Street Journal, citing documents stating that Elon Musk's SpaceX had sold off its BTC holdings, writing off $373 million in cryptocurrency. Notably, the report did not specify when SpaceX sold these coins. However, as the ensuing panic showed, such details weren't necessary.

In another context, these two pieces of news might not have provoked such a violent reaction. However, prolonged market consolidation, low trading volumes in the spot market, and a large number of derivative positions opened by traders using leverage all contributed negatively. The fall in prices triggered a domino effect, leading to the liquidation of more than 175,000 leveraged positions in 24 hours, according to Coinglass data. Subsequently, the leverage ratio dropped to levels last seen in April.

Now, a week later, following the speech by the Federal Reserve Chair at Jackson Hole, it turns out that a rate hike might or might not happen. In other words, the Federal Reserve may put an end to its monetary tightening cycle and freeze the rate at its current level. This eliminates the first reason for panic. As for the second reason, it turns out that SpaceX had written off its crypto assets back in 2021-2022, rendering this "news" inconsequential.

However, what's done is done. Short-term BTC holders took the biggest hit: 88.3% of them are now in a losing position. This is a concern because these speculators are typically not known for their patience and could begin offloading their remaining crypto holdings, exerting further downward pressure on prices. On the other hand, it's worth noting that long-term holders (those holding for more than 155 days) took advantage of the situation to buy more coins, seeing it as an opportune time to bolster their portfolios.

After the crash on August 17, the voices advocating for a swift bitcoin rebound have become increasingly subdued, while the pessimists have gained momentum. However, even within their forecasts, the term "halving" is frequently mentioned, a concept upon which many influencers place great hopes. For example, an analyst known by the pseudonym Tolberti predicts a continuation of the bearish trend until bitcoin hits a bottom around $10,000 by the time of the halving in April 2024. This prediction is based on BTC's price falling below its 200-week and 20-month moving averages (MAs). Additionally, Tolberti notes the formation of a bearish flag on the chart, indicating a continued negative trend.

According to popular analyst Benjamin Cowen, the current downturn in the leading cryptocurrency may not be its last, and bitcoin will likely continue to fall. He believes that such a bearish trend is consistent with the current global economic trajectory. Cowen also pointed out that similar bitcoin declines happen every four years. "The fact is, every four years in August or September, the year before the U.S. presidential elections, there is a correction in the American market. And bitcoin correlates with U.S. stock market indices. If we look at 2023, we see this as well. In 2019, bitcoin plummeted 61%. In 2015, the decline was about 40%. In 2011, we saw a 'black swan' of 82.5%. That is, every year before the halving and American elections, we see a bitcoin decline," explained Cowen.

Dave the Wave, an analyst who accurately predicted the crypto market crash in May 2021, believes that the current bear market for bitcoin will last at least until the end of the year. The expert used his own version of logarithmic growth curves, which help forecast bitcoin's macro highs and lows while filtering out medium-term volatility and noise. According to his calculations, BTC is currently trading at the lower boundary of these logarithmic growth curves but is still in a "buy zone." Dave the Wave does not rule out that BTC may decline a bit more but anticipates that by mid-2024, specifically after the April halving, it will rise to new highs above $69,000.

According to a number of investors and traders, the Relative Strength Index (RSI) serves as a valuable tool for assessing the condition of an asset. The RSI oscillates between 0 and 100, with values above 70 typically indicating an overbought condition and values below 30 signalling an oversold condition.

The drop in bitcoin's daily RSI from August 17 to 22 below the 20 mark (hitting a low of 17.47) is comparable to the oversold levels seen during the market crash in March 2020, when the entire financial landscape was gripped by fear and uncertainty due to COVID-19. Analysts and traders are now closely monitoring RSI readings, as they could signal a potential bullish reversal in BTC's trend, although they are not a guaranteed indicator. Cryptocurrency markets are known for their unpredictability, and their direction can be influenced by a multitude of factors, among which political and macroeconomic elements play a significant role.

Wall Street legend, analyst, and trader Peter Brandt had already speculated a decline in bitcoin's price back in May. He identified a chart pattern known as a "pennant" or "flag," indicative of bearish implications. He now warns that bitcoin could break from the ascending trend that started in January 2023, as it approaches a critical price zone. The expert clarified that a close below $24,800 would damage both the daily and weekly charts and increase the likelihood that BTC's mid-term bullish momentum will falter.

Another analyst, publishing under the pseudonym Credible Crypto, noted that the current market scenario closely resembles what was observed in 2020. Back then, the leading digital currency's price rose from approximately $16,000 to $60,000 within a few months. According to the specialist, the market leader is now taking a "breather" after price gains earlier this year. He describes this as a normal correction. The current position almost fully mirrors the price dynamics of bitcoin from March to August 2020. What is happening now, in his opinion, suggests that the objective is asset accumulation.

Credible Crypto noted that bitcoin began its "parabolic rally" in 2020 right after such a phase. "Breaking out of the accumulation range last time triggered the next upward move, causing BTC's price to soar," said the expert. According to him, this time around, bitcoin has twice as much time, or about four months, to do it again in 2023. He emphasized that his forecast would be invalidated if the digital gold's quotations fall below $24,800: the same critical support level identified by Peter Brandt.

For the past week, the flagship cryptocurrency has been trading within the $25,500-26,785 channel around a Pivot Point of $26,000, suggesting there is no compelling reason for either its rise or fall. As of the time of writing this overview, on the evening of Friday, August 25, BTC/USD is trading at approximately $26,050. The overall market capitalization of the cryptocurrency market stands at $1.047 trillion (compared to $1.054 trillion a week ago). The Bitcoin Fear & Greed Index remains in the "Fear" zone at a score of 39 points (compared to 37 points 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 August 21-25, 2023

EUR/USD: What Strengthens the Dollar and What Can Weaken It

The US currency maintained its ascent last week. The minutes from the Federal Open Market Committee (FOMC)'s July meeting of the US Federal Reserve were published on Wednesday, August 16, suggesting the possibility of further monetary policy tightening.

Before the minutes were unveiled, market players debated how long the central interest rate would linger at 5.5%. However, once the document's content was revealed, discussions shifted to how much more this rate could increase. Several FOMC members expressed in the minutes that the current economic landscape might not see as significant a decrease in inflation as hoped. This sentiment paves the way for the Fed to consider another rate hike. As a result, the likelihood that the interest rate could climb to 5.75% or even higher in 2023 has surged from 27% to 37%, reinforcing the dollar's position.

Other factors bolstering the US dollar include the favourable state of the securities market and the robust health of the US economy. Positive retail sales figures prompted the Federal Reserve Bank of Atlanta to revise its Q3 GDP forecast for the country, raising it from 5.0% to 5.8%. The real estate market is also showing promising signs: the monthly issued construction permits rose by 0.1%. Furthermore, the construction of new homes increased by 3.9%, reaching 1.452 million units, surpassing the projected 1.448 million. Retail sales statistics released on August 15th further supported the Dollar Index (DXY), with consumer activity in July expanding by 0.7%: outpacing the anticipated 0.4% and the prior 0.2% figure. Collectively, these data points underscore a diminishing risk of the US economy entering a recession, suggesting a likely continuation of the monetary restriction phase. Additionally, escalating oil prices might nudge the regulator towards subsequent rate hikes, potentially spurring another inflationary wave.

On the other hand, the situation in the US banking sector could pose challenges for the dollar. Neil Kashkari, the President of the Federal Reserve Bank of Minneapolis, believes that the crisis that began in March, leading to the bankruptcy of several major banks, might not yet be over. He opines that if the Federal Reserve continues to raise interest rates, it will significantly complicate the operations of banks and could trigger a new wave of bankruptcies. This perspective is echoed by analysts at Fitch Ratings. Their projections even consider the possibility of downgrading the ratings of several US banks, including giants like JPMorgan Chase & Co.

Strategists at Goldman Sachs believe that the Federal Reserve might only consider reducing the key rate in Q2 2024. A potential trigger for this move could be the inflation rate stabilizing at the target level of 2.0%. However, Goldman Sachs acknowledges that the actions of the regulator remain unpredictable, which means the rate could stay at peak levels for a more extended period. Overall, according to the CME FedWatch Tool, 68% of market participants anticipate that by May 2024, the rate will be reduced by at least 25 basis points (b.p.).

Regarding the Eurozone's economy, data published on August 16th showed that it grew by 0.3% (quarter-on-quarter) for Q2 2023. This figure aligns perfectly with predictions and matches the growth rate of Q1. On an annual basis, the GDP growth stood at 0.6%, which is consistent with both forecasts and the previous quarter's numbers. The inflation figures released on Friday, August 18, were also unsurprising. They matched both market expectations and previous figures. In July, the Core Consumer Price Index (CPI) was recorded at 5.5% (year-on-year) and -0.1% (month-on-month).

Amid such consistently modest economic performance, the euro continues to face downward pressure. Factors contributing to this include the potential energy crisis in Europe this upcoming winter and uncertainties surrounding the monetary policy of the European Central Bank (ECB).

Starting the five-day trading period at 1.0947, EUR/USD closed at 1.0872. As of the evening of August 18, when this review was written, 50% of analysts predict a rise for the pair in the near future, 35% favour the dollar, and the remaining 15% maintain a neutral stance. Regarding oscillators on the D1 timeframe, 100% are leaning towards the US currency, but 25% of them indicate that the pair is oversold. Trend indicators show 85% pointing southward, while the remaining 15% look north. The nearest support levels for the pair lie in the range of 1.0845-1.0865, followed by 1.0780-1.0805, 1.0740, 1.0665-1.0680, 1.0620-1.0635, and 1.0525. Bulls will encounter resistance in the range of 1.0895-1.0925, then at 1.0985, 1.1045, 1.1090-1.1110, 1.1150-1.1170, 1.1230, 1.1275-1.1290, 1.1355, 1.1475, and 1.1715.

Next week, the spotlight will be on the symposium of heads of major central banks in Jackson Hole, taking place from August 24 to 26. If the Federal Reserve Chairman, Jerome Powell, even hints at the imminent conclusion of the current rate-hike cycle in his speech on August 25, the DXY (Dollar Index) might turn downward. However, it's evident that currency pair dynamics will also depend on what leaders of other central banks say, naturally including ECB President Christine Lagarde.

Other notable events for the week include the release of US labour market data on August 22 and 23. On Wednesday, August 23, business activity indicators (PMI) for the United States, Germany, and the Eurozone will be disclosed. Additionally, on Thursday, August 24, statistics on durable goods orders and unemployment in the US will be made available.

GBP/USD: BoE's Indecision - A Disaster for the Pound

GBP/USD has oscillated within the 1.2620-1.2800 range for the past two and a half weeks, with neither bulls nor bears establishing a clear upper hand. Despite the Bank of England (BoE) recently raising interest rates, bullish momentum for the pound remains elusive.

There's growing concern among market stakeholders that an aggressive monetary policy tightening could further destabilize the UK's already fragile economy, which teeters on the brink of recession. In July, the unemployment rate rose notably by 0.2%, settling at 4.2%. More worryingly, youth unemployment surged by 0.9%, moving from 11.4% to 12.3%. Additionally, there was an increase of 25K in those claiming unemployment benefits compared to the prior month. This rise in unemployment can be largely attributed to the wave of business bankruptcies that initiated in 2021. This trend saw a stark acceleration in early 2022, matching levels witnessed only during the late 1980s crisis and the 2008 financial meltdown.

As per the latest data released by the Office for National Statistics (ONS) on August 18, retail sales in the UK for July declined by 1.2% on a monthly basis, a more significant drop than the 0.6% seen the previous month. On an annual basis, there was a 3.2% contraction, compared to the 1.6% decrease observed in June.

The inflation data (CPI) released on August 16 indicates that despite dropping from 7.9% to 6.8% year-on-year (YoY), inflation remains notably high. Moreover, the core rate remained steady at 6.9%. The rising cost of energy could potentially lead to a further inflationary surge.

The market firmly believes that the Bank of England must take appropriate action in response. The central bank might need to continue increasing rates not only this year but potentially into 2024. However, as economists from Commerzbank suggest, if in the coming weeks the market gets the impression that the BoE is wavering in its commitment to tackle inflationary risks for fear of hampering the economy too much, it could have catastrophic implications for the pound.

GBP/USD closed at 1.2735 n Friday, August 18. Experts' forecast for the near future is as follows: 60% lean bullish on the pound, 20% are bearish, and the remaining 20% prefer a neutral stance. On the D1 oscillators, 50% are coloured red, indicating a bearish trend, while the other 50% are in a neutral gray. For trend indicators, the ratio of red to green is 60% to 40%, favouring the bullish side.

Should the pair move downward, it will encounter support levels and zones at 1.2675-1.2690, 1.2620, 1.2575-1.2600, 1.2435-1.2450, 1.2300-1.2330, 1.2190-1.2210, 1.2085, 1.1960, and 1.1800. If the pair ascends, resistance will be met at 1.2800-1.2815, 1.2880, 1.2940, 1.2980-1.3000, 1.3050-1.3060, 1.3125-1.3140, 1.3185-1.3210, 1.3300-1.3335, 1.3425, and 1.3605.

In terms of macroeconomic data, Wednesday, August 23 will be the "PMI day" not only for Europe and the USA but also for the UK, as business activity indicators in various sectors of the British economy will be released. And, of course, one cannot forget about the annual symposium in Jackson Hole.

USD/JPY: Anticipating Currency Interventions

The release of the FOMC minutes and the rise in yields of 10-year U.S. Treasuries to levels not seen since 2008 propelled USD/JPY even higher, reaching 146.55. As noted by economists from Japan's MUFG Bank, "The dollar's strengthening has pushed USD/JPY into a danger zone where the risk of intervention to halt its upward movement is increasing." Colleagues from the Dutch banking group ING concur that the pair is now in the territory of currency interventions. "However," ING believes, "it likely lacks the necessary volatility to alarm Japanese officials."

Recall that the Ministry of Finance (MOF) had intervened in USD/JPY at levels above 145.90 last September. But currently, neither the Ministry of Finance nor the Bank of Japan (BoJ) are in a hurry to defend the domestic currency. Contrary to the U.S., Eurozone, and the UK, where inflation is on a decline (albeit at different rates), inflation in Japan is on the rise. On Friday, August 18, the country's Statistical Bureau published the National Consumer Price Index (CPI) for July, which stood at 3.3%, whereas a result of 2.5% (year-on-year) was anticipated.

Commerzbank analysts don't see much chance for the yen to appreciate again, even though the country's GDP is growing. (Preliminary data indicates growth in the second quarter was at 1.5% (year-on-year) compared to a forecast of 0.8% and a previous rate of 0.9%). On the contrary, there are concerns that under current conditions, the yen could weaken further if the Ministry of Finance doesn't take action to halt the decline. "Perhaps the Bank of Japan and the Ministry of Finance are hoping the situation will shift once U.S. interest rates begin to drop again," Commerzbank economists suggest. "We also anticipate a weakening of the dollar at that point. However, that moment is still some time away. The only thing the Ministry of Finance will achieve with its interventions up until then is to buy time. In our view, going against the prevailing winds cannot succeed in strengthening the yen. It might work temporarily, but that's not a certainty.".

However, market participants are growing increasingly concerned that a weak yen might at some point prompt action from Japanese officials. As suggested by ING, the oversold status of the Japanese currency coupled with the threat of interventions will likely exacerbate any bearish corrections in USD/JPY. It was following such a correction, albeit a modest one, that the pair concluded the past week at a level of 145.37.

Regarding the near-term outlook, the median forecast from experts is as follows: An overwhelming majority (60%) anticipates the dollar to strengthen and expects USD/JPY to continue its upward trajectory. The remaining 40% anticipate a bearish correction. On the D1 oscillators, a full 100% are colored green, although 20% indicate overbought conditions. For the trend indicators, 80% are in green while 20% are in red. The nearest support level is situated at the 144.50 zone, followed by 143.75-144.04, 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. Immediate resistance lies at 145.75-146.10, then 146.55, 146.90-147.15, 148.45, 150.00, and finally, the October 2022 high of 151.95.

The Consumer Price Index (CPI) for the Tokyo region will be released on Friday, August 25. No other significant data releases pertaining to the state of the Japanese economy are scheduled for the upcoming week.

CRYPTOCURRENCIES: How Elon Musk Crashed the "People's Dollar"


From July 14, the primary cryptocurrency, and the digital asset market as a whole, have been under the pressure of a strengthening dollar. Clearly, when the weight on the BTC/USD scale tips towards the dollar, bitcoin becomes lighter. In fact, from August 11 to 15, it seemed as if the market had completely forgotten about cryptocurrencies, with the BTC/USD pair's chart thinly stretching from west to east, hugging the Pivot Point of $29,400.

Glassnode analysts noted at the time that the digital gold market had reached a phase of extreme apathy and exhaustion. Volatility metrics at the beginning of the week hit record lows, with the Bollinger Bands spread narrowing to 2.9%. Such low levels were only seen twice in history: in September 2016 and January 2023. "The market needs to take steps to...break the investor apathy," concluded Glassnode specialists.

Such actions were taken, though not necessarily in the direction investors would have preferred. The first move occurred on the evening of August 16 when BTC/USD dropped to $28,533. This decline was likely triggered by the publication of the minutes from the Federal Reserve's July meeting, as mentioned earlier. But that modest setback wasn't the end of it. The next significant drop occurred on the night of August 17 to 18. It can be described as a plunge into the abyss, with bitcoin reaching a low of $24,296. The crash came after The Wall Street Journal, citing undisclosed documents, reported that Elon Musk's SpaceX had liquidated its BTC holdings, accounting for a $373 million markdown in cryptocurrency. However, the report did not specify when exactly SpaceX had sold these coins. Still, such details aren't necessary to ignite panic in the market.

Several other events also added pressure to the quotations. For instance, a U.S. Federal Court granted the Securities and Exchange Commission's (SEC) appeal against Ripple, casting doubt on a partial decision made in favour of Ripple a month prior. The ongoing series of legal claims by U.S. authorities against major cryptocurrency exchanges remains another negative influence.

Bitcoin's nosedive dragged the entire crypto market down with it, leading to a mass liquidation of open margin positions. According to Coinglass, over a 24-hour span, positions of more than 175,000 market participants were liquidated, resulting in traders' losses surpassing $1 billion.

The situation could have been much graver had it not been for a report from Bloomberg stating that the SEC was preparing to authorize the creation of the first futures ETFs for Ethereum. As a result, BTC/USD and ETH/USD corrected upwards, returning to levels seen two months prior. As a reminder, the market soared on June 15 after BlackRock filed an application to establish a spot bitcoin ETF. However, after the recent plunge, those gains were virtually erased.

Should we expect further declines? Notably, a trader and analyst known by the pseudonym Dave_the_Wave, renowned for his accurate forecasts, had warned that by the end of 2023, bitcoin could drop to the lower boundary of its Logarithmic Growth Curve (LGC), implying a roughly 38% drop from this year's peak. In such a scenario, the bottom would be around $19,700.

Another well-known trader, Tone Vays, did not rule out a drop in BTC to $25,000 (which has already occurred). In this case, Vays believes there's a high likelihood of a further long-term decline. From his perspective, the premier cryptocurrency is "teetering on the edge, and things look bleak." "The price needs to reverse immediately, I mean – this month. We cannot afford another month of decline; otherwise, panic will set in the market. I wouldn't be surprised if BTC trades below $20,000. Miners might even begin offloading their holdings, which is highly precarious," Vays cautions.

We have previously mentioned another expert, Michael Van De Poppe, founder of the venture company Eight, who has refuted claims of BTC's price dropping to the $12,000 mark. However, in his view, for bitcoin to return to active growth, it needs to surpass the $29,700 level. The next significant target for the coin would be $40,000.

In contrast to Michael Van De Poppe, Kevin Kelly, co-founder, and head of research at Delphi Digital, has already spotted early signs of a bull rally. However, this observation was made before the slump on August 18. According to Kelly, a standard crypto cycle starts when bitcoin reaches an all-time high (ATH), followed by an 80% decline. Roughly two years later, it rebounds to its previous ATH and continues climbing to a new peak. This sequence typically spans around four years.

Kelly believes this pattern isn't random but aligns with a "broader business cycle." He noted that bitcoin's price peak often coincides with the ISM manufacturing index, which currently appears to be in the final phase of its downturn. The current situation reminds Kelly of the market dynamics between 2015 and 2017.

He highlighted that the last two bitcoin halvings occurred roughly 18 months after the asset bottomed out and about seven months before it broke its historical peak. The next halving is anticipated in April 2024. After which, about six months later by the expert's estimates, the digital gold might reach its ATH. However, Kelly warned that there are no guarantees of this scenario unfolding. He also speculated about the possibility of a "false bottom."

A similar cyclical analysis was conducted by an analyst known as Ignas, predicting a bitcoin bull market in 2024. His calculation is based on the pattern that the primary cryptocurrency has showcased for many years: 1. An 80% dip from ATH, lowest point a year later (Q4 2022). 2. Two years for recovery and reaching the previous peak (Q4 2024). 3. Another year of price growth leading to a new ATH (Q4 2025).

According to Ignas, the crypto industry faced macroeconomic challenges in 2022, but the situation is now improving. The bitcoin halving in April 2024 might align with a global liquidity surge, fuelling the anticipated bull rally. Additionally, new use cases for bitcoin and the launch of spot bitcoin ETFs, once approved by the SEC, will influence its price.

From a survey conducted by the popular blogger and analyst known as PlanB, 60% of respondents believe in a bull market's onset post-halving. PlanB himself theorizes that by the time of this event, BTC will be priced around $55,000. Signals from his bitcoin price prediction model, S2F, hint at the coin's potential movement towards this figure.

Robert Kiyosaki, investor, and author of the financial bestseller “Rich Dad Poor Dad” made another prediction. "Bitcoin is heading to $100,000," Kiyosaki believes. "The bad news: if the stock and bond market crashes, gold and silver prices will skyrocket. Worse, if the global economy collapses. Then bitcoin will be worth a million, gold can be bought for $75,000, and silver for $60,000. The national debt is too great. Everyone is in trouble," wrote Kiyosaki. But he added, just in case, "I hope I'm wrong."

Fittingly for a writer, Kiyosaki metaphorically called gold and silver "God's money" and bitcoin the "people's dollar". "I like bitcoin because we have a common enemy - the US federal government, the treasury, the Federal Reserve, and Wall Street. I don't trust them. If you trust, then collect dollars, and you'll get an IOU," he said.

It's worth noting that, in contrast to Robert Kiyosaki's stance, many investors have recently been gravitating towards the US dollar instead of the "people's currency." They view the dollar as a more reliable safe-haven asset. This shift is evident when comparing the DXY and BTC charts. At the time of this review, on the evening of August 18, the market has shown some signs of stabilization, with the BTC/USD trading close to $26,100. The total market capitalization of cryptocurrencies took a significant hit, narrowly maintaining above the psychological threshold of $1 trillion, registering at $1.054 trillion, down from $1.171 trillion just a week prior. Not surprisingly, the Crypto Fear & Greed Index also saw a decline, moving from the Neutral category into the Fear territory, marking a score of 37, a drop from last week's 51 points.
 

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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 August 14-18, 2023

EUR/USD: Inflation, GDP, and Prospects for Monetary Policy

Looking at the two-week flat trend on the EUR/USD chart, one is reminded that it's August, a vacation season. Even the US inflation data released on Thursday, August 10th, couldn't disrupt the relaxed demeanour of traders. And yet, they warrant close attention. The year-on-year Consumer Price Index (CPI) growth of 3.2% and core inflation at 4.7% came in below forecasts (3.3% and 4.8% respectively). The monthly CPI remained unchanged at 0.2%, marking the lowest figure in over two years. As for the GDP, previously released data confirmed a diminished risk of the national economy slipping into a recession. After a 2.0% year-on-year rise in the first quarter of 2023, the second quarter recorded a 2.4% growth, significantly surpassing market expectations of 1.8%.

Therefore, the US boasts a robust economy with a gradually cooling labour market and inflation steadily approaching the 2.0% target level. All of this suggests that the Federal Reserve's monetary policy has been bearing positive fruits. The regulator can now, at the very least, pause the tightening process. They might even conclude the current monetary restriction cycle. The likelihood of the dollar interest rate remaining at the current 5.50% level in September is estimated at 89%, whereas the odds of it increasing by 25 basis points (b.p.) by year's end stand at just 27%. 

In such a situation, the dollar should have begun to relinquish its positions, but this did not occur. Of course, immediately after the inflation data release, EUR/USD spiked by approximately 50 points but soon reverted. Why did this happen? While the vacation season theory could be considered, there are two considerably more crucial reasons. The first is the disappointing results of the latest auction for the 30-year US Treasury bonds, which concluded with a yield of 4.199%, lower than rates in the secondary market. The second reason lies in the weakness of the dollar's European counterpart.

The best insight into how the Eurozone's economy is faring is provided by the "Economic Bulletin" published by the European Central Bank (ECB) on that same Thursday, August 10. Here are its key points:

"Inflation continues to decline, but it is expected to remain too high for an extended period." "The immediate economic outlook for the Eurozone has worsened, mainly due to weakening domestic demand. High inflation and tighter financing conditions are suppressing spending growth." "A modest production growth in the Eurozone is anticipated in the third quarter, largely driven by the services sector." "Upside risks for inflation include potential resurgence in energy and food prices, as well as risks associated with Russia's unilateral withdrawal from the Black Sea Grain Initiative." "The prospects for economic growth and inflation remain highly uncertain." According to a recent Reuters poll, such a bulletin from the ECB has left market participants guessing about their next moves.

Next week, Eurostat will present a report with revised GDP data for the Eurozone for Q2 2023, as well as figures for industrial production and inflation for July. The preliminary GDP estimate showed a growth of +0.3% (+0.6% year-on-year) after stagnant growth in Q4 2022 and a decline of -0.1% in Q1 2023. While inflation is on the decline (currently at 5.5%, compared to 10.6% in October 2022), it still exceeds the target level of 2.0%. If the ECB continues to maintain a strict monetary policy and energy prices rise, many economists believe this could lead to a 5.0% drop in the Eurozone's GDP in 2024.

The comparison of the provided data suggests that the US currency currently has a greater chance of prevailing. The dollar's role as a safe-haven asset also plays in its favour. Naturally, a lot hinges on the actions of the Fed and the ECB this fall. As for the past week, after the release of the US production inflation data (PPI), the dollar further strengthened its position, and the EUR/USD pair concluded the week at 1.0947.

At the time of writing this review, on the evening of August 11, 35% of analysts have voiced in favour of the pair's rise in the near term, 50% sided with the dollar and took the opposite stance, and the remaining 15% voted for the continuation of the sideways trend. Among the oscillators on D1, the majority, 80%, favor the US currency (with 15% in the oversold zone), 10% point northward, and 10% are in the neutral zone. Among the trend indicators, 65% recommend selling, and the remaining 35% suggest buying. The nearest support for the pair is located around 1.0895-1.0925, followed by 1.0845-1.0865, 1.0780-1.0805, 1.0740, 1.0665-1.0680, and 1.0620-1.0635. Bulls will encounter resistance around 1.0985, then at 1.1045, 1.1090-1.1110, 1.1150-1.1170, 1.1230, 1.1275-1.1290, 1.1355, 1.1475, and 1.1715.

For the upcoming week, notable events include the release of U.S. retail sales data on Tuesday, August 15. On Wednesday, August 16, the Eurozone's GDP figures will be revealed, and the minutes from the latest FOMC (Federal Open Market Committee) meeting will also be published. Data on U.S. unemployment and manufacturing activity will be presented on Thursday. To cap off the week, on Friday, August 18, we'll get insights into the inflation (CPI) situation in the Eurozone.

GBP/USD: Day X – August 16

According to data released on Friday, August 11, by the UK's Office for National Statistics (ONS), the country's economic growth for the second quarter was 0.2%, compared to a 0.1% increase in the first quarter (with a forecast of 0.0%). Year-on-year, while forecasts were at 0.2%, the actual GDP growth was 0.4% (with the previous figure being 0.2%). The total volume of industrial production in June also rose, registering a +1.8% compared to a forecast of +0.1% and a -0.6% decline in May. Overall, the upward momentum is evident. This reduces the risks of recession and heightens the likelihood that the Bank of England (BoE) will maintain its hawkish stance at least until the end of 2023. Especially given that the country's inflation remains relatively high, with the year-on-year CPI at 7.9%. To combat this, according to predictions, the BoE might increase the key interest rate in 2-3 steps from the current 5.25% to 6.00% this year, giving the British currency a distinct edge.

Strategists at the Netherlands' largest banking group, ING, believe that the positive GDP figures won't be the defining factor for the Bank of England. "The June GDP growth numbers for the UK surpassed expectations," they agree. "However, we believe that the implications for the Bank of England are likely to be quite limited, as the numbers aren't significantly different from its forecasts. The primary focus will be on next week's service sector inflation and wage growth figures, [...] which are crucial for the pound."

GBP/USD closed at the 1.2695 mark on Friday, August 11. The near-term forecast from experts is as follows: 60% are bearish on the pair, 20% are bullish, and the same percentage chose to remain neutral. On the D1 oscillators, bears have a unanimous 100% backing, with 15% of these indicating an oversold condition. Trend indicators display a 65% to 35% split in favour of the bears (red). Should the pair trend downwards, it will encounter support levels and zones at 1.2675, 1.2620-1.2635, 1.2575-1.2600, 1.2435-1.2450, 1.2300-1.2330, 1.2190-1.2210, 1.2085, 1.1960, and 1.1800. In the event of an upward movement, resistance can be expected at 1.2760, followed by 1.2800-1.2815, 1.2880, 1.2940, 1.2980-1.3000, 1.3050-1.3060, 1.3125-1.3140, 1.3185-1.3210, 1.3300-1.3335, 1.3425, and 1.3605.

As for the UK macroeconomic statistics, a flurry of data from the national labour market awaits us on Tuesday, August 15, including indicators such as wage growth and unemployment rates. The next day, on Wednesday, August 16, key inflation (CPI) figures for the United Kingdom will be released. Lastly, on Friday, August 18, we'll receive statistics on retail sales in the country.

USD/JPY: The Pair Returns to its Moonshot


While EUR/USD and GBP/USD spent the week trading sideways, USD/JPY once again soared into the stratosphere. On Friday, it reached a height of 144.995, almost touching the peak of June 30. It last traded at such levels over a year ago, in June 2022. The week concluded slightly lower, settling at 144.93. Neither the Bank of Japan's (BoJ) recent decision to shift from a rigid yield curve targeting for government bonds to a more flexible approach, nor the interventions conducted by the Japanese regulator, were able to support the yen.

Inflation data is crucial for most central banks. To combat rising prices, regulators in the US, EU, and the UK are tightening monetary policy and raising interest rates. However, the BoJ disregards such methods, even as inflation in the country continues to climb. Moreover, the country's government has recommended a 4% increase in the minimum wage, and spring wage negotiations have resulted in the highest wage growth in three decades. Against this backdrop, there's mounting evidence that businesses are ready to pass on these increases to consumers, which could lead to a rise in CPI.

At Japan's MUFG Bank, they forecast that the Bank of Japan might only decide on its first rate hike in the first half of the following year. Only then will there be a shift towards strengthening the yen. As for the recent change in the yield curve control policy, MUFG believes it's insufficient on its own to prompt a recovery of the Japanese currency.

Analysts at Germany's Commerzbank feel that the lack of clarity in the Bank of Japan's policy further depresses the yen and hinders its growth. Over the recent months, when all Central Banks, except the Japanese one, have raised their key rates, one thing has become clear: the monetary policy of the Bank of Japan will not be favourable for the yen in the foreseeable future, Commerzbank shares. They add that the yen is a complex currency to understand, possibly linked to the BoJ's monetary policy.

Strategists at Societe Generale opine that if the USD/JPY pair consolidates above 144.50-145.00, growth may continue to 146.10 (76.4% correction of the movement from last October) and then even higher to 147.90.

Analysts at Credit Suisse also maintain a bullish outlook on the pair and aim higher in their forecasts. "We continue to anticipate a retest of our interim target of 145.00-145.12," they write. "Although this mark is expected to hold again, our core forecast remains bullish, and we anticipate that it will ultimately be breached. This will lead the market to resistance at 146.54-146.66, and eventually, to a target of 148.57.".

Concerning the near-term perspective, the median forecast of experts greatly diverges from the aforementioned opinions. An overwhelming majority of them (80%) expect a correction of USD/JPY downwards. (One possible reason for the decline could be another currency intervention.) The remaining 20% chose to remain neutral. The number of those expecting further growth of the pair this time was zero. Both trend indicators and oscillators on D1 are 100% green, although a quarter of the latter signals overbought conditions. The nearest support level is located at 144.50, followed by 143.75-144.04, 142.90-143.05, 142.20, 141.40-141.75, 140.60-140.75, 139.85, 138.95-139.05, 138.05-138.30, 137.25-137.50. The closest resistance stands at 145.30, followed by 146.85-147.15, 148.85, and finally, the October 2022 high of 151.95.

Among the events of the upcoming week in the calendar, one can note Tuesday, August 15, when data on consumer spending, industrial production volumes, and Japan's GDP will be published. The next day, the value of the Reuters Tankan Business Confidence Index will be known, and on Friday, August 18, we will learn the values of the National Consumer Price Index (CPI).

CRYPTOCURRENCIES: The Search for a Trigger Continues

Two weeks ago, we titled our review "In Search of the Lost Trigger". Over the days that have passed since then, the trigger has still not been found. After the drop on July 23-24, BTC/USD moved to another phase of sideways movement, moving along the Pivot Point around $29,500. According to some analysts, market participants avoided sharp movements in anticipation of inflation data in the US, which was published on Thursday, August 10. Which, as a result, the crypto market completely ignored.

Bitcoin network indicators suggest accumulation in anticipation of a price breakthrough. According to the Blockware Intelligence newsletter, the volume of liquid and highly liquid supply has dropped to its lowest level since 2018. As noted in Blockware, speculative traders are exchanging a decreasing amount of coins back and forth, while long-term holders have tucked their reserves into cold wallets.

Opinions on which direction this breakthrough may take, as usual, are divided. For instance, trader, analyst, and founder of the venture firm Eight, Michael Van De Poppe, refuted suggestions about the first cryptocurrency's price dropping to the $12,000 mark and reassured those talking about a complete capitulation of altcoins.

"The bear market has been ongoing for more than two years," he wrote, making it the longest market in cryptocurrency history. However, this is not surprising given the hacks, bankruptcies, and litigations in the crypto industry. From the analyst's observations, the most bearish sentiments are often found among those who first invested in digital assets specifically in 2021. "For them, the slow loss of money feels extremely painful, and they only expect further portfolio value decreases," the expert noted.

In his opinion, the second stage of capitulation is now taking place: the most boring period of the cycle, during which it seems that nothing at all is happening in the markets. "Be patient, enjoy the realization that you are still in the market, accumulate positions. [...] Big companies are getting into the game, and the wisest thing you can do is to follow them," Van De Poppe advised.

A considerably less optimistic forecast was given by another renowned trader, Tone Vays. He noted that selling pressure is increasing and the price of the first cryptocurrency might significantly decline. "Bitcoin continues to struggle, but I'd say there's a high chance the BTC price could drop to the next moving average. And, if daily candles keep closing below the previous ones, I would advise reducing the position by 50% because I can't predict how low bitcoin might fall. It could easily drop to $25,000. There are enough people in the market who, for some reason, keep selling their coins," the analyst writes.

Tone Vays is convinced: if bitcoin does indeed drop to $25,000, there's a high likelihood of further long-term decline. From the expert's perspective, the first cryptocurrency is "on the edge of a cliff, and things look bad." "The price needs to turn around immediately, I mean - this month. We don't have the luxury to drop another month, otherwise, panic will spread in the market, and I won't be surprised if BTC trades below $20,000. Miners will also start liquidating their holdings, which is very dangerous," warns the specialist. (It's worth noting that at the end of May, Vays spoke about the imminent rise of the first cryptocurrency above $30,000. The forecast turned out to be correct, but BTC couldn't maintain that level.).

A potential trigger for the start of a bullish rally could have been the news of payment giant PayPal issuing its own stablecoin, PayPal USD (PYUSD). This was announced on Monday, August 7. The founder of the charity The Bitcoin Foundation, Charlie Shrem (Charles Shrem), quickly stated that this event would lead to a rise in bitcoin's price to at least $250,000. Moreover, this will happen much faster than expected. In his opinion, ETH will also appreciate at an accelerated pace to $18,000, as PYUSD is issued on the Ethereum blockchain. Consequently, the price of this altcoin may increase due to a rise in the number of network users from PayPal's clientele.

However, unlike Charlie Shrem, most experts reacted sceptically to the news, as the tool doesn't offer anything new or useful for users. It also remains a mystery why Shrem suddenly decided that PYUSD would positively affect the price of bitcoin. Logically, the issuance of stablecoins should, on the contrary, cause a decrease in BTC's value, as it would enhance the investment appeal of a competitor - ETH. Nonetheless, PYUSD did not act as a trigger for either bitcoin or Ethereum, which is evident from the BTC/USD and ETH/USD charts.

As a result, investors have three events in "reserve" that can potentially push the crypto market upward. These are: 1) a radical easing of the monetary policy of the US Federal Reserve, 2) the approval by the Securities and Exchange Commission (SEC) to launch spot bitcoin ETFs, and 3) the bitcoin halving.

It should be noted that the next halving is tentatively scheduled for April 12, 2024. Every 210,000 blocks or once every 4 years, it halves the reward that miners receive for mining a block. This is done to create a deflationary environment and support the value of BTC by reducing the rate of new coin issuance. (The total emission limit is set at 21 million coins). Initially, from 2009, miners received 50 BTC for each generated block. In 2012, the reward was reduced to 25 BTC, in 2016 to 12.5 BTC, and after 2020, to 6.25 BTC. When the 2024 halving occurs, the mining reward will decrease to 3.125 coins.

As a result of this event, miners will have to adapt to the new reality. They will need to acquire more powerful and energy-efficient equipment or upgrade existing ones. According to forecasts, many small companies will likely leave the market or be acquired by larger players. Consequently, a centralization of the mining market can be expected, which will be taken over by a few large pools. This will make the network more susceptible to manipulations and hacker attacks. However, a sharp increase in the price of BTC can at least partially offset these negative factors.

Many market participants expect that after this event, the bitcoin price might skyrocket once again, as evidenced by historical data. After the 2012 halving, the BTC price rose from $11 in November 2012 to $1,100 in November 2013. The 2016 halving: the price increased from $640 in July to $20,000 in December 2017. The 2020 halving allowed the coin's price to rise from $9,000 in May 2020 to a peak of $69,000 in November 2021. However, despite these statistics, experts warn that past results do not guarantee their repetition in the future.

One of the leading figures in the crypto industry and CEO of Blockstream, Adam Back, placed a bet of one million satoshi (0.01 BTC) that the price of bitcoin would reach $100,000 a month before the halving. The bet was made as a result of a wager with a user of platform X (formerly Twitter) under the nickname Vikingo, who believes that the digital gold quotes will not reach this height until 2025.

Back's former colleague at Blockstream, and now CEO of Jan3, Samson Mow, agreed with him. Experts from Seeking Alpha mention almost the same figure. They believe that the cryptocurrency should be worth about $98,000 for miners to stay afloat after the halving. However, a popular analyst known as PlanB, based on his S2F model, stated that by the time of the halving, BTC will be worth much less - only about $55,000.

As of the time of writing this review, on the evening of Friday, August 11, BTC/USD is trading around $29,400, ETH/USD is around $1,840. The total market capitalization of the crypto market has grown and is now $1.171 trillion ($1.157 trillion a week ago). The Crypto Fear & Greed Index remains in the Neutral zone at 51 points (54 points 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 August 07-11, 2023

EUR/USD: Dollar Bulls Disappointed by NFP


Throughout the past week, leading up to Thursday, August 3, the dollar continued to strengthen its position and build on the offensive that began on July 18. It appears that markets, wary of the global economic condition, have once again turned to the American currency as a safe haven.

Interestingly, the dollar seemed to benefit from Fitch's first downgrade of the long-term US credit rating in 12 years. The agency reduced the rating by one notch from the highest AAA to AA+, a move that seems more of a reputational hit than a trigger for market collapse. However, in such situations, investors tend to shed the weakest and most risky assets in their portfolio, opting for more liquid US treasury bonds and the dollar instead. It's worth recalling 2011 when the US rating downgrade by Standard & Poor's triggered a stock market fall and multi-year dollar growth as it turned out that other countries were in even worse conditions. The shaky state of high-risk corporate bonds doesn't need to be mentioned, as it is self-evident.

A number of analysts do not rule out the possibility that a similar situation could repeat this time around. The key level of the DXY Dollar Index at 100.0 points could serve as a launching pad for further growth. (Round levels like 80.0 during the periods from 1990 to 1995 and in 2014, and 90.0 from 2017 to 2021 played a similar role.).

The macroeconomic data released last week for the United States proved to be rather mixed. On one hand, the Purchasing Managers' Index (PMI) in the country's manufacturing sector grew month-over-month from 46.0 to 46.4 points, but on the other hand, it fell short of the forecast of 46.8. Conversely, the PMI in the services sector declined from 53.9 to 52.7, against a forecast of 53.0. Despite the index remaining in the recovery zone (above 50), the figures suggest that this sector of the economy is also grappling with the consequences of the Federal Reserve's hawkish policy and decreasing consumer demand. The increase in initial jobless claims from 221K to 227K also put pressure on the dollar.

As for the Eurozone, preliminary data shows that inflation, albeit slowly, is beginning to recede. The Consumer Price Index (CPI) fell from 5.5% to 5.3%, which fully met market expectations. The rate of decline in retail sales volumes also slowed, moving from -2.4% to -1.4%, beating the forecast of -1.7%.

Following such statistics, everything was set to be decided on Friday, August 4. The market was awaiting fresh data from the US labour market, including indicators such as wage levels, unemployment rates, and Non-Farm Payrolls (NFP): the number of new jobs created outside the agricultural sector. These figures play a special role as the state of the labour market, alongside inflation, influences the Federal Reserve's decisions regarding future monetary policy.

In the end, the figures didn't change significantly. However, market participants decided that they were more indicative of a bearish than bullish sentiment for the dollar. The increase in average hourly earnings (month over month) remained at the previous level of 0.4%, the unemployment rate dropped slightly from 3.6% to 3.5% (forecast was 3.6%). The NFP figure also remained relatively unchanged, registering at 187K compared to 185K a month earlier. However, this number fell short of expectations of 200K.

The NFP is a key barometer of potential cooling in the US economy. A decline in NFP suggests that the 'screws' have been tightened too much, the economy is stagnating, and perhaps further tightening of monetary policy needs to be paused. At the very least. Or maybe it's time to end the cycle of monetary restriction altogether. This logic drove the DXY down and pushed EUR/USD up. As a result, the pair ended the five-day period at a mark of 1.1008.

As for the near-term prospects, at the time of writing this review on the evening of August 4, only 25% of analysts voted for the pair's growth and further dollar weakening, with 75% taking the opposite stance. The picture is similar among the oscillators on D1: 75% point south (15% are in the oversold zone), 15% point north, and 10% are in the neutral zone. The trend indicators present the opposite situation: 75% recommend buying, and the remaining 25% recommend selling.

The pair's nearest support is located around 1.0985, then 1.0945, 1.0895-1.0925, 1.0845-1.0865, 1.0780-1.0805, 1.0740, 1.0665-1.0680, and 1.0620-1.0635. The bulls will meet resistance around 1.1045, then 1.1090-1.1110, 1.1150-1.1170, 1.1230, 1.1275-1.1290, 1.1355, 1.1475, and 1.1715.

We've already mentioned that the state of the labour market and inflation are the defining factors for Central Banks' monetary policy formation. While we received plenty of statistics on the former last week, the coming week will bring data on the latter. On Monday, August 8, we'll find out what's happening with inflation in Germany, and on Thursday, August 10th, the US Consumer Price Index (CPI) values will be made public. Also, on this day, unemployment statistics in the US will be released. To round off the work week, on Friday, August 11, another important inflation indicator, the US Producer Price Index (PPI), will be revealed.

GBP/USD: Was the BoE Right or Wrong?

The intrigue regarding how much the Bank of England (BoE) would raise the key interest rate on August 3, by 50 or 25 basis points (bps), ended in favour of a more cautious step. The rate increased from 5.00% to 5.25%, returning the GBP/USD pair to the zone of five-week lows, with the local bottom found at the level of 1.2620.

Economists at Commerzbank commented on the decision by the British regulator as follows: "The Bank of England is trying to restore its authority," they write. "However, it is still unclear how successful it will be." Commerzbank believes that the BoE's decision to slow the pace of rate hikes, based only on the fact that June's inflation surprised with a smaller figure, does not necessarily indicate that the Central Bank has changed its overall approach. "If inflationary conditions in the UK continue to improve," the bank's economists believe, "the current rate decision may turn out to be adequate. But if the June inflation report turns out to be an isolated case, then the Bank of England will most likely seem too hesitant again, which will put pressure on the pound.".

In June, the Consumer Price Index (CPI) in the United Kingdom decreased from 8.7% to 7.9% (with a forecast of 8.2%). However, inflation in the country remains the highest among developed nations. Considering that it significantly exceeds the target benchmark of 2%, the British regulator, according to some experts, will still have to maintain a more active stance and continue raising the rate, despite the growing risks of recession.

After the fall of DXY due to disappointing labour market data in the US, GBP/USD ended the week at 1.2748. The median forecast of experts for the near future looks quite neutral. Bears were backed by 45%, bulls by 30%, and the remaining 25% preferred to abstain. Among the oscillators on D1, 10% are coloured green, 15% are neutral grey, and 75% are red (a quarter of them signal oversold). The ratio of green and red for trend indicators remains 50% to 50%, as a week ago. If the pair moves south, it will encounter support levels and zones at 1.2675-1.2695, 1.2575-1.2600, 1.2435-1.2450, 1.2300-1.2330. 1.2190-1.2210, 1.2085, 1.1960, and 1.1800. In case of the pair's growth, it will meet resistance at the levels of 1.2800-1.2815, then 1.2880, 1.2940, 1.2980-1.3000, 1.3050-1.3060, 1.3125-1.3140, 1.3185-1.3210, 1.3300-1.3335, 1.3425, 1.3605.

It's noteworthy that the UK's GDP data is set to be released on Friday, August 11, offering some insight into the country's economic health. However, you can expect more significant volatility in the exchange rate on Thursday, August 10, when the U.S. inflation (CPI) data will be published. These economic indicators wield a significant influence on the exchange rate, and will be closely scrutinized by traders and investors. The outcome could potentially influence the Bank of England's future monetary policy decisions and, in turn, impact the value of GBP/USD.

USD/JPY: Inflation Decides Everything

During the first half of the week, the yen, like other currencies in the DXY basket, retreated under the pressure of the dollar, and the USD/JPY pair reached a high of 143.88. However, then the Bank of Japan (BoJ) came to the aid of the national currency.

We reported in our last review that for the first time in many years, the new head of the Bank, Kazuo Ueda, decided to turn the rigid targeting of the yield curve into a flexible one. The target level of yield on Japanese 10-year government bonds (JGB) remained the same, 0%. The allowable yield fluctuation range of +/-0.5% was also maintained. But from now on, this limit was no longer to be seen as a rigid boundary but became more flexible. Of course, within certain limits – the Bank of Japan drew a "red line" at the 1.0% level and announced that it would conduct purchase operations to keep the yield from rising above this mark.

And now, less than a week after this revolutionary step for the BoJ, the yield on JGB reached nine-year highs near the 0.65% mark. As a result, the central bank hurried to intervene, and to avoid further growth, it conducted an intervention by buying these securities, thereby supporting the yen.

The Japanese currency received further support on Friday, August 4th, due to weak data on the NFP in the USA. As a result, the week's finish for USD/JPY was at the level of 141.73.

There is no doubt that inflation data will be crucial for central banks and, in turn, for currency markets. At the moment, there is much evidence that inflation in Japan will continue to rise. A few days ago, the country's government recommended a 4% increase in the minimum wage, and spring wage negotiations secured the highest wage growth in the last three decades. Against this backdrop, there is increasing evidence that businesses are ready to pass this growth on to consumers, leading to a rise in the Consumer Price Index (CPI). This trend reflects a willingness among Japanese companies to respond to growing labour costs by increasing prices, potentially fuelling inflation. In turn, this may have an impact on the Bank of Japan's policy decisions and influence the value of the yen in currency markets. The situation clearly highlights the interconnectedness of labour markets, monetary policy, and currency value, and underscores the importance of closely monitoring economic indicators and central bank actions.

To combat rising prices, the Bank of Japan's (BoJ) counterparts in the U.S. and Europe are tightening monetary policy and raising interest rates. Analysts at the Dutch Rabobank are hoping that the BoJ will finally follow suit and gradually move away from its ultra-soft policy. As a result, they anticipate that the USD/JPY exchange rate could return to the 138.00 mark within a three-to-six-month period.

The view of strategists at Japan's MUFG Bank is less optimistic. They write, "Currently, we forecast the first rate hike by the Bank of Japan in the first half of next year. The shift towards tightening BoJ policy supports our forecast of yen strengthening in the coming year." As for the recent change in the yield curve control policy, MUFG believes that it alone is insufficient to cause a recovery of the Japanese currency.

Economists at Germany's Commerzbank and Finland's Nordea Bank agree that if the Japanese regulator manages to tame inflation, the yen's exchange rate should rise. However, changes in the Bank of Japan's policy will not happen quickly. Therefore, according to many specialists, significant shifts can only be expected around 2024.

The various views and forecasts presented highlight the complexity of the economic environment and the challenges of predicting monetary policy changes and currency movements. The situation in Japan is particularly nuanced, given the BoJ's long-standing struggle with deflation and its commitment to an extremely accommodative monetary stance. Market participants and policymakers will need to pay close attention to a range of economic indicators, central bank signals, and global economic trends to navigate the evolving landscape.

As for the analysts' short-term forecast, it offers no clear direction. A third of them believe the USD/JPY pair will move north in the coming days, a third expect it to move south, and the final third anticipate a sideways or "east" movement. The indicators on the D1 timeframe look as follows:

Oscillators: 75% are coloured green, and 25% are neutral grey. Trend indicators: The greens have a clear advantage, with 85%, and the reds account for only 15%.

The nearest support level is positioned at 141.40, followed by 140.60-140.75, 139.85, 138.95-139.05, 138.05-138.30, 137.25-137.50, 135.95, 133.75-134.15, 132.80-133.00, 131.25, 130.60, 129.70, 128.10, and 127.20. The nearest resistance stands at 141.20, then 142.90-143.05, 143.75-144.04, 145.05-145.30, 146.85-147.15, 148.85, and finally, the October 2022 high of 151.95.

Given the divergent opinions of analysts and the varying readings of the technical indicators, market participants should approach this currency pair with caution. A careful examination of upcoming economic data releases, central bank statements, and other fundamental factors could provide additional insights into the likely direction of USD/JPY.

No significant information concerning the Japanese economy is expected in the upcoming week. Traders should be aware that Friday, August 11, is a holiday in Japan, as the country observes Mountain Day.

CRYPTOCURRENCIES: ETH/BTC - Who Will Win?

Last week's crypto review was titled "In Search of a Lost Trigger." Over the past week, the trigger has still not been found. After the decline on July 23-24, BTC/USD moved to another phase of sideways movement, vigorously resisting the strengthening dollar. The surge on August 1-2 to $30,000 looked very much like a bull trap and ended with the pair hesitating and returning to the Pivot Point around $29,200. Digital gold, unlike physical gold, hardly reacted to the publication of labour market data in the US on August 4. 

Some analysts believe that the crisis in DeFi is putting additional pressure on Bitcoin, and even predict a significant decline for the leading cryptocurrency in the near future. However, in our view, what they call a "crisis" is not actually one. Everything comes down to the vulnerabilities in early versions of the Vyper programming language, which is used to write smart contracts on which decentralized exchanges (DEX) operate. On July 30, liquidity pools in four pairs (CRV/ETH, alETH/ETH, msETH/ETH, pETH/ETH) using early Vyper versions 0.2.15-0.3.0 were hacked on the Curve Finance exchange. Other pools, the total number of which exceeds two hundred, were unaffected. The total loss amounted to about $52 million.

According to CertiK experts, traders lost digital assets worth $303 million as a result of hacking attacks in July. According to PeckShield data, from January to June 2023, the crypto industry faced at least 395 hacks, resulting in the theft of about $480 million. So, the hacking of Curve Finance is certainly unpleasant, but nothing extraordinary. It's far from the scale of last year's crashes in Terra (LUNA) and FTX.

Perhaps in order to feel more or less at ease, one should not put all their eggs in one basket. This was the message from the CEO of Galaxy Investment Partners, Michael Novogratz, in an interview with Bloomberg. "If an investor was young and took risks calmly, I would advise him to buy Alibaba shares," the billionaire said. "I would also advise investing in silver, gold, bitcoin, and Ethereum. That would be my portfolio."

Novogratz's confidence in bitcoin's future was bolstered after the largest investment company, BlackRock, filed an application for a spot bitcoin ETF. The businessman noted that BlackRock's CEO, Larry Fink, never believed in bitcoin, but has now changed his mind. "Now he says that BTC will be a global currency, and people around the world will trust it. He took the orange pill. He believes in bitcoin," Michael Novogratz stated.

Peter Brandt, a legendary trader and veteran of the financial industry, has also "taken the orange pill." He believes that over time, the first cryptocurrency will "come out of the shadow" of more traditional investment assets, such as stocks and gold, and in the future, it will be bitcoin that sets the tone in the financial market.

Peter Brandt emphasized that U.S. regulators will surely approve the launch of spot bitcoin ETFs. However, in his opinion, this approval will not be news, just as the halving will not be an event. After them, the price of BTC may even go down instead of up. "In 48 years of speculation," Brandt writes, "I have always found that markets take into account events before they happen." Always follow the saying "Buy on the rumour, sell on the fact," advises the Wall Street legend.

Moderate pessimism regarding the consequences of the halving was also expressed by analysts at CME Group. They noted that the demand for crypto assets, which was very strong during the first eight years of bitcoin's existence, has noticeably slowed down over the past five years. Therefore, in their opinion, there is no guarantee that the halving will lead to an appreciation of either BTC or altcoins.

Despite the warnings, many influencers and crypto enthusiasts continue to compete in forecasting how much bitcoin will grow in the coming years. Here are some opinions, sorted in ascending order. An analyst going by the nickname TechDev forecasts the price of BTC by relying on the behaviour of traditional financial markets, including the price of 10-year Chinese bonds, the dynamics of the Dollar Index, as well as the balances of the central banks of major countries, etc. According to him, the coin's rate closely follows the indicators of global liquidity, and the current economic cycle should once again conclude with massive growth in the money supply. Therefore, bitcoin is preparing for growth. In the analyst's view, the logarithmic growth curve indicator, which ignores short-term asset fluctuations, indicates that the leading cryptocurrency will reach a level of $140,000 by 2025.

"I will note that this is a very rough approximation, based on specific parameters of the indicator and the steepness of the momentum," warned TechDev. The analyst also noted that such an indicator as Bollinger Bands is in a very narrow range. The last time bitcoin exited such a range, a full-scale bull trend began.

Next in our top 3 is venture capitalist and billionaire Tim Draper, who stated in an interview with FOX Business that sooner or later, the entire world will embrace the first cryptocurrency. "It's only a matter of time before retailers realize they can save 2% by accepting bitcoin. They don't have to pay banks and credit card manufacturers," he explained. Draper repeated his forecast for the first cryptocurrency's growth to $250,000, predicting this would happen by 2025. (It's worth noting that the investor had already mentioned this price back in 2018, though at that time he referred to 2022 as the "Hour X." As we can see, the billionaire was mistaken.)

And finally, the gold step of the podium of honor this time goes to BitMEX co-founder Arthur Hayes. He published an article in which he forecasted the flagship cryptocurrency's surge to $760,000. In his opinion, the integration of Artificial Intelligence (AI) projects into the BTC blockchain will sharply increase the coin's appeal as a foundational asset of the ecosystem.

Hayes believes that ethereum should demonstrate a similar development model. If AI-based projects are integrated into this altcoin, the investment attractiveness of ETH, the main transaction instrument in the network, will sharply intensify. In this case, the altcoin may appreciate by 1,556%. In other words, the BitMEX co-founder does not rule out that ETH may soar to $31,063.

Another factor stimulating the growth of ETH over the next five years, according to Hayes, will be the expansion of the decentralized finance (DeFi) market. Most protocols of this ecosystem are based on ethereum, and their popularity continues to grow. An increase in the number of users of decentralized exchanges (DEX) will lead to a growth in transaction volumes with ETH and, consequently, to a rise in the price of the altcoin.

A survey was conducted among industry experts on the financial platform Finder to assess the future prospects of ethereum. The experts forecasted that ETH would be valued at an average of $2,400 by the end of 2023. They also predict that the price of ethereum will reach $5,845 by the end of 2025, and $16,414 by the end of 2030. It's worth noting that 56% of the experts believe that now is the most opportune time to buy ETH, while 41% advise holding the cryptocurrency, and a mere 4% recommend selling it.

PwC, the world's second-largest consulting firm, conducted a survey involving representatives from both cryptocurrency and traditional hedge funds. 93% of those surveyed believe that the market has already hit bottom, and they expect the cryptocurrency market to grow by the end of 2023. Among cryptocurrencies, they continue to favour bitcoin and ethereum. However, 72% think that ethereum has no chance of ever surpassing bitcoin in market capitalization. Of the remaining 28% who believe in the altcoin's victory, the majority expect that it will occur within the next 2 to 5 years.

A recent report from CME Group showed that ETH/BTC exhibits almost zero correlation with changes in interest rates, gold futures, and crude oil. However, it is significantly influenced by factors such as the strength of the dollar, changes in the market supply of bitcoin, and the dynamics of technology company stocks. The research indicates that ETH is more vulnerable to the strength of the USD, and changes in BTC supply have more influence on ETH/BTC than changes in ETH supply. At the same time, ETH often grows relative to BTC on days when technology company stocks (S&P 500 and Nasdaq-100 Tech indices) are on the rise.

As of the time of writing this overview, on the evening of Friday, August 4, BTC/USD is trading around $28,950, ETH/USD is around $1,820, and ETH/BTC is at 0.0629. The total market capitalization of the crypto market continues to decline and stands at $1.157 trillion ($1.183 trillion a week ago). The Crypto Fear & Greed Index remains in the Neutral zone at a mark of 54 points (52 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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July Results: NordFX's Top 3 Traders Surpass $230,000 in Profits

NordFX, the brokerage firm, has summarized the performance of its clients' trading transactions for July 2023. The social trading services, PAMM and CopyTrading, have also been evaluated, as well as the profits gained by the company's IB partners.

- The highest profit in July was achieved by a trader from Western Asia, with account number 1692XXX, whose profit amounted to 192,396 USD. This substantial result was achieved through transactions involving gold (XAU/USD) and the British pound (GBP/USD).
- The second spot in the ranking of the most successful traders of the month was taken by a client from East Asia, account number 1663XXX, who earned 26,699 USD exclusively through transactions with the currency pair XAU/USD.
- Third place on July's honour podium went to a representative from South Asia (account number 1705XXX), whose result, 15,358 USD, was also primarily achieved through operations with gold (XAU/USD).

The situation unfolded as follows in the NordFX passive investment services:

- In CopyTrading, a fairly large number of interesting (at least at first glance) signals periodically appear among startups, combining high profitability with moderate maximum drawdown. Here are just a few of them: G@SDR (profit 126% / max drawdown 27% / lifespan 50 days), Leonard6789 (184%/27%/27), SURE PROFIT (328%/25%/14). However, looking at these impressive results, it should be understood that they have been achieved through quite aggressive trading. Therefore, when subscribing to them, risk factors must certainly be taken into account. One of the main factors in this case is the very short lifespan of these signals.
    
As for the long-livers, we continue to monitor the fate of the signal KennyFXPRO - Prismo 2K. It started working on May 2, 2021. During this time, the 'veteran' experienced two serious drawdowns: on November 14, 2022, and June 20-23, 2023. In both cases, to avoid account liquidation, its author took the difficult step of closing loss-making positions. However, as a result, the signal is still alive and has shown a profit of 231% over 819 days.

- On the PAMM service display, there are two accounts that we have mentioned several times in previous reviews. These are KennyFXPRO-The Multi 3000 EA and TranquilityFX-The Genesis v3. Just like their veteran colleague from CopyTrading, they suffered serious losses on November 14, 2022: the drawdown at that time approached 43%. However, the PAMM managers decided not to give up, and the profit on the first of these accounts exceeded 106% by July 31, 2023, and on the second - 70%.
    
We also continue to monitor the Trade and earn account. It was opened more than a year ago, on March 8, 2022, but was in a dormant state, awakening only in November. As a result, over the past 9 months, its profitability has exceeded 153% with a very small drawdown - less than 13%.

The top three among NordFX's IB partners are as follows:
- A partner from Western Asia, with account number 1645XXX, has claimed the top spot for the third consecutive month. They earned a reward of 13,891 USD in July, bringing their total earnings to nearly 35,000 USD over the three-month period.
- Next is a partner from East Asia, who received 5,565 USD.
- Finally, rounding out the top three is a partner from South Asia, account number 1672XXX, who received a reward of 5,435 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 July 31 - August 04, 2023

EUR/USD: From Hawks to Not-Yet Doves

The past week was filled with both events and the release of macroeconomic data. Regarding the Federal Reserve meeting on July 26 and the European Central Bank meeting on July 27, there were no surprises in terms of key interest rate hikes. In both cases, they were predictably increased by 25 basis points (bps): to 5.50% for the dollar and to 4.25% for the euro. Therefore, market participants' attention was drawn to the statements made by the heads of these regulators following the meetings.

Jerome Powell, the Chairman of the Federal Reserve, announced during the press conference on July 26 that the US central bank's monetary policy has now become restrictive. As is usual, he deflected a direct answer on whether there will be an additional rate hike within this year. He didn't rule out the prospect of a further surge in the cost of federal fund borrowings but neither did he confirm it, even though it has already touched a 22-year peak.

It became apparent from Powell's remarks that the Federal Reserve no longer anticipates a recession. Instead, the central bank's policy will aim for a 'soft landing' – a state of moderate economic expansion coupled with a continued deceleration in inflation. This upbeat forecast for the stock market prompted further growth in the S&P500 and Dow Jones indices, whereas the yields on US Treasury bonds and the Dollar Index (DXY) dropped. Amidst this backdrop, the EUR/USD pair recorded its weekly high at 1.1149.

Everything changed radically the next day, on Thursday, July 27. Almost simultaneously, with a 15-minute interval, the European Central Bank's decision on interest rates and preliminary US GDP data were announced. 15 minutes later, a press conference led by the head of the European Central Bank, Christine Lagarde, began.

The US economy, against a forecast of 1.8%, expanded by 2.4% in Q2, substantiating Powell's statements and removing the topic of recession from the current agenda. Against this backdrop, the Eurozone economy is clearly lagging behind (for instance, German GDP, after a drop of -0.3% in Q1, contracted further by -0.2% in Q2). The ECB's head lamented this weakness in her address. If a month ago it was said that the European regulator would bring rates to levels that would be sufficiently restrictive, on July 27 everything sounded different. It was now stated that the Governing Council of the Central Bank would maintain restrictive borrowing costs for as long as necessary. In other words, they would at least take a pause, or even cease further tightening of their policy.

Gediminas Šimkus, a member of the Bank's Governing Council, confirmed this, stating that the "economy is weaker in the short term than forecasted" and monetary authorities are "near the peak of rates or at it". As a result of these statements, the probability of a rate hike in September dropped below 50%, and EUR/USD plummeted. The pair bottomed for the week at the mark of 1.0943.

Towards the end of the work week, on Friday, July 28, the pair corrected into the 1.1000 zone. Following the publication of preliminary inflation (CPI) data in Germany and personal consumption expenditure data in the US, EUR/USD closed the five-day period at 1.1016.

As for the near-term prospects, at the time of writing this review on the evening of July 28, 30% of analysts voted for further growth of the pair, 55% foresaw a decline, and the remaining 15% held a neutral position. Among trend indicators on D1, 50% point upwards, 50% downwards. The oscillators present a more specific picture: only 15% recommend buying, 65% selling, and the remaining 20% are neutral. The nearest support for the pair is around 1.0985, followed by 1.0945-1.0955, 1.0895-1.0925, 1.0845-1.0865, 1.0780-1.0805, 1.0740, 1.0665-1.0680, and 1.0620-1.0635. Bulls will encounter resistance in the area of 1.1045, then 1.1085-1.1110, 1.1145, 1.1170, 1.1230-1.1245, 1.1275-1.1290, 1.1355, 1.1475, and 1.1715.

In the coming week, on Monday, July 31, we await data on retail sales in Germany and a whole raft of preliminary statistics for the Eurozone, including GDP and inflation (CPI) data. On Tuesday, business activity indicators (PMI) in Germany and the US will be revealed. The following day, August 2, we will receive data on the level of employment in the private sector of the United States. The labour market statistics will be supplemented on August 3 and 4, when we will learn the number of unemployment benefit claims and such important indicators as wage level, unemployment rate, and the number of new jobs created outside the agricultural sector (NFP) of the country.

GBP/USD: Awaiting the Bank of England's Meeting

The preliminary data released on Monday, July 24, showed a decline in business activity in the UK. According to the Chartered Institute of Procurement & Supply (CIPS), the PMI in the manufacturing sector, which was forecasted at 46.1, actually fell from 46.5 to 45.0 points. The PMI in the service sector and the composite PMI, although they remained above 50, also showed a decline: from 53.7 to 51.5 and from 52.8 to 50.7 points, respectively.

The Bank of England (BoE) meeting will take place on Thursday, August 3, and the market has yet to come to a consistent opinion on how much the regulator will raise the base rate for the pound under current conditions. Will it be 50 basis points or, like the Fed and ECB, 25? We've previously mentioned arguments in favor of both numbers. We'll just repeat some of them.

Three main reasons for the BoE to decide on a 50 basis point increase were formulated by economists of the French financial conglomerate Societe Generale.

Firstly, service sector inflation and wages may have peaked in June, but both indicators remain uncomfortably high. The Consumer Price Index (CPI), although it decreased from 8.7% to 7.9% (forecasted at 8.2%) over the month, is still far from the target level of 2.0%.

Secondly, as Societe Generale believes, investors are avoiding British bonds due to the persistent inflation in the country. Such high and steady inflation means that investors require higher compensation for holding British bonds compared to US Treasuries and German bonds. To reassure investors, it is necessary at this stage to continue a tight monetary policy.

Thirdly, in recent weeks the Bank of England and its governor, Andrew Bailey, have been subjected to extensive criticism for maintaining a soft monetary policy for too long, thereby allowing inflation to rise significantly. Now the BoE may overdo it in an effort to prove its critics wrong.

However, not everyone agrees with the arguments of the French economists. For example, their colleagues from the German Commerzbank note that consumer prices (CPI) in the UK grew much slower in June than expected. Therefore, market expectations for a rate hike are too high and need to be adjusted downwards. This, in turn, will lead to a weakening of the pound. A similar view was expressed by strategists from the largest banking group in the Netherlands, ING, who believe that the rate will be increased by a maximum of 25 basis points.

It can be seen on the long-term chart that the British currency has recovered more than three-quarters after a sharp fall in the second half of 2021 and in 2022. And according to economists at Scotiabank, the pound is "likely to continue to receive support from positive yield spreads, even though a very tight monetary policy will threaten the prospects for UK economic growth next year." Scotiabank predicts that the pound will reach 1.3500 by the end of 2023 and 1.4000 by the end of 2024.

As for the current situation, the GBP/USD dynamics last week were similar to how EUR/USD moved - both pairs reacted to the results of the Fed and ECB meetings, to the statements of their leaders, and to macroeconomic statistics from the US. As a result, the week's maximum was recorded on July 27 at the height of 1.2995, the minimum - the next day at the level of 1.2762, and the final chord sounded at the mark of 1.2850.

The median forecast for GBP/USD in the near term tends to be bearish, with 70% supporting this view and the remaining 30% taking the opposite position. On the D1 oscillators, 15% are coloured green, 25% neutral-grey, and 60% red. For trend indicators, as in the case of EUR/USD, the ratio between green and red is 50% to 50%. If the pair moves south, it is expected to meet support levels and zones - 1.2800-1.2815, then 1.2740-1.2760, 1.2675-1.2695, 1.2575-1.2600, 1.2435-1.2450, 1.2300-1.2330. 1.2190-1.2210. In case of pair growth, it will encounter resistance at levels 1.2880, then 1.2940, 1.2980-1.3000, 1.3050-1.3060, 1.3125-1.3140, 1.3185-1.3210, 1.3300-1.3335, 1.3425, 1.3605.

In the calendar for the upcoming week, in addition to the Bank of England meeting and the subsequent press conference of its management, Tuesday, August 1 can be noted when the final data on business activity (PMI) in the manufacturing sector of the UK economy will be published.

USD/JPY: BoJ Delivers a Surprise

The second half of the past week turned out to be not just volatile, but insanely volatile for USD/JPY. Jumps of 100, 200, and even 300 points followed one after another. Not only did the yen react sharply to the meetings of the Fed and the ECB, but also its own Bank of Japan (BoJ) delivered a surprise. The fire was started by the Nikkei newspaper, which published an insider that the BoJ intends, on the one hand, to maintain control over the bond yield curve in the same range, but on the other hand - to allow the rates of the debt market to go beyond its limits.

The results of the regulator's meeting fully confirmed the journalists' information. As expected, the Japanese Central Bank kept the key rate at an ultra-low negative level of -0.1%. However, for the first time in many years, the new head of the bank, Kazuo Ueda, decided to turn strict targeting of the yield curve into flexible one. For some central banks, this is a common practice. But for the BoJ, it's a desperately bold, revolutionary step.

The target yield level of Japanese 10-year bonds remains 0%. The permissible range of yield changes of +/-0.5% is also maintained. But from now on, this limit should no longer be seen as a hard boundary but is more flexible. True, to certain limits - the Bank of Japan drew a "red line" at the level of 1.0% and will conduct daily purchase operations so that the yield does not rise above this mark.

Initially, this decision literally blew up the market, the yen's rate began to strengthen. USD/JPY dropped to the mark of 138.05. But then everything calmed down. Investors reasoned that, essentially, the BoJ policy remained ultra-soft. The review of the target range for long-term government bonds has purely symbolic significance so far, as it is unknown whether such a range will actually be used.

Especially since there were immediate critics of this decision. Thus, strategists from Commerzbank warned in advance that the possibility of a slight increase in rates could be devastating for the yen. They referred to the potential growth of inflation and the high level of public debt in the country. "With such half-hearted measures," they said, "the Bank of Japan is fuelling fears that the actual cessation of control over the yield curve could be undesirable or impractical. [...] Even if the yen currently benefits from the possibility of a slight increase in interest rates in the long run, this will be a catastrophic signal for it.".

"And in general, it is still unclear what and how will happen in this distant future," thought market participants, and as a result, the end of the week ended in favour of the dollar. The final point of the week was set at the level of 141.15.

At the time of writing the review, the forecast is maximally neutral: a third of analysts believe that in the coming days the pair will continue to grow, a third expect its fall, and a third have taken a wait-and-see position. The readings of the indicators on D1 look as follows. Among oscillators, 35% are coloured red, 25% are gray, and 40% are green (a quarter of them are in the overbought zone). Among trend indicators, green has a total advantage, such are 100%. The nearest support level is located in the zone of 140.60-140.75, then 139.85, 138.95-139.05, 138.05-138.30, 137.25-137.50, 135.95, 133.75-134.15, 132.80-133.00, 131.25, 130.60, 129.70, 128.10, and 127.20. The nearest resistance is 141.95-142.20, then 143.00, 143.75-144.00, 145.05-145.30, 146.85-147.15, 148.85, and finally, the maximum of October 2022, 151.95.

Part from the meeting of the Bank of Japan, no significant economic information related to the economy of this country is expected to arrive in the coming week.

CRYPTOCURRENCIES: In Search of a Lost Trigger


The decisions of the Federal Reserve (and even more so the European Central Bank and the Bank of Japan) have not had a significant impact on bitcoin quotes. After a decline on Monday, July 24, BTC/USD attempted to rise slightly in line with stock indices, but it did not manage to consolidate above $30,000.

Statistics show that after a price surge in June, blue whales (those holding more than 10,000 bitcoins) are locking in profits and selling bitcoin at record rates for 2023, offloading an average of 16,300 coins per day onto exchanges. During this period, the share of whale transactions in the overall inflow to these platforms reached 41%. This even surpasses crisis periods in 2022, such as the Terra project crash and the FTX bankruptcy (when whale proportions were 39% and 33%, respectively).

Conspiracy theorists attribute this sell-off to the whales possessing some kind of insider information. However, it's more likely that the sales are driven by increasing risks due to heightened regulatory pressure on the crypto market from the U.S. Securities and Exchange Commission (SEC), including the legal pursuit of its prominent participants.

As for the smaller members of the whale family (those holding between 1,000 and 10,000 bitcoins), they have been actively replenishing their reserves over the past month. Other market participants behaved fairly passively, not exerting a significant impact on quotes.

The only positive development for the crypto market this summer has been the submission of applications to launch spot bitcoin exchange-traded funds (ETFs) by giants such as BlackRock, Invesco, Fidelity, and others. Thanks to these developments, BTC/USD managed to rise above $30,000 in mid-June.

Senior Bloomberg analyst Eric Balchunas believes that SEC approval of these applications will open up $30 trillion worth of capital to the bitcoin market. According to forecasts by the analytical company Fundstrat, the launch of a bitcoin ETF could increase the daily demand for bitcoin by $100 million. In this case, even before the halving scheduled for April 2024, the price of bitcoin could rise by 521% from its current levels, reaching up to $180,000.

However, clarity about the fate of these applications is still a long way off. For instance, the final decision on BlackRock's application is not expected until the middle of Q3 2023 and no later than mid-March 2024. And this decision does not necessarily have to be positive. As a result of this uncertainty, the joyful excitement among crypto enthusiasts in June has fizzled out, but fear of the SEC remains. This fear continues to put pressure on the market.

Two events could potentially serve as new triggers to initiate a bull rally. The first is a shift in the Federal Reserve's monetary policy towards easing (QE). In other words, it would involve not just an end to the tightening cycle (QT), but the actual start of easing. But so far, this isn't even being discussed. The interest rate will either be frozen at its current level or rise by another 25 b.p. However, based on recent statements, the Federal Reserve does not intend to lower it. In general, we are still far from the point where a significant amount of free money appears on the market, which investors would want to invest in digital assets.

The second trigger is the halving, which could cause not only the subsequent, but also preceding growth in bitcoin. As on traditional markets, shifts in investor sentiment on the crypto market follow certain patterns. Taking into account the so-called "Wall Street Cheat Sheet," which describes the psychology of market cycles, and the emotions traders typically experience, bitcoin is moving towards the "hope" phase after passing through pessimistic phases of "panic," "capitulation," and "depression."

According to the chart by analyst CryptoYoddha, the cryptocurrency is currently going through the "disbelief" or "sucker's rally" stage, with the next step being "hope" for a price recovery, possibly to $50,000 and higher by the end of 2023. The upward movement will correspond to the passage through the stages of "optimism," "belief," "thrill," and finally, "euphoria.".

Cody Buffington, the host of the Altcoin Buzz YouTube channel, holds the view that a surge in bitcoin's volatility will happen even sooner than everyone expects. In his opinion, the impending volatility of the flagship cryptocurrency could rival its growth since January 2023. Buffington noted that in July, the bitcoin price fluctuated in a narrow range around the $30,000 mark, which was a kind of test for both bulls and bears. More often than not, such a flat period occurs before large movements. As evidence, he referred to the Bollinger Bands and a visual display of the indicator, where it can be seen that the bitcoin price chart is in its narrowest state since the beginning of 2023.

A survey of 29 analysts conducted by Finder.com resulted in the following median forecast. Experts expect BTC to rise to $38,488 by the end of the year, with a potential peak for bitcoin in 2023 potentially reaching $42,000. By the end of 2025, according to the average opinion of those surveyed, the price of the coin could reach $100,000, and by the end of 2030 - $280,000.

Naturally, individual forecasts of the experts varied. Overall, the majority of survey participants (59%) are optimistic about BTC and believe that now is a good time to enter the market, 34% simply advise holding existing cryptocurrency, and 7% recommend selling it.

Market strategist Todd "Bubba" Horwitz believes that within the next six months, the flagship cryptocurrency will rise to $35,000, and then to $40,000. Interestingly, "Bubba" has chosen neither the Federal Reserve nor the halving as the trigger, but… Robert F. Kennedy Jr. This Democratic presidential candidate stated that saving the country's economy and supporting the dollar could be facilitated by hard assets such as gold, silver, platinum, and... bitcoin.

Analyst under the pseudonym Trader Tardigrade believes that bitcoin is repeating the same price structure as in the period from 2013 to 2018 when it followed the model of transition from the "previous peak" to the "top-1", which preceded the "top-2" and the "retest" (the stage where bitcoin is now). If this model is correct, the next step will be a price "boom", which could lead to bitcoin's growth to $400,000 in 2026.

Another expert, Stockmoney Lizards, opines that bitcoin has just exited its third historical cycle, during which it reached a historical maximum of $68,900, and has entered its fourth price cycle, the culmination of which could be a new record between $150,000 and $200,000 Q2 or Q3 2025.

Artificial Intelligence also has an opinion on this matter (we couldn't possibly proceed without it!). The experts at Finbold decided to ask the Google Bard machine learning system how much the flagship of the crypto market will cost after the long-awaited halving in 2024. The AI noted that several factors could influence this, but it's highly likely that bitcoin will reach a new all-time high. This will be facilitated not only by halving but also by a more global integration of BTC and interest from institutional investors. Speaking in specific figures, Google Bard noted that after halving, the coin could spike to a $100,000 mark. On the other hand, the AI highlighted factors that could limit the growth of the main cryptocurrency and did not rule out the possibility that the crypto winter could continue in 2024.

As of the time this review was written, on the evening of Friday, July 28, bitcoin doesn't seem to be significantly affected. BTC/USD is being traded around $29,400. The total capitalization of the crypto market has slightly decreased and is at $1.183 trillion ($1.202 trillion a week ago). The Crypto Fear & Greed Index is currently in the Neutral zone, standing at 52 points (compared to 50 points 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 July 24 - 28, 2023

EUR/USD: Awaiting the Federal Reserve and ECB Meetings

When the DXY Dollar Index dropped to April 2022 levels (99.65) on July 14, many market participants concluded that the best days for the American currency were over. Inflation is nearing target levels, and in order not to suffocate the economy, the Federal Reserve will soon initiate a campaign to ease its monetary policy. However, things aren't that straightforward. After reaching a peak of 1.1275 on Tuesday, July 18, the EUR/USD pair reversed and started to decline.

In general, against the backdrop of weak macroeconomic reports coming from the United States, the dollar could have given up a few dozen or even a couple of hundred points to the euro. Industrial production in the country is falling for the second month in a row, with a 0.5% decrease in June. Retail sales, expected to grow by 0.5%, only increased by 0.2% (a 0.5% increase in May). The Philadelphia Federal Reserve's Manufacturing Activity Index continues to be in the negative territory (-13.5). The real estate market data also turned out worse than predicted. For instance, the number of new constructions in the U.S. fell by 8.0% in June, following a 15.7% increase in the previous month. The number of issued construction permits also dropped by 3.7% after a 5.6% rise in May. Sales in the secondary housing market were below the previous values (4.16M in June, 4.30M in May, forecast 4.20M). However, the labour market data turned out slightly better than expected - the number of initial jobless claims was 228K (previous value 237K, forecast 242K). Yet, this is a highly volatile indicator, and it may not reflect the actual situation, but the market was pleased with this bit of positivity.

Overall, the published macro-statistics vividly illustrate the cooling of the American economy. The worsening situation in the real estate market clearly signals the pressure that high-interest rates exert on this important sector. It's enough to recall the Global Financial Crisis of 2007-2008, which began with a mortgage crisis in the U.S.

In such a situation, the hawkish course of the Federal Reserve is likely nearing its end. Almost all Bloomberg experts anticipate that on July 26, the Federal Open Market Committee (FOMC) will raise the interest rate by 25 basis points to 5.5%. There's a possibility that the hike could be even less: not 25, but just 10 basis points. Afterwards, the regulator is expected to take a wait-and-see approach, which could last until the end of the year. The futures market estimates the probability of a rate increase to 5.75% in 2023 at 28%.

However, there's not just the American currency on the EUR/USD scale but also the pan-European one. Revised statistics show that in Q1, the Eurozone's GDP was almost at zero, the economy is stagnating, and its growth prospects appear rather weak. It is clear that the hike in the euro's key interest rate, which has grown from 0% to 4.00% in this tightening cycle, has had and continues to have a negative impact. The lagging effect of monetary tightening is becoming more and more palpable.

On the other hand, despite a 400 basis point increase in rates, inflation (CPI) in the Eurozone is declining quite slowly - in June, it was 5.5% year-on-year compared to 6.1% a month earlier. It is still very far from its target level of 2.0%.

Therefore, on one hand, we see significant price pressure, on the other – the difficulties the EU economy is experiencing. In such an ambiguous situation, the further steps of the European Central Bank officials also seem uncertain. More clarity regarding future monetary policy is expected to emerge at the upcoming European Central Bank Monetary Policy Committee meeting on Thursday, July 27. At least, that's what market participants are hoping for.

Even somewhat unclear data from the US labour market was enough to trigger a DXY correction northwards and send EUR/USD south. The final note of the working week was set at 1.1125. As for the near-term prospects, at the time of writing this review, the evening of July 21, only 20% of analysts voted for the pair's further rise, 50% for its fall, and the remaining 30% took a neutral stance. As for technical analysis, on D1, 75% of trend indicators point up, 25% point down. Of the oscillators, 85% recommend buying, while the remaining 15% take a neutral stance. The pair's nearest support is located around 1.1090-1.1110, 1.1045, 1.0995-1.1010, 1.0895-1.0925, 1.0845-1.0865, 1.0800, 1.0760, 1.0670, 1.0620-1.0635. Bulls will meet resistance around 1.1145, then 1.1170, 1.1230-1.1245, 1.1275-1.1290, 1.1355, 1.1475, and 1.1715.

Undoubtedly, the key events of the upcoming week will be the FED meeting on July 26 and the ECB meeting on July 27, along with the subsequent press conferences held by the leaders of these regulators. Additionally, on Monday, July 24, numerous preliminary business activity data (PMI) will come from Germany, the Eurozone, and the US. The next day, the Eurozone Bank Lending Survey will be published, and the value of the US Consumer Confidence Index will be known. On Thursday, data on durable goods orders will arrive from the United States, along with real estate and unemployment statistics. Finally, at the very end of the working week, on Friday, July 28, we will learn the preliminary data on inflation (CPI) in Germany, as well as personal consumption expenditure data in the US.

GBP/USD: 50 Basis Points or is it 25 After All?

The next meeting of the Bank of England (BoE) is set for August 3. Some market participants are inclined to believe that at this meeting, the regulator will raise the base rate for the pound by another 50 basis points (bps) to 5.50%. Economists from the French financial conglomerate Societe Generale have formulated three main reasons why the BoE will take this step.

Firstly, inflation in the service sector and wages may have peaked in June, but both indicators remain uncomfortably high. The Consumer Price Index (CPI), although it fell over the month from 8.7% to 7.9% (with a forecast of 8.2%), is still far from the target level of 2.0%.

Secondly, as Societe Generale believes, investors are avoiding UK bonds due to persistent inflation in the country. Such high and stable inflation means that investors require higher compensation for holding UK bonds compared to US Treasuries and German bonds. To reassure investors, it is necessary at this stage to continue a strict monetary policy.

Thirdly, in recent weeks the Bank of England and its governor Andrew Bailey have been heavily criticized for sticking to a soft monetary course for too long, thereby allowing a powerful surge in inflation. And now the BoE may overdo it in its desire to prove that its critics are wrong. This can lead to more aggressive actions, such as a significant rate hike. However, we must also consider the possibility that the BoE could choose a more conservative 25 basis point rate hike instead.

Indeed, not everyone agrees with the arguments put forth by the French economists. For instance, their colleagues at the German Commerzbank have noted that consumer prices (CPI) in the UK grew at a much slower rate in June than was expected. Therefore, the market's built-in expectations for a rate increase are too high and require a downward correction. This, in turn, will lead to a weakening of the pound. A similar viewpoint was expressed by strategists at the Netherlands' largest banking group, ING, who believe the rate will be increased by a maximum of 25 basis points.

The above-mentioned CPI data was published on Wednesday, July 19. However, in addition to this, the Office for National Statistics (ONS) in the UK also published retail trade data for the country on Friday, July 21. It turned out that in June, the volume of retail trade increased by 0.7% on a monthly basis, compared to the expected 0.2% and 0.1% previously. The main indicator of retail sales, excluding auto fuel sales, increased by 0.8% over the month compared to the forecasted 0.1% and 0% in May. The annual volume of retail sales in the UK fell by -1.0% in June against the forecasted -1.5% and May's decline of -2.3%, while the base volume of retail sales dropped by -0.9% against the expected -1.6% and the previous -1.9%.

After the release of these favorable data, the UK Finance Minister Jeremy Hunt stated that "we will start seeing results if we stick to our plan to halve inflation". The minister's words could be interpreted as support for further tightening of the BoE's hawkish policy. However, the markets practically ignored them, and the strengthening dollar continued to pressure GBP/USD, which ended the five-day trading period at the 1.2852 mark.

As for the pair's movement, it will, of course, depend on the decisions and statements of the Fed on July 26. Undoubtedly, the ECB's meeting on July 27 will also influence the pound through EUR/GBP. But all this is in the near future. As for the present, at the time of writing this review, the median forecast of experts for GBP/USD looks maximally neutral: a third of them voted for the pair's growth, a third - for its fall, and a third maintained neutrality. On D1 oscillators, 35% are coloured green, 25% - red, and the remaining 40% - neutral grey. Among trend indicators, 60% sided with the green, and 40% sided with the red. In case of the pair's movement south, it will meet support levels and zones at 1.2800-1.2815, then 1.2675-1.2695, 1.2570, 1.2435-1.2450, 1.2300-1.2330, 1.2190-1.2210. In case of the pair's growth, it will meet resistance at 1.2940, then 1.2980-1.3000, 1.3050-1.3060, 1.3125-1.3140, 1.3185-1.3210, 1.3300-1.3335, 1.3425, 1.3605.

Apart from the FED and ECB meetings, another notable event in the upcoming week's calendar is on Monday, July 24, when the preliminary business activity data (PMI) for various sectors of the UK economy will be published.

USD/JPY: Two Steps Forward, One Step Back


The Russian revolutionary Vladimir Lenin wrote a book in 1904 titled "One Step Forward, Two Steps Back". What happened to the yen over the past three weeks can be titled as "Two Steps Forward, One Step Back". For the first two weeks of July, the Japanese currency grew, and for the third, it gave back more than half of its gains. And while its peers - the euro and pound, retreated thanks to a stronger dollar, in the case of USD/JPY, a significant blow to the national currency was not dealt by the US, but by a fall in inflation in Japan.

It should be recalled that at the time of writing the previous forecast, the number of supporters of yen weakening was three times the number of those expecting its further strengthening (45% versus 15%). And the majority turned out to be correct. The Inflation Report published on Friday, July 21st, sent the Japanese currency into a knockdown. USD/JPY jumped by more than 1%. It turned out that despite the ultra-dovish policy of the BoJ and a negative interest rate of -0.1%, consumer price growth has decreased. Despite a forecast of 3.5%, in reality, inflation (CPI) in June was 3.3%. The consumer price index excluding food and energy fell to 4.2% compared to the previous value of 4.3%.

These data, if not completely, then at least for a long time, buried hopes for a tightening of the monetary policy of the Japanese Central Bank. Moreover, the Prime Minister Fumio Kishida, who spoke the day before, supported the current monetary policy of the regulator. Therefore, with a high degree of probability, at its meeting on Friday, July 28, the Bank of Japan will leave the interest rate unchanged. And to maintain the course of the national currency, if necessary, as before, it will resort to currency interventions.

In the meantime, to stop the yen's fall, Japan's Chief Currency Diplomat Masato Kanda stepped in with a "verbal intervention". In particular, he stated that he "never felt a limit to the possibilities for currency interventions" and that when it comes to them, he takes various steps to avoid running out of "ammunition".

The situation has somewhat calmed down after the comments made by Masato Kanda, with USD/JPY ending the past week at a mark of 141.80. At the time of writing this review, 25% of analysts predict the pair will continue its upward movement in the upcoming days, 55% voted for a downward trend, and 20% took a neutral position. The readings of the D1 indicators are as follows: among the oscillators, 25% are coloured red, 50% green, and 25% grey. Trend indicators show a clear advantage for the greens at 90%, with only 10% on the opposite side. The nearest support level is located in the zone of 141.40, followed by 140.45-140.60, 139.85, 138.95-139.05, 138.05-138.30, then 137.25-137.50, 135.95, 133.75-134.15, 132.80-133.00, 131.25, 130.60, 129.70, 128.10, and 127.20. The nearest resistance is at 142.20, followed by 143.75-144.00, 145.05-145.30, 146.85-147.15, 148.85, and finally the peak of October 2022 at 151.95.

Besides the Bank of Japan's meeting, no significant economic information pertaining to the country's economy is anticipated in the upcoming week.

CRYPTOCURRENCIES: Litecoin Halving - Rehearsal for Bitcoin Halving

Observers note that the peak of the Dollar Index DXY in 2023 almost coincided with bitcoin's trough. There's nothing surprising about this: BTC/USD is like a scale. If the dollar gets heavier, bitcoin becomes lighter. Last week, the rise of the American currency led to a weakening of the digital one. It's worth noting that bitcoin is desperately trying to hold onto the support zone at $29,850 and avoid a collapse to the June lows around $25,000.

The relationship between BTC and USD is logical and understandable. However, some crypto enthusiasts are trying to position bitcoin as the primary, leading asset, with the dollar trailing behind like a dog's tail. As an argument, they cite, for example, the fact that bitcoin entered a horizontal channel by the middle of last year, while the Dollar Index caught up with it a few weeks later. If you look closely, you can find many such moments on the charts. But in our opinion, one should not overestimate the significance of the main cryptocurrency.

At the moment, many experts and influencers continue to paint a bright future for bitcoin. Although the heights of target horizons differ by times, sometimes even by tens of times. For example, Standard Chartered economist Geoff Kendrick recently stated that his financial corporation has adopted a more optimistic forecast for bitcoin's market value, targeting the $120,000 level by the end of 2024.

In response, BBC World analyst Glen Goodman wrote that these $120,000 "seem more like a figure pulled out of thin air than a genuinely justified forecast." He believes that the authors of such predictions are siding with the bulls and are not considering a number of key factors. The most important of them is that the US financial regulators are ruthlessly cracking down on the crypto industry, inundating its participants with lawsuits and investigations. Moreover, Goodman refers to forecasts by American economists who expect a protracted recession next year, the consequences of which can seriously suppress activity in the financial markets, including the digital asset market.

Unlike Glen Goodman, Real Vision CEO and former Goldman Sachs top manager Raoul Pal believes that economic troubles, confusion in the banking sector, and the real estate market crisis are beneficial for bitcoin, which serves as a defensive asset against this backdrop. According to Raoul Pal, a bullish rally for digital gold is inevitable, and BTC can easily reach the $50,000 mark later this year.

Renowned analyst under the nickname PlanB, on the other hand, does not believe that a powerful pump of the flagship cryptocurrency can occur before the halving in April 2024. His forecast is based on using the MA-200 as an indicator. This line increases on average by $500 a month, so in nine months it will be at the $32,000 mark. According to PlanB, it is possible that the coin's price might even be about 50% above this mark, but even then, it would be only $48,000.

Michael Van De Poppe, the founder of venture firm Eight, has clarified his prediction from last week. He believes that the current trend is breaking the minimums, as a result of which bitcoin could drop to $29,500 and even $29,000. However, he thinks that such a price movement could precede a bullish rally, during which the main cryptocurrency will raise its rate first to $32,500, then to $34,000, followed by a surge to $38,000.

Shifting from short- and medium-term forecasts to long-term, one could mention the opinion of Catherine Wood, CEO of ARK Invest. It seems that she is not particularly interested in jumps to $38,000 and even to $120,000. Once again, she reaffirmed her forecast that in about seven years, against the backdrop of inflation and a banking crisis, bitcoin will trade at $1,500,000 per coin, or at least at $625,000.

Against the backdrop of Catherine Wood's boundless optimism, data from CryptoVantage, whose employees surveyed 1,000 crypto investors from the U.S., comes as a cold sobering shower. It turned out that only 23% of them believe that the Bitcoin rate will reach its historical maximum of $68,917 next 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 all-time high, but in an uncertain future. And 9% believe that this will never happen again.

We've paid significant attention to the upcoming bitcoin halving in April 2023 in our previous reviews. Let's now remember that the Litecoin halving is due quite soon, on August 2nd of this year. The reward for mining a block will be reduced to 6.25 LTC. Given that Litecoin is a fork of bitcoin, and its total emission is capped at 84 million coins, it will be interesting to observe the changes in Litecoin's price and attempt to forecast bitcoin's performance after its future halving based on these observations.

At the time of writing this review, on the evening of Friday, July 21, BTC/USD is trading around $29,850. The total capitalization of the crypto market has barely changed and stands at $1.202 trillion ($1.198 trillion a week ago). The Crypto Fear & Greed Index is in the Neutral zone, at 50 points (down from 60 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 July 17 - 21, 2023

EUR/USD: Falling Inflation Has Crushed the Dollar

So, we can either congratulate (or, conversely, upset) everyone with the onset of a global process of dedollarization. As Bloomberg reports, after the inflation rate in the US approached 3.0%, which is not far off the Federal Reserve's target of 2.0%, it seems like a turning point is approaching for the US economy.

Last week, the dollar faced the most significant pressure from national macroeconomic statistics in over a year. The Consumer Price Index (CPI) published on Wednesday, July 12, showed a 0.2% increase in June, falling short of the forecasted 0.3%. The annual indicator dropped from 4.0% to 3.0%, reaching the lowest level since March 2021. Core inflation also fell from 5.3% in May to 4.8% in June, against a forecast of 5.0%.

Against the backdrop of such steady deceleration in inflation, market participants began to factor into the quotations both a refusal of the second Federal Reserve rate hike, as well as an imminent turnaround in monetary policy. According to CME Group FedWatch data, the likelihood that the regulator will raise the rate again after a 25-basis point hike in July has fallen from 33% to 20%. As a result, most financial instruments have made a successful onslaught on the dollar. Meanwhile, the market completely ignored statements by Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, his Federal Reserve Bank of Richmond colleague Thomas Barkin, and Federal Reserve Board member Christopher Waller that inflation is still above the target level and hence the Federal Reserve is ready to continue tightening its policy (QT).

The story of the dollar's decline did not end there. EUR/USD continued its rally after the US Bureau of Labor Statistics reported on Thursday, July 13, that the Producer Price Index (PPI) had grown by just 0.1% in annual terms in June (forecast was 0.4%, May value was 0.9%). As a result, the DXY Dollar Index broke the 100.00 support level and fell to the values of April 2022, and EUR/USD reached its highest level since February 2022, marking a high at 1.1244.

Many market participants decided that the best times for the US currency are over. The US economy will slow down, inflation will reach target values, and the Federal Reserve will begin a campaign to soften its monetary policy. As a result, the second half of 2023 and 2024 will become a period of strengthening for other currencies against the dollar. The result of such expectations was the fall of the Spot USD Index to a 15-month low, and hedge funds exclusively engaged in selling the US currency for the first time since March.

After a crushing week for the dollar, EUR/USD finished at 1.1228. As for near-term prospects, at the time of writing this overview, on the evening of July 14, 30% of analysts voted for the pair's further growth, 55% for its decline, and the remaining 15% took a neutral stance. Among trend indicators and oscillators on D1, 100% are on the side of the greens, although a third of oscillators signal the pair is overbought.

The nearest support for the pair is located around 1.1200, then at 1.1170, 1.1090-1.1110, 1.1045, 1.0995-1.1010, and 1.0895-1.0925. Bulls will meet resistance around 1.1245, 1.1290-1.1310, 1.1355, 1.1475, and 1.1715.

The blackout period leading up to the next Federal Open Market Committee (FOMC) meeting, which is set for July 26, will begin on July 15. Therefore, it's not worth expecting any statements from Federal Reserve officials in the coming week. The quotations will only be influenced by the macroeconomic data hitting the market. On Tuesday, July 18, data on US retail sales will be released. On Wednesday, July 19, we will find out what is happening with inflation (CPI) in the Eurozone. Then on Thursday, July 20, data on unemployment, manufacturing activity, and the housing market in the United States will come in.

GBP/USD: The Potential for Growth Remains

Back at the end of June, we speculated that GBP/USD might cover the remaining distance to 1.3000 in just a few weeks or even days. And we were right. In the current situation, the British pound did not miss an opportunity for growth: the peak of the week was recorded at the height of 1.3141, which corresponds to the levels of the end of March - beginning of April 2022. The final note of the five-day period sounded at the mark of 1.3092.

In addition to a weakening dollar, another driver of the pound's growth was the semi-annual report on the assessment of the UK's financial system. It demonstrated the resilience of the national economy against the backdrop of a prolonged cycle of raising the key interest rate. Unlike several US banks, major UK banks maintain high capitalization, and their profits are growing. This suggests that they can withstand several more rate hikes this year. It is expected that at its next meeting on August 3, the Bank of England (BoE) will raise the rate by another 50 basis points (bps) to 5.50%. And it will do so regardless of potential economic problems, as the fight against rising prices is more important. Consumer inflation (CPI) in the country in May was 8.7% (for comparison, over the same period in Germany it was 6.1%, in France 4.5%, in Japan 3.2%, and in the USA 4.0% in May and 3.0% in June).

The UK's labour market is also pushing inflation upwards. Even despite the increase in the interest rate, the latest report noted an acceleration in wage growth to 6.9% YoY. Excluding the turbulence during the Covid-19 pandemic, this is the fastest pace since 2001. And although unemployment is rising alongside wages, its current level of 4.0% is still historically low. Yes, in August of last year it was lower - 3.5%, but what is a growth of only 0.5% almost over a year? It's nothing! (Or almost nothing).

In general, in the foreseeable future, there are no major obstacles that would prevent the Bank of England from continuing to tighten monetary policy. Thus, the prospect of further rate hikes will continue to fill the sails of the British currency with a tailwind. And, according to a number of analysts, GBP/USD, having broken through the 1.3000 resistance, may now aim for an assault on the 1.3500 level.

However, this does not mean that such growth will happen right now. "In a sense, the pound has already experienced overvaluation against the backdrop of a hawkish Bank of England and is unlikely to show strong results against the current bearish phase of the dollar. However, traders will now be targeting 1.3300 on GBP/USD assuming we can close the week above 1.3000," believe strategists from the largest banking group in the Netherlands, ING.

The possibility of the pound's consolidation in the coming week is also suggested by Canada's Scotiabank, not ruling out pullbacks to 1.2900-1.3000 and further growth to the area of 1.3300. The bullish sentiment is also supported by Singapore's United Overseas Bank. Its economists believe that "the strong growth momentum suggests that GBP/USD is unlikely to pull back. On the contrary, it is more likely to continue moving towards the upper boundary of the weekly exponential moving average. This key resistance level is currently at 1.3335."

When it comes to the median forecast for the near future, at the moment only 25% of experts have spoken out for further growth of the pair. The opposite position was taken by 50%, the remaining 25% maintained neutrality. As for technical analysis, all 100% of trend indicators and oscillators are pointing upwards, although a quarter of the latter are in the overbought zone. If the pair moves south, it will encounter support levels and zones – 1.3050-1.3060, then 1.2980-1.3000, 1.2940, 1.2850-1.2875, 1.2740-1.2755, 1.2675-1.2695, 1.2570, 1.2435-1.2450, 1.2300-1.2330. In the case of the pair's rise, it will meet resistance at levels 1.3125-1.3140, 1.3185-1.3210, 1.3300-1.3335, 1.3425, 1.3605.

The events of the upcoming week worth noting in the calendar are Wednesday, July 19, when the value of such an important inflation indicator as the United Kingdom's Consumer Price Index (CPI) will become known. Towards the end of the working week, on Friday, July 21, data on retail sales in the country will also be published. These figures can have a significant impact on the exchange rate, as they provide insights into consumer spending and overall economic activity, which are key factors in the Bank of England's decisions on interest rates.

USD/JPY: The Yen Pleased Investors Once Again

For the second week in a row, yen investors have been rewarded for their patience. USD/JPY continued its descent from the Moon to Earth, marking a local minimum at 137.23. Thus, since June 30th, in just two weeks, the Japanese currency has gained more than 780 points against the US dollar.

Compared to other currencies included in the DXY basket, the yen appears to be the primary beneficiary. The main ace up this safe-haven currency's sleeve is investor fears about a recession in the US and narrowing yield differentials on US government bonds. The correlation between Treasuries and USD/JPY is no secret to anyone. If the yield on US Treasury bills falls, the yen shows growth against the dollar. Last week, following the publication of CPI data, the yield on 10-year US papers slipped from 3.95% to 3.85%, and on 2-year papers – from 4.85% to 4.70%.

Speculation that the Bank of Japan (BoJ) may finally adjust its ultra-loose monetary policy towards tightening in the coming months also continues to favor the yen. We are talking about speculation here, as no clear signals have been given by the country's Government or the BoJ leadership on this matter.

Let's recall that at the French Societe Generale, it's expected that the yield on 5-year US bonds will fall to 2.66% in a year's time, which will allow USD/JPY to break below 130.00. If, at the same time, the yield on Japanese government bonds (JGBs) remains at its current level, the pair could even drop to 125.00. Economists at Danske Bank are forecasting a USD/JPY rate below 130.00 within a 6–12-month horizon. Similar forecasts are made by strategists at BNP Paribas: they are aiming for a level of 130.00 by the end of this year and 123.00 by the end of 2024. Against this backdrop, many hedge funds have begun active selling of dollars and buying of yen.

Last week, USD/JPY ended at 138.75 after a correction to the north. As of this review, 45% of analysts believe the pair will resume growth in the coming days. Only 15% support further fall, and 40% maintain a wait-and-see stance. The D1 indicators are as follows: 100% of oscillators are coloured red, but 10% signal oversold. The balance between green and red among trend indicators is 35% to 60%. The nearest support level is in the 138.05-138.30 zone, followed by 137.25-137.50, 135.95, 133.75-134.15, 132.80-133.00, 131.25, 130.60, 129.70, 128.10, and 127.20. The closest resistance is 1.3895-1.3905, then 139.85, 140.45-140.60, 141.40-141.60, 142.20, 143.75-144.00, 145.15-145.30, 146.85-147.15, 148.85, and finally the October 2022 high of 151.95.

No significant economic information related to the Japanese economy is expected in the upcoming week. However, traders may want to note that Monday, July 17th is a holiday in Japan: the country is observing Marine Day.

CRYPTOCURRENCIES: Karl Marx and $120,000 for BTC


After the release of impressive consumer inflation data in the US last week, the markets became confident in the Fed's imminent abandonment of monetary restriction and a turn towards lowering the key rate. The dollar responded to this with a sharp fall, and risky financial instruments - with growth. The S&P500, Dow Jones, and Nasdaq Composite stock indices went up, but not bitcoin. The BTC/USD pair continued to move sideways along the Pivot Point $30,600, trapped in a narrow range. It seems as if it has completely forgotten about its direct correlation with stocks and its inverse correlation with the dollar. On Thursday, July 13, after the release of the American PPI, bitcoin still tried to break through to the north, but unsuccessfully: the very next day it returned within the limits of the sideways channel.

Why did this happen? What prevented digital gold from soaring along with the stock market? There don't seem to be any super serious reasons for this. Although analysts do point to three factors that are weighing on the crypto market.

The first of these is the low profitability of mining. Due to the increasing computational complexity, it remains close to a historical minimum. Moreover, it is accompanied by the fear of a possible new price drop. This is pushing miners to sell not only freshly mined coins (about 900 BTC per day), but also accumulated reserves. According to Bitcoinmagazine data, miners have transferred a record volume of coins to exchanges in the last six years.

In addition to miners, the US Government is contributing to the increase in supply. On just one day, July 12, it transferred $300 million worth of coins to crypto exchanges. And this is the second negative factor. Finally, the third is the bankrupt Mt.Gox exchange, which must pay customers everything that remains in its accounts by the end of October. This equates to approximately 135,900 BTC, totalling roughly $4.8 billion. Payments will be made in cryptocurrency, which will then be available on the market for sale and exchange for fiat.

Of course, all of this does not add positivity, increasing the supply but not the demand. However, considering that the average trading volume of bitcoin exceeds $12 billion daily, the figures mentioned do not seem that apocalyptic. In our view, the main reason for the current sideways trend is a balance between positives and negatives. The positives are the applications to launch spot btc-ETFs from such giants as BlackRock, Invesco, Fidelity, and others. The negatives are the increasing regulatory pressure on the crypto market by the US Securities and Exchange Commission (SEC).

It should be noted that the SEC has previously rejected all applications for spot BTC-ETFs and is not currently eager to give them the green light. Therefore, the struggle for these funds could be drawn out over many months. For instance, a final decision on BlackRock's application is not expected until mid-Q3 2023 at the earliest, and no later than mid-March 2024, just a month before the next BTC halving. The halving could be the trigger for not only the subsequent, but also the preceding growth of BTC.

According to economists at Standard Chartered Bank, the price of bitcoin may exceed $50,000 this year, and it could reach $120,000 by the end of the next year. In the view of bank analyst Geoff Kendrick, as the price rises, miners will return to a strategy of accumulation. As already mentioned, they are currently selling everything they mine. However, when bitcoin is trading at $50,000, their sales will decrease from the current 900 coins to 180-270 per day. Such a decrease in supply should lead to further growth in the value of the asset. In general, everything is in line with Karl Marx's economic theory of supply and demand.

In addition to miners, institutional investors are also expected to show interest in accumulating bitcoins, in anticipation not only of the launch of spot BTC-ETFs and the halving, but also of a shift in the Federal Reserve's monetary policy and a weakening of the dollar. As Grayscale Investments CEO Michael Sonnenshein recently stated, it has become clear that the first cryptocurrency is no longer a "passing fad". "Recent news [...] underscores the resilience of this asset class in a broader sense, and many investors view [digital gold] as a unique investment opportunity."

Analyst and trader Michael Pizzino also believes that the dollar is ready to significantly depreciate. However, he does not consider an apocalyptic scenario of a collapse of the world's main currency, as the dynamics of its exchange rate are slower than those of other classes of financial assets. However, Pizzino predicts a steady downward trend in USD in the foreseeable period and a redistribution of funds in favor of digital assets. The macrographic chart suggests their upward trend, and given the correlation between USD and BTC, a fall in the former could contribute to an increase in the value of the latter, followed by growth in other significant crypto assets.

Robert Kiyosaki, author of the famous book "Rich Dad, Poor Dad", claims that by 2024, bitcoin will reach the $120,000 mark. The economist bases his forecast on the fact that BRICS countries (Brazil, Russia, India, China, and South Africa) will soon move to the gold standard and issue their own cryptocurrency backed by gold. This could undermine the dominance of the U.S. dollar in the world economy and cause its devaluation. He also warns that many traditional financial institutions may go bankrupt in the near future due to their imprudent decisions and corruption. In this regard, Kiyosaki recommends protecting your money from inflation by buying physical gold and bitcoin.

A similar figure, only not at the beginning, but by the end of 2024, was named by the head of research at the crypto-financial service Matrixport, Markus Thielen. He stated in an interview with CoinDesk that the quotes of the first cryptocurrency could overcome the $125,000 mark by the end of next year. "On June 22, bitcoin reached a new annual high. This signal historically indicated the end of bearish and the beginning of bullish markets," he explained.

According to Thielen, the price of bitcoin can soar by 123% over 12 months and by 310% over a year and a half. With such growth, the asset will rise to $65,539 and $125,731, respectively. The expert's forecast is based on the average profitability of similar signals in the past: in August 2012, December 2015, May 2019, and August 2020. (Thielen intentionally ignores the first case with growth of 5,285% over 18 months, calling it "epic" and "disproportionate".).

As for a more short-term forecast, Michael Van De Poppe, founder of venture company Eight, believes that bitcoin is preparing for a leap to $41,000. The popular analyst bases his opinion on the recent growth of the first cryptocurrency rate and Fibonacci levels. According to him, "the previous annual high for BTC was overcome in April. And now we are seeing increasingly higher highs as traders build up bullish momentum and positions." "To continue the uptrend, which we call a bull cycle, bitcoin needs to reach a new and clearer high," explains Michael Van De Poppe. "There are several points that allow determining the possibilities of further growth using Fibonacci levels. And now I would say that there is a rally to $41,000 ahead."

"There are two scenarios: a rise above the current maximum, followed by some consolidation and a rollback before a new growth. Or consolidation at current levels, and then accelerated growth in the coming months. For bitcoin, this is pretty standard behaviour. And then we will go to $41,000 or even $42,500," the analyst predicts.

As of writing this review on the evening of Friday, July 14, BTC/USD is trading around $30,180. The total market capitalization of the crypto market has slightly increased and stands at $1.198 trillion ($1.176 trillion a week ago). The Crypto Fear & Greed Index is in the Greed zone and stands at 60 points (55 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 July 10 - 14, 2023

EUR/USD: Much Depends on the CPI


The Dollar Index (DXY) steadily increased during the past week, leading up to Thursday, July 6. As a result, EUR/USD was more inclined towards the American currency, causing the pair to find a local bottom at the 1.0833 level. The dollar's strength was driven by the publication of the minutes from the Federal Open Market Committee's (FOMC) last meeting on June 14. In it, the Committee members highlighted the risks of inflationary pressure and expressed a commitment to swiftly achieve their target inflation levels of 2.0%. They also noted the appropriateness of at least one more interest rate hike, in addition to the one in July, which boosted confidence for DXY bulls. Recall that the head of the regulator, Jerome Powell, also stated at the end of June that the "vast majority of Federal Reserve leaders expect two or more rate hikes by the end of the year".

Everything seemed to be going well for the dollar. However, the statistics released throughout the week were quite mixed, stirring doubts regarding the unwavering hawkish policy of the regulator. On one hand, according to the ADP report, employment in the US private sector, with a forecast of 228K, actually grew by 497K in June, significantly higher than the 267K in May. On the other hand, the JOLTS job openings index stood at 9.82 million in May, down from 10.3 million the previous month and falling short of the expected 9.935 million. The US manufacturing PMI index, which has been falling for eight consecutive months, disappointed as well, reaching 46.0 in June – the lowest level since May 2020. Commenting on these figures, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, stated that "the health of the US manufacturing sector deteriorated sharply in June, and this is fuelling fears that the economy may slide into recession in the second half of the year".

These fears were further exacerbated by renewed trade tensions between the US and China. Against this backdrop, market participants are questioning whether the Fed will dare to make another interest rate hike after the July one? (The market has long taken into account the rate increase on July 27 from 5.25% to 5.50% in its quotations.) Or will the regulator announce the end of the current monetary tightening cycle? The latest batch of labour market data released on Friday, July 7, could help answer this question.

The figures turned out to be disappointing for DXY bulls. Non-Farm Payrolls (NFP), a key barometer of potential economic cooling in the United States, showed that the number of new jobs created outside the agricultural sector decreased to 209K in June. This figure is lower than both the May value of 306K and the forecast of 225K. As for the growth of average hourly wages, according to the report from the US Bureau of Labor Statistics, this indicator remained at the previous level: 4.4% YoY and 0.4% MoM. The only market expectation that was met was the unemployment rate, which decreased from 3.7% to 3.6% over the month.

Following the release of such data, dollar sellers returned to the market, and EUR/USD ended the work week at the 1.0968 level. As for the near-term prospects, at the time of writing this review on the evening of July 7, 35% of analysts forecast further growth for the pair, 45% anticipate a decline, and the remaining 20% took a neutral stance. Among the oscillators on D1, 80% favour the bulls, 20% the bears, and all trend indicators are leaning towards bullish. The nearest support for the pair is located around 1.0895-1.0925, followed by 1.0835-1.0865, 1.0790-1.0800, 1.0740, 1.0670, and finally, the May 31st low of 1.0635. The bulls will meet resistance in the 1.0975-1.0985 area, followed by 1.1010, 1.1045, 1.1090-1.1110.

The upcoming week brings a whole package of US consumer inflation data that could have the most significant impact on the Federal Reserve's future monetary policy. The Consumer Price Index (CPI) values, including the core, will be published on Wednesday, July 12. The next day, on Thursday, July 13, we'll get information on key indicators such as the number of initial jobless claims and the US Producer Price Index (PPI). On Friday, as a 'cherry on top', we'll be presented with the University of Michigan's Consumer Confidence Index. As for important European statistics, the German Consumer Price Index (CPI) will be published on Tuesday.

GBP/USD: Prospects for a Bullish Trend

In the past week, the pound clearly became the beneficiary in GBP/USD. As of June 29, the British currency was trading at the 1.2600 level, and by July 7, it had already reached a high of 1.2848.

The pound was buoyed by weak manufacturing activity and labor market data in the US, and doubts about the continuation of the Fed's hawkish stance. It was also helped by the fact that the UK Manufacturing Purchasing Managers' Index (PMI) came in at 46.5 in June, which, although lower than the previous figure of 47.1, was above the market expectation of 46.2. Against this backdrop, the likelihood of further active tightening of monetary policy by the Bank of England (BoE) is practically beyond doubt. Following its meetings in May and June, the BoE raised interest rates by 25 basis points and 50 basis points to 5.00%. Many analysts believe that the regulator could push it up to 5.50% in the next two meetings, and then even up to 6.25%, despite the threat of an economic recession. In such a situation, the British currency has a significant advantage. For example, at Credit Suisse, they believe that GBP/USD still has potential to grow to 1.3000.

The pair ended the past week at the 1.2838 level. "The trend momentum remains confidently bullish across short-term, medium-term, and long-term oscillators, suggesting that the push to 1.2850 (and beyond) is still in play," Scotiabank economists write. In theory, with the current volatility, GBP/USD could cover the remaining distance to 1.3000 in just a few weeks or even days. However, at this point, only 25% of experts support this scenario. The opposite position was taken by 45%, and neutrality was maintained by 30%.

As for technical analysis, 90% of the oscillators on D1 point to the north (a quarter are in the overbought zone), and 10% are looking to the east. 100% of the trend indicators recommend buying. In case of the pair's movement to the south, it will find support levels and zones at 1.2755, 1.2680-1.2700, 1.2590-1.2625, 1.2480-1.2510, 1.2330-1.2350, 1.2275, 1.2200-1.2210. In case of the pair's growth, it will meet resistance at the levels of 1.2850, 1.2940, 1.3000, 1.3050 and 1.3185-1.321.

Notable events for the upcoming week include a speech by Bank of England Governor Andrew Bailey on Monday, July 10, and the release of the UK's labour market data on Tuesday, July 11.

USD/JPY: The Pair's Interrupted Flight and Triumph of the Bears

What experts had long been waiting for has finally happened: USD/JPY interrupted its "moon flight" and switched to an emergency decline. More precisely, it was not just a decline, but a real crash. The reason for it, of course, was weak macroeconomic data from the U.S. since nothing has changed on the side of Japan. The policy of the Bank of Japan (BoJ) remains unchanged. The Deputy Governor of the Central Bank, Shinichi Uchida, has recently once again ruled out the possibility of an early end to ultra-soft monetary policy and exit from negative interest rates.

The monetary policy carried out by the Government and the Central Bank of Japan over the past few years clearly indicates that the yen rate, and even inflation, are not their top priority, even though the CPI has accelerated to 3.1% YoY. The main thing is the economic indicators, and it seems that everything is fine here. The Tankan Index of Large Manufacturers published on Monday, July 3, showed an impressive increase from 1 to 5 (with a forecast of 3), indicating an improvement in the business climate in the country.

USD/JPY traded at 145.06 on June 30, and the minimum on July 7 was recorded at 142.06. Thus, in just a week, the yen managed to win back a full 300 points from the dollar. The reason for such a triumph of the bears is the oversold Japanese currency. As strategists of the French financial conglomerate Societe Generale point out, the yen hasn't been this cheap since the 1970s. "Large pricing errors can last longer than we are used to thinking," they write, "but this one is extraordinary, and as soon as rates start to convert again, the yen will undoubtedly start a rally." Analysing the pair's prospects, Societe Generale expects that the yield on 5-year U.S. bonds will drop to 2.66% in a year, allowing USD/JPY to break below 130. If the yield on Japanese government bonds (JGB) remains at the current level, the pair has a chance to even drop to 125.00.

We noted in the last review that Danske Bank economists predict a USD/JPY rate below 130.00 on the horizon of 6-12 months. Strategists at BNP Paribas make a similar forecast - they target the level of 130.00 by the end of this year and 123.00 by the end of 2024. The Wells Fargo prediction looks modest - its experts believe that by the end of 2024, the pair will only drop to 133.00.

The past week saw USD/JPY end at 142.10. At the time of writing this review, 60% of analysts believe that the southward movement is just a short-term correction, and that the pair will return to growth in the coming days. The remaining 40% voted for its further fall. The indications of indicators on D1 are quite diverse. Among oscillators, 25% are coloured green, 15% are neutral grey, and 60% are red (with a quarter signalling the pair's oversold). Among trend indicators, the balance of power between green and red is 50% to 50%. The nearest support level is in the zone of 1.4140-141.60, followed by 140.45-140.60, 1.3875-1.3905, 137.50, 135.90-137.05. The nearest resistance is 145.00-145.30, then the bulls will need to overcome obstacles at the levels, 146.85-147.15, 148.85, and from there it is not far to the October 2022 peak of 151.95.

No significant economic information related to the Japanese economy is expected to be released in the upcoming week.

CRYPTOCURRENCIES: Three Growth Triggers - The Federal Reserve, Halving, and Women

The beginning of the summer turned out to be quite hot for the crypto industry. On the one hand, regulators continued to tighten their grip on the sector. On the other, we are witnessing a surge in institutional interest. First and foremost, it is applications for the launch of spot bitcoin ETFs from such giants as BlackRock, Invesco, Fidelity, and others.

Regarding regulatory pressure, debates have been going on for over a year. Some warmly welcome this process, while others protest. The former argue that this will cleanse the industry of unscrupulous participants and attract billions, if not trillions, of institutional dollars to the crypto market. The latter claim that the intervention of the same US Securities and Exchange Commission (SEC) completely breaks the main principle of cryptocurrencies - independence from states and governments. "Law enforcement regulation is killing our economy," wrote Tim Draper, co-founder of venture capital firm Draper Fisher Jurvetson, on June 20. "I think we have a real problem because the SEC is sowing fear... This compulsory regulation doesn't make sense.".

Note that the SEC has previously rejected all applications to create spot ETFs on bitcoin. This time around, the Commission stated that the fresh applications are not clear and comprehensive enough. However, companies are not retreating and have already submitted edited versions. "Approval of applications for a spot ETF on bitcoin will let investors know that the first cryptocurrency is a legitimate asset," explains MicroStrategy co-founder Michael Saylor. "If the SEC approves applications for this asset, a user can press a button and buy bitcoin for $10 million in 30 seconds." "This is an important milestone on the path to institutional acceptance. I think it's important, although I don't think bitcoin will grow to $5 million overnight," the billionaire concluded. However, in the medium term, according to Hugh Hendry, manager of hedge fund Eclectica Asset Management, bitcoin could triple its capitalization.

By the way, the aforementioned Tim Draper previously predicted that the price of bitcoin would reach $250,000 by the end of 2022. When his forecast did not come true, he extended the timing of its realization by another six months until mid-2023. Now Draper has adjusted his forecast again - according to him, the main cryptocurrency will reach the stated goal with a 100% probability by the end of June 2025. Moreover, one of the drivers of growth will be the acceptance of bitcoin by women.

Housewives paying for purchases with bitcoin can undoubtedly become a serious factor. However, more "conservative" analysts prefer to point to two others: 1) the easing of the Federal Reserve's monetary policy and 2) the upcoming bitcoin halving in April 2024. In anticipation of these two events, crypto exchanges are noting a decrease in supply, and long-term holders have accumulated a record number of coins in their wallets: 13.4 million bitcoins.

Regarding point 1. At its June meeting, the Federal Reserve decided to take a pause and left the key interest rate unchanged. However, the possibility of one or two more hikes of 25 b.p. each is not ruled out. After this, the cycle of monetary tightening may be completed, and at the end of 2023 - the beginning of 2024 markets expect a reversal and the start of a decrease in the rate. This should positively affect investors' risk appetite and facilitate the inflow of capital, including into digital assets.

Point 2. Halving. This event also usually has a positive effect on bitcoin quotes. A correlation between the halvings that occur every four years and the dynamics of the coin's value has long been noted. Analyst Root presented an interesting radial diagram on this topic. Making a circle in four years, the price forms the cycle's peaks and troughs in the same sectors. And, according to this diagram, after finding the bottom in 2023, bitcoin should move towards a price of $1 million per coin, which it will reach in 2026.

As for the near future, CoinDesk researchers believe that market participants should now be doubly cautious when trading cryptocurrency. The fact is that since the IV quarter of 2022, fiat liquidity indicators worldwide are rapidly declining, and the growth of BTC quotes in such conditions is an anomaly. The BTC rate reached a local price bottom at the $15,500 mark last November and since then has doubled to $31,000. Moreover, since June 15 alone, the price has jumped by more than 20%.

According to Decentral Park Capital's portfolio manager Lewis Harland, the situation remains complicated. He confirmed that recently tracked fiat indicators, such as the net liquidity of the Fed and the global level of net liquidity, have fallen sharply. "This is the main reason why we are cautious about BTC, despite the optimistic market consensus. We think investors are overlooking this," added Harland. (The global net liquidity indicator, which accounts for fiat supply in several major countries, has dropped to $26.5 trillion - the lowest level since November 2022. These data were provided by TradingView and Decentral Park Capital).

Anomalous, in the opinion of several specialists, is also the drop in correlation between physical and digital gold. While the price of bitcoin shows explosive growth, the value of gold is gradually decreasing. Fred Thiel, CEO of Marathon Digital, a mining company, suggested that this not only indicates a change in priorities in favour of digital assets but also demonstrates that bitcoin is becoming more accessible to a wider range of investors.

Euro Pacific Capital President Peter Schiff disagrees with these theses. According to this ardent gold supporter, most investors don't actually believe in bitcoin, but are only hoping that someone will buy it from them at a higher price. "The rapid fall in the price of the first cryptocurrency is just a matter of time. The peak we saw in 2021, around $70,000, is it. And ultimately bitcoin will explode," said Schiff, adding that stories about people losing money on cryptocurrency will eclipse stories about people getting rich on it.

According to renowned analyst Benjamin Cowen, the decline in fiat liquidity will primarily negatively impact not bitcoin, but altcoins. "Liquidity is drying up, so people see relative safety in bitcoin compared to the altcoin market," the specialist believes. "But that doesn't mean bitcoin can't fall; it just means it's a little safer."

According to Cowen's forecast, bitcoin could rise about 14% compared to current levels and reach a maximum of $35,000 in 2023. "In the short term, it's really hard to say if bitcoin can rise a little again. For myself, I set a target of $35,000," the analyst said.

The crypto trader known as Altcoin Sherpa is confident that the main cryptocurrency can first rise to $32,000 and then to a new 2023 high of $40,000. However, he's not so sure about the $40,000 mark. After that, there should be a significant correction downwards.

According to technical analysis, the BTC/USD cryptocurrency pair may be forming a new "bullish flag" pattern on the chart. This opinion was expressed by experts from Fairlead Strategies. They stated, "Bitcoin is digesting its gains during the consolidation phase. A potential new bullish flag is forming, which would occur with a breakthrough above the weekly Ichimoku cloud around $31,900."

The experts explained that this pattern consists of a pole and a flag. The pole represents the initial price rally, while the flag represents subsequent consolidation caused by "temporary exhaustion of bullish sentiment" and a lack of strong selling pressure. According to the theory of technical analysis, once the asset breaks above the flag's boundary price, it tends to rise by a distance approximately equal to the length of the pole.

In the case of bitcoin, the upward movement from the low on June 15, 2023, at $24,790 to the high on June 23 at $31,388 represents the pole, and the subsequent consolidation formed the flag. According to analysts, a potential breakthrough for BTC would allow the cryptocurrency's price to reach the next key resistance level at $35,900.

According to crypto strategist and trader Bluntz, who accurately identified the bottom of the bear market for bitcoin in 2018, he has now provided a forecast regarding ethereum. He believes that the leading altcoin is showing all the signs of a powerful rally that could take place in the coming months. According to the crypto strategist, the remaining part of 2023 could set ethereum up for parabolic growth, surpassing bitcoin significantly.

Bluntz is considered an experienced practitioner of technical analysis, particularly Elliott Wave Theory, which allows for price behaviour forecasting based on crowd psychology, often manifesting in waves. According to this theory, a bullish asset exhibits a five-wave rally, with the third wave signalling the steepest ascent. Bluntz suggests that ethereum is already in the early stages of the third wave surge, which could lead to ETH approaching $4,000 before the end of 2023.

In contrast, Altcoin Sherpa made an opposing forecast. Looking at ETH/BTC, he noted that ethereum is likely to decline in relation to the flagship cryptocurrency and aim for the lower end of the range around 0.053 BTC, or $1,614.

As of the time of writing the review, Friday evening, July 7, BTC/USD is trading around $30,200, and ETH/USD is in the range of $1,860. The overall cryptocurrency market capitalization has decreased and stands at $1.176 trillion ($1.191 trillion a week ago). The Crypto Fear & Greed Index remains on the border between the Greed and Neutral zones, currently at 55 points (56 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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June Results: Gold and Pound Remain in NordFX Top 3

The brokerage company NordFX has summarized the trading performance of its clients for June 2023. Additionally, the social trading services, CopyTrading and PAMM, were evaluated, along with the profits generated by the company's IB partners.

- The trader from South Asia, with account No.1658XXX, emerged as the leader for the month, achieving a profit of 66,634 USD. This impressive performance was accomplished through transactions involving gold (XAU/USD), British pound (GBP/USD), and euro (EUR/USD)
- A representative from Western Asia secured the second place, with account No.1692XXX and a result of 36,544 USD. This individual utilized identical trading instruments: gold, the British pound, and the euro. In all pairs, the US dollar also served as the quoted currency.
- Securing the third spot on the podium was another trader from Western Asia, with account No.1553XXX. This trader earned a total of 30,904 USD in June, primarily from trades involving the same instruments, gold and the British pound.

The situation unfolded as follows in NordFX passive investment services:

In CopyTrading, we continue to track the fate of the veteran signal KennyFXPRO - Prismo 2K. For over seven months, it has been recovering from the shock of November 14, 2022 (when its drawdown exceeded 67%). However, the signal experienced a new shock between June 20-23, and to prevent the account from being wiped out, the signal author decided to close the loss-making positions. As a result, the profit returned to the November 2022 level and currently stands at 221% over 788 days of operation.

Another signal, Trade2win, received a fantastic profit of 5,343% in the spring with an equally fantastic drawdown of less than 15%. However, as we warned in our previous review of this signal, trading in financial markets is risky and past results do not guarantee their repetition in the future. This is exactly what happened with Trade2win: no transactions were made based on this signal in June, and all indicators remained at May's level.

From the startups, the signal SM04 caught our attention this time. In its 53 days of existence, it has generated almost 80% profit with a relatively moderate drawdown of about 22%.

On the PAMM service showcase, there remain two accounts that we have mentioned repeatedly in previous reviews. These are KennyFXPRO-The Multi 3000 EA and TranquilityFX-The Genesis v3. On November 14, 2022, similar to their colleague from CopyTrading, they suffered significant losses: their drawdown approached 43%. However, the PAMM managers decided not to give up, and as of June 30, 2023, the profit on the first of these accounts exceeded 103%, and on the second, 68%. The growth over the last month was insignificant, but both of these accounts managed to avoid the shock that KennyFXPRO - Prismo 2K experienced in June.

Additionally, we continue to monitor the Trade and earn account. It was opened over a year ago but was in a state of hibernation, awakening only in November. As a result, over the past 8 months, the return on it has reached 145% with a very small drawdown of less than 10%.

Among NordFX's IB partners, the top three stand as follows:
- For the second consecutive month, the top spot is held by a partner from Western Asia, with account No.1645XXX. While in May he was awarded a commission of 10,370 USD, it amounted to 10,005 USD in June.
- In second place is a partner from South Asia, with account No.1597XXX, who received a commission of 6,142 USD.
- And rounding out the top three is a partner from Eastern Asia, with account No.1169XXX, who earned 5,436 USD in June.
 

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 July 03 - 06, 2023

EUR/USD: When Will the Pair Return to 1.1000?

Summarizing the second half of June, the result in the EUR and USD confrontation can be said to be neutral. On Friday, June 30, EUR/USD ended up where it traded on both the 15th and 23rd of June.

On Thursday, June 29, some quite strong macroeconomic data came out of the US. The Bureau of Economic Analysis revised its GDP figures for the first quarter upwards to 2.0% year on year (YoY) (forecast was 1.3%). As for the labour market, the number of initial jobless claims for the week dropped by almost 30K, reaching the lowest level since the end of May - 239K.

Recall that the Federal Open Market Committee (FOMC) of the US Federal Reserve decided at its June 14 meeting to take a pause in the process of monetary tightening and left the interest rate unchanged at 5.25%. After this, market participants were left to speculate on the regulator's next moves. The released data reinforced confidence in the stability of the country's economy and raised expectations for further dollar interest rate hikes. According to the CME FedWatch Tool, the probability of a rate hike of 25 basis points (bps) at the Fed's July meeting rose to 87%, and the probability that the total rate hike by the end of 2023 will be 50 bps is nearing 40%. As a result, in the middle of Friday, June 30, EUR/USD recorded a local low at 1.0835.

Speaking at an economic forum in Sintra (Portugal) on Wednesday, June 28, Federal Reserve Chairman Jerome Powell stated that further interest rate increases would be driven by a strong labour market and persistently high inflation. However, the core personal consumption expenditures (PCE) data published on June 30 indicated that inflation, although slowly, is declining. Forecasts suggested that the PCE index for June would remain at the previous level of 4.7%, but in reality, it fell to 4.6%. This somewhat dampened the bullish sentiment on the dollar, with the DXY index heading lower and EUR/USD returning to the central zone of the two-week sideways corridor, ending the five-day period at 1.0910.

As for the state of the economy on the other side of the Atlantic, following high preliminary inflation data from Spain and Germany, markets expected the Harmonised Index of Consumer Prices (HICP) in the Eurozone to rise by 0.7% in June, significantly exceeding the 0.2% a month earlier. However, the actual value, although higher than in May, was only slightly so, at 0.3%. Moreover, the preliminary Consumer Price Index (CPI) published on Friday, June 30th, showed a decrease in Eurozone inflation from 6.1% to 5.5% YoY (forecast was 5.6%).

Recall that after hawkish statements from ECB leaders made in mid-June, the markets had already priced in two euro rate hikes, in July and September, each by 25 basis points. Therefore, the fresh European inflation data had little effect on investor sentiment.

Friday, June 30, marked not only the end of the quarter but also the first half of the year. In this regard, representatives from several banks decided to make predictions for the second half of 2023 and the start of 2024. Economists at Credit Agricole see risks of a decrease in EUR/USD from current levels in the near term and predict its gradual recovery starting from Q4 2023. In their opinion, over the next 6-12 months, the pair could rise to 1.1100.

Strategists at Wells Fargo expect the dollar to be fairly stable or even slightly stronger for the rest of 2023. However, they predict a noticeable weakening over the course of the following year. "Given our expectations for a later and shallow recession in the U.S. and a later easing of Fed policy," Wells Fargo analysts write, "we anticipate a later and more gradual depreciation of the U.S. dollar. [...] We predict that by the end of 2023, the trade-weighted U.S. dollar rate will change little compared to the current level, and by 2024 it will have declined by 4.5%."

Economists at Goldman Sachs also updated their EUR/USD forecasts. They too now indicate a smaller drop in the coming months and a more prolonged recovery of the euro by the end of 2023 and the first half of 2024. They predict the pair rate to be at 1.0700 in three months, 1.1000 in six months, and 1.1200 in twelve months.

As for the near-term prospects, at the time of writing this review on the evening of June 30, 50% of analysts voted for the pair's decline, 25% for its rise, and the remaining 25% took a neutral position. Among oscillators on D1, 35% are on the side of the bulls (green), 25% are on the side of the bears (red), and 40% are painted in neutral grey. Among the trend indicators, 90% are coloured green, and only 10% are red. The nearest support for the pair is located around 1.0895-1.0900, followed by 1.0865, 1.0790-1.0815, 1.0745, 1.0670 and, finally, the May 31 low of 1.0635. The bulls will encounter resistance in the area of 1.0925-1.0940, followed by 1.0985, 1.1010, 1.1045, 1.1090-1.1110.

Upcoming events to note include the release of the Manufacturing Purchasing Managers' Index (PMI) for Germany and the US on Monday, July 3. The minutes from the latest FOMC meeting will be published on Wednesday, July 5. The following day, on Thursday, July 6, data on retail sales volumes in the Eurozone will be available. On the same day, the ADP employment report and the PMI for the US service sector will also be published.

Closing out the work week, another batch of data from the US labour market will be released on Friday, July 7, including the unemployment rate and the important nonfarm payroll (NFP) figure. ECB President Christine Lagarde will also deliver a speech on the same day.

Furthermore, traders should be aware that Tuesday, July 4 is a public holiday in the US, as the country observes Independence Day. As a result, the markets will close earlier the day before due to the holiday.

GBP/USD: How Mr. Powell "Defeated" Mr. Bailey

In the previous review, we noted how strongly the words of officials affect quotes. This week was another confirmation of this. On Wednesday, June 28, GBP/USD showed an impressive drop. The cause were the speeches of the Federal Reserve Chair Jerome Powell and Bank of England's Governor Andrew Bailey in Sintra. Mr. Bailey promised that his Central Bank would "do whatever it takes to get inflation to target level". This implies at least two more rate hikes. However, Mr. Powell did not rule out further tightening of the Fed's monetary policy, even though inflation in the US is much lower than in the United Kingdom. As a result of these two speeches, Jerome Powell and the US currency won, and GBP/USD dropped sharply.

The next day, strong US macro statistics added strength to the dollar. If it were not for the data on the Personal Consumption Expenditures (PCE) in the US published at the end of the week, the pound would have suffered quite a bit. But thanks to the PCE, in just a few hours it managed to recover almost all the losses and put the final chord at the mark of 1.2696.

In the mentioned speech in Sintra, Andrew Bailey also stated that "the UK economy has proven much more resilient" than the Central Bank expected. We would like to believe the head of the BoE. However, the data published by the Office for National Statistics (ONS) on June 30 raise certain concerns. Thus, the country's GDP grew in Q1 2023 by 0.1% in quarterly terms and 0.2% in annual terms. And if the first indicator remained at the previous level, then the second showed a significant decline: it turned out to be 0.5% lower than the data for Q4 2022.

According to Credit Suisse economists, the situation facing the Bank of England should be defined as genuinely exceptional. But the slowdown in British GDP does not seem to worry the BoE leadership too much, which is focused on combating high inflation.

Following the May and June meetings, the BoE raised the interest rate by 25 basis points and 50 basis points to 5.00%. Many analysts believe that the regulator may bring it up to 5.50% already at the two upcoming meetings, and then to 6.25%, despite the threat of economic recession. Such steps in the foreseeable future will support the pound. At Credit Suisse, for example, they believe that even though the pound has significantly strengthened since September 2022, GBP/USD still has the potential to grow to 1.3000.

From a technical analysis perspective, the indications of oscillators on D1 appear quite uncertain - a third point to the north, a third to the south, and a third to the east. The picture is clearer for trend indicators - 90% recommend buying, 10% selling. If the pair moves south, it will encounter support levels and zones at 1.2625, 1.2570, 1.2480-1.2510, 1.2330-1.2350, 1.2275, 1.2200-1.2210. In case of the pair's rise, it will meet resistance at levels of 1.2755, 1.2800-1.2815, 1.2850, 1.2940, 1.3000, 1.3050, and 1.3185-1.3210.

As for the events of the coming week, the focus will be on the publication of the PMI in the UK manufacturing sector on Monday, July 3. On Tuesday, July 4, the Bank of England's report will be published, which may shed light on the future course of monetary policy. And at the end of the week, on Friday, July 7, the data on the US labour market, including the level of unemployment and such an important indicator as the number of new jobs outside the agricultural sector (NFP), will be released.

In the events for the upcoming week, one can note Monday, July 3, when the Manufacturing Purchasing Managers' Index (PMI) for the United Kingdom will be published.

USD/JPY: The "Ticket to the Moon" Turned Out to be Multi-Use


As soon as we mentioned the potential interventions to support the yen in our last review, almost everyone started discussing this topic, including analysts and even officials from the Japanese Government. Of course, our speculations were not the trigger; it was the exchange rate of the Japanese currency. Last week, USD/JPY continued its "flight to the moon," setting another record at the height of 145.06. Interestingly, it was at the 145.00 mark that the Bank of Japan (BoJ) conducted its first intervention in many years.

It has been said a thousand times that increasing divergence in monetary policy between the Bank of Japan and other major central banks is a recipe for further yen weakening. Thus, last week, following the release of US GDP and unemployment claims data, the yield on 10-year US treasury bonds jumped to 3.84%, and two-year bonds to 4.88%, the highest level since March. Therefore, the spread between US and Japanese bonds continues to widen, reflecting the growing divergence in the monetary policy of the Fed and the BoJ and pushing USD/JPY to astronomical heights. Understandably, in such a situation, the question arose about the ability of the Japanese regulator to artificially support its national currency.

Hirokazu Matsuno, the Chief Cabinet Secretary of Japan, stated on Friday, June 30 that the authorities are "closely monitoring currency movements with a high sense of urgency and immediacy." "It's important that the exchange rate moves steadily, reflecting fundamental economic indicators. Recently, sharp unilateral movements have been observed. [We] will take appropriate measures in response to excessive currency movements," promised the high-ranking official.

However, several experts doubt that the Japanese Government and Central Bank have the strength and capability not just to strengthen the yen once, but to maintain it in such a state over an extended period of time. It's enough to recall that less than eight months have passed since the last intervention in November 2023, and here again, USD/JPY is storming the height of 145.00. Since all currency reserves are finite, say Commerzbank specialists, solving this problem will be infinitely difficult, and "all that remains is to hope that officials from the [finance] ministry realize this and do not overestimate their capabilities.".

The monetary policy pursued by the Japanese Government and Central Bank in recent years clearly indicates that their focus is not solely on the yen exchange rate, but on economic indicators. However, it is important to note that one of these indicators is inflation. In this regard, we have seen an acceleration in the Consumer Price Index (CPI) to 3.1% YoY, compared to 3.0% the previous month and 2.7% in February. While these values are significantly lower than those observed in the US, Eurozone, or the UK, no one can guarantee that inflation will not continue to rise further. If the BoJ does not intend to tighten its ultra-easy policy and raise interest rates, the only tool left to maintain the exchange rate is currency interventions. The only remaining question is when they will begin – now or when the rate reaches 150.00, as it did in the autumn of 2022.

Many experts still hold hope that the Bank of Japan will eventually decide to tighten its policy. These hopes allow economists at Danske Bank to forecast a USD/JPY rate below 130.00 within a 6–12-month horizon. Similar predictions are made by strategists at BNP Paribas, who target 130.00 by the end of this year and 123.00 by the end of 2024. However, Wells Fargo's forecast appears more modest, with their specialists expecting the pair to only decrease to 133.00 by the end of 2024. Nonetheless, reaching that level would still be considered a significant achievement for the Japanese currency, as it concluded the past week at 144.29 after the publication of US PCE data.

At the time of writing the review, 60% of analysts, like a week ago, anticipate that the yen will recoup at least some of its losses and push the pair to the south, while the remaining 40% of experts point to the east. However, there are no supporters of the pair's growth this time. It is worth noting that there were only a minimal number of supporters the previous week, with only 10%. Nevertheless, USD/JPY continues its journey to the stars. Ultimately, while experts ponder, the market decides. Regarding this matter, there are no doubts from either trend indicators or oscillators: all 100% on D1 point upwards. However, a quarter of the oscillators actively signal overbought conditions for the pair.

The nearest support level is located in the 143.74 zone, followed by 142.95-143.20, 142.20, 141.40, then 140.90-141.00, 140.60, 138.75-139.05, 138.30, and 137.50. The closest resistance is at 144.55, and then bulls will need to overcome barriers at 145.00-145.30, 146.85-147.15, and 148.85, before reaching the October 2022 high of 151.95.

No significant economic information related to the Japanese economy is expected to be released in the upcoming week. However, unless the Bank of Japan announces currency interventions, which they do not typically preannounce.

CRYPTOCURRENCIES: Institutional Bitcoin Frenzy Gains Momentum

What has been talked about and dreamed of for so long seems to be happening: global financial giants are finally believing in the bright future of Bitcoin. Back in 2021, Matt Hougan, Chief Investment Officer at Bitwise, mentioned that futures-based cryptocurrency ETFs were not suitable for long-term investors due to high associated costs. He stated that once spot-based bitcoin exchange-traded funds (ETFs) emerged, institutional investors would start pouring significant investments. Recently, in an interview with Bloomberg, Hougan announced the dawn of a new era, saying, "Now we have BlackRock raising the flag and stating that BTC has value, that it's an asset in which institutional investors want to invest. I believe we are entering a new era of cryptocurrencies, which I call the 'mainstream era,' and I expect a multi-year bull trend that is just beginning.".

A spot BTC ETF is a fund whose shares are traded on an exchange and track the market or spot price of BTC. The main idea behind such ETFs is to provide institutional investors with access to bitcoin trading without physically owning it, through a regulated and financially familiar product.

Currently, eight major financial institutions have submitted applications to the U.S. Securities and Exchange Commission (SEC) to enter the cryptocurrency market through spot-based ETFs. Alongside investment giant BlackRock, these include global asset managers such as Invesco and Fidelity. Global banks such as JPMorgan, Morgan Stanley, Goldman Sachs, Bank of New York Mellon, Bank of America, Deutsche Bank, HSBC, and Credit Agricole have also joined the bitcoin fever.

It is worth noting that the SEC has previously rejected all similar applications. However, the current situation may be different. SEC Chairman Gary Gensler has confirmed that the SEC considers bitcoin a commodity, opening up broad prospects for the leading cryptocurrency. Cameron Winklevoss, one of the founders of the cryptocurrency exchange Gemini, has confirmed that institutional investors are ready to start buying BTC, expecting the approval of spot-based BTC funds. "Bitcoin was the obvious and most profitable investment of the past decade. But it will remain the same in this decade," said Winklevoss. This sentiment is shared by Hugh Hendry, the manager of Eclectica Asset Management hedge fund, who believes that BTC could triple its market capitalization in the medium term.

When it comes to altcoins, the situation is somewhat more challenging. Max Keiser, a popular bitcoin maximalist and now an advisor to the President of El Salvador, believes that Gary Gensler has enough technical and political tools at his disposal to classify XRP and ETH as securities, which would ultimately kill these altcoins. "The Securities and Exchange Commission is working for the banking cartel, engaging in racketeering in the interest of financial structures," Keiser wrote in his blog.

It is worth noting that the SEC has filed lawsuits against Binance and Coinbase, accusing the platforms of selling unregistered securities. In the court documents, the Commission identified Solana (SOL), Cardano (ADA), Polygon (MATIC), Coti (COTI), Algorand (ALGO), Filecoin (FIL), Cosmos (ATOM), Sandbox (SAND), Axie Infinity (AXS), and Decentraland (MANA) as securities. Several cryptocurrency platforms have already taken this SEC statement as guidance and, to avoid potential claims, have delisted these altcoins.

The statements above indicate that bitcoin is likely to maintain its market leadership in the foreseeable future. Mark Yusko, the founder and CEO of Morgan Creek Capital, believes that the bullish trend of BTC could continue until the next halving, which is expected to occur in April 2024. "I think the rally is just beginning. We have just entered what is known as the crypto summer season," wrote the expert. However, he cautioned that after the speculative surge caused by the halving, there is typically an excessive reaction in the opposite direction, known as crypto winter.

According to an analyst known as InvestAnswers, in addition to the upcoming halving, the institutional adoption that has begun will help drive the growth of BTC by increasing demand for the asset and reducing its supply. The aforementioned investment giants collectively manage trillions of dollars in assets, while the market capitalization of Bitcoin is just over $0.5 trillion. Only a tiny fraction of this $0.5 trillion is actively traded on the market.

Peter Schiff, the president of Euro Pacific Capital and a staunch critic of Bitcoin, holds the opposite view. He believes that there is "nothing more low-quality than cryptocurrencies." "Until recently, the rally in highly speculative assets excluded bitcoin. Now that it has finally joined the party, it is likely to end soon," he stated. According to Schiff, such rallies typically come to an end when "the lowest-quality things" eventually join them, referring to digital assets.

Looking at the BTC/USD chart, there is a suspicion that Peter Schiff might be right. After soaring on the news of BlackRock's and other institutional players' interest, the pair has been trading sideways within a narrow range of $28,850 to $31,000 for the past week. According to analysts, besides concerns about SEC actions, bitcoin and the cryptocurrency market are currently being weighed down by miners. Breaking the $30,000 barrier prompted them to send a record volume of coins to exchanges ($128 million in just the past week). Crypto miners fear a price reversal from a significant level due to increased regulatory scrutiny in the industry. Additionally, the average cost of mining remains higher than the current prices of digital assets due to the doubling of computational difficulty over the past year and a half. As a result, miners are forced to sell their coin holdings to sustain production activities, cover ongoing expenses, and repay debts.

As of the time of writing the review, on Friday evening, June 30, BTC/USD is trading around $30,420. The total market capitalization of the crypto market has slightly decreased to $1.191 trillion ($1.196 trillion a week ago). The Crypto Fear & Greed Index is on the border between the Greed and Neutral zones, dropping from 65 to 56 points over the week.

New catalysts are needed for further upward movement. One of them could be the expiration of futures contracts for ethereum and bitcoin on Friday, June 30. According to AmberDate, over 150,000 BTC options with a total value of around $4.57 billion were settled on the Deribit Exchange. Additionally, $2.3 billion worth of contracts were settled for ETH. According to experts from CoinGape, this could trigger significant volatility in July and provide strong support for these assets. However, much will also depend on the macroeconomic data coming out of the United States.

As of the evening of June 30, ETH/USD is trading around $1,920. Several analysts believe that ethereum still has the potential for further bullish momentum. Popular expert Ali Martinez points out that ETH may encounter significant resistance near the $2,000-2,060 range, as over 832,000 addresses previously opened sales in this range. However, if ethereum surpasses this zone, it has a good chance of experiencing a sharp impulse towards $2,330. Furthermore, there is potential for further growth towards $2,750 in the long term.

And finally, a bit of history. Ten years ago, Davinci Jeremie posted a YouTube video strongly recommending his viewers to spend at least one dollar to purchase bitcoin and explained why BTC would grow in the coming years. At that time, Jeremy's forecast angered or amused most people who did not want to listen to his recommendation. However, they now deeply regret it as they could have acquired over 1,000 BTC for the $1 they would have invested, which is worth $30 million today.

In a recent interview, Jeremy emphasized that it is still worthwhile to buy bitcoin. According to him, only 2 percent of the world's population owns cryptocurrency, so it still has the potential to delight its investors with new records. "However, there is also one problem," says Jeremy. "Everyone wants to own a whole bitcoin. No one wants to go to a store and say, 'Can I get one trillionth of an apple?' So, although bitcoin is divisible, this property is essentially its Achilles' heel. The solution to this problem is to make the display of small fractions of BTC more user-friendly and understandable. For example, instead of writing amounts like 0.00001 BTC, they could be replaced by the equivalent amount of satoshis, which is the smallest indivisible unit of one Bitcoin valued at 0.00000001 BTC."
 

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 June 26 - 30, 2023

EUR/USD: Officials' Words Drive the Markets

Just a reminder, the Federal Open Market Committee (FOMC) of the US Federal Reserve decided on Wednesday, June 14 to pause the process of monetary tightening and left the interest rate unchanged at 5.25%. The following day, on Thursday, June 15, the European Central Bank (ECB) raised the euro interest rate by 25 basis points from 3.75% to 4.00%. ECB President Christine Lagarde noted that the tightening of credit and monetary policy would continue in July.

The firm rhetoric was supported by other ECB representatives. According to comments from ECB Governing Council member Olli Rehn, the underlying inflation in the Eurozone is declining too slowly, necessitating additional efforts from the regulator to stabilize prices. The intentions of the regulator to continue raising rates were also confirmed by ECB Chief Economist Philip Lane and ECB Governing Council member Isabel Schnabel. In their view, the regulator has significant work to do before inflation stabilizes around 2%. (According to the latest data, annual inflation in the Eurozone remained at 6.1%, and the Core Consumer Price Index stood at 5.3%).

Against the backdrop of these hawkish statements from European officials, the markets concluded that at least two more rate hikes should be expected for the euro, in July and September, each by 25 basis points. This continued to push the euro currency higher, and EUR/USD reached a peak at 1.1011 on Thursday, June 22.

However, the financial world doesn't revolve solely around the ECB. On June 21 and 22, market participants' attention was focused on Federal Reserve Chairman Jerome Powell's semi-annual testimony before the U.S. Congress. While the overall rhetoric was nearly identical to the press conference on June 14, this time Powell placed more emphasis on the prospects of further rate hikes in the near future. This sentiment became particularly evident on the second day of his testimony. The hawkish stance of the Fed Chair and the market's risk-averse atmosphere helped the American currency outperform its competitors. On Thursday, the U.S. Dollar Index (DXY) reversed its course and started moving upwards again, while EUR/USD declined.

The growing concerns of a recession in the Eurozone also played against the euro. On Friday, June 23, the European currency came under significant bearish pressure as data from Germany and the Eurozone indicated that business activity (PMI) in the manufacturing sector continued to decline at an accelerated pace. Following the release of the PMI statistics, according to Reuters calculations, the likelihood of the ECB's final rate reaching 4.25% decreased to nearly 0%, and EUR/USD reached a local minimum at the level of 1.0844.

However, the situation for the European currency is not as dire, at least in the medium term. For instance, economists at ANZ (The Australia and New Zealand Banking Group) believe that while the Federal Reserve may reduce its key interest rate by 20 basis points by the end of the year, market expectations suggest that the ECB will not lower its rates until early 2024. As a result, the ECB's easing cycle will be later and less significant compared to the Fed's, which is favorable for the euro. Consequently, in Q3, EUR/USD could rise to 1.1200. Overall, according to ANZ, the exchange rates are expected to fluctuate in the range of 1.0500 to 1.1400 throughout 2023.

After the release of PMI data for the manufacturing and services sectors in the United States, EUR/USD concluded the five-day period at 1.0893. As for the immediate prospects, at the time of writing this review on the evening of June 24, the forecast appears highly uncertain: 45% of analysts favored a decline in the pair, while an equal percentage expected its growth, and the remaining 10% adopted a neutral position. Among the oscillators on the daily timeframe, 90% lean towards bullish signals, while 10% remain neutral-grey. Regarding the trend indicators, 80% are coloured green, while 20% are in red. The nearest support levels for the pair are located around 1.0865, followed by 1.0790-1.0800, 1.0745, 1.0670, and finally the May 31 low at 1.0635. Bulls will encounter resistance around 1.0900-1.0925, followed by 1.0960-1.0985, 1.1010, and 1.1045, with further resistance at 1.1090-1.1110.

The upcoming week brings a cascade of macroeconomic data from the United States. We can expect housing market data on Tuesday, June 27, as well as the release of durable goods orders and capital goods orders. Additionally, the Consumer Confidence Index (CCI) from the Conference Board, a leading indicator, will be announced. The results of the country's bank stress tests will be revealed on the following day, Wednesday, June 28, which is particularly interesting given the banking crisis that followed the Fed's interest rate hikes. Furthermore, on the same day, Federal Reserve Chair Jerome Powell will deliver a speech. Thursday will bring labour market statistics and GDP data for the country. Finally, on Friday, June 30, the Core Personal Consumption Expenditures (PCE) Index, a key measure of inflation, will be released for US residents. As for the Eurozone economy, preliminary inflation figures (CPI) for Germany and the Eurozone as a whole, which will be published on June 29 and 30, respectively, are of interest.

GBP/USD: Bank of England's Delayed Surprise

The economic data released during the past week concerning the UK appeared quite mixed. A significant inflation indicator, the Consumer Price Index (CPI), remained unchanged for the month, standing at 8.7% YoY, surpassing market expectations of 8.4%. Retail sales showed a positive outlook as they unexpectedly grew by 0.3% for the month, contrary to the anticipated decline of -0.2% and the previous value of 0.5%. The core retail sales, excluding automotive fuel, increased by 0.1% against the negative forecast of -0.3% and the previous month's 0.7%. However, the business activity indicators in the country were disappointing. The preliminary Services Purchasing Managers' Index (PMI) decreased to 53.7 in June, compared to the expected 54.8. The Manufacturing PMI also fell short of expectations, dropping from 47.1 to 46.2 (forecast: 46.8).

The inflation data released on June 21 not only exceeded market expectations but also surpassed the Bank of England's (BoE) own forecasts. Against this backdrop, the central bank surprised the markets during its meeting on Thursday, June 22, by raising the base rate not by 25 basis points but by 50 basis points, bringing it to 5.00%.

Following conventional logic, such a move should have significantly supported the British currency. However, that was not the case. GBP/USD initially jumped 60 pips to 1.2841 within 10 minutes of the BoE decision, but then declined by over 100 pips to 1.2737. Analysts believe that the initial upward movement was driven by news headline-reactive algorithmic trading, but the bullish momentum was later dampened as sellers encountered resistance near 14-month highs recorded on June 16.

Strategists from the largest banking group in the Netherlands, ING, believe that a 150 basis point rate hike was already priced in before the Central bank meeting. The 50-basis point increase has occurred, and now markets are anticipating a further 100 basis point rise to 6.00%. Along with the aggressive rate hike, market speculation is growing that the Bank of England, in order to avoid an economic collapse, may be compelled to begin easing its monetary policy starting from the summer of 2024 (or even earlier).

Economists at Commerzbank argue that the BoE started raising the key rate too late and too slowly, putting itself in a position of playing catch-up. According to their view, the regulator is chasing inflation rather than actively combating it through monetary policy, which could have a negative impact on the British currency.

However, different opinions exist. Scotiabank economists, for example, anticipate that GBP/USD could rise to 1.3000 in the near future. Colleagues at ING share this view, stating, "Looking at the charts, it seems that there are no significant levels between current levels and 1.3000, which suggests that the latter is not far away."

GBP/USD ended the past week at the level of 1.2714. Given the current volatility, theoretically, it could cover the remaining distance to 1.3000 in just a few weeks or even days. Currently, 45% of surveyed experts support this scenario, while 25% hold the opposite view, and 30% prefer to refrain from commenting. In terms of technical analysis, both oscillators and trend indicators on the daily timeframe mirror the readings of their counterparts for EUR/USD. In the event of a southward movement in the pair, it will encounter support levels and zones at 1.2685-1.2700, 1.2625, 1.2570, 1.2480-1.2510, 1.2330-1.2350, 1.2275, and 1.2200-1.2210. In the case of an upward movement, the pair will face resistance levels at 1.2760, 1.2800-1.2815, 1.2850, 1.2940, 1.3000, 1.3050, and 1.3185-1.3210.

One notable event in the upcoming week's calendar is Friday, June 30, when the GDP data for the United Kingdom will be released.

USD/JPY: The Journey to the Moon Continues

We issued a "Ticket to the Moon" for USD/JPY a few weeks ago, and it continues to be in effect. The pair reached a height of 143.86 last week. According to Commerzbank, "the yen's weakness is gradually taking on a dramatic character." Economists at Singapore's United Overseas Bank (UOB) forecast that the dollar is likely to continue rising in the next 1-3 weeks. They state, "The next significant level is 144.00. It is still too early to determine whether the dollar's strength [...] will break above this barrier. On the other hand, our strong support level has been adjusted to 141.60 from 141.00."

Economists at MUFG Bank believe that the increasing divergence in monetary policy between the Bank of Japan and other major central banks is a recipe for further weakening of the yen. "The widening yield differentials between Japan and foreign countries, along with the reduction in currency and rate volatility, contribute to the yen becoming increasingly undervalued," write analysts at MUFG. According to their counterparts at the French financial conglomerate Societe Generale, if there is another interest rate hike in the United States in July, the USD/JPY pair could rise to 145.00. 

It is clear that the yen is suffering not only from the persistently "dovish" stance of the Bank of Japan (BoJ) but also from the overall rise in global yields. The pressure on the Japanese currency can only be alleviated by the hope that the BoJ will eventually take the first step towards ending its ultra-loose monetary policy. For instance, economists at Danske Bank hope that USD/JPY exchange rate will fall below 130.00 within a 6–12-month horizon. Similar forecasts are made by strategists at BNP Paribas, with targets of 130.00 by the end of the current year and 123.00 by the end of 2024.

As for the Japanese government and the Bank of Japan, it seems that they are not yet ready for any significant changes. Last week, Finance Minister Shunichi Suzuki stated that while they closely monitor currency movements, they have no intention of commenting on them. He added that "sharp currency movements are undesirable" and that "currency rates should be determined by the market, reflecting fundamental indicators." However, it appears to us that the head of the finance ministry is being deceptive. We only need to recall the unexpected currency interventions carried out by the Bank of Japan last year, prompted by the Ministry of Finance. Through these interventions, the yen was able to strengthen against the dollar by over 1,500 pips. Is it not possible for a similar surprise to occur now?

After reaching another high at 143.86, the pair concluded the past five-day period at 143.71. At the time of writing this review, 60% of analysts anticipate that the yen will recover at least some of its losses and push the pair lower, while 30% of experts point to the west. Although the number of supporters for pair growth this time stands at just 10%, it's worth noting that even the minority can be right. Moreover, it is supported by technical analysis, as all 100% of trend indicators and oscillators on the daily timeframe point upwards. However, a quarter of the oscillators actively signal overbought conditions for the pair. The nearest support level is located in the 143.00-143.20 zone, followed by 142.20, 1.4140, 140.90-141.00, 1.4060, 139.85, 1.3875-1.3905, 138.30, and 137.50. The closest resistance is at 143.85, and then bulls will need to overcome barriers at 144.90-145.30, 146.85-147.15, 148.85, and potentially reach the October 2022 high at 151.95.

There is no significant economic information related to the Japanese economy expected to be released during the upcoming week.

CRYPTOCURRENCIES: Influencers Betting on Bitcoin


Bears dominated the crypto market for nine consecutive weeks. However, the situation abruptly changed on June 15 as bitcoin unexpectedly demonstrated a rapid growth. It broke through resistance levels at $25,000, $26,500, and surpassed $30,000, reaching a peak of $31,388 on June 23. The increase during these days amounted to over 26%. Altcoins also followed bitcoin's upward trend, with ethereum gaining approximately 19% in weight.

Bitcoin's surge was fuelled by a series of positive news. The main highlight was the announcement that investment giant BlackRock filed an application to launch a spot bitcoin trust, aiming to simplify institutional access to the crypto market. However, this news wasn't the only one. One of Germany's largest financial conglomerates, Deutsche Bank, declared its entry into the digital asset market and its involvement in cryptocurrency custody services. Wall Street financial giants Citadel and Fidelity joined forces to launch a decentralized crypto exchange called EDX Markets on June 20. Another investment giant, Invesco, which manages assets worth $1.4 trillion, filed an application for a spot Bitcoin ETF. (MicroStrategy believes that such an ETF could attract trillions of dollars). Lastly, the issuance of a new batch of Tether (USDT) stablecoins may have also contributed to the growth of BTC/USD.

It is worth noting that the surge of the flagship cryptocurrency occurred despite the U.S. Securities and Exchange Commission's (SEC) crackdown on the digital market. Previously, the SEC filed lawsuits against Binance and Coinbase, accusing the platforms of selling unregistered securities. In the court documents, the Commission classified over a dozen tokens as securities. According to experts, a victory for the regulator could lead to the delisting of these coins and restrict the potential development of their blockchains. The regulator has already included over 60 coins on its blacklist.

Preston Pysh, the author of popular investment books, believes that the regulatory pressure was a planned campaign. Its aim is to provide major players with the opportunity to enter the digital asset market under favourable conditions. He supports his viewpoint with the bold moves made by Wall Street giants, as mentioned earlier.

The TV host and billionaire, Mark Cuban, and former SEC executive, John Reed Stark, discussed the ongoing crackdown on the crypto industry. Stark believes that the actions taken by the SEC are necessary. According to him, the regulator is trying to protect investors from potential fraud and scams in this sector. He is also convinced that the SEC's actions will ultimately benefit the industry by filtering out dishonest participants and increasing transparency. As for Mark Cuban, he drew parallels with the early days of the internet. In the billionaire's opinion, "90% of blockchain companies will fail. 99% of tokens will fail. Just like 99% of early internet companies."

It is worth noting that many influencers are skeptical about cryptocurrencies and are putting bitcoin aside. We have already quoted Benjamin Cowen, the founder of Into The Cryptoverse, who believes that altcoins "will face reckoning while bitcoin dominance continues to grow." A similar sentiment was expressed by renowned trader Gareth Soloway, who stated that he has always compared the crypto market to the dot-com bubble. According to him, a collapse similar to the early 2000s will occur in this industry. Soloway reassured that "the system needs to be cleared of junk" in order to thrive. He believes that 95% of all tokens "will strive towards zero.".

Robert Kiyosaki, the author of the book "Rich Dad Poor Dad," has recently warned about an impending real estate market crash. According to the expert, California mortgage lender LoanDepot is already on the verge of bankruptcy, and the upcoming real estate market collapse is likely to be much worse than the 2008 crisis. In this situation, Kiyosaki once again advised his followers to prepare for the disaster and accumulate precious metals and bitcoin.

Mike Novogratz, CEO of Galaxy Digital, also believes that in the fight against inflation, the demand for alternative instruments will increase, and one of them is Bitcoin, which he predicts will reach $500,000 in the long term. Max Keiser, a former trader and television host who is now an advisor to Salvadoran President Nayib Bukele, mentioned an even higher figure of $1 million per coin. Cathy Wood, CEO of ARK Invest, also believes that the $1 million target is achievable.

Peter Brandt, known as the "Mysterious Market Wizard," has joined the ranks of bitcoin praise, expressing doubts about all coins except Bitcoin. This legendary trader and analyst stated that bitcoin is the only cryptocurrency that will successfully finish this marathon. He later added that ethereum (ETH) is likely to survive, but the real legacy belongs to bitcoin. Benjamin Cowen, mentioned earlier, also predicts difficulties for ethereum, suggesting that ETH/BTC may plummet to Q1 2021 levels in the near future, potentially losing up to 45% of its current value.

Chris Burniske, a partner at venture capital firm Placeholder, has noted that cryptocurrencies often experience growth when the Nasdaq 100 (NDX) index takes a breather. Cooling off in stocks prompts capital to flow into riskier assets, and bitcoin begins a bullish rally. Burniske refers to observations made by Glassnode's founders, Jan Happel and Yann Allemann. According to their findings, since 2019, bitcoin has shown strong growth after signs of bullish exhaustion in the NDX. Currently, bitcoin is just a few steps away from surpassing the NDX once again as the index nears a local peak. 

Popular investor and founder of venture company Eight, Michael Van De Poppe, believes that the current market conditions make it impossible for the negative forecasts for BTC to come true, as some authors predict a drop in the cryptocurrency to $12,000. According to his opinion, investors should now "fill their pockets" in anticipation of further growth.

BTC dominance reached 50% on Thursday, June 21. This means that half of the entire cryptocurrency market capitalization is accounted for by this asset. The last time the index was this high was two years ago in May 2021. The current rise is attributed to the pressure from the SEC on altcoins and the application for a spot bitcoin trust by BlackRock. Michael Saylor, the CEO of MicroStrategy, believes that bitcoin dominance will continue to grow and reach 80% in the coming years. "Currently, there are 25,000 tokens of varying quality in the market, which confuses large investors," he says. "After removing unnecessary assets through the SEC, major capital will be more willing to invest in the leading cryptocurrency.".

At the time of writing the review, on the evening of Friday, June 23, BTC/USD is trading at around $30,840. The total market capitalization of the cryptocurrency market stands at $1.196 trillion ($1.064 trillion a week ago). The Crypto Fear & Greed Index has returned to mid-April levels, jumping from the Neutral zone to the Greed zone over the week, and rising from 47 to 65 points.
 

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 June 19 - 23, 2023

EUR/USD: The Euro's Victory Over the Dollar

The key events of the past week were the meetings of the Federal Open Market Committee (FOMC) of the US Federal Reserve on Wednesday, June 14, and the European Central Bank's Monetary Policy Committee on Thursday, June 15. The outcome of these meetings resulted in a decisive victory for the euro over the dollar.

During the COVID19 pandemic, the Federal Reserve printed and released a large amount of cheap money into the market. This action spurred inflation, which ultimately reached its highest level in the last 40 years. With the pandemic over, the American regulator completely reversed its monetary policy, shifting from Quantitative Easing (QE) to Quantitative Tightening (QT). Over the course of the last ten meetings, in an attempt to curb inflation, the Fed raised the key interest rate, which ultimately reached 5.25%: the highest level since 2006.

Data published on Tuesday, June 13, showed that the core inflation (CPI) in May was 5.3% (year-on-year) after 5.5% a month earlier. This is, of course, progress, but very slight, and the target value of 2.0% is still far off. However, in an effort to avoid economic problems and the continuation of the banking crisis, the Federal Reserve leaders at their meeting decided to keep the interest rate unchanged.

This was not a surprise to the market. Both the vice president of the Federal Reserve, Philip Jefferson, and the president of the Federal Reserve Bank of Philadelphia, Patrick Harker, talked about the need for a pause in the monetary tightening process. Even the head of the Federal Reserve, Jerome Powell, mentioned the possibility of a break. As a result, on the eve of the meeting, the likelihood of the rate remaining at the previous level was estimated by market participants at 95%.

Moreover, data published on Thursday, June 15, showed that industrial production in the US fell by 0.2% in May, and the number of unemployment benefit claims stubbornly remains at the previous level of 262K. This weak statistics increased the market's expectations that the current Fed pause might be extended for a longer period. As for the long-term forecasts published by the FOMC, the peak rate is seen by the committee members at 5.60%, after which a decrease should follow: in a one-year perspective to 4.60%, in a two-year perspective to 3.40%, and then further down to 2.50%.

So, while the Federal Reserve left borrowing costs unchanged at its June meeting, the European Central Bank raised it by 25 basis points (b.p.) - from 3.75% to 4.00%. Furthermore, ECB President Christine Lagarde noted that the tightening of monetary policy will continue in July. Additionally, inflation forecasts were revised upwards due to rising wages and high energy prices. Based on this, the market expects a 25 b.p. rate hike not only next month but also in September. The ECB's hawkish stance caused a surge in German government bond yields, while U.S. security yields conversely dropped. As a result, the Dollar Index (DXY) continued its decline, and EUR/USD continued to build on its bullish impulse formed earlier in the week. If on Monday, June 12th, it was trading at 1.0732, by June 16th it had reached 1.0970, closely approaching the psychologically important level of 1.1000.

EUR/USD concluded the five-day period at 1.0940. As for near-term prospects, at the time of writing this review on the evening of June 16, most analysts (65%) expect the continuation of its upward trend, 25% voted for the pair's fall, and 10% took a neutral position. Among trend indicators on D1, 100% are in favour of the bulls, and among oscillators, 90% are in the green, although a third of them are signalling overbought conditions. The remaining 10% are in the red. The pair's nearest support is located around 1.0895-1.0925, then 1.0865, 1.0790-1.0800, 1.0745, 1.0670, and finally, the May 31 low of 1.0635. The bulls will encounter resistance in the area of 1.0970-1.0985, then 1.1045, and 1.1090-1.1110.

Notable dates on the calendar for the upcoming week include June 21 and 22, which are set for the testimony of Federal Reserve Chairman Jerome Powell before Congress. Fresh unemployment data from the US will also be released on Thursday. At the end of the work week, preliminary Purchasing Managers' Index (PMI) figures for both Germany and the Eurozone as a whole, as well as for the US services sector, will be revealed. In addition, traders should note that Monday, June 19, is a public holiday in the United States: Juneteenth.

GBP/USD: The Pair's Growth May Continue

Taking advantage of the weakening dollar, the pound actively strengthened its position throughout the past week. Having bounced off the local low of 1.2486 on Monday, GBP/USD soared by 362 points on Friday and reached a high of 1.2848. The week ended slightly lower: at the level of 1.2822. The British currency last felt this good over a year ago, in April 2022.

Bullish investor sentiment was also supported by the expectation that the Bank of England (BoE) will raise its rate from 4.50% to 4.75% at its meeting on Thursday, June 22, accompanying this decision with hawkish rhetoric and promises to continue tightening its monetary policy.

As a result, economists at Scotiabank expect that GBP/USD may soon rise to 1.3000. They are joined in this prediction by their colleagues from ING, the largest banking group in the Netherlands. "Looking at the charts," they write, "it seems that there are no significant levels between current levels and 1.3000, which suggests that the latter is not far off."

Overall, the median forecast from analysts appears more neutral. Bullish sentiment is supported by 50% of experts, 40% favor bears, and 10% prefer to refrain from comments. As for technical analysis, 100% of both trend indicators and oscillators point north, but a quarter of the oscillators are in the overbought zone. If the pair moves south, support levels and zones await it – 1.2685-1.2700, 1.2570, 1.2480-1.2510, 1.2330-1.2350, 1.2275, 1.2200-1.2210. In case of the pair's growth, it will meet resistance at levels 1.2940, 1.3000, 1.3050 and 1.3185-1.3210.

Next week, on the eve of the aforementioned meeting of the Bank of England, on Wednesday, June 21, inflation statistics will be released in the United Kingdom. It is expected that it will show a decrease in the Consumer Price Index (CPI) from 8.7% to 8.5%. However, such a slight drop will likely not deter the BoE in its hawkish stance. In addition, attention should be paid to Friday, June 23, when the preliminary Manufacturing Purchasing Managers Index (PMI) value will be published in the UK. Since the PMI for Germany, the Eurozone, and the US will also be announced on this day, it will vividly illustrate and allow a comparison of the state of their economies.

USD/JPY: The Pair Yearns to Return to Earth, But Can't

It would have been logical to assume that as a result of the fall in the US Dollar Index (DXY) and US Treasury bond yields, the Japanese currency would strengthen its position and USD/JPY would finally change course: instead of flying to the Moon, it would start landing on Earth. Such a movement even appeared on Thursday, June 15. But it only lasted one day: until the meeting of the Bank of Japan (BoJ), at which it again maintained the policy rate at the negative level of -0.1%. (We recall that the Japanese Central Bank has not changed this rate since January 2016). In addition, as part of the new decision, the regulator announced that it also plans to buy a "necessary" amount of government bonds and continue to target the yield of 10-year securities at a level close to zero.

Economists at MUFG Bank believe that the increasing divergence in monetary policy between the Bank of Japan and other major central banks is a recipe for further yen weakening. "The expansion of yield spreads between Japan and foreign countries, coupled with the decrease in currency exchange rate volatility and rates [...] contributes to the yen becoming more undervalued," write MUFG analysts.

Their colleagues at Commerzbank believe that if the Federal Reserve signals two potential new dollar rate increases, the yen's decline will continue. According to specialists from the French financial conglomerate Societe Generale, if another rate hike occurs in the US in July, USD/JPY could rise to 145.00. 

Only hopes that the BоJ will eventually take the first step towards ending its ultra-loose monetary policy can alleviate pressure on the Japanese currency. For example, economists at BNP Paribas write that "although we have revised our USD/JPY forecasts upwards considering the higher terminal rate of the Fed and a later expansion of the Bank of Japan's YCC, we continue to forecast a downward trend in USD/JPY". They target levels of 130.00 by the end of this year and 123.00 by the end of 2024.

Having fixed a local high at 141.89, the pair ended the past five-day period at 141.82. 70% of analysts expect that the weakening DXY will soon cause a correction of the pair to the south, while the remaining 30% set their goal to reach the height of 143.00. 100% of trend indicators on D1 also look up. Among the oscillators, 90% are also pointing up (a third signals the pair's overbought condition), the remaining 10% are painted in a neutral grey color. The nearest support level is located in the 1.4140 zone, followed by 140.90-141.00, 1.4060, 139.45,1.3875-1.3905, 137.50. The nearest resistance is 142.20, then the bulls will need to overcome barriers at levels 1.4300, 143.50 and 144.90-145.10. And from there it's not far to the October 2022 high of 151.95.

No significant economic information related to the Japanese economy is expected to be released in the upcoming week. The release of the report on the last Bank of Japan meeting on Wednesday, June 21, could be an exception, but market participants are unlikely to find anything new in it: everything has already been said at the press conference on June 16.

CRYPTOCURRENCIES: The Fed and ECB Prevent Bitcoin Catastrophe


BTC/USD climbed to the $30,989 mark on April 14, its highest value since June 2022. Since then, the market has been dominated by bearish sentiment for nine weeks in a row. The past week was no exception and did not bring joy to investors. As noted by Michael Van De Poppe, founder of venture company Eight, "this is not the situation you would want to see." The expert noted that breaking support in the form of the 200-week moving average (200WMA) indicates a continuation of the downtrend.

This scenario seemed obvious after the U.S. Securities and Exchange Commission (SEC) filed lawsuits against Binance and Coinbase, accusing the platforms of selling unregistered assets. Meanwhile, in court documents, the SEC named more than a dozen tokens as securities. According to experts, a victory for the regulator could lead to the delisting of these coins and limit the potential development of their blockchains. In total, over 60 coins have already made it onto the regulator's blacklist.

The court rejected the SEC's request to freeze the assets of Binance's American division last week. However, as some observers believe, the battle is far from over. It's worth noting that Gary Gensler, the head of the regulator, has recently stated that cryptocurrencies, in essence, are not needed at all. Quote: "We don't need more digital currency. We already have digital currency. It's called the U.S. dollar. It's called the euro or the yen. Now they are all digital.".

According to strategists at JPMorgan, US bitcoin exchanges are highly likely to be forced to register with the SEC as brokers, and all cryptocurrencies will be classified as securities. While many see this as the beginning of the end for the entire industry, there are optimists. For instance, JPMorgan believes that new rules "will free the industry from bad practices and dishonest players, which in turn is necessary for the industry to mature and see more active institutional participation."

Adam Back, the CEO of Blockstream, tried to calm market participants. Considered one of the leading figures in modern cryptography and the crypto industry, his argument was directly opposed to JPMorgan's. This prominent expert stated that the crypto market is like water, flowing and finding detours when encountering obstacles. So, if any major crypto exchange operating in the US stops servicing its clients due to regulatory pressure, the industry will ultimately find a way out. Bitcoin traders will simply move to other jurisdictions and start trading in other currencies. And it seems that Adam Back is right: the exodus from the US is already underway. According to data from the analytical platform Glassnode, the share of American players has dropped by 11% since mid-2022. At the same time, it has grown by 9.9% in the Asian region.

It's worth noting that many influencers, while predicting a dismal end for cryptocurrencies, often exclude bitcoin from their projections. For instance, Into The Cryptoverse founder Benjamin Cowen stated that liquidity in the crypto market has long since dried up, and altcoins are "due for a reckoning, while bitcoin's dominance will continue to grow." A similar sentiment was expressed by well-known trader Gareth Soloway, who said he has always compared the crypto market to the dotcom bubble. According to him, the collapse that occurred in the early 2000s will repeat in this industry. He assured that "the system needs to be cleared of trash" to flourish, stating that 95% of all tokens "will be striving towards zero."

Peter Brandt, often called the "Mysterious Wizard of the Market," also joined the chorus praising bitcoin. This legendary trader and analyst also metaphorically "buried" all coins, with the exception of bitcoin. "Bitcoin is the only cryptocurrency that will manage to finish this marathon. All others, including ethereum, are fakes or scams," he wrote. Many members of the crypto community were unsettled by the respected analyst's grouping of ethereum, the second-largest cryptocurrency by capitalization, together with fraudulent projects. In response, Brandt stated that "ETH will likely survive, but the true legacy is BTC."

ARK Invest CEO Cathy Wood has doubled down on her bitcoin forecast, stating that the target of $1 million per coin will be realized. According to Wood, the current global economic environment increases her confidence in the flagship cryptocurrency. She stated, "The more uncertainty and volatility there is in the global economy, the more our confidence in bitcoin grows, which has been and remains a hedge against inflation."

CEO and founder of Galaxy Digital, Mike Novogratz, also expects support from the global economy. Specifically, the billionaire predicts that the Federal Reserve will begin lowering interest rates in October, leading to a sharp increase in liquidity inflows into the crypto market. Dan Tapiero, co-founder of 10T Holdings and Gold Bullion International, expressed a more specific outlook, forecasting an "explosive" rally. He stated, "We will likely see new highs in the second half of 2024 and in 2025. And I think during this bull phase, the overall market capitalization of the crypto market will reach $6-8 trillion."

Despite optimistic long-term forecasts, the outlook for the near future does not inspire investors. Bloomberg strategist Mike McGlone does not rule out a significant decline in the Bloomberg Galaxy Crypto Composite Index, which reflects the performance of leading digital currencies. In an analytical note prepared for investors, he warned of a dominant bearish trend for at least the next few months. Fiona Cincotta, a strategist at City Bank, also cautioned that a drop in the price of bitcoin below the strong support level of $25,000 could further activate sellers and trigger a more pronounced decline in prices.

PlanB, an analyst and the author of the well-known Stock-to-Flow (S2F) forecasting model, asked his 1.8 million followers to provide their Bitcoin price predictions for the end of June. Many responded that Bitcoin would close the first month of summer near the $24,000-25,000 levels. Only a small portion of respondents indicated the potential for further growth above $30,000. Another expert with the username PROFIT BLUE believes that BTC will not be able to sustain itself in the $25,000 range, and the next target for the cryptocurrency will be the $23,700 level. The most pessimistic forecast came from analyst WhaleWire, who did not rule out the coin revisiting its cyclical low. According to WhaleWire, BTC is preparing for a move towards $12,000. The breakthrough of the $15,000 level, WhaleWire is confident, will occur during this summer.

The minimum for the past seven days and the last three months was recorded at $24,791. The main cryptocurrency was saved from further decline by the weakening US dollar, following the decisions of the Federal Reserve and the European Central Bank regarding interest rates. At the time of writing the review, on the evening of Friday, June 16, BTC/USD recovered all of its losses for the week and is trading at around $26,400. The total market capitalization of the crypto market stands at $1.064 trillion ($1.102 trillion a week ago). The Crypto Fear & Greed Index has remained in the Neutral zone, although it has decreased from 50 to 47 points over the past seven days.
 

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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XAU/USD: Historical Overview and Forecast Until 2027

Gold is one of the favourite trading instruments of the most successful traders at NordFX. This can be easily confirmed by looking at the monthly rankings published by this brokerage company. That is why it is appropriate to provide a special review, focusing solely on the XAU/USD pair.

Is Gold Truly a Protective Asset?

In the current economic situation, as leading central banks worldwide attempt to curb inflation, the price of this precious metal has reached a historic high, hitting $2,080 per troy ounce on May 4. Market participants are rushing to buy gold, believing it can safeguard their capital from devaluation.

According to a survey conducted by Bloomberg, approximately 50% of respondents identified gold as their primary safe-haven asset (with US Treasury bonds coming in second place, receiving only 15% of the votes). However, is gold truly an effective tool for hedging price risks, or is this a widespread misconception?

Consider, for instance, the period from March to October 2022 when gold prices fell from $2,070 to $1,616, a decline of almost 22%. This occurred despite the fact that inflation in the United States reached a 40-year peak during that time. So, what kind of protective asset is gold, then?

The Growth of Gold Prices

If we trace the dynamics of gold prices since the beginning of the 20th century, we observe the following pattern. In the year 1900, the price of this precious metal was approximately $20 per troy ounce.

During the period from 1914 to 1918, amidst and immediately after World War I, the price rose to around $35. Then, in the 1930s, during the Great Depression and as a result of currency reforms in the United States, the price was set at $20.67 per troy ounce. Throughout World War II, the value of the asset remained stable and was fixed at $35 under the Bretton Woods system, the same level as during World War I.

 In 1971, the United States abandoned the gold standard, which led to floating exchange rates and an increase in the price of gold. In the late 1970s and early 1980s, the price exceeded the $800 mark per troy ounce due to geopolitical tensions, inflation, and a reduction in gold production. From the 1980s to the 2000s, the price of gold declined and fluctuated within a range of approximately $250 to $500.

 Since the early 2000s, there has been a significant increase in the price of gold due to geopolitical events, financial instability, and inflationary pressures. In August 2020, amidst the COVID-19 pandemic and economic uncertainty, the price of gold surpassed the $2,000 mark per troy ounce for the first time. However, following this peak, it experienced a decline due to expectations of economic recovery, tightening monetary policies by central banks, rising interest rates, and various other factors.

A subsequent unsuccessful attempt to break above the $2,000 resistance level occurred in March 2022. Finally, the third surge occurred in May of this year.

Why Gold Prices Are Rising

So, what contributes to the value of gold and why does its price rise?

- Rarity and Limited Supply: Gold is a rare metal, and its extraction is limited and requires significant efforts and resources.
- Durability and Longevity: Gold is highly resistant to wear and corrosion. It retains its physical properties over time, making it suitable for long-term storage and attractive for use in jewellery and various industries.
- Store of Value: Gold has long been considered a store of value. It can preserve its purchasing power over extended periods, serving as a hedge against inflation and the instability of stocks and currencies.
- Liquidity and Recognizability: Gold is universally recognized and accepted as an asset. It can be easily exchanged for cash or used as a medium of payment in different countries and cultures.
- These factors contribute to the desirability and demand for gold, thus driving its price upward.

Factors Influencing Gold Prices

Let's delve into the factors that influence the price of gold. It's important to note that there is no direct correlation between the price of gold and each of these factors individually. Market forecasts and the combination of these factors also play a role in determining gold prices. For example, the recent surge in XAU/USD can be attributed to expectations of a reversal in the Federal Reserve's interest rate hike cycle, potential U.S. debt default, as well as geopolitical and economic instability due to Russia's armed actions in Ukraine. Now, let's explore the key factors:

- Economic Conditions: The global economic situation, including GDP growth or decline, unemployment, and overall financial stability, can impact gold prices. Uncertainty in the markets or a recession, for instance, may increase demand for gold as a risk-free asset.
- Geopolitical Events: Political and geopolitical events such as armed conflicts, wars, terrorist acts, sanctions, elections, etc., can cause market instability and uncertainty, leading to an increased demand for gold as a safe haven.
- Inflation: The level of inflation plays a crucial role in determining the value of gold. When inflation rises, the price of gold typically follows suit as investors seek protection against the devaluation of money.
- Central Banks: Actions taken by central banks, including changes in interest rates, can influence gold prices. For example, a decrease in interest rates may stimulate demand for gold as holding it becomes comparatively more attractive than other assets.
- Currency Movements: Fluctuations in exchange rates between different countries can also impact the price of gold. If the currency of a gold-producing country weakens against other currencies, the price of gold in that currency may increase, stimulating exports and raising the demand for gold.
- Investment Demand: Investment demand includes the purchase of gold bars, coins, and futures market transactions. Demand typically rises when trust in fiat currencies weakens.
- It's important to consider the interplay of these factors and market expectations when assessing the price of gold.

Forecast: Will the Price of Gold Rise?

When it comes to forecasts, it's important to note that they are mere assumptions based on available information and analysis. As mentioned before, the gold market is complex and subject to the influence of multiple factors. Any forecasts are subjective assessments and can change depending on economic and geopolitical situations, as well as changes in market demand and supply. However, it should be acknowledged that some forecasts have proven to be relatively accurate.

 Here are a few examples of such forecasts made before September 2021. In May 2021, analysts at Goldman Sachs predicted that the price of gold would reach $2,000 per troy ounce by 2024. Two months later, their counterparts at Bank of America made the exact same forecast. The touch of this resistance level occurred one year earlier. However, whether XAU/USD will be able to sustainably establish itself above this level, turning it from resistance to support, remains to be seen.

Currently, Goldman Sachs strategists are indicating a target of $2,200. Meanwhile, the Swiss financial holding UBS believes that the price of gold may rise to $2,100 by the end of 2023 and to $2,200 by March 2024. (It's worth noting that their previous forecast projected a peak of $2,400 for this year). Similar figures are mentioned by analysts at the Economic Forecasting Agency, who believe that the price of gold may even exceed $2,400, but this is expected to occur only in 2027.

***

At the beginning of this overview, we raised the question of whether gold is a protective asset. In his early statements, Warren Buffett expressed scepticism about investing in gold, referring to it as an unproductive asset that doesn't generate income. However, looking at the chart, it becomes clear that he was mistaken. Even the legendary investor himself acknowledged this and later expressed a positive attitude towards gold as a store of value. Prominent financier George Soros also recognized gold as a diversification asset that provides protection against inflation and political instability. Ray Dalio, the founder of investment firm Bridgewater Associates, recommended including this precious metal in one's portfolio.

Most likely, they are all correct, and in the foreseeable future, gold will retain its role as a primary capital preserver. However, it is always important to remember that the effectiveness of any investment depends on the entry point. If the timing of a trade is chosen incorrectly, it is possible that your deposit may start to decrease. Nevertheless, in the case of gold, the probability of XAU/USD rising again is significantly higher than that of many fiat currencies. To withstand drawdowns and ultimately achieve profit, sound money management, as well as time and patience, are necessary.
 

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 June 05 - 09, 2023

EUR/USD: Will the Dollar Return to Steady Growth?


The dollar has been rising since May 4. The DXY Index reached the 104.609 mark on the last day of spring, May 31. It hasn't soared this high since January 2023. As we have previously mentioned, two primary factors were propelling the American currency upwards.

The first one is the investors' appetite for the dollar as a safe-haven asset, triggered by the threat of a U.S. default. However, the Senate voted in favour of passing a bill on the public debt limit last week. Consequently, the default threat has finally passed, which has improved market sentiments and weakened demand for the dollar.

The second factor was the anticipation of a further rise in the key Federal Reserve interest rate. Amid hawkish statements from officials, the probability that the FOMC (Federal Open Market Committee) would increase the rate to 5.5% at its June 14 meeting rose above 60% by the end of May.

However, as the old song goes, "a beauty's heart is prone to change and fickleness". The first to play the role of such a "beauty" was the new Vice President of the Federal Reserve, Philip Jefferson, who subtly hinted at the need for a pause in the monetary tightening process. Furthermore, Patrick Harker, the president of the Federal Reserve Bank of Philadelphia, outright stated that "we should skip the rate hike at least at the June meeting". Then, Harker went even further and suggested skipping every other FOMC meeting, naturally including the one in June. Market participants immediately recalled Jerome Powell, the head of the Federal Reserve, who had also mentioned a pause.

Strong US macroeconomic data could have aided the dollar. However, the employment report from ADP released on Thursday, June 1, showed that the number of jobs in the private sector decreased from 291K in April to 278K in May. Meanwhile, the number of initial unemployment claims, albeit slightly, increased from 230K to 232K. The cooling of the economy was also indicated by the fall in the ISM's Purchasing Managers' Index (PMI) in the manufacturing sector from 47.1 to 46.9. (As a reminder, if the PMI is below 50, it indicates economic contraction, especially if the trend persists over several months). The substantial revision of data on unit labour costs for Q1 2023, which was downgraded from 6.3% to 4.2%, also fuelled dovish expectations. Such weak statistics added doubts for market participants about another rate hike on June 14th. As a result, according to the FedWatch Tool from CME Group, the chances of this happening have plummeted from 60% to 25%. The DXY Index also took a southern turn.

If the US statistics on June 1 worked against the American currency, the data from Europe the day before, on May 31, conversely, helped EUR/USD reach a 9-week low at 1.0634. The Consumer Price Index (CPI) showed that inflation in the Eurozone is on a downward trend. With a previous value of 7.0% and a forecast of 6.3%, the actual CPI dropped to 6.1%. If we talk about individual countries, the rate of consumer price growth in Italy fell from 8.7% to 8.1%, in France - from 6.9% to 6.0%, and in Germany - from 7.6% to 6.3%. In Spain, the CPI fell to a two-year low.

At the same time, with the decrease in inflation, the chances for further aggressive tightening of its monetary policy by the European Central Bank also went downhill. Although, at its next meeting on June 15, the ECB is still likely to raise the rate by 25 basis points (bp) to 4.0%, even after this, it will still remain below the current Federal Reserve rate of 5.25%. And if the ECB stops there and takes a pause, it will deprive EUR/USD bulls of an important trump card.

Strong labor market statistics, traditionally due on the first Friday of the month, June 2, could have helped the dollar towards the end of the week. The NFP (Non-Farm Payrolls) lived up to expectations: the number of new jobs created outside the agricultural sector, with a previous value of 294K and a forecasted fall to 180K, actually increased to 339K. However, another important indicator, the unemployment rate, disappointed investors: the unemployment rate in the US reached 3.7% in May (3.4% in April, forecast 3.5%).

Following such an ambiguous employment report, the pair ended the five-day period at a level of 1.0707. As for the near-term prospects, at the time of writing the review, the evening of June 2, the forecast is as neutral as possible: 50% of analysts expect the pair to move north, and just as many expect it to move south. Both among trend indicators and oscillators on D1, a substantial advantage is on the side of the dollar - 85% of each are coloured red, with 15% on the green side. Among trend indicators, 85% side with the reds (15% side with the greens). The pair's nearest support is located around 1.0680, followed by zones and levels at 1.0620-1.0635 and 1.0490-1.0525. Bulls will meet resistance around 1.0745-1.0707, then 1.0800-1.0835, 1.0865, 1.0895-1.0925, 1.0985, 1.1045, and 1.1090-1.1110.

For the upcoming week's calendar, it is worth noting Monday, June 5, when the ISM's Service Sector PMI (Purchasing Managers Index) for the US will be known. The EIA's (Energy Information Administration's) Energy Market Outlook and data on US crude oil reserves may cause some volatility on Tuesday and Wednesday. Additionally, Eurozone retail sales volumes will be announced on Tuesday, June 6. Thursday, June 8 could also be quite volatile, with data coming in on Eurozone GDP (Gross Domestic Product) and the US unemployment rate.

GBP/USD: UK Inflation Propels Pound Upwards

Over the last week, the pound has recovered all of its losses from May 12 to May 25. This occurred after last week's inflation figures in the UK shocked the market with an unexpected increase. The April release reported a rise in consumer prices by 1.2%, compared to the 0.8% increase recorded a month earlier. The core Consumer Price Index reached multi-year highs, hitting 6.8% YoY, exceeding the predicted 6.2%. Although annual inflation has slowed from 10.1% to 8.7%, it still exceeded the 8.2% forecast. This is a 13-month low, but still significantly above the target level. In particular, food inflation reached 19.1%, a level not seen since 1977. This figure greatly impacts low-income households, forcing them to spend more on food and less on other goods and services.

UK Chancellor of the Exchequer Jeremy Hunt has already stated the need to continue a hawkish monetary policy course, despite increasing recession risks. The official noted that economic recovery is only possible if inflation is fully defeated. As a result, investors have become more confident that the Bank of England (BoE) will raise the rate by 25 basis points at its next meeting, and likely will not stop there.

There's another factor that allowed GBP/USD to reach 1.2544 on June 2. If the dollar was strengthening its position energetically in mid-May, last week the US currency found itself under selling pressure (the reasons were indicated earlier), which facilitated a rally of GBP/USD. After the release of US labour market data, it concluded on the note of 1.2450.

In the current situation, the median forecast of analysts looks as follows: 45% of experts maintain a bullish outlook, 30% prefer the bears, and the same percentage (25%) chose to abstain from comments. Among oscillators on D1, only 15% recommend selling, 50% are set to buy, and 35% are painted in a neutral grey colour. Among trend indicators, the balance of power between green and red is 85% to 15% in favour of the greens.

If the pair moves south, its support levels and zones are 1.2390-1.2420, 1.2300-1.2330, 1.2275, 1.2200-1.2210. In the event of the pair's rise, it will meet resistance at levels 1.2480, 1.2510, 1.2540, 1.2570, 1.2610-1.2635, 1.2675-1.2700, 1.2820, and 1.2940.

The Composite Business Activity Index (PMI), as well as the PMI in the services sector of the United Kingdom will be published the next week, on Monday, June 5. The picture of business activity will be supplemented by the PMI in the country's construction sector the following day, Tuesday, June 6.

USD/JPY: The Pair Seeks a Return to Earth

The previous review was titled "USD/JPY Received a 'Ticket to the Moon'. As for the current one, it could be called "The Pair Seeks a Return to Earth". Or at least, it tries to do so, justifying the forecast given by 75% of analysts a week ago. If the pair reached its maximum for the past five-day period (and the last six months) on May 30 at the height of 140.92, the minimum on June 01 was 250 points lower, at 138.42. However, then the ambition to reach the stars took over again, and the pair finished at the level of 139.95.

It's clear that the yen's strengthening in recent days has been directly tied to the weakening of the dollar. However, when it comes to future prospects, things are very unclear and uncertain. Let's just quote a few statements.

Speaking in Parliament, Bank of Japan (BoJ) Governor Kazuo Ueda said that it will take some time to reach the 2.0% price growth target. He also added that he can't specify when this target will be reached. Moreover, the BoJ chief believes that setting strict timelines to achieve this goal could cause unexpected consequences for the market and hence is undesirable.

On Friday, June 2, a statement was also issued by Japan's Finance Minister, Shunichi Suzuki. In his opinion, currency rate movements are determined by the market and various factors. He also mentioned: "A weak yen has various impacts on Japan's economy". However, the Minister did not specify what these "various factors" are and what kind of "various impacts" he was referring to.

In the current situation, economists at ING, the largest banking group in the Netherlands, believe that "USD/JPY appears overvalued compared to trading conditions, which are now much more favorable for the yen than a year ago." They also note that "there is still a risk that the Bank of Japan will surprise on June 16, further normalizing its yield curve control policy," which would be a positive factor for the yen.

Strategists from Wells Fargo, one of the "big four" U.S. banks, are also relatively optimistic about the future of the Japanese currency, expecting the yen to be the main beneficiary of a weakening U.S. dollar. They believe that "The Bank of Japan will adjust its policy in Q4 2023 for further normalization of the government bond market," which could provide an opportunity for the yen to strengthen by the end of the year. "The strengthening of the yen should also be supported by the end of the global central bank tightening cycle and a transition to global easing, as well as a recession in the U.S. in the second half of 2023," Wells Fargo strategists said. "We are targeting a USD/JPY rate of 136.00 by the end of 2023 and 129.00 by the end of 2024." (end of quote).

As for the near future of the pair, the voices of analysts are distributed as follows. At this point, 65% of them are hoping for further strengthening of the Japanese currency and movement of the pair to the south. Only 25% of experts vote for a rise in the dollar, and the remaining 10% have taken a neutral position. Among the indicators on D1, the absolute advantage is on the side of the dollar: 100% of trend indicators and 85% of oscillators point north (10% signal overbought conditions). The remaining 15% of oscillators point south. The nearest support level is in the 139.45 area, followed by levels and zones 138.75-139.05, 137.50, 135.90-136.10, 134.85-135.15, 134.40, 133.60, 132.80-133.00, 132.00, 131.25, 130.50-130.60 and 129.65. The nearest resistance is 140.90-141.00, then bulls will need to overcome obstacles at levels 142.20, 143.50 and 144.90-145.10. And from there it's not far to the October 2022 high of 151.95.

No significant economic information concerning the Japanese economy is anticipated in the coming week. The exception is Thursday, June 8, when the volume of Japan's GDP for Q1 2023 will be announced.

CRYPTOCURRENCIES: A Moderately Positive Forecast for Bitcoin

After bouncing off the $25,850 support on May 25, the bulls launched an attack, instilling hope in the hearts of investors. However, their strength proved insufficient to reach the $29,000 resistance level. A local peak was recorded on May 29 at $28,433, after which BTC/USD retreated to the $26,500 support, leaving investors disappointed.

This dynamic was likely triggered by speculations surrounding the US government debt. Although, upon examining the charts, there was no direct correlation with stock indices (S&P500, Dow Jones, and Nasdaq), nor was there an inverse correlation with the Dollar Index (DXY) observed in bitcoin quotes.

After significant and tumultuous events in the crypto space in 2022 and early 2023, such as the FTX crash in November and numerous other bankruptcies, including Celsius, Voyager Digital, and Three Arrows Capital, bitcoin managed to recover its losses and grow by over 60%. However, a period of calm ensued for eleven weeks. Renowned cryptocurrency analyst Ton Vays believes that the leading cryptocurrency is concluding its consolidation phase, with many investors already "buying the bitcoin dip," indicating that BTC is preparing for further growth. To achieve this, though, it must overcome resistance at the $30,000 level. If the "bulls" succeed, BTC will reach new price highs.

"It is indeed time for bitcoin to grow," says Vays. "However, looking at the weekly chart, the bulls lack strength. [...] There is still time to overcome resistance. We need to surpass $30,000, reverse the Lucid SAR indicator, and then we will rise to $34,000, where another resistance awaits." (For reference: The Lucid SAR indicator is a variation of the Parabolic SAR. It is a trend-following indicator that combines price and time to calculate trends and determine entry and exit points.)

According to analysts at JPMorgan, the price of bitcoin is expected to rise to $45,000. This is indicated by the current price of gold, which is close to $2,000 per ounce. Analysts note that these two assets usually move in tandem. Based on JPMorgan strategists' calculations, the value of physical gold held outside central banks is currently estimated at around $3 trillion. This implies a price of digital gold, or bitcoin, at around $45,000 per coin, assuming the volume of bitcoin in private investors' portfolios matches that of the precious metal.

However, analysts at JPMorgan view $45,000 as the upper limit for bitcoin's price, suggesting limited potential for the asset. This calculation does not take into account the halving process and the increasing costs for miners. The upcoming halving in 2024 will automatically double the cost of bitcoin mining to approximately $40,000, and historically, this figure has served as the lower boundary for the asset's price.

When it comes to miners, the situation is twofold. In pursuit of profits, they contribute to the increasing computational difficulty. Over the past five months of 2023, the difficulty has grown by 45%, equal to the growth seen throughout the entire year of 2022. The price increase of bitcoin in Q1 of this year added optimism among miners, leading them to actively expand their computing power. However, this had the opposite effect, as the increased difficulty impacted mining profitability, bringing it down to levels seen on January 13 when BTC was trading at $19,000.

Former CEO of BitMEX, Arthur Hayes, believes that 2023 will be highly volatile for bitcoin due to the actions of the Federal Reserve System (FRS) in the United States. However, he does not expect the cryptocurrency to reach new all-time highs this year. Hayes states, "I don't think bitcoin will reach $70,000 this year. Most likely, we will surpass that level next year after the halving. Bitcoin will continue to grow in 2025 and 2026. And then, I anticipate an apocalypse. This situation will occur when least expected... We are currently sitting on a powder keg: the US has printed a massive amount of money, there is a lack of trust in them, and people are trying to make a living for themselves," Hayes concludes.

Popular analyst Credible Crypto disagrees with him. According to his opinion, bitcoin may replicate the impulsive waves of growth observed in previous bull cycles and set a new price record as early as 2023. "I keep hearing that it's impossible for bitcoin to reach a new all-time high this year. But I think we need to compare it to the last impulse in 2020. Remember, it took bitcoin about three months to surpass the $10,000 level. But within the next two months, it increased by another 90%. And just four months later, it set a new price record, growing fivefold from $10,000. So don't tell me that anything is impossible for bitcoin. We'll see it at new highs, most likely this year," Credible Crypto burst with optimism.

The publication Business Insider has also taken an interest in expert forecasts regarding what may happen to the leading cryptocurrency by the end of 2023. Charmyn Ho, Head of Analytics at the crypto exchange Bybit, believes that bitcoin will not be able to reach a new high until the macroeconomic environment becomes clearer. It all depends on the potential forecast of a recession in the US, Europe, and other major economies due to an inverted yield curve combined with a range of other unfavorable macroeconomic factors, such as inflation. The halving factor should also be taken into account, although it is expected to occur in April 2024.

According to Jagdeep Sidhu, President of the Syscoin Foundation, despite several crypto storms, the resilience of the ecosystem remains evident. The market has recovered from the ashes of FTX, with its inherent ability to absorb shocks and evolve. If inflation in the US decreases and there is more clarity in terms of regulating digital assets, bitcoin could reach the $38,000 mark by the end of the year, which is approximately 40% higher than the current level.

According to the scenario presented by Tim Shan, Chief Operating Officer of the crypto exchange Dexalot, bitcoin is expected to trade in a range of $25,000 to $32,000 by the end of 2023. However, if inflation remains high, it may return to the lows seen earlier this year.

David Uhryniak, Director of Ecosystem Development at TRON, is confident that bitcoin will finish the year above $35,000. According to him, traders are not rushing to invest significant amounts of money and want to see which direction the leading cryptocurrency and the market as a whole will move. By Q4 2023, most of the uncertainties should disappear.

The cryptocurrency market is not solely reliant on bitcoin. It's been a while since we discussed the second most significant cryptocurrency, ethereum. This altcoin also demonstrates high volatility, and investment returns depend heavily on the entry point. For example, the coin's price increased from $90 to $4,855 from March 2020 to November 2021, a more than 50-fold gain. However, it had dropped to $880 by June 2022, losing 80% of its value. Looking at the returns from the beginning of 2018 to the present, they stand at a modest 30%.

Researchers from VanEck have presented three price scenarios for ethereum over a seven-year horizon. In the base case scenario, the coin will be valued at $11,849 in 2030. In the bullish scenario, ETH could reach $51,006, while in the unfavourable bearish scenario, ethereum would plummet to $343. "Our estimates are based on the assumption that ethereum will become the dominant global network for transactions, hosting a significant portion of the most profitable business sectors. The dominant platform is likely to capture the lion's share of the market," write the VanEck analysts.

The report also notes that ethereum is likely to become a store of wealth, much like bitcoin, but with some differences. "We argue that ETH goes beyond being a transactional currency or a commodity-like oil or gas. We believe the coin is not a full-fledged store of value like bitcoin, due to the potential for code changes in ethereum and the project's utility-focused position. Nevertheless, this cryptocurrency can become a savings asset for government organizations seeking to maximize human capital."

However, according to JPMorgan strategists, the main threat to the number one altcoin comes from government organizations. It is their pressure and selling activity that poses a challenge for ethereum, and in the near future, it may lag behind bitcoin in terms of growth. This became particularly noticeable after SEC Chairman Gary Gensler stated that "everything other than bitcoin" falls under securities laws. "Crypto tokens and crypto securities will be regulated and may even cease to exist. Bitcoin is the only commodity that the SEC does not intend to regulate. Bitcoin is the safest network and the safest asset," commented MicroStrategy CEO Michael Saylor on Gensler's statement.

At the time of writing this review on the evening of Friday, June 2, BTC/USD is trading at $27,155, and ETH/USD is trading at $1,900. The total cryptocurrency market capitalization stands at $1.149 trillion ($1.123 trillion a week ago). Bitcoin's dominance in the market is 47.51%, while ethereum accounts for 20.65%. The Crypto Fear & Greed Index has remained relatively unchanged over the past seven days and is currently in the Neutral zone at 50 points (compared to 49 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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NordFX CopyTrading: 5,343% Profit from Gold Trades

The brokerage firm NordFX has summed up the results of its clients' trading transactions for May 2023. The social trading services, CopyTrading and PAMM, as well as the profit earned by the company's IB partners, were also evaluated.

- The leader for the month was a trader from Western Asia, account number 1692XXX, who made a profit of 130,874 USD. This substantial result was achieved through trades with gold (XAU/USD) and the British pound (GBP/USD).
- The second step of the podium was taken by a representative from Southern Asia, account number 1679XXX, with a result of 33,895 USD, also made through trades with gold (XAU/USD).
- In third place was another trader from Southern Asia, account number 1549XXX, who earned 24,857 USD in May through trades with the euro (EUR/USD) and the British pound (GBP/USD).

In NordFX's passive investment services, the situation was as follows:

- In CopyTrading, we continue to track the fate of the "veteran" signal KennyFXPRO - Prismo 2K. It continues to recover from the shock of November 14, 2022, when its maximum drawdown exceeded 67%. As of today, it has achieved a profit of 348% over 757 days. Another signal under the same "brand" also draws attention: KennyFXPRO - Variables_RBB 35. In its 175 days of existence, it has shown a relatively modest profit of 40%. However, what makes this signal interesting is that this profit was achieved with a fairly moderate drawdown of 24%.

One notable start-up signal is Future Forex, whose provider managed to achieve a 91% profit from GBP/USD trades over 68 days, with a maximum drawdown of about 30%.

Finally, the super-hit of the last two months: Trade2win. In just 62 days, this signal has achieved a phenomenal profit of 5,343% from gold (XAU/USD) trades, with an equally remarkable drawdown of less than 15%. Trade2win's trading style is not overly aggressive: there are few trades, and the average leverage is far from the maximum possible, ranging between 50 and 150. Despite these impressive achievements, it's important to remember that past performance doesn't guarantee future success, and that trading in financial markets is risky. Thus, to avoid losing funds, subscribers should exercise maximum caution and always adhere to money management principles.

- The PAMM service showcase still features two accounts we have mentioned several times in previous reviews. These are KennyFXPRO-The Multi 3000 EA and TranquilityFX-The Genesis v3. On November 14, 2022, like their CopyTrading colleagues, they suffered significant losses – drawdown approached 43% at that point. However, the PAMM managers decided not to give up, and as of May 31, 2023, the profit on the first of these accounts exceeded 100%, and on the second, 66%. We also continue to monitor the Trade and Earn account. It was opened more than a year ago, but lay dormant, awakening only in November. As a result, over the past 7 months, its return has exceeded 100% with a very small drawdown of less than 10%.

Among NordFX's IB partners, the Top 3 looks as follows:
- The largest commission reward of the month, amounting to 10,370 USD, was credited to a partner from Western Asia, account No. 1645XXX.
- In second place is a partner from Southern Asia, account No. 1668XXX, who received 9,093 USD.
- The top three is rounded off by a partner from Eastern Asia, account No. 1218XXX,
 

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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Crypto Traders Vote for NordFX Once Again

The broker NordFX has once again affirmed the high quality of services it provides to its clients. Based on the results of the vote on the international Forex portal, FXDailyinfo, the company was awarded the title of "Best Crypto Trading Platform - 2023".

FXDailyInfo is a vital information resource that provides daily news and financial market analytics, including broker reviews, educational materials, bonus and promotion information, and other valuable insights for traders. The FXDailyInfo Awards, on the other hand, are annual accolades given for exceptional achievements and contributions to various segments of the financial market, awarded to companies and individuals based on the open voting of portal visitors.

In 2019, NordFX was named the "Best Cryptocurrency Broker" at the FXDailyInfo Awards. Now, four years later, the title of "Best Crypto Trading Platform" has reaffirmed NordFX's solid reputation in the world of online cryptocurrency trading. During the voting, visitors cited the following reasons for their decision:

- A wide selection of cryptocurrency pairs, allowing traders to find the most profitable trading opportunities at any given moment.
- Advanced analytical features and tools, reviews, and forecasts, which help traders make informed trading decisions.
- Cutting-edge security technologies that NordFX employs to protect its clients' funds. Unlike many cryptocurrency exchanges, NordFX has never been hacked in all its years of operation, and not a single cent of client funds has ever been stolen.
- Ease of use. The MetaTrader-4 platform has an intuitive interface, making cryptocurrency trading accessible to people of various experience levels.
- Extremely fast order execution. The presence of modern technologies allows for order execution in just 0.5 seconds, enabling NordFX traders to take maximum advantage of rapidly changing market conditions.
- The ability to profit both in rising and falling markets, without the need to physically own cryptocurrency.
- Finally, the availability of margin trading is a critical factor. It suffices to say that to open a transaction of 1 Bitcoin, you only need $150, only $15 for a transaction in 1 Ethereum, and $0.02 for a trade of 1 Ripple. This means that traders can trade cryptocurrency volumes tens and hundreds of times exceeding their own funds, which significantly boosts potential profits.
 

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 Cryptocurrency Forecast for May 29 – June 2, 2023

EUR/USD: Dollar Awaits U.S. Bankruptcy

The dollar has been rising since May 4. Last week, on May 26, the DXY Index reached 104.34. It hasn't been this high since mid-March 2023. What is driving the U.S. currency up and, consequently, pushing the EUR/USD pair down? According to analysts at Commerzbank, "the absolute calmness in the options market suggests that the driving force behind the EUR/USD exchange rate is monetary policy considerations rather than ongoing U.S. debt ceiling negotiations." It is worth noting that the probability of a rate hike at the June 14 FOMC (Federal Open Market Committee) meeting increased throughout May. At the beginning of the month, the likelihood of a rate increase was close to 0%, but by the end of the month, it reached 50%. It turns out that the U.S. economy is holding up very well compared to other economies, and the deterioration in lending has not been as severe or rapid as initially feared.

Of course, 50% is far from 100%. Moreover, the FOMC published the minutes of its latest meeting on Wednesday, May 24, and the key phrase regarding the possibility of additional tightening of monetary policy was absent. The document also revealed divergent opinions among committee members regarding further rate hikes. However, despite this, the flight to safety in anticipation of a potential U.S. default continued to support the dollar.

The United States government has been living with a debt that has already exceeded $31 trillion. If Congress does not raise its permissible limit by June 1, the U.S. will declare default. Treasury Secretary Janet Yellen has already warned about this multiple times. However, the actual date of bankruptcy may vary slightly from the "X Day" on June 1. For example, Deutsche Bank points to the end of July, while Morgan Stanley mentions either June 7-14 or July 21-28, and Goldman Sachs even suggests the end of September.

The authors of the British publication The Economist are alarming readers, stating that U.S. bankruptcy will cause a collapse in global stock markets and sow panic in the global economy. According to the estimates of the White House Council of Economic Advisers, the securities market will plummet by 45% in the first months of the crisis. Moody's agency predicts a decline of about 20%, but unemployment will increase by 5%.

As for politicians, discussions about extending the debt ceiling continue. On Wednesday, May 24th, Kevin McCarthy, the Speaker of the United States House of Representatives, noted that there is still work to be done to reach an agreement. However, he added that the country will not declare default. President Joe Biden also expressed confidence in reaching a deal with Republicans. An agreement is in the interests of both parties, as next year is an election year in the United States.

David Malpass, the President of the World Bank, stated in an interview with CNN that he does not expect a default and explained that such situations occur every few years. (For reference, the U.S. debt ceiling has existed since 1917 and has been raised 78 times since 1960).

As mentioned earlier, statistics indicate that the U.S. economy is feeling relatively confident. The GDP estimate for Q1 was revised upward from 1.1% to 1.3%. At the same time, the number of initial unemployment claims, forecasted at 250K, actually decreased to 229K. Durable goods orders increased by 1.1%. This figure followed a growth of 3.3% in March and exceeded market expectations, which anticipated a 1.0% decrease. Finally, the April National Activity Index from the Chicago Fed rose from -0.37 to +0.07.

Investment bank Goldman Sachs predicts further strengthening of the dollar due to the lack of an attractive alternative among other currencies. According to the bank's experts, there is currently no serious contender for the reserve status of the dollar in the world, including the euro. Unlike the American economy, the Eurozone does not please investors. If the preliminary estimate of Germany's GDP for Q1 was -0.1%, the reality showed a decline to -0.3%. Additionally, the Purchasing Managers' Index (PMI) for Germany's manufacturing sector declined (42.9 compared to the previous value of 44.5 and a forecast of 45.0), as did the country's business climate index (IFO) (91.7 compared to the previous value of 93.4 and a forecast of 93.0).

Starting the week at 1.0805, on May 25, EUR/USD reached a local low of 1.0701, and by the end of the five-day workweek (Friday evening, May 26), it is trading around 1.0725. As for the near-term prospects, at the moment, the majority of analysts (55%) anticipate a correction to the upside. 20% expect further strengthening of the dollar, while the remaining 25% hold a neutral position. Among the indicators on the daily chart (D1), there is a significant advantage for the dollar: 100% of oscillators are coloured in red (although a third of them signal oversold conditions for the pair), and among the trend indicators, 85% favour the red side (15% are on the green side). The nearest support for the pair is located around 1.0680-1.0710, followed by zones and levels at 1.0620 and 1.0490-1.0525. Bulls will encounter resistance around 1.0800-1.0835, followed by 1.0865, 1.0895-1.0925, 1.0985, 1.1045, 1.1090-1.1110, 1.1230, 1.1280, and 1.1355-1.1390.

The upcoming week features several notable events. The US Consumer Confidence Index will be published on Tuesday, May 30. The following day will bring unemployment and Consumer Price Index (CPI) data, while on Thursday, Germany's Purchasing Managers' Index (PMI) for business activity will be released. On June 1st, the preliminary Consumer Price Index (CPI) for the Eurozone and the minutes of the European Central Bank's latest Monetary Policy Committee meeting will be published. Additionally, a significant number of US economic data will be released, including labour market data and the Institute for Supply Management's (ISM) PMI for the US manufacturing sector. As is customary, the first Friday of summer will see another round of US labour market statistics, including the unemployment rate and the number of non-farm payroll jobs created in the country. Traders should also note that Monday, May 29, is Memorial Day in the United States, and there will be no trading.

GBP/USD: One Step Forward, One Step Back

Indeed, GBP/USD has been moving with one step forward and one step back recently. Although it appears to be heading downwards, a closer look at the chart reveals that it ended the week on Friday, May 26, at the same level it had reached in April and a week ago. On one hand, the strengthening dollar is pushing the pair down. On the other hand, hopes that inflation will prompt the Bank of England (BoE) to continue raising interest rates prevent it from plummeting into the abyss.

Fresh consumer inflation (CPI) data in the UK turned out to be significantly higher than expected. The April release showed a rise in consumer prices by 1.2% compared to the previous month's 0.8%. The core CPI reached multi-year highs, reaching 6.8% YoY instead of the forecasted 6.2%. Although the annual inflation rate slowed from 10.1% to 8.7%, it still exceeded the projected 8.2%. While it is the lowest level in 13 months, it remains well above the target level.

In response to this data, Bank of England Monetary Policy Committee member Jonathan Haskel stated that he would not comment on market prices but could not rule out further rate hikes. Another important figure, Chancellor of the Exchequer Jeremy Hunt, also expressed support for tightening monetary policy, even if it harms the economy. In an interview with Sky News, he stated that "it's not a trade-off between tackling inflation and recession; ultimately, the only route to sustainable growth is reducing inflation." Many analysts believe that if the Bank of England indeed raises rates by another 1.0%, the UK economy will fall into a recession, putting significant pressure on the pound.

At the time of writing, GBP/USD is trading around 1.2350. The current analyst consensus is nearly neutral, with 40% bullish, 30% bearish, and another 30% refraining from commenting. Among the oscillators on the D1 timeframe, 100% recommend selling (20% indicate oversold conditions). Among the trend indicators, the ratio between red and green stands at 65% to 35%. In the event of a southward movement, the pair will encounter support levels and zones at 1.2300-1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, and 1.1900-1.1920. If the pair rises, it will face resistance levels at 1.2390, 1.2480, 1.2510, 1.2540, 1.2570, 1.2610-1.2635, 1.2675-1.2700, 1.2820, and 1.2940.

As for the upcoming events in the following week, traders can enjoy a day off on Monday, May 29, in both the UK and the US as it is a public holiday. However, Thursday, June 1, is worth noting as it will reveal the Manufacturing Purchasing Managers' Index (PMI) for the country's manufacturing sector.

USD/JPY: Yen Receives "Ticket to the Moon"


Вue to the ongoing ultra-accommodative policy of the Bank of Japan (BoJ) and similar statements from its new Governor Kadsuo Ueda, the yen was the weakest currency in the DXY basket in April. With a high probability, it will retain this title in May as well. Last week, USD/JPY continued its journey to the Moon. Starting at 137.93 on Monday, it reached above 140.70 on Friday evening, with a finish slightly lower in the 140.60 zone.

According to many analysts, the dovish stance of the Bank of Japan could continue undermining the Japanese currency and suggests that the path of least resistance for USD/JPY is upwards. This is supported by prospects of further interest rate hikes by the US dollar and new rising Treasury yields, increasing the interest rate differential between the US and Japan and encouraging a flow of funds from JPY to USD.

Regarding the near-term prospects of USD/JPY, analysts' opinions are divided as follows. Currently, 75% of them are hoping for at least a short-term strengthening of the Japanese currency and a correction to the south. Only 25% of experts vote for the continuation of the upward trajectory. Among the indicators on the daily chart, the US dollar has an absolute advantage, with 100% of trend indicators and 100% of oscillators pointing north (though 25% of the oscillators indicate overbought conditions for the pair). The nearest support level is located in the 139.85 zone, followed by levels and zones at 138.75-139.05, 137.50, 135.90-136.10, 134.85-135.15, 134.40, 133.60, 132.80-133.00, 132.00, 131.25, 130.50-130.60, and 129.65. The closest resistance is at 141.40, and then bulls will need to overcome obstacles at levels 142.20, 143.50, and 144.90-145.10. The October 2022 high of 151.95 is not far from there.

There is no significant economic information related to the Japanese economy expected for the upcoming week.

CRYPTOCURRIENCIES: Bitcoin Needs a Trigger

Bitcoin remains under pressure from sellers for the tenth consecutive week. However, despite the struggle, it manages to hold its ground in the strong support/resistance zone around $26,500. On Thursday, May 25, amid the strengthening of the dollar, bears launched another attack and pushed the BTC/USD pair down to the $25,860 level. A similar attack was observed on May 12 when the pair dropped to $25,799. But both attacks were repelled, and the storm did not occur.

Investors nostalgically recall the impressive start of the leading cryptocurrency in the first quarter of this year. However, since then, a period of calm and declining trading activity to three-year lows has set in. Some analysts believe that the current price fails to generate enthusiasm among both sellers and buyers. In this situation, investors are hesitant to spend money. According to the analytics agency Glassnode, long-term holders (over 155 days) have accumulated 14.5 million BTC coins. If we add the reserves of cryptocurrency exchanges and other aggregators to this figure, it will be even higher. Even short-term speculators have fallen into a state of hibernation. The market needs a trigger, which could be either decisions by the Federal Reserve regarding monetary policy or an announcement of a US government debt default.

There are two possible scenarios: either a default will be declared (which is unlikely), or it will not. In the first case, if a default occurs, investor confidence in the US dollar as a reserve currency will sharply decline, benefiting bitcoin as a safe haven asset. In the second case, if there is no default, it will become more challenging for cryptocurrencies. To replenish cash reserves, the US Treasury will issue a large number of bonds, causing their yields to rise, and investors will prefer to invest their money in these securities rather than BTC.

However, it is important to note that the announcement of a default could have a significant impact on the stablecoin market. It is worth remembering that Tether, the issuer of USDT, is one of the largest holders of US Treasury bills, surpassing countries like Thailand and Israel. The volume of these debt securities on Tether's balance sheet is $53 billion, or 64% of its own reserves. It is these reserves that support the liquidity of USDT. If a default occurs, then 1 stablecoin will be worth not $1 but only 36 cents. Alternatively, it is possible that it will simply cease to exist along with Tether.

Indeed, the situation is highly ambiguous. Furthermore, industry participants continue to be concerned about increasing regulatory pressure. It is worth noting that in 2023 alone, the US Securities and Exchange Commission (SEC) has filed complaints against cryptocurrency exchanges Bittrex, Coinbase, Kraken, Gemini, and Genesis. Additionally, the Commodity Futures Trading Commission (CFTC) has filed a lawsuit against Binance and its CEO, Changpeng Zhao. According to Yassine Elmandjra, an analyst at ARK Invest, this situation discourages new players and has a negative impact on existing companies, prompting them to flee from the United States to more crypto-friendly countries such as the UAE, South Korea, Australia, and Switzerland. (According to Coin Metrics, bitcoin trading volume in the US has declined by 75% over the past two months, from $20 million per day in March to $4 million in May).

Michael Saylor, the CEO of MicroStrategy, believes that active regulatory intervention will actually benefit bitcoin because it will create problems for its competitors. Saylor pointed out the increased investor interest shifting towards bitcoin from other tokens. According to him, BTC's competitors naturally fall away after more persistent regulation of the industry. This became particularly noticeable after SEC Chairman Gary Gensler stated that "all but bitcoin" fall under securities laws. Saylor believes that "crypto tokens and crypto securities will be regulated, and perhaps cease to exist. Bitcoin is the only commodity that the SEC is not going to regulate. Bitcoin is the safest network and the safest asset." He expects a continuous capital outflow from the rest of the crypto space into Bitcoin, and he already sees the beginning of a new bullish cycle. (As of April 4, 2023, MicroStrategy, along with its subsidiaries, held approximately 140,000 BTC, making it one of the largest holders of the cryptocurrency. The company paid a total of $4.17 billion for them. Thus, the average purchase price was $29,803 per bitcoin).

The opposite opinion is held by Bloomberg analyst Mike McGlone, who expects a collapse in the bitcoin price to the support level of $7,366. This forecast is based on the descending movement of the 52-week moving average (MA) on the BTC chart. McGlone notes that before the powerful pump in 2020, this line, on the contrary, was moving upwards. According to the expert, the negative trend will continue, and the cryptocurrency will face challenging times. (It should be noted that not long ago, at the end of last year, McGlone was looking in a completely different direction. At that time, according to his version, bitcoin was supposed to rise to $100,000).

In the absence of fundamental triggers, experts are paying more attention to technical analysis. For example, a trader known as Dave the Wave, who has made several accurate forecasts, believes that currently Bitcoin is consolidating in the "buying zone" of the logarithmic growth curve. This curve evaluates long-term highs and lows of the leading cryptocurrency throughout its lifecycle, ignoring short-term volatility. The analyst notes that based on the current market structure, a breakout signal from the consolidation channel would be a rise above $32,000. Therefore, according to Dave the Wave, any purchase below $31,000 is still considered an excellent deal. Based on his conservative estimate, the target price for bitcoin by the end of the year should be around $40,000.

Michael van de Poppe, an analyst, trader, and founder of the consulting platform EightGlobal, informed his Twitter followers that a successful retest of support at the $26,280 level (MA200) could mark the completion of the correction and consolidation for the leading cryptocurrency. Therefore, it is advisable to buy bitcoins at such a level. "If we look at past periods, the retest of the 200-day moving average has always been an excellent time to accumulate bitcoins. Over the past six months, Bitcoin has spent a long time below this indicator, making it [BTC] undervalued. The next week will be crucial - a quick retest and bounce upward will signify the end of the bitcoin correction," explains the crypto analyst. Michael van de Poppe is confident that for bitcoin to confirm future growth, it needs to firmly establish itself above $27,000.

The well-known saying goes, "Different people, different opinions." In this case, it can be paraphrased as "Different analysts, different forecasts." The opinions of representatives from the crypto community, surveyed by the online publication BeInCrypto, also turned out to be quite contradictory. For example, the forecast of popular blogger CryptoKaleo does not exclude the possibility of bitcoin reaching a new local high. Signals that indicate a bet on the coin's growth were also noticed by a trader known as DaanCrypto. He paid attention to the bounce of BTC from the weekly MA200 moving average. From a technical analysis perspective, such behavior of the cryptocurrency may indicate the strength of buyers.

On the other hand, crypto blogger Nebraskangooner sees signals for a decline on the chart. His forecast does not rule out a drop in the cryptocurrency to $25,500. According to the blogger, this is indicated by the coin's exit from the symmetrical triangle formation on the chart. The negative Bitcoin forecast was supported by the usually optimistic analyst Inmortal, who pointed to a target level of $22,000. However, Inmortal is confident that the cryptocurrency will be able to recover its position promptly.

As of the evening of Friday, May 26, BTC/USD is trading at $26,755. The total market capitalization of the crypto market stands at $1.123 trillion ($1.126 trillion a week ago). The Crypto Fear & Greed Index has remained relatively unchanged over the past seven days and is currently in the Neutral zone at a level of 49 (48 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 May 22 - 26, 2023

EUR/USD: Why the Dollar Continues to Rise

We titled our last week’s review "Why the Dollar Rose" and detailed the reasons for the strengthening of the American currency. It's fitting to name today's fresh review "Why the Dollar Continues to Rise," and naturally, we will answer this question.

The DXY dollar index has been on the rise for the past two weeks, reaching a mark of 103.485 on May 18. This is the highest it's been since March 2023. This coincides with increasing chances of a new interest rate hike at the upcoming Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve on June 14.

A potential U.S. government debt default could have dampened the hawkish sentiment of the American Central Bank. However, firstly, the Federal Reserve has developed a system of measures since 2011 to mitigate the effects of a U.S. default on its obligations. Secondly, and most importantly, it's unlikely they will have to resort to such quantitative easing (QE). President Joe Biden has expressed confidence in reaching a deal with the Republicans. Additionally, the Republican House Speaker, Kevin McCarthy, has confirmed that a vote on the debt ceiling will take place next week.

Markets have responded to this with optimism and confidence that an economic and financial market crisis can be averted. This has boosted not only the dollar but also the S&P500, Dow Jones, and Nasdaq stock indices (noting that such a combination is extremely rare). As a result, the likelihood of raising the key interest rate to 5.5% has reached 33% (the chances were close to 0% at the beginning of May).

Lorie Logan, the president of the Federal Reserve Bank (FRB) of Dallas, and her colleague from St. Louis, James Bullard, are prepared to vote for monetary tightening. Raphael Bostic, the head of the FRB of Atlanta, does not rule out that after a pause in June, the rate could be raised at the July meeting. Neil Kashkari, the president of the FRB of Minneapolis, has also made hawkish statements. He agreed that a banking crisis could be the source of the economic slowdown. However, in his view, the labor market remains quite strong, inflation, although somewhat weakened, still significantly exceeds the target level of 2.0%, so it's too early to talk about easing monetary policy.

EUR/USD fell to a level of 1.0760 on Friday, May 19, after which the decline ceased. This slowdown was aided by a statement from European Central Bank President Christine Lagarde, who said that like the Fed, the ECB "will boldly make the necessary decisions to return inflation to 2%". Clearly, this will require further tightening of credit and monetary policy (QT) and a rate hike, as inflation (CPI) in the Eurozone is reluctant to decrease. Statistics published on Wednesday, March 17, showed that in annual terms it had increased over the month from 6.9% to 7.0%.

Economists from the Canadian investment bank TD Securities (TDS) believe that the deposit rate for the euro will rise from the current 3.25% to 4.00% by September and will be maintained at this level until mid-2024. Accordingly, after a rise of 75 basis points (bps), the key interest rate will reach 4.5%.

The picture of the past week would be incomplete without the final part, aptly titled "Why the Dollar Fell." This happened on the evening of Friday, May 19, thanks to the same Fed. More precisely, its chairman Jerome Powell. Earlier in the day, he stated that inflation was much higher than the target, this created significant difficulties, and therefore it needed to be brought back to 2%. This speech had no impact on market participants as it completely aligned with their expectations. However, in his second speech at the end of the trading week, Powell managed to shock the market. According to him, the recent banking crisis, which led to a tightening of credit standards, has reduced the need for interest rate hikes. "Our rate may not need to rise as much as we would like," Powell said, adding that "the markets have priced in a different rate hike scenario than what the Fed is forecasting."

Following these words, EUR/USD rallied north, closing the past week at a level of 1.0805. As for the near future, as of the evening of May 19, when this review was written, most analysts (55%) expect the dollar to continue strengthening. Northward corrections are expected by 30%, and the remaining 15% have taken a neutral position. Among the oscillators on D1, 100% are coloured red (although a quarter of them are signalling that the pair is oversold). Among the trend indicators, 75% point south, and 25% look north. The nearest support for the pair is located around 1.0740-1.0760, followed by zones and levels of 1.0680-1.0710, 1.0620, and 1.0490-1.0525. Bulls will meet resistance around 1.0820-1.0835, then 1.0865, 1.0895-1.0925, 1.0985, 1.1045, 1.1090-1.1110, 1.1230, 1.1280, and 1.1355-1.1390.

Noteworthy events for the upcoming week include the publication of Germany's business activity (PMI) and business climate (IFO) indices on May 23 and 24, respectively. Also, the minutes of the last FOMC meeting will be released, on Wednesday, May 24. We will know the GDP values of Germany and the US (preliminary) for Q1 2023, as well as data from the US labour market, on Thursday, May 25. To round off the working week, we are expecting data on US core durable goods orders and personal consumption expenditures on Friday, May 26.

GBP/USD: BoE Hints at a Dovish Turn

The plunge on May 11 and 12 resulted in GBP/USD being unable to maintain its position above the strong 1.2500 support level. On the past week of May 18, the pair reached the next, no less significant, support level, but couldn't break through it. After several attempts to drop below 1.2391, the pair reversed and headed north, ending the week at 1.2445. 

The economy of the United Kingdom currently, to put it mildly, doesn't look good. Inflation is still measured in double digits. And while general inflation slowed down a bit over the month, dropping from 10.4% to 10.1%, food inflation, on the other hand, is soaring: it has already reached 19.1% and may soon cross into the third decade.

In terms of bankruptcies, the United Kingdom ranked third in the world in March, after Switzerland and Hong Kong. Moreover, the wave of compulsory liquidations could turn into a full-blown tsunami as the Electricity Bill Assistance Program comes to an end. And if the government doesn't extend it, many more businesses will be buried under new bills. The only slightly reassuring thing is that the industry's share of the country's GDP is less than 20%. The service sector, which consumes significantly less energy, contributes about 75% of GDP.

The pound could have been supported by further tightening of the Bank of England's (BoE) monetary policy. However, judging by the recent statements of its leaders, the cycle of rate hikes is coming to an end, with the last increase most likely in June. Deputy Governor of the BoE, Dave Ramsden, speaking before the UK Parliament's Treasury Select Committee, stated that while quantitative tightening (QT) does have some effect on the economy, it is quite insignificant. Another Deputy Governor, Ben Broadbent, announced a reduction in QT volumes to disrupt market liquidity. However, he was only talking about the volumes of bond sales, but overall, the direction of movement is evident.

Commerzbank strategists rightly believe that the BoE's indecision in combating inflation is putting heavy pressure on the pound. Their colleagues from the Internationale Nederlanden Groep (ING) talk about the possibility that if the Bank of England maintained its hawkish stance, GBP/USD could advance to the 1.3300 mark by the end of the year. But will it maintain this stance?

At present, talking about the near-term prospects for the pair, 35% of experts maintain a bullish outlook, 55% prefer bears, and the remaining 10% prefer to abstain from forecasts. Among oscillators on D1, 75% recommend selling (20% are in the oversold zone), 10% are set to buy and 15% are painted in neutral gray. Trend indicators, as a week ago, have a 50% to 50% ratio of forces between red and green. Support levels and zones for the pair are 1.2390-1.2420, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1,2025, 1.1960, 1.1900-1.1920, 1.1800-1.1840. When the pair moves north, it will meet resistance at the levels of 1.2480, 1.2510, 1.2540, 1.2570, 1.2610-1.2635, 1.2675-1.2700, 1.2820 and 1.2940.

Key events for the coming week in the calendar include Tuesday, May 23, when preliminary business activity (PMI) data will arrive from various sectors of the UK economy. The next day will reveal the value of one of the main indicators of inflation levels, the Consumer Price Index (CPI) in the country, followed by two speeches by the Bank of England's head, Andrew Bailey. Finally, the volume of retail sales in the UK will be disclosed on Friday, May 26. 

USD/JPY: The Yen Gets Knocked Down

In April, the yen was the worst currency in the DXY basket. On ultra-dovish statements from the new Bank of Japan (BoJ) Governor Kazuo Ueda, USD/JPY soared to a height of 137.77 by May 2. After that, the banking crisis in the United States came to the aid of the yen, playing the role of a safe haven, and the pair turned downwards. But not for long…

Ueda once again struck at the national currency, commenting on Japanese inflation data. He stated that "the current inflation increase is due to external factors and rising costs, not a strengthening of demand", that "inflation in Japan is likely to slow to below 2% in the middle of the current fiscal year" and that "tightening monetary policy would harm the economy". The yen was also undermined by the GDP data for Japan published on May 17. If the country's economy fell in the third and fourth quarters of 2022, then in the first quarter of 2023, it showed an increase of 1.6% YoY.

So, if inflation falls even below 2.0% by the middle of the year, and GDP grows, why should the central bank change anything in its monetary policy and raise the interest rate? Let it stay at the previous negative level of -0.1%. That's exactly what the market participants thought, sending the yen into the abyss, and USD/JPY into flight. As a result, it updated a six-month high, reaching the height of 138.74 on May 18. The speech by the Fed Chair on the evening of Friday, May 19, slightly weakened the dollar, and the end of the week the pair met at the level of 137.93. 

Of course, this flight would not have been possible without a strengthening dollar and U.S. Treasury bonds. It is known that there is traditionally a direct correlation between ten-year treasuries and USD/JPY. If the yield on securities goes up, so does the pair. And last week, against the backdrop of the hawkish mood of the Fed, the yield rose by 8%. Another piece of not very pleasant news for the Japanese currency is that SWIFT data showed that in April, the use of the dollar in cross-border payments increased from 41.74% to 42.71%, while the share of the yen, on the contrary, fell from 4.78% to 3.51%.

Regarding the near-term prospects for USD/JPY, the votes of analysts are distributed as follows. At the moment, 35% of analysts vote for the strengthening of the Japanese currency. 45% of experts expect a continuation of the flight to the Moon, 20% remain neutral. Among the indicators on D1, the absolute advantage is on the side of the dollar: 100% of trend indicators and oscillators point north (although among the latter 20% signal the pair is overbought). The nearest support level is in the 137.30-137.50 zone, followed by levels and zones at 136.70, 135.95-136.30, 134.85-135.15, 134.40, 133.60, 132.80-133.00, 132.00, 131.25, 130.50-130.60, 129.65, 128.00-128.15 and 127.20. The nearest resistance is 138.30-138.75, then the bulls will need to overcome barriers at levels 139.05, 139.60, 140.60, 142.25, 143.50 and 144.90-145.10.

There is no significant economic information related to the Japanese economy expected to be released in the upcoming week.

CRYPTOCURRENCIES: Bitcoin Has No Intention of Retreating


Bitcoin has been under pressure from sellers for the ninth consecutive week. However, despite the difficulty, it manages to hold on, relying on strong support in the $26,500 zone, preventing it from falling to $25,000 and lower. The bearish attack attempt on Friday, May 12, was unsuccessful: after dropping to $25,800, BTC/USD reversed course and reached a local high of $27,656 on May 15. According to some experts, investors seem willing to buy. However, there are no triggers for a bullish impulse. Market participants are focused on the prospects of a US debt default on June 1, which is causing them to refrain from any significant activity. At the same time, there is an atypical situation where both the Dollar Index (DXY) and stock indices are rising simultaneously. This preservation of investor risk appetite undoubtedly provided support to the cryptocurrency market.

According to a survey conducted by Bloomberg, in the event of a default, 7.8% of professional investors and 11.3% of retail investors will choose the first cryptocurrency as a safe haven, while 7.8% and 10.2% will rely on the US dollar, respectively.

Gold remains in the first place on the list of safe-haven assets. Even though the price of the precious metal is currently near its historical high ($2,000 per ounce), it was chosen by about half of the surveyed investors from both categories. The Bloomberg report highlights the existing deficit of alternative assets to hedge against gold.

US Treasury bills became the second most popular asset (purchased by 14-15% of respondents). Bloomberg journalists see some irony in this, as these debt instruments may potentially default. Bitcoin comes in third place, slightly behind the dollar, followed by the Japanese yen and the Swiss franc. 

The debates in the US Congress regarding the debt ceiling were relatively lacklustre last week. Influencers' statements on the ceiling (and the "bottom") for bitcoin were equally sluggish and uncertain. For example, venture billionaire Chamath Palihapitiya stated that, on one hand, the devaluation of the dollar certainly stimulates the US economy, and the dominant position of the dollar in the global economy remains undisputed. However, on the other hand, he believes that in the long term, the US government is likely to face currency devaluation, and therefore, it is advisable to invest in risky assets such as stocks and cryptocurrencies.

Paul Tudor Jones, the head of hedge fund Tudor Investment Corporation, who has always been a proponent of investing in bitcoin, has now stated that the leading cryptocurrency has become less attractive in the current regulatory and economic situation. He noted that bitcoin is currently facing real problems because the entire regulatory apparatus in the United States is against cryptocurrencies. Furthermore, the billionaire expects a decrease in inflation in the US, which makes hedging assets less appealing. Bitcoin is often perceived as an asset for protection against inflation.

Paul Tudor Jones himself continues to hold a small amount of bitcoin and has no intention of selling the cryptocurrency even in the distant future. However, it appears that he has abandoned his previous plans to invest up to 5% of his wealth in BTC. Perhaps he has decided to wait out these uncertain times.

Mark Yusko, the founder and CEO of cryptocurrency hedge fund Morgan Creek Digital, has reiterated his prediction of an inevitable bull rally in the digital asset market. He believes that the "crypto summer" is likely to begin in mid-June. According to him, bitcoin could already make a significant breakthrough as a technical reversal pattern is forming on the chart. "If you look at the chart [starting from May 2022], you'll see that it's a beautiful inverted head and shoulders pattern at the $27,000 level," Yusko writes. "It's a really interesting technical pattern. And you know, I think we need some good news to give it a boost." (Regarding the need for good news, one can only agree with Mark Yusko. However, if you look at the chart starting from March 17-18, 2023, the head and shoulders pattern would point in the opposite direction). 

Glassnode, too, anticipates the arrival of the first summer month. "We are confident in our medium-term target of $35,000 as external pressures ease. The Federal Reserve will pause its interest rate hike in June [...] - optimal for upward movement [of bitcoin] throughout the summer. The dollar index has crossed below a significant moving average - explosive movements are ahead," analysts from the agency explain.

Even though summer is approaching, it has not yet arrived. As of the evening of Friday, May 19, BTC/USD is currently trading at $26,850. The total market capitalization of the crypto market stands at $1.126 trillion ($1.108 trillion a week ago). The Crypto Fear & Greed Index has remained relatively unchanged over the past seven days and is in the Neutral zone at 48 points (49 points a week ago).

And to conclude the review, in order to liven up the tranquil state of the crypto market, let's discuss a sensation. Debates have ignited online regarding the first purchase made with BTC. It turns out that the legendary pizza may not have been the actual first purchase. It has been discovered that in 2010, a user named Sabunir attempted to sell a JPEG image for 500 bitcoins, which was worth about $1 at the time. As evidence, a screenshot indicating the date of January 24, 2010, has been presented, which is four months prior to Laszlo Hanyecz's famous pizza purchase of 10,000 BTC. It is also claimed that a user named Satoshi Nakamoto even attempted to participate in the buying/selling process.

However, doubts remained as to whether it was merely an attempted sale or if the transaction actually took place. To dispel the doubt, Matt Lohstroh, co-founder of Gige Energy, conducted his own investigation. According to the obtained on-chain data, on January 24, 2010, 500 BTC (equivalent to approximately $13.3 million at the current exchange rate) were indeed received in Sabunir's wallet. This means that the transaction did take place, and therefore, this image is indeed the world's first item purchased with BTC.

So now, instead of celebrating the annual Pizza Day on May 22, will crypto enthusiasts have to mark January 24 as the Day of the JPEG Image? But what about the "Bitcoin Pizza" pizzeria owned by Morgan Creek co-founder Anthony Pompliano? It seems that "JPEG Pizza" doesn't sound quite as appetizing.
 

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 May 15 - 19, 2023

EUR/USD: Why the Dollar Rose


We named the previous review "Market at a Crossroads." We can now say that it finally made a decision and chose the dollar last week. Starting from 1.1018 on Monday, May 8, EUR/USD reached a local low of 1.0848 on Friday, May 12. Interestingly, this growth occurred despite the cooling of the U.S. economy. Not even the prospects of a U.S. debt default or the possibility of a reduction in federal fund rates could stop the strengthening of the dollar.

The slowdown in the American economy is further evidenced by a decline in producer prices (PPI) to the lowest level since January 2021, at 2.3%, and an increase in the number of unemployment benefit claims to the highest level since October 2021, reaching 264K (compared to a forecast of 245K and a previous value of 242K). Inflation in the United States, measured by the Consumer Price Index (CPI), decreased to 4.9% on an annual basis in April from 5.0% in March (forecasted at 5.0%), while the monthly core inflation remained unchanged at 0.4%.

It may have seemed that this situation would finally prompt the Federal Reserve (Fed) to start easing its monetary policy. However, based on recent statements by officials, the regulator does not intend to do so. For instance, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated that although inflation has softened slightly, it still significantly exceeds the target level of 2.0%. Kashkari agreed that a banking crisis could be a source of economic slowdown. However, he believed that the labour market remains sufficiently strong.

Following the head of the Minneapolis Fed, Federal Reserve representative Michelle Bowman also confirmed the regulator's reluctance to change course towards a more dovish stance. According to Bowman, "inflation is still too high" and "the interest rate will need to remain sufficiently restrictive for some time." Moreover, Bowman added that there is no certainty that the current policy is "sufficiently restrictive to bring down inflation," and if inflation remains high and the labor market remains tight, additional rate hikes are likely to be appropriate.

Similar conclusions have been reached by many analysts. For example, according to experts from Commerzbank, "given the slow decline in inflation, which remains well above the target level, the Fed is unlikely to consider the possibility of lowering the key rate this autumn.".

The market reacted to the prospects of maintaining (and possibly further increasing) the interest rate with a rise in the dollar. The strengthening of the American currency could have been even more significant if not for the banking crisis and the issue of the US debt ceiling.

A hawkish stance from the European Central Bank (ECB) could have aided the euro and reversed EUR/USD to the upside. However, after the May meeting of the European regulator, it appears that the end of monetary restraint is near. It is quite possible that the rate hike in June will be the last. "At this point, the ECB can only surprise with a dovish tone. [...] Euro bulls should be prepared for this," warn economists from Commerzbank.

The final note of the past week for EUR/USD was set at 1.0849. As for the near-term prospects, at the time of writing this review on the evening of May 12, the majority of analysts (65%) believe that the dollar has become too overbought, and it's time for the pair to correct to the upside. Only 15% expect further strengthening of the dollar, while the remaining 20% hold a neutral position. In terms of technical analysis, among the oscillators on the daily chart (D1), 90% are coloured red (although one-third of them are signalling the pair's oversold condition), with only 10% in green. Among the trend indicators, there are more green ones, 35%, while red ones account for 65%. The nearest support for the pair is located around 1.0800-1.0835, followed by 1.0740-1.0760, 1.0675-1.0710, 1.0620, and 1.0490-1.0530. Bulls will encounter resistance around 1.0865, followed by 1.0895–1.0925, 1.0985, 1.1090-1.1110, 1.1230, 1.1280, and 1.1355-1.1390.

The upcoming week will be quite eventful with important economic events. On Tuesday, May 16, we will see retail sales data from the United States and the ZEW Economic Sentiment indicator from Germany. Additionally, preliminary GDP data for the Eurozone for Q1 will be published on the same day. On Wednesday, May 17, inflation data (CPI) for the Eurozone will be released. Thursday, May 18th, will bring a series of US statistics, including unemployment data, manufacturing activity, and the US housing market. Furthermore, speeches by ECB President Christine Lagarde are expected on May 16 and May 19. The week will conclude with a speech by Federal Reserve Chair Jerome Powell on the last working day.

GBP/USD: BoE and GDP Upset Investors

The bulls managed to push GBP/USD higher until Thursday. Although the forecast suggested that the Bank of England (BoE) would raise the interest rate by 25 basis points at its meeting on May 11, investors were hopeful for a miracle: what if it's not 25, but 50? However, the miracle did not happen, and after reaching a high of 1.2679, the pair reversed and started to decline.

The decline continued the next day. The strengthening dollar played a role, and mixed preliminary GDP data for the UK added to the negative sentiment. The country's economy grew by 0.1% in Q1 2023, which fully matched the forecast and the growth in Q4 2022. On an annual basis, GDP increased by 0.2%, which, although in line with the forecast, was significantly lower than the previous value of 0.6%. However, in monthly terms, the GDP showed an unexpected contraction of -0.3% in March, against expectations of 0.1% growth and a previous value of 0.0%. Despite the optimistic statement by UK Chancellor of the Exchequer Jeremy Hunt that this was "good news" as the economy is growing, it did not help the pound. It was evident that the growth occurred only in January, stalled in February, and began to contract in March.

Economists at Commerzbank note that the indecisiveness of the Bank of England (BoE) in combating inflation is a negative factor for the pound. "Future data will be crucial for the BoE's next rate decision," Commerzbank states. "If a swift decline in inflation becomes evident, as expected by the BoE, they are likely to refrain from further rate hikes, which will put pressure on the sterling."

Strategists at Internationale Nederlanden Groep (ING) also believe that the rate hike on May 11 may be the last. However, they add that "the Bank of England has maintained flexibility and left the door open for further rate hikes if inflation proves to be persistent."

The plunge on May 11 and 12 resulted in GBP/USD failing to hold above the strong support level of 1.2500, and the week ended at 1.2447. However, according to 70% of experts, the bulls will still attempt to reclaim this support level. 15% believe that 1.2500 will now turn into resistance, pushing the pair further downward. The remaining 15% preferred to refrain from making forecasts. Among the oscillators on the daily chart (D1), 60% recommend selling (with 15% indicating oversold conditions), 20% are inclined towards buying, and 20% are neutral. Among the trend indicators, the balance between red and green is evenly split at 50%.

The support levels and zones for the pair are at 1.2390-1.2420, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, and 1.1800-1.1840. In the event of an upward movement, the pair will encounter resistance at levels of 1.2500, 1.2540, 1.2570, 1.2610-1.2635, 1.2675-1.2700, 1.2820, and 1.2940.

There are several notable events on the calendar in the upcoming week. The Inflation Report hearing will take place on Monday, May 15. Data on the UK labor market will be released on Tuesday, May 16. And the Governor of the Bank of England, Andrew Bailey, is scheduled to speak on Wednesday, May 17.

USD/JPY: Yen as a Shelter from Financial Storms

The yen was the worst-performing currency in the DXY basket in April. USD/JPY soared to a height of 137.77 on the ultra-dovish statements of the new Governor of the Bank of Japan (BoJ), Kadsuo Ueda. However, after that, the yen, acting as a safe haven, was aided by the banking crisis in the United States, causing the pair to reverse downwards.

As for Japanese banks, Ueda stated on Tuesday, May 9 that "the impact of recent bankruptcies of American and European banks on Japan's financial system is likely to be limited" and that "financial institutions in Japan have sufficient capital reserves." Assurances of the stability of the country's financial system were also expressed by the Minister of Finance, Shunichi Suzuki.

Currency strategists at HSBC, the largest British bank, continue to believe that the Japanese yen will strengthen further, aided by its status as a "safe haven" amidst the banking crisis and US debt issues. According to their analysis, the yen may also strengthen because the current review by the Bank of Japan does not exclude changes in its yield curve control (YCC) policy, even if it happens slightly later than previously expected. The shift in the BoJ's course could be influenced by the fact that core inflation in Japan remained stable in March, and excluding energy prices, it accelerated to a 41-year high of 3.8%. However, when comparing this level with similar indicators in the US, EU, or the UK, it is difficult to consider it a significant problem.

Meanwhile, analysts at Societe Generale, a French bank, believe that considering yield dynamics, geopolitical uncertainty, and economic trends, USD/JPY may "get stuck in narrow ranges for some time." However, they also mention that the sense that the dollar is overvalued, and the anticipation of the Bank of Japan's actions will not be easy to dismiss. The perception that the yen's recovery is only a matter of waiting for actions by the Bank of Japan lingers.

The next meeting of the Bank of Japan (BoJ) is scheduled for June 16. Only then will it become clear whether or not there will be any changes in the monetary policy of the Japanese central bank. Until that day, the USD/JPY exchange rate will likely depend largely on events in the United States.

The pair concluded the past week at 130.72. Regarding its immediate prospects, analysts' opinions are divided as follows. At present, 75% of analysts have vote for the strengthening of the Japanese currency. 15% of experts expect an upward movement, while the same percentage remains neutral. Among the oscillators on the daily chart (D1), the balance leans toward the dollar, with 65% indicating an upward trend, 20% remaining neutral, and the remaining 15% showing a downward direction. Among the trend indicators, the balance of power is 90% in favour of the green zone. The nearest support level is located in the range of 134.85-135.15, followed by levels and zones at 134.40, 133.60, 132.80-133.00, 132.00, 131.25, 130.50-130.60, 129.65, 128.00-128.15, and 127.20. The resistance levels and zones are at 135.95-136.25, 137.50-137.75, 139.05, and 140.60.

As for economic data releases, the preliminary GDP data for Japan's Q1 2023 will be announced on Wednesday, May 17. However, there are no other significant economic information expected to be released concerning the Japanese economy in the upcoming week.

CRYPTOCURRENCIES: Bitcoin Hopes for a Banking Crisis

Bitcoin has been under selling pressure for the eighth consecutive week but continues to attempt to hold within the strong support/resistance zone of $26,500. The past week once again did not bring joy to investors. As noted by WhaleWire, transaction fees within the bitcoin ecosystem reached global highs for the third time in history (similar to what was observed in 2017 and 2021). The average network speed does not exceed 7 transactions per second. As a result, those wishing to make transfers increase the amount of the transaction fee to expedite its execution. This caused the average fee on May 8 to soar to $31 per transaction. This was very frustrating for users but welcomed by miners, as for the first time since 2017, fees surpassed block rewards.

Some operators, including Binance, were unprepared for this and did not adjust the fees in time for users. Hundreds of thousands of transactions got stuck in the mempool. In order to speed up their "clearing," the largest cryptocurrency exchange suspended withdrawals twice and increased the transfer fee. The situation was exacerbated by an investigation launched by US authorities against Binance. According to Bloomberg reports, the exchange is suspected of violating sanctions related to Russia due to its invasion of Ukraine.

Panic sentiment was further heightened by the news that the cryptocurrency exchange Bittrex filed for bankruptcy on the same day, May 8 (although this procedure is expected to only affect its US subsidiary). The problems faced by Binance and Bittrex reminded investors of the FTX crash. All of this has instilled fear, uncertainty, and doubt (FUD) among participants in the crypto market, leading to a decrease in the number of active addresses to yearly lows. Bitcoin experienced a sharp decline against this backdrop.

BTC is forming a "head and shoulders" pattern on the daily chart. A trader and analyst known as Altcoin Sherpa suggested that the price of the leading cryptocurrency may soon drop to $25,000. According to his analysis, this price level coincides with the 200-day EMA, the 0.382 Fibonacci level, and has previously been tested as support/resistance. The possibility of a deeper correction, down to the $24,000 level, cannot be ruled out. However, experts at CoinGape point out that the supply of bitcoins on centralized platforms is at its lowest level since 2017. They believe this indicates that the upcoming correction may have a local character.

The strengthening of the US dollar last week also played against bitcoin. However, hopes that the banking crisis in the US will continue to support the digital market are still in the air. For many cryptocurrency enthusiasts, bitcoin is considered a safe haven and a store of value similar to physical gold, protecting against loss of funds.

The tightening of monetary policy by the Federal Reserve has reduced the value of certain assets on banks' balance sheets and decreased demand for banking services. Therefore, the likelihood of new disruptions in the traditional financial sector remains quite high. Four US banks (First Republic Bank, Silicon Valley Bank, Signature Bank, and Silvergate Bank) have filed for bankruptcy, and a dozen more are facing difficulties. According to surveys by the Gallup polling agency, half of US citizens are concerned about the safety of their funds in bank accounts.

Robert Kiyosaki, the author of the bestseller Rich Dad Poor Dad, often emphasizes that challenging times lie ahead for the US and global economy. This time, he addressed his 2.4 million Twitter followers, stating that the sharp increase in the yield of one-month US Treasury bills indicates that a recession may be approaching. He questioned whether this implies that the global banking system is collapsing and advised people to focus on gold, silver, and bitcoins. It is worth noting that Kiyosaki has previously predicted that the price of bitcoin will soon rise to $100,000. 

Michael Van de Poppe, an analyst, trader, and founder of the consulting platform EightGlobal, conducted a detailed analysis of the relationship between the banking sector and the crypto market. The stocks of American banks reacted with a decline to an attempt by Jerome Powell, the head of the US Federal Reserve, to calm the financial markets. Within a few hours after the official's speech on May 3, shares of PacWest Bancorp fell by almost 58%, and Western Alliance by more than 28%. Other credit institutions such as Comerica (-10.06%), Zion Bancorp (-9.71%), and KeyCorp (-6.93%) experienced a decline as well.

Using a 30-minute chart, Van de Poppe demonstrated that while banks were falling in price, bitcoin and gold were rising. According to the founder of EightGlobal, there is growing uncertainty and distrust among bankers towards the statements made by government officials. Such sentiments may lead to further problems in traditional markets and contribute to the continued growth of digital and physical gold.

Warren Buffett, the billionaire investor, remains steadfastly sceptical of the flagship cryptocurrency, bitcoin. At the annual Berkshire Hathaway shareholders' meeting, Buffett stated that while people may lose faith in the dollar, it does not mean that bitcoin can become the world's reserve currency. In response to this, James Ryan, the founder of Six Sigma Black Belt, pointed out that Buffett does not believe in gold either, as he believes the precious metal does not produce anything and does not generate cash flow.

By the way, Warren Buffett may be right about gold. According to research by DocumentingBTC, an investor who invested exactly $100 in physical gold ten years ago would now have only $134 in their account. But if they had invested in digital gold, they would have $25,600! That's why bitcoin is considered the best investment of the decade.

Second are NVIDIA stocks, which would have grown to $8,599. The honourable third spot goes to Tesla with an investment growth from $100 to $4,475. Apple investors could have gained $1,208, Microsoft - $1,111, Netflix - $1,040, Amazon - $830, Facebook - $818, and investing in Google stocks would have yielded $504 in the present.

To further justify the hopes of bitcoin enthusiasts, technically bitcoin needs to rise above $28,900, test $30,400, and firmly fix above the $31,000 level. However, at the time of writing this review on Friday evening, May 12, BTC/USD is trading at $26,415. The total market capitalization of the crypto market stands at $1.108 trillion ($1.219 trillion a week ago). The Crypto Fear & Greed Index has decreased from 61 to 49 points over the past seven days, moving from the Greed zone to 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 May 08 - 12, 2023

EUR/USD: The Market Is at a Crossroads

Everything happened as it was supposed to. The Federal Open Market Committee (FOMC) of the US Federal Reserve raised the federal funds rate by 25 basis points (bps) to 5.25% during its meeting on May 2 and 3. Similarly, the European Central Bank did the same on May 4, increasing the euro interest rate by the same 25 bps to 3.75%. This increase had long been factored into market quotations. Of much greater interest were the statements and press conferences of the leaders of both central banks.

Attention to Federal Reserve Chairman Jerome Powell's speech was heightened by the fact that the banking crisis had escalated earlier in the week. Shares of First Republic Bank plummeted following poor financial reports, dragging down the shares of many other banks. The US banking sector had dropped by more than 10% since the beginning of the week. This situation provided grounds for expecting that the Fed would finally shift from a tightening policy (QT) to a more accommodative one (QE), as high interest rates had been the cause of the banking crisis.

The statements made by the Fed Chairman were characteristically vague. While acknowledging some issues, Jerome Powell did not insist on maintaining peak interest rates until the end of 2023. He also indicated that although a decision to pause in the current monetary tightening cycle had not been made, it was not ruled out that the rate was already approaching its peak levels.

As a result, the derivatives market decided that the rate would be 90 basis points lower by the end of the year than it is now. Based on these forecasts, the DXY Dollar Index and Treasury yields went down, while EUR/USD moved upward. However, its growth was relatively moderate, at about 100 points. It failed to surpass the 1.1100 level, and after the ECB meeting on May 5, it even rolled back.

Statistics published on Tuesday, May 2 showed that retail sales in Germany fell from -7.1% to -.6% (forecast -6.1%), and inflation (CPI) in the Eurozone as a whole increased from 6.9% to 7.0%, according to preliminary data. Against this backdrop, the European Central Bank, like the Fed, indicated its concern about the delayed effect of tightening monetary policy, which could cause new problems in the economy. Consequently, the pace of monetary tightening should be reduced.

Although the ECB announced that, starting from July, asset sales from the balance sheet would be increased from €15 billion to €25 billion per month, investors remained unimpressed. The short-term market reacted to the possibility of winding down QT in the Eurozone by lowering the deposit rate forecast from 3.9% to 3.6% by the end of the year. This time, the euro and German bond yields fell together.

As a result, EUR/USD returned to the centre of the sideways channel of 1.0940-1.1090, in which it had been moving for two consecutive weeks. (In fact, if you exclude spikes, the channel appears even narrower: 1.0965-1.1065.)

Data from the US labour market arrived on the first Friday of the month, May 5, and provided the dollar with brief support. The number of new jobs created outside the US agricultural sector (NFP) amounted to 253K, significantly exceeding both the previous value (165K) and the forecast (180K). The unemployment situation also improved, with the rate falling from 3.5% to 3.4%, instead of the expected increase to 3.6%.

As a result, EUR/USD ended the five-day period at the 1.1018 level. At the time of writing this review, on the evening of May 5, analysts' opinions are divided as follows: 60% of them expect the dollar to weaken and the pair to rise, 30% anticipate its strengthening, and the remaining 10% have taken a neutral stance. Regarding technical analysis, among oscillators on the D1 chart, 60% are green (with 10% signalling being overbought), while the remaining 40% are neutral grey; among trend indicators, 90% are green, and only 10% are red. The nearest support for the pair is located around 1.0985-1.1000, followed by 1.0925-1.0955, 1.0865-1.0885, 1.0740-1.0760, 1.0675-1.0710, 1.0620, and 1.0490-1.0530. Bulls would encounter resistance around 1.1050-1.1070, then 1.1109-1.1110, 1.1230, 1.1280, and 1.1355-1.1390.

As for the events of the upcoming week, Wednesday, May 10, is likely to be the most important day. Inflation data (CPI) for Germany and the US will be released then. The preliminary Michigan Consumer Sentiment Index, to be published on Friday, May 12, will complement the economic picture.

GBP/USD: Pound Forecast Mostly Positive

When forecasting the past five-day period, the majority of experts (75%) had sided with the US currency. Indeed, at the beginning of the week, the dollar recouped 130 points from the pound. However, then the UK's Chartered Institute of Procurement and Supply (CIPS) began publishing PMI figures, which indicated an increase in business activity in the country. With a previous value of 52.2 and a forecast of 53.9, the Composite PMI actually grew to 54.9 points. The UK's services sector PMI showed an even more convincing increase: from 52.9 to 55.9 (forecast 54.9).

The pound received additional support from across the Atlantic Ocean. The banking crisis in the US and the vague statements from the Federal Reserve's chair allowed GBP/USD to rise to the 1.2652 mark. It had not soared that high since the beginning of June 2022. As for the final note of the past week, it sounded slightly lower, at the 1.2631 level.

There will be a bank holiday in the United Kingdom on Monday, May 8. However, a whole avalanche of events related to the country's economy awaits us afterwards. Preliminary data on manufacturing output and the UK's overall GDP will be revealed on Thursday. In addition, a meeting of the Bank of England (BoE) will be held on the same day. Most experts believe the pound's interest rate hike cycle has not yet come to an end and will be raised from 4.25% to 4.50%. After the BoE meeting, a press conference will follow, led by its governor, Andrew Bailey. As for the end of the workweek, we will learn the revised data on manufacturing output and the country's GDP on Friday, May 12.

At the moment, many experts anticipate further strengthening of the British currency and growth of GBP/USD. Here are just a few quotes.

"It seems that the belief that European banks, including British ones, are better regulated than banks in the US provides some protection for European currencies," economists from Internationale Nederlanden Groep (ING) write. "This also helps support expectations (with which we disagree) that the Bank of England may raise rates two or three more times this year. According to our latest estimates, the Bank of England may not counteract these expectations next week, leading to sterling retaining its recent achievements." ING economists believe that the GBP/USD pair could rise to 1.2650-1.2750.

Scotiabank specialists believe that upward pressure will continue to develop towards 1.2700-1.2800, although they do not rule out that this growth could be very slow. In their opinion, support is in the 1.2475-1.2525 zone.

Credit Suisse also sees the "potential for a final upward surge towards the main target at 1.2668-1.2758 – the May 2022 high and the 61.8% correction of the 2021/2022 decline." "Here, we will expect an important top to form," the specialists say. Credit Suisse also warns that if the pound weakens, the 1.2344 support should hold. However, if it is broken, a deeper pullback towards the 55-DMA and 1.2190-1.2255 support is threatened.

Strategists at HSBC, one of the largest financial conglomerates in the world, join the positive sentiment of their colleagues. "At present, the pound sterling benefits from both an improvement in investor risk appetite and a cyclical upswing," states HSBC. "We believe that the positive cyclical momentum will continue to support the British pound in the coming months. [...] Nevertheless, amid weakening lending dynamics and the waning positive impact of disinflation, GBP/USD rate may not be able to move far beyond the 1.3000 level."

As for the median forecast, currently 50% of experts are siding with the pound, 10% side with the dollar, and 40% remain neutral. Among trend indicators on D1, 100% are in favour of the green (bullish), and oscillators show a similar picture, although a third of them are in the overbought zone. Support levels and zones for the pair are 1.2575-1.2610, 1.2510, 1.2450-1.2480, 1.2390-1.2400, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, and 1.1800-1.1840. If the pair moves north, it will face resistance at levels 1.2650, 1.2695-1.2700, 1.2820, and 1.2940.

USD/JPY: Yen Finds Support from the US

At its latest meeting, the Bank of Japan (BoJ) maintained its negative interest rate at -0.1% (The last time it changed was on January 29, 2016, when it was lowered by 20 basis points). Recall that during the press conference following this meeting on April 28, the new head of the Central Bank, Kazuo Ueda, stated that "we will continue to ease monetary policy without hesitation if necessary." It seems like there's not much room left for easing, but perhaps the current -0.1% is not the limit.

The result of BoJ's head's words can be seen on the chart: within just a few hours, USD/JPY soared from 133.30 to 136.55, weakening the yen by 325 points. The growth continued during the past week: the pair recorded a local high at 137.77 on Tuesday, May 2. After that, the yen, acting as a safe haven, was supported by the banking crisis in the US. Jerome Powell's statements finished the "job" of strengthening the yen, ultimately causing the pair to drop by 428 points to 133.49.

On Friday, May 5, strong US labour market data allowed the US currency to recover some of its losses, and USD/JPY ended the workweek at 134.83.

The next BoJ meeting will take place only on June 16. Until then, the USD/JPY rate will most likely depend mainly on the dollar. Regarding the short-term prospects of the pair, analysts' opinions are distributed as follows. At the moment, only 25% of experts vote for its further growth, the same number point in the opposite direction. The majority (50%) simply shrugg, confirming that investors are currently at a crossroads and are waiting for signals that could move the market in one direction or another.

Indicators on D1 are also in doubt. Among oscillators, 50% point north, 25% have taken a neutral position, and the remaining 25% indicate south (with a third of them in the oversold zone). The ratio of forces for trend indicators is 60% to 40% in favour of the greens. The nearest support level is located in the 134.35 area, followed by levels and zones at 133.60, 132.80-133.00, 132.00, 131.25, 130.50-130.60, 129.65, 128.00-128.15, and 127.20. Resistance levels and zones are at 135.15, 135.95-136.25, 137.50-137.75, and 139.05, 140.60.

The report of the April meeting of the Bank of Japan's Monetary Policy Committee will be published on Monday, May 8. No other important economic information related to the Japanese economy is expected during the upcoming week.

CRYPTOCURRENCIES: When Will Bitcoin Wake Up?


Of course, the price of bitcoin is influenced by many specific factors. These include industry-related regulatory actions, bankruptcy of crypto exchanges and banks, and statements made by influencers shaping the crypto community's opinion. All of these factors play a role. However, one of the most important factors affecting BTC/USD is the latter half: the US dollar. The better the world's main currency performs, the worse it is for the leading cryptocurrency, and vice versa. This inverse correlation is clearly visible when comparing bitcoin charts and the US Dollar Index (DXY).

In March, anticipation of the Federal Reserve's interest rate decision locked DXY and BTC/USD in a sideways channel. The 25 basis point increase fully coincided with the forecast and was already factored into the market quotes, so the DXY's calm reaction to this move was quite logical. Bitcoin also reacted calmly to this step, remaining in the $26,500-30,000 range.

The current background remains neutral. The "bulls" are conserving their energy. In addition to the predictable Fed decision on the key interest rate, their reluctance to buy is influenced by investors' general lack of appetite for risky assets. Weak macroeconomic data from China plays a significant role here.

Another factor putting pressure on bitcoin is the profit-taking by some holders, which followed the impressive growth of the coin in Q1 of this year. Most of these were short-term speculators, who accounted for over 60% of the total realized profit.

As for the "whales," having liquidated part of their holdings, they have either gone into hibernation or returned to insignificant accumulation, prompted by the banking crisis. Recall that BTC/USD dropped to $26,933 on April 24. Market participants were already prepared to see bitcoin even lower, at the $26,500 support level, breaking which would open the way to $25,000. However, the coin unexpectedly soared to $30,020 on April 26. The reason for the surge was the fourth bankruptcy of an American bank, this time being the First Republic Bank.

According to experts at the British bank Standard Chartered, bitcoin took advantage of its status as a "brand-safe haven" for savings at the beginning of 2023, and the current situation indicates the end of the "crypto-winter." Geoff Kendrick, the head of currency research at the bank, believes that bitcoin could grow by $20,000 if the US defaults on its debts. In an interview with Business Insider, he stated that this could happen in July 2023 if Congress does not agree to raise the debt limit to a new level. However, the specialist called such a default an "unlikely" event, albeit with "massive consequences."

Kendrick believes that bitcoin will not grow linearly. Most likely, after the default, its price will fall by $5,000 in the first days or week, and then sharply increase by $25,000. As for ethereum, which, according to the analyst, trades like stocks, it is more likely to fall in the event of a default. Kendrick considers the optimal trading strategy to be opening a long position in bitcoin and a short position in ethereum. Recall that earlier, Standard Chartered stated that the first cryptocurrency could grow to $100,000 by the end of 2024. The main reasons cited were the banking crisis, halving, and the easing of the US Federal Reserve's monetary policy.

Investor Ray Dalio agrees that the first cryptocurrency is a good hedge against inflation. He admitted that he owns bitcoins, but still prefers gold. According to the billionaire, bitcoin cannot be a full-fledged alternative to the precious metal. "I don't understand why people are more inclined towards bitcoin than gold," he wrote. "Gold is the third-largest reserve asset for central banks internationally. First dollars, then euros, gold, and Japanese yen." In Dalio's opinion, the precious metal is "timeless and universal." Bitcoin, on the other hand, requires close attention from investors due to its volatility. "You have to be prepared for its significant drop, about 80% or so," warned the billionaire.

Jenny Johnson, the CEO of investment company Franklin Templeton, criticized bitcoin as the biggest distraction from real innovation, blockchain technology. She believes that bitcoin will never become a global currency because the US government will not allow it. Johnson warned that the crypto industry should prepare for tougher regulatory rules.

Senator Cynthia Lummis suggests that President Joe Biden will sign a law establishing basic guidelines for the crypto industry within the next 12 months. Meanwhile, the White House Council of Economic Advisers has proposed a 30% tax on miners to prevent them from damaging the environment, which is expected to be another way for authorities to pressure the industry seen as a threat by many officials.

Upcoming regulatory changes, along with wars and catastrophes, are just some of the many factors that Artificial Intelligence is currently unable to take into account. Therefore, relying on ChatGPT's predictions when developing trading strategies would be, to put it mildly, reckless. However, they are still of interest. According to the statement of Coinbase's Business Director, Conor Grogan, "ChatGPT clearly sympathizes with BTC, while being much more skeptical towards altcoins." Thus, according to the AI's forecast, there is a 15% chance that BTC will lose 99.9% of its value by 2035 and become obsolete. In the case of ethereum, the chances of such a scenario are 20%, with LTC - 35%, and with DOGE - 45%.

Earlier, ChatGPT stated that the price of Bitcoin could reach the mark of $150,000 already in 2024, after which it will grow on average by $25,000 per year and reach the mark of $300,000 by 2030.

Unlike ChatGPT, the trader known as Bluntz possesses human, not artificial intelligence. It was this intelligence that allowed him to correctly predict the bottom of the bearish BTC market in 2018. Now, however, he believes that the leading cryptocurrency is unlikely to sustainably establish itself above $30,000 in the foreseeable future. This opinion is based on the fact that BTC has already passed a five-wave bullish trend on the daily chart. According to Bluntz's calculations, bitcoin is currently in the middle of a corrective ABC formation, which could lead to a drop to around $25,000. After that, the trader believes the coin will rise to $32,000, and this will happen in the second half of 2023.

As of the writing of this review, on the evening of Friday, May 5, BTC/USD is trading at $29,450. The total market capitalization of the crypto market is $1.219 trillion ($1.204 trillion a week ago). The Crypto Fear & Greed Index decreased from 64 to 61 points over the past seven days, and it remains in the Greed zone.

The Bitcoin Dominance Index (the share of the first cryptocurrency in the total market capitalization of the crypto market) is currently at 46.9%. According to the legendary trader, analyst, and CEO of Factor LLC, Peter Brandt, this indicator is preparing for a breakthrough after a two-year consolidation in the form of a large rectangle. While the trend is within a "limiting range," the exit from it will be crucial for the asset, explained the expert. Over the past five years, the BTC share has fallen to 32.4% in 2018 and risen to 71.9% in 2021. The indicator is likely to surpass the 50% mark to begin a bullish movement. "I believe that bitcoin will bury all the imposters. In the end, there will be only one king of the hill," Peter Brandt wrote.
 

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 Cryptocurrency Forecast for May 1 - 5, 2023

EUR/USD: Awaiting Fed and ECB Meetings


The main factor determining the dynamics of the US Dollar Index (DXY) and, consequently, the EUR/USD pair last week was… silence. If recently, the speeches of Federal Reserve representatives were almost the most important market guide, then a silence regime has been in effect since April 21. Leading up to the press conference by Fed Chairman Jerome Powell following the FOMC's May meeting, all officials are instructed to maintain silence. Only a few days remain until the FOMC (Federal Open Market Committee) meeting, where a decision regarding the regulator's future monetary policy will be made, scheduled for May 2/3. Furthermore, on Thursday, May 4, there will be a meeting of the European Central Bank, where an interest rate decision will also be made. In general, the upcoming five-day period promises to be, at the very least, not dull.

Of course, macroeconomic data and events from both sides of the Atlantic caused certain fluctuations in EUR/USD last week. However, the final result was close to zero: if on Friday, May 21, the last chord sounded at the 1.0988 mark, then on Friday, May 28, it was placed not far away: at the 1.1015 level.

One event worth highlighting was the publication of the First Republic Bank (FRC) report, which ranks among the top 30 US banks by market capitalization. It was this report that led to the dollar's decline and the pair's surge by more than 100 points on Wednesday, April 26.

It seemed that the banking crisis caused by the tightening of the Federal Reserve's monetary policy (QT) was beginning to fade... US Treasury Secretary Janet Yellen even assured the public of the resilience of the banking sector. But then... a new flare-up called First Republic Bank (FRC). To prevent its bankruptcy and support its liquidity in Q1 2023, a consortium of banks transferred $30 billion in uninsured deposits to FRC. Another $70 billion in the form of credit was provided by JPMorgan. However, this was not enough: the bank's clients began to scatter, and FRC shares collapsed by 45% in two days and by 95% since the beginning of the year. In March alone, clients withdrew $100 billion from the bank. Thus, First Republic Bank has a very high chance of becoming number 4 in the lineup of bankrupted major US banks. And if the Fed does not stop its QT cycle, there is a very high probability that numbers 5, 6, 7, and so on will appear on this list.

However, as we have already detailed in our previous review, at the meeting on May 2/3, the key rate will be raised by only 25 basis points (FedWatch from CME estimates the probability of this at 72%). After that, the US Central bank is likely to take a pause. As stated by the President of the Federal Reserve Bank of Atlanta, Raphael Bostic, "one more increase should be enough for us to step back and see how our policy is reflected in the economy." It should be noted that the 25 bp rate hike has long been factored into market quotations. Therefore, immediately after the news about FRC and the surge to 1.1095, EUR/USD returned to a comfortable state for itself.

At the time of writing the review, on Friday evening, April 28, analysts' opinions were divided as follows: 35% of them expect the dollar to weaken and the pair to rise, 50% expect it to strengthen, and the remaining 15% have taken a neutral position. As for technical analysis, among oscillators on D1, 85% are coloured green, 15% are neutral-grey, among trend indicators, 90% are green, and 10% have changed to red. The nearest support for the pair is located in the area of 1.0985-1.1000, followed by 1.0925-1.0955, 1.0865-1.0885, 1.0740-1.0760, 1.0675-1.0710, 1.0620, and 1.0490-1.0530. Bulls will encounter resistance in the area of 1.1050-1.1070, then 1.1110, 1.1230, 1.1280, and 1.1355-1.1390.

In addition to the aforementioned FOMC and ECB meetings, we can expect a substantial amount of economic data next week. On Monday, May 1, the ISM Manufacturing PMI for the US will be published. The next day, the value of a similar index, but for Germany, will become known. Also, on Tuesday, May 2, we will learn about the inflation situation in the Eurozone, as the Consumer Price Index (CPI) will be released. Furthermore, on May 2, 3, 4, and 5, we will get a flurry of US labour market data. Important indicators such as the unemployment rate and the number of new non-farm jobs in the US (NFP) are among these, they will traditionally be published on the first Friday of the month, May 5.

GBP/USD: BoE vs. Fed: Who Will Win the Battle of Interest Rates?

The Bank of England (BoE) meeting will take place a week after the Fed's meeting, on Thursday, May 11. Most experts believe that the cycle of interest rate hikes for the pound is not yet over, which supports the British currency.

Recent data on inflation for March contribute to these forecasts. The Consumer Price Index (CPI) in annual terms once again reached a double-digit figure, 10.1%, which is higher than the forecast of 9.8%. To bring this indicator below the psychologically important mark of 10.0%, the BoE is highly likely to continue following the Fed's example. Market participants expect the regulator to raise the interest rate by 50 basis points on May 11: from 4.25% to 4.75%. No more effective ways to curb inflation have been devised so far. And if it continues to remain so high, it will harm both the consumer market and the overall UK economy.

Since the beginning of April, we have observed a sideways trend. However, GBP/USD finished the past five-day period at the 1.2566 mark, unexpectedly breaking the upper boundary of the channel. Perhaps the reason for the jump was the closing of trading positions at the end of the month. Currently, 75% of experts are in favor of the dollar, and only 25% side with the British pound. Among oscillators on D1, the balance of power is as follows: 85% vote in favor of the green (with a third of them being in the overbought zone), and the remaining 15% have turned neutral-grey. Trend indicators are 100% on the green side. Support levels and zones for the pair are 1.2450-1.2480, 1.2390-1.2400, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, and 1.1800-1.1840. As the pair moves north, it will encounter resistance at the levels of 1.2510-1.2540, 1.2575-1.2610, 1.2700, 1.2820, and 1.2940.

Regarding important statistics on the state of the UK economy for the upcoming week, on Tuesday, May 2, the Manufacturing Purchasing Managers' Index (PMI) will be published. Then, on May 4, we will learn the value of the PMI for the services sector as well as the composite business activity indicator for the UK as a whole. Traders should also be aware that there will be a bank holiday in the country on Monday, May 1.

USD/JPY: Bank of Japan - Heading for Softer Ultra-Soft Policy

Forecasting the interest rate of the Bank of Japan (BoJ) is quite simple and very, very boring. As a reminder, it is currently at a negative level of -0.1% and was last changed on January 29 of the distant 2016, when it was lowered by 20 basis points. This time around, at its meeting on Friday, April 28, the regulator left it unchanged at the same -0.1%.

But that's not all. Many market participants were expecting that with the arrival of the new Central bank governor, Kazuo Ueda, the regulator would eventually change course towards tightening. However, contrary to these expectations, during his first press conference following his first meeting on April 28, Ueda stated, "We will continue to ease monetary policy without hesitation if necessary." One might wonder how much softer it could get, but it turns out that the current -0.1% is not the limit.

The result of the BoJ governor's words can be seen on the chart: in just a few hours, USD/JPY soared from 133.30 to 136.55, weakening the yen by 325 points. Of course, it's still far from the October 2022 peak, but a rise to the 137.50 level no longer seems entirely unrealistic.

The pair ended the past week at the level of 136.30. Regarding its near-term prospects, analysts' opinions are distributed as follows: currently, only 25% of experts vote for the pair's further growth, 65% point in the opposite direction, expecting the yen to strengthen, and 10% simply shrug. Among the oscillators on D1, 85% point upward (a third of them are in the overbought zone), while the remaining 15% remain neutral. Trend indicators show 90% looking north, and 10% pointing south. The nearest support level is in the 136.00 area. Next are the levels and zones at 135.60, 134.75-135.15, 132.80-133.00, 132.00-132.40, 131.25, 130.50-130.60, 129.65, 128.00-128.15, and 127.20. Resistance levels and zones are at 137.50 and 137.90-138.00, 139.05, and 140.60.
 Regarding events characterizing the state of the Japanese economy, none are expected in the coming week. Moreover, the country is looking forward to a series of holidays: May 3 is Constitution Day, May 4 - Greenery Day, and May 5 is Children's Day. As a result, the dynamics of USD/JPY will depend entirely on what is happening on the other side of the Pacific Ocean, in the United States.

CRYPTOCURRENCIES: Awaiting the 2024 Halving

BTC/USD continued to decline on Monday, April 24 and, after breaking the support at $27,000, fell to $26,933. Market participants were already prepared to see bitcoin go even lower at the strong support level of $26,500. However, it unexpectedly soared to $30,020 on April 26. The main cryptocurrency was saved, as it has been many times before and will be many times again, by a weakened dollar. The cause of the shock was the problems of First Republic Bank, which followed a series of bankruptcies of crypto-friendly banks, as discussed above.

The correlation between the crypto and banking industries arises thanks to the following chain of events: 1) Tightening of the Federal Reserve's monetary policy hits banks, lowering their asset prices, reducing demand for their services, and causing customers to flee. 2) This situation creates serious difficulties for some banks and leads to the bankruptcy of others. 3) This can force the Fed to pause its cycle of raising interest rates or even lower them. Additionally, the regulator may restart the printing press to support bank liquidity. 4) Low rates and a flow of new cheap money lead to a decrease in the value of the dollar and allow investors to direct these funds into risky assets such as stocks and cryptocurrencies, which leads to an increase in their quotes. We have already seen this during the COVID-19 pandemic and may see it again in the near future.

According to former Goldman Sachs top manager and macro-investor Raoul Pal, the Federal Reserve (Fed) is likely to have finished its saga of raising interest rates. He has also predicted an upcoming recession that will force the regulator to "change course" and support the markets by printing money. In that case, he believes that risky assets are in for an "inevitable liquidity wave." This capital influx will "enlighten" the crypto industry with new innovations, and the number of people using digital assets will increase from the current 300 million to over 1 billion.

According to experts from the British bank Standard Chartered, bitcoin has benefited from its status as a "brand refuge" for savings at the beginning of 2023, and the current situation indicates the end of the "crypto winter". Standard Chartered believes that recent turmoil in the banking sector, stabilization of risky assets due to the end of the Fed's interest rate hike cycle, and increased profitability in the crypto mining industry will contribute to BTC's further growth. In addition, the adoption of the first EU framework for regulating crypto markets by the European Parliament could also support the leading cryptocurrency. The upcoming halving event will also impact BTC's growth, with bitcoin potentially reaching $100,000 by the end of 2024.

It should be noted that the topic of halving is becoming more and more prevalent. The Bitcoin Archive press service reminds us that it is less than a year away, with the procedure scheduled for April 6, 2024, as of April 24, 2023. However, this date is not final and may change, as it has in the past.

Some market participants believe that this event will be crucial for the future price of the flagship cryptocurrency. They believe that cycles for cryptocurrencies are consistent, and BTC quotes will reach new record highs a year or a year and a half after halving, as happened in previous cycles. Others argue that the market situation has changed. Bitcoin has become a mass phenomenon, and now "other laws and rules apply to the cryptocurrency", so other factors will become decisive, not just the halving of mining rewards.

It is worth noting that the second group of specialists includes Bloomberg Intelligence analyst Jamie Coutts, who predicts that the price of bitcoin will rise to $50,000 before April 2024. "The price of bitcoin bottoms out when there are 12-18 months left until the halving. The structure of the current cycle is similar to previous ones. However, many factors have changed: the network has become significantly more resilient, and bitcoin has never experienced a prolonged economic downturn," Coutts said. If his forecast is correct, the asset will appreciate by about 220% from the low reached last November before the halving.

The expert and trader known as Doctor Profit reminded of his previous statement that the bottom for bitcoin was reached at the level of $15,400, and it is unlikely that we will see another drop to this level. The dump in November 2022 was a complete capitulation, including for bitcoin miners, some of whom were forced to sell their coins and equipment at a loss. According to Doctor Profit, BTC is currently in an accumulation phase, neither in a bull nor in a bear market. At the same time, the specialist has advised traders to closely monitor the correlation between the Chinese stock market and bitcoin, believing that China will lift the ban on cryptocurrencies and legalize them, which will have a very positive long-term effect on their price.

Another analyst under the nickname DonAlt also excludes a drop in BTC/USD to the lows of November 2022. At the same time, he allows for a correction down to $20,000, which, in his opinion, will be a good level to replenish the reserves of the main cryptocurrency.

It's been a while since we quoted the popular analyst under the nickname PlanB, known for his Stock-to-Flow (S2F) model. He continues to assert that the predictions he makes based on this model continue to come true. "Before the halving, we can expect $32,000 for bitcoin, then $60,000. Then [after the halving] $100,000 will become the minimum, and the maximum rate could reach $1 million. But on average, after the next halving, the BTC rate should reach $542,000," wrote PlanB. At the same time, the analyst emphasized that the behaviour of the crypto market fully corresponds to S2F, so its critics are simply unfounded.

It is worth noting that PlanB is not alone in his super-optimistic predictions for the price of bitcoin, which legendary Warren Buffett called "rat poison squared." Robert Kiyosaki, the author of the popular book Rich Dad Poor Dad, believes that the value of the flagship cryptocurrency will rise to $500,000 by 2025. And at Ark Invest, looking a decade ahead, they named a figure of $1 million per coin.

As of the evening of Friday, April 28, BTC/USD is trading at $29,345. The total market capitalization of the crypto market is $1.205 trillion ($1.153 trillion a week ago). The Crypto Fear & Greed Index has increased from 50 to 64 points over the past seven days, moving from Neutral to 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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April Results: Gold Emerges as the Top Choice Among NordFX's Top 3 Traders Again

NordFX brokerage company has summed up the performance of its clients' trade transactions in April 2023. The services of social trading, PAMM and CopyTrading, as well as the profit received by the company's IB-partners have also been assessed.

- The maximum profit this month was earned by a client from East Asia, account №1543XXX, who made 25,086 USD through transactions with gold (XAU/USD), bitcoin (BTC/USD), and the Japanese Yen (USD/JPY).

- The second place in the Top 3 was taken by a trader from Southeast Asia, account №1686XXX, with a result of 23,341 USD, which was also achieved through transactions with gold (XAU/USD).

- The same precious metal allowed the owner of account №1687XXX from East Asia to earn a profit of 22,250 USD and secure the third position on the pedestal of honor.

The situation in NordFX passive investment services is as follows:

- In CopyTrading, the long-standing signal "veteran" with a complex name, KennyFXPRO - Prismo 2K, continues to be noticeable. Its profit amounted to 348% over the course of 726 days. Let us remind you that this signal faced significant challenges last November, as the maximum drawdown surpassed 67%. In all fairness, it should be noted that such an impressive failure was a one-time occurrence, and KennyFXPRO - Prismo 2K has been fairly stable for the rest of the time.
The same provider introduced another signal last December, with an even more intricate name: KennyFXPRO - Variables_RBB 35. In its 144 days of existence, it has demonstrated a modest 27% profit with a reasonably moderate 24% drawdown. If the provider of this signal manages to prevent it from experiencing more serious setbacks, it could potentially become a strong competitor to its "senior colleague" in the future.

The performance of the signal ATFOREXACADEMY ALGO 1, which we discussed in our previous review, ended in disaster. During its initial 100 days, it exhibited a remarkably high yield of 202%. However, April proved to be extremely unfavorable for it, with a drawdown of over 90%, once again reminding us that trading in financial markets is a highly risky endeavor.

Lastly, in reviewing April, the startup signal Trade2win deserves attention. Existing for just one month, it has shown an impressive outcome on gold trades, with a return of 2,290% and a maximum drawdown of less than 15%. Relentless statistics indicate that even less aggressive trading strategies can lead to a complete loss of funds, thus investors must exercise extreme caution. We will observe and see what happens with this signal in May.

 - Two accounts, which we have previously mentioned in our past reviews, are still present on the PAMM service showcase. These are KennyFXPRO-The Multi 3000 EA and TranquilityFX-The Genesis v3. They suffered serious losses in mid-November 2022: the drawdown at that moment approached 43%. However, the PAMM managers have decided not to give up, and as of April 30, 2023, the profit on the first account has approached 90%, while on the second account it has surpassed 58%.

In April, we continued to monitor the Trade and earn account. It was opened more than a year ago, but was in a state of hibernation, waking up only in November. As a result, the yield on it has exceeded 76% over the past 6 months with a very small drawdown of less than 10%.

Among the IB partners, NordFX TOP-3 is as follows:
- the largest commission, 5,348 USD, was credited to a partner from West Asia, account No.1621ХXХ;
- next is partner from South Asia, account No.1618XXX, who received 3,991 USD;
- finally, their compatriot with account №1517XXX completes the top three, earning a reward of $3,876 USD.

***

In summarizing the month, it is important to remind traders that they now have an excellent opportunity to boost their budget. NordFX has launched another super lottery for its clients this year, in which over 200 cash prizes totaling 100,000 USD will be drawn. It is very easy to take part in the lottery and get a chance to win one or even several of these prizes. All the 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 and is divided in 2023 into 202 prizes from $250 to $1,800 plus 3 super prizes of $5,000 each.

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 NordFX.

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 Cryptocurrency Forecast for April 24 - 28, 2023

EUR/USD: Rate Forecast: USD +0.25%, EUR +0.50%

Due to the lack of significant economic news, the EUR/USD dynamics in recent days has been determined by statements by representatives of mega-regulators regarding interest rate hikes at the upcoming meetings of the US Federal Reserve on May 2/3 and the ECB on May 4.

The U.S. dollar index (DXY) rose following a statement from Federal Reserve representative Christopher Waller, who said that despite the most aggressive monetary policy tightening since the 1980s, the Fed has "not made substantial progress" in returning inflation to its target level of 2%, and that interest rates still need to be raised. As a result, DXY broke through the resistance of 102.00 on Monday, April 17 and reached the level of 102.22.

Raphael Bostic, President of the Federal Reserve Bank of Atlanta, seemed to support his colleague, but at the same time said that "another increase should be enough for us to step back and see how our policy affects the economy."

According to Philadelphia Fed President Patrick Harker, the US Central Bank may soon finish raising interest rates, after which there may be a pause of almost a year and a half. "Since the full impact of monetary policy measures on the economy can take up to 18 months, we will continue to carefully analyze available data to determine what additional actions we may need to take," said Harker, speaking as part of the Wharton Initiative on Financial Policy and Regulation.

Another member of the FOMC (Federal Open Market Committee), Cleveland Fed President Loretta Mester, agreed that the Fed is close to completing the rate hike cycle. However, since inflation in the U.S. remains too high, Mester believes that "the interest rate needs to be raised to a level above 5% and maintained there for some time." At the same time, Ms. Mester did not specify how much "above" 5% (as the current rate is already at 5.00%) and what duration constitutes "some time."

On Wednesday, April 19th, the Beige Book was published: an economic review by the Federal Reserve, which is based on the reporting documents of the 12 Federal Reserve Banks that make up its system. The analysis of the document's content can be summarized in the following points: 1) economic conditions have somewhat cooled in recent weeks, while inflation continues to remain relatively high; 2) wage growth has slightly slowed down but also remains high; 3) the overall price level moderately increased during the reporting period, although the pace of price growth appears to have slowed down.

Taking into account the content of the Beige Book and the statements of FOMC members, the market concluded that the regulator will raise the rate by another 25 bps (basis points) at its meeting on May 2/3, after which it will take a pause. According to the WIRP forecast, the probability of such a rate hike is now about 90%, compared to 80% at the beginning of last week and 50% at the beginning of April. And this is already included in the price. The quotes still take into account one possible rate cut at the end of the year (two cuts were previously predicted).

More clarity may appear in early summer. But two more employment reports, two CPI/PPI reports and one retail sales report will be released between the May 2/3 and June 13/14 meetings. It is clear that all these data can seriously affect the further policy of the Federal Reserve.

As for the situation on the other side of the Atlantic, the Consumer Price Index (CPI) published on Wednesday, April 19, showed that inflation in the Eurozone fell from 8.5% to 6.9% y/y. But since such a decline was fully consistent with the forecast, it did not have much impact on the pair's quotes.

The Minutes of the ECB's March monetary policy meeting were published the next day, on Thursday, May 20. According to this document, the overwhelming majority of the members of the Governing Board agreed with the proposal of Chief Economist Philip Lane to raise the key rate by 50 bps, after which it will reach 4.00%.

The situation described above led to the fact that the DXY Dollar Index consolidated in the area of 101.70-102.00, and EUR/USD stayed in the range of 1.0910-1.1000. S&P Global made a small contribution at the very end of the working week, it published preliminary data on the US Purchasing Managers' Index (PMI) for April. With a forecast of 52.8 and a previous value of 52.3, the Composite PMI came in at 53.7, which supported a certain degree of optimism regarding the state of the U.S. economy. But not for long.  As a result, EUR/USD put the last chord almost at the upper limit of the weekly channel, at around 1.0988.

At the time of writing, on the evening of Friday, April 21, analysts' opinions are divided almost equally: 35% of them expect further weakening of the dollar, 35% - its strengthening, and the remaining 30% have taken a neutral position. As for technical analysis, all the trend indicators on D1 are colored green, as for the oscillators, these are 85%, 15% have changed color to red. The nearest support for the pair is located in the area of 1.0925-1.0955, then 1.0865-1.0885, 1.0740-1.0760, 1.0675-1.0710, 1.0620 and 1.0490-1.0530. The bulls will find resistance around 1.1000-1.1015, then 1.1050-1.1070, then 1.1110, 1.1230, 1.1280 and 1.1355-1.1390.

We expect a lot of economic statistics next week, especially from the United States. The US Consumer Confidence Index will be known on Tuesday, April 25. The next day, statistics on the volume of orders for capital goods and durable goods will be received from the United States. On Thursday, April 27, data on unemployment and GDP will be known, and on Friday - on personal consumption expenditures in the United States. At the very end of the working week, there will also be a lot of information about the state of the economy of Germany, the main locomotive of the EU. These are the country's GDP indicators, unemployment data, as well as such an important indicator of inflation as the Consumer Price Index (CPI). However, one thing not to expect in the upcoming week is speeches from Federal Reserve representatives, as a silence period began on April 21 and will last until the press conference by Fed Chairman Jerome Powell following the May meeting, with no other statements being made during this time.

GBP/USD: Things Are Not as Bad, But Not as Good Either

The inflation data for March in the United Kingdom, published on Wednesday, May 19, turned out to be not very bad, but not quite good either: in March, the CPI dropped from 10.4% YoY to only 10.1%, while the market was expecting a decline to 9.8%. The fact that consumer prices remain high has given reason to expect that the Bank of England (BoE) will continue to raise interest rates. And this, in turn, supported the British currency a little.

The seasonally adjusted S&P Global/CIPS Purchasing Managers' Index (PMI) in the UK manufacturing sector, with a growth forecast of 48.5, has actually fallen from 47.9 to 46.6 over the month. On the other hand, the preliminary Index of business activity in the service sector presented a surprise: with the forecast and the March value of 52.9, it jumped to 54.9 in April. Thus, the composite PMI improved from 52.2 in March to 53.9 in April.

Commenting on this positive outcome, Dr John Glen, Chief Economist at the UK's Chartered Institute of Procurement and Supply (CIPS), said it was the fastest recovery for the year, which showed that "businesses are taking advantage of the pockets of recovery emerging in the UK economy, and activity levels have risen sharply thanks to new orders and improved supply chain performance."

The UK Office for National Statistics reported on Friday April 21 that retail sales fell 0.9% in March after a 1.1% increase in February. The data turned out to be weaker than the forecast, which suggested a decline of 0.5%, which put pressure on the pound.

GBP/USD started the past five days at 1.2414, and ended nearby at 1.2442, showing a sideways movement against the background of multidirectional statistics. At the moment, 45% of experts side with the pound and expect further growth of the pair, 35% side with the dollar and 20% vote for the continuation of the sideways trend. Among the oscillators on D1, the balance of power is as follows: 35% vote in favor of green, 25% have turned red and 40% prefer neutral gray. Trend indicators are 100% on the side of the greens. Support levels and zones for the pair are 1.2390-1.2400, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, 1.1800-1.1840. When the pair moves north, it will face resistance at the levels of 1.2450-1.2480, 1.2510-1.2540, 1.2575-1.2610, 1.2700, 1.2820 and 1.2940.

No important statistics on the state of the UK economy are expected in the coming week.

USD/JPY: No BoJ Surprises Expected

USD/JPY rose to its highest level in six weeks, reaching the height of 135.13 on April 19. The fall of the yen was exacerbated by the data of the Ministry of Finance on Japan's trade deficit for the 2022 fiscal year. The figure was $160 billion, setting an anti-record since 1979. At the same time, the mood is quite positive in the semi-annual report of the Bank of Japan, published on April 21, since "the Japanese financial system as a whole remains stable," and the expectation of inflation falling to the target 2% runs like a red thread through all statements.

The historic meeting of the Bank of Japan (BoJ) will take place next week, on Friday, April 28. Historic not because any revolutionary decisions may be made, but because it will be the first one chaired by the new Central Bank Governor Kazuo Ueda, following the departure of Haruhiko Kuroda. Citing a number of informed sources, Reuters reported that the regulator is likely to maintain an ultra-loose monetary policy at this meeting, without making any changes to the interest rate targets and the yield corridor. Recall that the rate is at a negative level of -0.1%, and the last time it changed was on January 29 of 2016, when it was lowered by 20 bps.

Three main factors can support the yen: investor risk flight, the weakening of the dollar due to the easing of the Fed's monetary policy and a decrease in Treasury yields. Recall that there is a direct correlation between ten-year US bonds and USD/JPY. If the yield on Treasury bills falls, the yen shows growth, and the pair forms a downtrend.

USD/JPY ended the last week at the level of 134.12. Regarding its immediate prospects, the opinions of analysts are distributed as follows. At the moment, 35% of experts vote for the growth of the pair, 65% point in the opposite direction, expecting the yen to strengthen. Among the oscillators, 90% point to D1 (10% of them are in the overbought zone), the remaining 10% adhere to neutrality. Trend indicators have 75% looking to the north, 25% pointing to the south. The nearest support level is located in the 134.00 zone, followed by the levels and zones 132.80-133.00, 132.00-132.40, 131.25, 130.50-130.60, 129.65, 128.00-128.15 and 127.20. The resistance levels and zones are 134.75-135.15, 135.90-136.00, 137.00, 137.50 and 137.90-138.00.

The meeting of the BoJ and the subsequent press conference of the leadership of this regulator was mentioned above. As for the release of any important statistics on the state of the Japanese economy, it is not expected in the coming week.

CRYPTOCURRENCIES: Bitcoin Falls, but Optimism Grows


The bulls have struggled to keep BTC/USD above the $29,000 support since April 10. However, it still fell on Thursday, April 20, pulling other cryptocurrencies with it and causing a wave of closing long positions. There was no obvious reason for this drawdown, beautifully named Coinglass. Some analysts believe that against the backdrop of a news vacuum, technical signals have come to the fore. And perhaps some growth in the DXY Dollar Index on April 14-17 played a role. But, despite this fall, according to many experts, the prospects for bitcoin look quite optimistic, which is confirmed by both network metrics and macroeconomic factors. Investors' appetites are fueled by a good start of the flagship cryptocurrency, which showed a yield of 70% in Q1. Thanks to this, Goldman Sachs experts called it the most effective financial asset in 2023.

According to analytics agency Glassnode, despite the collapse of FTX and tightening crypto regulation, the holdings of long-term holders (addresses with coins that have been idle for more than 155 days) rose to 14.2 million BTC. This is near the all-time high and suggests that coin owners are counting on their growth in the future.

At the moment, there is no clear understanding of the future monetary policy of the US Federal Reserve. But it is the behavior of the American mega-regulator that is decisive for the dollar exchange rate, and as a result, determines in which direction the BTC/USD scales will swing. Robert Kiyosaki, author of the popular book Rich Dad Poor Dad, spoke again this week about the inevitability of financial turmoil and called on investors to invest more in bitcoin, gold and silver. The businessman promised that he would increase reserves in digital currency in the near future, as he does not trust the US Federal Reserve and the economic policies of the Joe Biden administration. According to Kiyosaki's forecast, if big capital becomes more active in physical and digital gold, their price will rise to $5,000 and $500,000 by 2025, respectively.

It should be noted here that, according to Glassnode, the correlation coefficient between XAU and BTC is growing and now exceeds 0.85. Such a connection of bitcoin with the classic safe-haven asset can provide it with serious support, since gold has already approached its all-time high and is preparing to update it.

Ark Invest looked even further into the future than Robert Kiyosaki and called the timing of bitcoin's reaching $1 million. “In the next decade, the value of bitcoin could reach $1 million as the digital economy grows,” said Yassine Elmandjra, an analyst at the company. He acknowledged that the 30x coin price growth forecast looks incredible, but it is “quite reasonable” if you look at the history of cryptocurrency development.

According to the Ark Invest analyst, statements that it is now too late to invest in BTC are wrong. The expert noted the impressive performance of bitcoin in recent times, which now makes digital gold an attractive component of investment portfolios. According to Elmandjra, a reasonable share of bitcoin in institutions should be between 2.5% and 6.5%, depending on the overall return of the portfolio and risk appetite.

Bobby Lee, the founder of the Ballet app and the former CEO of the BTCC China crypto exchange, have taken a similar position. In his opinion, against the backdrop of the banking crisis, digital currencies have demonstrated the qualities of safe-haven assets. “People have begun to realize that their money in the bank is not necessarily in place. Institutions lend these funds to other enterprises and firms. And cryptocurrencies like bitcoin provide self-storage and full control over resources". At the same time, Lee has noted signs of bitcoin's recovery after the crypto winter of 2022. “It has been like this for a long time. Cryptocurrency has four-year cycles [...] and now we have practically recovered. It looks inspiring,” said the industry veteran.

According to a report by Matrixport researchers, the price of bitcoin hit its predicted low in November 2022. The analysts explained that BTC historically bottomed out 515-458 days before the next halving. This event is scheduled for April 2024; hence the predicted low was between November 2022 and January 2023. And so it happened. This gives reason to expect that this model will continue to work further, and the value of the coin will rise to at least $63,160 by the spring of 2024.

As for the near-term prospects, the analytical agency K33 predicts the growth of BTC/USD by another 50% in the next 30 days. The analysis is based on the surprising similarity of the 2018 and 2022 cycles. So, in both cases, it took about 370 days to reach the bottom from the historical high, and recovery to 60% took another 140 days. Further extrapolation suggests that bitcoin will trade around $45,000 in the last decade of May.

The forecast of Galaxy Digital CEO Mike Novogratz looks more modest and stretched in time. In his opinion, the quotes of the first cryptocurrency will rise to $40,000 only when the US Federal Reserve begins to reduce the key rate. “The most profitable trades have been and will continue to be longs on gold, euro, bitcoin and Ethereum: these assets will do well when the Fed stops raising [the base rate] and starts lowering it,” Novogratz said. He also predicted a reduction in loans amid the collapse of US banks. In his opinion, this could lead to a credit crisis, and the Fed, against the background of a “slowdown in the economy”, will have to cut the rate more aggressively than expected.

And of course, against the background of dominant optimism, the forecast of analyst Nicholas Merten looks exactly the opposite. He announced in a new video on DataDash to his 511,000 subscribers that it's time to sell bitcoin, as the first cryptocurrency has grown by almost 100% since November 2022. Merten believes that the first cryptocurrency's latest breakthrough could be a trap, as crypto markets were overbought. The expert disagrees with those who believe that bitcoin will follow the 2019 scenario, when it rose by 300% in a few months. According to him, the scenario of June 2021 is likely to be repeated, when BTC reached its historical high and then collapsed.

At the time of writing, Friday evening, April 21, BTC/USD is trading at $27,305. The total capitalization of the crypto market is $1.153 trillion ($1.276 trillion a week ago). The Crypto Fear & Greed Index fell from 68 to 50 in seven days, and moved from the Greed zone to the very center of the Neutral zone.
 

NordFX Analytical Group
 

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NordFX Wins Two Nominations at the Finance Derivative Awards

Finance Derivative magazine announced the Awards 2023. Among the awardees is the NordFX brokerage company, which won in two categories at once: "Most Transparent Forex Brokerage Company UAE 2023" and "Best Forex Affiliate Program South East Asia 2023".

Finance Derivative is a print and online publication that publishes news and insights about the financial industry. It was founded in 2017 and provides its readers with information on financial technology, investment, banking, and other topics related to the financial sector. Finance Derivative's readership includes financial industry professionals, among them bankers, traders, analysts, consultants, investors, and managers.

In addition to publications, Finance Derivative hosts the annual Awards to celebrate outstanding achievements in the financial industry. The award includes several categories, such as "Best Bank", "Best Investment Fund", "Best Financial Startup", "Best Broker" and others. The award is given by a team of journalists and experts from the financial industry who conduct in-depth analysis and evaluation of candidates and decide who deserves the award. Past winners include such world-famous organizations as Barclays Bank and JPMorgan Chase, BlackRock investment fund, Visa and Revolut payment systems.

In 2023, the brokerage company NordFX is among the winners. «Finance Derivative would like to congratulate you and offers special recognition and appreciation for your outstanding performance and dedication to excellence. Honoring your outstanding performance, we are delighted to announce that Nord FX is the Winner 2023 for the Category "Most Transparent Forex Brokerage Company UAE 2023" and "Best Forex Affiliate Program South East Asia 2023".
 

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 Cryptocurrency Forecast for April 17 - 21, 2023

EUR/USD: The Dollar Continues to Sink


The DXY dollar index updated a 12-month low last week, and EUR/USD, respectively, rose to a maximum (1.1075) since April 04, 2022. The US currency has been falling for the fifth week in a row: the longest series since summer 2020.

The dollar received a serious blow on Wednesday, April 12, when data on consumer inflation (CPI) and the minutes of the March US Federal Reserve FOMC (Federal Open Market Committee) meeting were published. Statistics showed that prices are under control and inflation in the US has been consistently slowing down for nine consecutive months, going from 9.1% y/y to the current 5.0% y/y. The US Producer Price Index (PPI), released a day later, also showed a decrease in inflation, although at the basic level, US price pressure still looks stable.

With regard to the Fed Protocol, at the meeting on March 22, FOMC members discussed the possibility of taking a pause in the rate hike cycle due to problems in the banking sector. Information about a possible mild recession in the US economy later this year was also discussed. However, the rate is likely to be raised again at the next meeting of the Committee on May 3. According to CME FedWatch forecasts, it is likely to grow by another 25 basis points (bp) to 5.25% per annum.

This increase has already been taken into account by the market in quotes and is unlikely to provide any support to the dollar. Moreover, 5.25% is likely to be the peak value of the rate, until the last months of the year, when it starts to decline. The futures market expects that federal funds spending will be 4.30-4.40% in December 2023, and they will fall even lower to 4.12-4.20% in January 2024.

Slower inflation and the end of the Fed's tight monetary policy cycle are putting pressure on the dollar, pushing the DXY down. At the same time, forecasts suggest that, unlike the Fed, the European Central Bank will continue its tightening cycle for now. This was confirmed by the Member of the Board of Governors of the ECB, President of the Bundesbank Joachim Nagel. He said on Thursday, April 13 that it is necessary to continue raising rates, as core inflation in the Eurozone is still very high.

Data on retail sales in the US released at the very end of the working week, on Friday, April 14 slightly supported the US currency. They showed that sales, although falling, were much slower than expected. With the forecast of -0.4% and the previous value of -0.2%, in reality, the decline was -0.1%. Market participants regarded such dynamics in favor of the dollar, and as a result, EUR/USD ended the last week at 1.0993. At the time of writing the review, on Friday evening, April 14, analysts' opinions are almost equally divided: 45% of them expect the dollar to further weaken, 45% expect it to strengthen, and the remaining 10% have taken a neutral position. As for technical analysis, all oscillators and trend indicators on D1 are 100% colored green. The nearest support for the pair is at 1.0975, then 1.0925, 1.0865-1.0885, 1.0740-1.0760, 1.0675-1.0710, 1.0620 and 1.0490-1.0530. Bulls will meet resistance at 1.1050-1.1070, then 1.1110, 1.1230, 1.1280 and 1.1355-1.1390.

We expect quite a lot of economic statistics from the EU next week. Thus, the ZEW Economic Sentiment Index in Germany, the main locomotive of the European economy, will be published on Tuesday, April 18. On Wednesday, we will find out what is happening with inflation (CPI) in the Eurozone as a whole. On Thursday, the Minutes of the last meeting of the ECB on monetary policy will be published, and on Friday, April 21, business activity indicators (PMI) in the manufacturing sector of Germany and in the country as a whole will become known. No significant macro statistics are expected from the US next week. 

GBP/USD: Things Are Much Better Than Expected

Against the backdrop of the dollar weakening, GBP/USD still feels good, and it made another high in the first half of Friday, April 14, reaching the height of 1.2545. The pound has not traded this high since the beginning of June 2022. However, then, after the publication of data on retail sales in the US, the dollar improved its position, and the pair completed the five-day period at the level of 1.2414.

As for the UK economy itself, the GDP release on Thursday 13 April showed that the economy stagnated at 0.0% in February, compared with the forecast of 0.1% and the previous reading of 0.3%. The growth of production in the manufacturing industry in February was also 0.0% against the expected 0.2% and -0.1% in January, while the total industrial output is still in the negative zone -0.2% against the forecast of 0.2% and -0.5% a month earlier. On an annualized basis, manufacturing output came in at -2.4%, beating expectations of -4.7%. The total volume of industrial production decreased by -3.1% against the forecast -3.7% and the previous value -3.2%. Data on the trade balance of goods in the UK was also published last week, which in February amounted to £17.534 billion, which is more than the forecast of £17.000 billion and the previous value of £16.093 billion.

What do all these numbers say? Together with the data on business activity (PMI), which became known on April 03 and remained above 50 points, all these statistics give investors hope that the British economy is able to avoid a recession. Which, in turn, supports the position of the national currency. This was confirmed on April 13 by British Treasury Secretary Jeremy Hunt, who said that the economic outlook looks brighter than expected. “Thanks to the steps we have taken, we will avoid a recession,” he assured the audience.

The Bank of England (BoE) Chief Economist Hugh Pill's comments were quite optimistic as well. According to him, although "the exact path of inflation may be more uneven than we expect," the Central Bank still forecasts a decrease in CPI in Q2 of this year. "The latest figures are somewhat disappointing," said Hugh Pill, "but they are much better than the BoE's forecasts made at the end of last year." The economist also noted that the UK banking system remains very sound and resilient, and inflationary dynamics is a key factor determining the direction of BoE's monetary policy.

At the moment, 75% of experts side with the pound and expect further growth of the pair, the remaining 25% side with the dollar. Among the oscillators on D1, the balance of power is as follows: 65% vote in favor of green (10% give overbought signals), 10% have turned red and 25% prefer neutral gray. Among the trend indicators, the advantage is also on the side of the greens, they have 65%, the enemy has 35%. Support levels and zones for the pair are 1.2390-1.2400, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, 1.1800-1.1840. When the pair moves north, it will face resistance at levels 1.2440-1.2455, 1.2480, 1.2510-1.2540, 1.2575-1.2610, 1.2700, 1.2820 and 1.2940.

Among the events of the coming week, the calendar can and should note the publication of the latest unemployment data in the United Kingdom on Tuesday, April 18. On Wednesday, the value of the Consumer Price Index (CPI) will become known, and on Friday the statistics on retail sales and business activity (PMI) in the UK will be published.

USD/JPY: Bank of Japan Is an Island of Stability

Since last December, USD/JPY has been moving in a fairly wide sideways range of 129.00-138.00. (An exception is the brief strengthening of the yen to 127.15 in mid-January). The pair ended the last week almost in its very center, at the level of 133.75, which indicates the absence of significant drivers capable of giving the pair a powerful acceleration in one direction or another.

We have repeatedly written that even after Haruhiko Kuroda, Governor of the Bank of Japan (BoJ), leaves his post, the Central Bank “will continue to support his adequate and expedient policy.” This was once again confirmed by Kazuo Ueda, the new head of the regulator, who took office on April 9. He stated at the G20 meeting that he would support the current ultra-soft monetary policy. In addition, Ueda said that core consumer inflation in Japan, which is currently only about 3%, is likely to fall below 2% in the second half of this fiscal year. Market participants concluded from these words that there is no point in fighting it by raising rates for the Bank of Japan, and therefore it is not worth expecting a reversal of the BoJ rate in the foreseeable future. (Recall that economists at Societe Generale and ANZ Bank expected that this could still happen somewhere around June).

Regarding the immediate prospects for USD/JPY, analysts' opinions are distributed as follows. At the moment, 40% of experts vote for the further movement of the pair to the north, 50% point in the opposite direction and 10% prefer neutrality. Among oscillators, 75% point upwards at D1 (a third of them are in the overbought zone), 10% look in the opposite direction and 15% are neutral. For trend indicators, 85% point to the north, the remaining 15% point to the south. The nearest support level is located in the zone 132.80-133.00, then there are levels and zones 132.00-132.40, 131.25, 130.50-130.60, 129.65, 128.00-128.15 and 127.20. Levels and resistance zones are 134.00, 134.90-135.10, 135.90-136.00, 137.00, 137.50 and 137.90-138.00.

As for the release of any important statistics on the state of the Japanese economy, it is not expected this week.

CRYPTOCURRENCIES: Weak Dollar Is Strong Bitcoin

Bitcoin rose above $30,000 on Tuesday, April 11, for the first time since June 2022. This happened due to instability in the banking sector and expectations that mega-regulators, primarily the Fed, will suspend raising interest rates. The MSCI World Index rose to its highest point since early February by Friday, April 14. This confirmed the fact that international investors are waiting for the American, and in the future, for other major Central Banks to curtail the policy of quantitative tightening (QT). Against this background, the main cryptocurrency continues to outperform other major asset classes, such as gold or oil. In addition, BTC has surpassed many top cryptocurrencies in terms of dynamics.

In the middle of the week, the bears had a chance to return BTC/USD to the support of $29,000. However, the FRS saved it from falling again: the published Minutes of the March FOMC meeting, coupled with macro statistics from the US, weakened the dollar, swinging the scales in favor of bitcoin.

The growth of BTC quotes pulls up the entire crypto market. The total market capitalization of cryptocurrencies has grown by more than 55% since the beginning of 2023, rising above $1.2 trillion. However, despite this, it still remains well below the all-time high of $2.9 trillion recorded in November 2021.

Several experts at once expressed their opinion on what happened on April 11. Michael Van De Poppe, a well-known strategist and founder of the investment company Eight, noted that bitcoin successfully passed the $28,600 test, which led to a breakthrough in resistance and reached $30,000. An analyst with the nickname PlanB tweeted that all the goals he set back in October 2022 have now been achieved. At that time, the expert predicted that BTC quotes would overcome $21,000, $24,000, and then $30,000. And another popular blogger and analyst, Lark Davis, stressed that the time will soon come when buying bitcoins for less than $30,000 will seem as fantastic as buying BTC at $3,000 now.

As of this writing, Friday evening April 14, BTC/USD is trading at $30,440. The total capitalization of the crypto market is $1.276 trillion ($1.177 trillion a week ago). The Crypto Fear & Greed Index rose from 64 to 68 in seven days and is still in the Greed zone. But what's next?

A well-known analyst under the nickname PlanB noted that bitcoin has left the deep bear zone and is at the very beginning of a new bull market. According to PlanB, the Stock to Flow (S2F) model he developed is still relevant. The expert claims that bitcoin fundamentals will eventually allow it to rise above the all-time high (ATH) of $69,000 set in November 2021. PlanB has previously predicted bitcoin will rise from $100,000 to $1 million after the 2024 halving. (Recall that the S2F (stock-to-flow ratio) model for predicting the BTC rate measures the relationship between the available supply of an asset and its production volume and has been repeatedly criticized by members of the crypto community).

Larry Lepard, managing partner at Boston-based equity firm Equity Management Associates, also looks extremely optimistic in the long-term outlook. According to him, the dollar will depreciate over the next 10 years, and citizens will begin to actively invest in cryptocurrencies, gold and real estate. The supply of bitcoins is limited, so the digital asset will become a highly sought-after investment vehicle and will benefit from the collapse of the fiat currency. “I believe that the price of bitcoin will go up a lot. I think it will first reach $100,000, then $1 million and eventually rise to $10 million per coin. I’m sure my grandchildren will be shocked at how rich people who own just one bitcoin become,” Lepard said in an interview.

In connection with this forecast, the businessman fears that the authorities will put spokes in the wheels of the crypto industry, trying to slow down the growth in the popularity of digital assets. For example, officials could raise taxes on profits from bitcoin trading and tighten regulation of coins to make it harder for startups to enter the market. However, Lepard is confident that bitcoin will be able to overcome these difficulties and succeed in the long run.

Many analysts agree that long-term macro conditions do point to a possible rise in BTC. But their estimates are much more restrained in relation to the current rally. This is due to the fact that bitcoin liquidity is now much lower than in the same period last year. This is manifested in a greater price dispersion among the leading exchanges. (In the previous review, we wrote that on the one hand, there is an increase in trading volumes, and on the other hand, a decrease in BTC liquidity to a 10-month low).

Although, of course, the prospects for this year will largely depend on the actions of the leading Central banks led by the Fed. Recall that the record capitalization of the crypto market in November 2021 was also the result of the actions of this regulator, which then flooded the economy with a huge amount of cheap money (the M2 monetary unit grew by 39%, which is an anomaly by historical standards). Moreover, interest rates were near zero levels at the time, which led to the emergence of a bubble in the market for risky assets, including stocks and digital currencies. The Fed then moved from quantitative easing (QE) to quantitative tightening (QT) through the fastest interest-rate hike cycle in 40 years, and... the bubble burst.

Speaking about the prospects of the flagship cryptocurrency, it is impossible not to mention those who still consider it a bubble and predict its final collapse. Dieter Wermuth, an economist and partner at Wermuth Asset Management, said last week that the economy would be better and simpler without bitcoin. In his opinion, these risky investments are associated with social costs, and the cryptocurrency itself does not contribute to global prosperity. If we consider bitcoin as a currency, then, given the high volatility and lack of real use, BTC is doomed to failure. In this vein, it makes sense to ditch bitcoin altogether: it could be good for shared prosperity, as investing in cryptocurrencies is wasteful and takes away funds from overall economic growth. In addition, bitcoin creates social inequality, allows for money laundering, tax evasion, and is very energy intensive due to mining. Dieter Wermuth even called bitcoin “the biggest climate killer.”

Cryptocurrency opponents received unexpected support from … artificial intelligence. ChatGPT Bot spoke about the formation of a recession-resistant investment portfolio. According to a document published by the Gold IRA Guide, it recommended allocating 20% for gold and other precious metals. The rest of its hypothetical portfolio consisted of bonds (40%), "defensive" stocks (30%) and cash (10%). The chatbot did not mention cryptocurrencies, much to the delight of well-known bitcoin critic and gold advocate Peter Schiff. “After all, artificial intelligence is pretty smart. It did not recommend any bitcoin deposit,” this investor wrote.

By the way, answering the question of which cryptocurrency is the most promising today, ChatGPT did not name bitcoin, but ethereum. Artificial intelligence, of course, did not know about the latest events, but it seems to have hit the mark. In the last review, we detailed the Shapella hard fork, which will allow validators to withdraw the frozen ETH coins they have invested and locked on the network over the past 3 years in exchange for interest. Investors and traders were worried that an unlock could lead to a massive selling wave and, as a result, a sharp drop in the price. However, we are still seeing the opposite process: on May 13, ETH/USD rose above $2,000, and on the evening of Friday, April 14, it is trading in the $2,100 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 Cryptocurrency Forecast for April 10 - 14, 2023

EUR/USD: Fed rate Divination Continues


The dollar seems to be either weakening or not. On the one hand, the DXY dollar index updated a two-month low on April 4, falling below the support of 101.50, and EUR/USD rose to a new high of 1.0972. On the other hand, the pair returned by the end of last week to where it had already been on March 23 and 31.

DXY continues to be pressured by poor US macro statistics. The country's GDP growth for Q4 2022 was 2.6%, which is lower than both the forecast and the previous value (2.7%). Business activity in March continued to decline at an accelerated pace: the PMI index in the manufacturing sector fell to 46.3 against the forecast of 47.5 and 47.7 in February, and it fell to 51.2 in the services sector (forecast 54.5, February value 55.1). New orders for industrial goods fell by 0.7% in February, worse than the forecast of 0.5% once again. And this despite the fact that they had already fallen by 2.1% a month earlier. The JOLTs job market report showed a decline in the number of open vacancies to 9.9 million, the lowest figure in the last two years.

The US Bureau of Labor Statistics released its March employment report on Friday, March 07. The number of new jobs created outside the agricultural sector (NFP) in the United States, with a forecast of 240K, in reality fell to 236K. This figure was significantly higher in February and amounted to 326K. But the unemployment rate fell from 3.6% to 3.5%, which slightly supported the US currency (on the thin market, DXY rose above 102.00). However, the main reaction of the market to these data will follow only next week. April 07 in Europe, the USA and a number of other countries was a day off, Good Friday. Europe takes a break on Easter Monday, April 10 as well. The last time NFP was released on Good Friday was in 2021, and then, despite a sharp jump in this indicator, the delayed market response was very restrained.

Of course, all of the above indicators may lead to adjustments in market expectations for the US Federal Reserve rate. However, the next FOMC (Federal Open Market Committee) meeting will be held only on May 03, and many more significant statistics will be released before then. The weak state of the economy may cool the hawkish ardor of the FOMC members and force them to take a break in tightening monetary policy, leaving the rate at the same level of 5.00%. At the moment, according to the CME Group FedWatch Tool, there is a 52.7% chance of another rate hike of 25 basis points (bp).

EUR/USD closed last week at 1.0901. At the time of writing this review, on the evening of Friday, April 07, the opinions of analysts are divided almost equally: 35% of them expect further weakening of the dollar, 35% - its strengthening, and the remaining 30% have taken a neutral position. Among the oscillators on D1, 90% are colored green, another 10% are gray neutral. Among trend indicators, 75% recommend buying, 15% - selling. The nearest support for the pair is located at 1.0885, 1.0860, then 1.0740-1.0760, 1.0675-1.0710, 1.0620 and 1.0490-1.0530. Bulls will meet resistance at 1.0925, then 1.0955, 1.0985-1.1030, 1.1110, 1.1230, 1.1280 and 1.1355-1.1390.

Retail sales in the Eurozone will be announced this week on Monday April 11. The next day, important data on consumer inflation (CPI ) in the US will be released. The minutes of the March FOMC meeting will also be published on Wednesday. On Thursday, the CPI values in Germany, the number of initial jobless claims in the US and the US Producer Price Index (PPI) will be known. On Friday, we will have a whole package of statistics on retail sales in the US.

GBP/USD: PMI Gives Investors Hope

Against the backdrop of a weakened dollar, GBP/USD feels quite good, and the pound made another high on April 04, reaching a high of 1.2525. It has not traded this high since the beginning of June 2022. However, then there was a slight correction, and the pair completed the five-day period at the level of 1.2414, returning to the values of mid-December 2022 - the second half of January 2023.

As a matter of fact, the UK economy, like the US, had nothing to brag about last week. The index of business activity (PMI) in the manufacturing sector of the country, published on April 3, showed a decrease from 49.3 to 47.9 points (with a forecast of 48.0). PMI values in the services sector and the composite value of this Index also turned out to be lower than the previous values - 52.9/53.5 and 52.2/53.1, respectively. However, the fact that both of these Indexes are holding above the 50.0 mark gives investors hope that the British economy is able to avoid a recession. This, in turn, supports the position of the national currency.

At the moment, 40% of experts side with the pound, the same number (40%) have taken a wait-and-see position, only 20% have turned out to side with the dollar. Among the oscillators on D1, the balance of power is as follows: 90% vote in favor of green and 10% have turned red. Among the trend indicators, the advantage is on the side of the greens, they have 85%, the enemy has 15%. Support levels and zones for the pair are 1.2390, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, 1.1800-1.1840. When the pair moves north, it will face resistance at levels 1.2450, 1.2510-1.2525, 1.2575-1.2610, 1.2700, 1.2750 and 1.2940.

In terms of the UK economy, there are two speeches by Bank of England (BoE) Governor Andrew Bailey next week on Wednesday April 12. On Thursday, April 13, there will be data on production volumes in the manufacturing industry, as well as on the country's GDP. As a reminder, Monday April 10 is Easter Bank Holiday in the United Kingdom.

USD/JPY: BoJ Remains Ultra Soft

This time the dynamics of USD/JPY as a whole corresponded (as it should be, mirrored) to what its "colleagues" in DXY were doing. At the beginning of the week, it fell from a height of 133.75 and recorded a local low of 130.60 on April 5. And then it went up, reaching 132.37 in a thin market and a sluggish US employment report. The last chord of the week sounded a bit lower, at 132.14.

As far as Japan's monetary policy is concerned, nothing has changed here: external influencers still hope for its tightening, domestic influencers say that the ultra-soft, dovish rate remains unchanged. Thus, on Friday, April 7, Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), gently hinted that “it is appropriate to make the Bank of Japan's monetary policy more flexible.” And Japanese Finance Minister Shunichi Suzuki on Friday praised the efforts of the outgoing Governor of the Bank of Japan (BoJ) Haruhiko Kuroda and expressed the hope that under the new leadership, the Central Bank “will continue to support its adequate and expedient policy.”

We wrote in our previous review that Societe Generale economists expect that any steps to change the BoJ rate can be taken no earlier than June. The comments of their colleagues from ANZ Bank look similar. “In the near term, [BOJ] policy change looks unlikely,” they wrote. And if changes do occur, then, according to ANZ Bank forecasts, they can be expected only after Q2 of this year.

As for the immediate prospects for USD/JPY, at the moment 55% of experts vote for the further movement of the pair to the north, and 45% point in the opposite direction. Among the oscillators on D1, 25% point south, the same number look in the opposite direction, and 50% are neutral. For trend indicators, 40% point to the north, the remaining 60% point to the south. The nearest support level is located in the zone 131.85-132.00, then there are levels and zones 131.25, 130.50-130.60, 129.70-130.00, 128.00-128.15 and 127.20.  Resistance levels and zones are 132.80-133.00, 133.60-133.75, 134.35, 135.00-135.35, 135.90-136.00, 137.00, 137.50 and 137.90-138.00.

As for the release of any important statistics on the state of the Japanese economy, it is not expected this week.

CRYPTOCURRENCIES: $29,000 Resistance Has Never Been Taken

The beginning of the previous review sounded like this: “The crisis that crippled Silvergate, Silicon Valley Bank (SVB) and Signature and hit Credit Suisse has certainly helped the crypto market by reminding what decentralized finance was created for. However, investors' fears about a new wave of the banking crisis in the US and Europe are gradually fading away, which is clearly seen on the BTC/USD chart. If during the March 10-17 rally, digital gold gained almost 45% in weight, it has been unsuccessfully trying to storm the important $29,000 resistance for the last two weeks.  […] BTC is supported by the $26,500 level.”

This was written seven days ago, but even now everything said remains relevant. The only amendment is that the fluctuation range narrowed even more last week, and the local low was fixed at $27,190. Triggers are needed to break through this range in one direction or another, they have not yet been observed.

As already mentioned, the crypto market, especially bitcoin, was supported by the banking crisis and the worsening macroeconomic environment in general. However, the industry continues to be under regulatory pressure from US government agencies, which have now been joined by their UK colleagues. As a result, on the one hand, we are seeing a decrease in BTC liquidity to a 10-month low, and on the other, an increase in trading volumes.

According to a CNBC survey of industry influencers, the market remains bullish on the future of the first cryptocurrency at this stage. According to the analytical company Glassnode, its attractiveness continues to increase. Experts from this company note that a surge in trader activity was recorded in the second half of last year, when bitcoin fell to $15,000, and a similar trend is observed in 2023. Thus, the number of unique addresses on the bitcoin network with a balance of at least one coin has reached 992,243. The number of addresses controlling from 100 to 1000 BTC is 14,004. The four largest whales hold between 100,000 and 1 million BTC, including the Binance and Bitfinex exchanges, which control 248,597 and 178,010 bitcoins, respectively. At the same time, it is possible that one of these four whales is the US government. According to Dune analysts, the total stock of the first cryptocurrency in the US authorities is 205,515 BTC: more than 1% of the coin issue (mostly these assets were obtained during confiscation from criminals).

Representatives of the Derebit platform confirm the general bullish attitude. According to them, open interest in bitcoin derivatives continues to grow steadily. Derebit stressed that most of the positions are open to buy, as investors continue to believe in the potential of the crypto market's flagship.

In parallel with the growing attractiveness of digital assets for investors, their attractiveness for criminals is also growing. Cybercriminals have stolen $255.8 million in digital currencies since the beginning of the year. At the same time, "only" $8.8 million was stolen in January, 3.5 times more - $35.5 million in February, and the figure rose to $211.5 million in March.

A crypto analyst known as Stockmoney Lizards analyzed the dynamics of the flagship crypto asset. In his opinion, the asset's monthly chart looks promising and indicates the potential for further growth. The expert's assumptions are supported by the readings of the RSI indicator. Stockmoney Lizards believes that the current market situation is very similar to the period from 2017 to 2020, when a steady upward trend began to form, and that bitcoin will soon be able to reach the key $47,000 mark.

Another well-known analyst, Michael Van De Poppe, shares this view. According to the expert, buyers are still in control of the situation. If bitcoin quotes remain above $25,000 for some time, we can count on a potential increase up to the level of $40,000.

Charles Edwards, founder of hedge fund Capriole Investments, has noted a "familiar" bullish signal on the SLRV Ribbons metric. SLRV Ribbons is a tool to measure the potential return of bitcoin. It analyzes the interaction of two moving averages. When the short-term 30-day MA crosses the long-term 150-day MA, bitcoin is in the beginning of a bullish phase. This metric is “as simple as it gets,” Edwards tweeted. “It is currently repeating classic bullish behavior with a crossover in early 2023.” The specialist added that although SLRV Ribbons is a relatively new tool, tests have proven its reliability and ability to increase the return on investments in BTC.

SLRV is not the only metric that gave the founder of Capriole Investments a sense of déjà vu this month. The Bitcoin Yardstick tool shows a retracement of bitcoin's market value relative to hashrate, but still classifies BTC as "cheap" at current prices. “Bitcoin Yardstick is drawing a very familiar signature to the 2019 lows,” Edwards commented on the indicator readings. At the beginning of that year, after exiting the “cheap” zone, BTC/USD saw only one brief drop during the crisis caused by the start of the COVID-19 pandemic in March 2020. At the moment, according to indicators, price targets for BTC are fixed at $35,000.

Moving from short-term to long-term, Arthur Hayes, the former CEO of BitMEX crypto exchange, was the biggest optimist here, citing $1 million per coin as a target for bitcoin. He was prompted to do so by the news that the People's Bank of China lowered the required reserve ratios (RRR) for all banks by 0.25%. (For reference: The required reserve ratio is the statutory share of a commercial bank's liabilities on attracted deposits. When this rate is lowered, the amount of funds that commercial banks can provide for lending or investment increases.

At the time of this writing, Friday evening, April 07, BTC/USD is clearly still very far from reaching $1 million and is currently trading at $27,860. The total capitalization of the crypto market is $1.177 trillion ($1.185 trillion a week ago). The Crypto Fear & Greed Index has risen by just one point in seven days, from 63 to 64, and is still in the Greed zone.

And finally, a few words about the main altcoin, ethereum. The long-awaited Shanghai hard fork will take place on its network on April 12, which will allow validators to withdraw coins frozen for staking. At the moment, their volume is 18 million ETH, or 15% of the total supply.

To reduce potential pressure on the price and not overload the network, those wishing to exit staking will be forced to stand in line. The maximum daily outflow is limited to 2,200 transactions or 70k coins. Most likely, this queue will be quite long. And much of this is due to U.S. regulators, which put even more pressure on ethereum than bitcoin. Here are pre-trial proceedings with the Kraken and Coinbase crypto exchanges to refuse staking, and the SEC's desire to assign ETH the status of a security. All this, of course, despite the hard fork, reduces the attractiveness of this asset for investors, and makes the prospects for ethereum very vague. Well-known trader and analyst Benjamin Cowen believes that the best time to buy ethereum will be when ETH/BTC falls into the range from 0.03 to 0.04 (currently 0.067). The analyst assures that he will wait for these figures, and only then will he make an appropriate investment decision.
 

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 Cryptocurrency Forecast for April 03 - 07, 2023

EUR/USD: Why the Dollar Fell

Last week passed without sharp jumps. The dollar continued to fall in price, and EUR/USD returned by March 30 to where it was traded seven days before. The local maximum was fixed at 1.0925, and the five-day period finished at 1.0842.

The dollar continues to be pressured by the growth of investors' risk appetite: American and European stock indices have been going up since mid-March. Asian markets are not lagging behind: they were supported by statistics on business activity (PMI) in the manufacturing industry in China.

As for US macro statistics, it did not look good. The country's GDP growth for Q4 2022 was 2.6%, which is lower than both the forecast and the previous value (2.7%). But the number of initial applications for unemployment benefits, on the contrary, increased from 191K to 198K against the forecast of 196K. Both of these indicators indicate a slowdown in the US economy.

In addition, it has become obvious to market participants that the crisis, which knocked out American Silvergate Bank, Silicon Valley Bank, Signature Bank and European Credit Suisse, will cool the Fed's hawkish ardor and make it act much more cautiously. This opinion was confirmed on March 30 by the head of the Richmond Fed, Thomas Barkin, who said that the bankruptcy of Credit Suisse ruled out the option of further raising interest rates by 50 basis points (bp).

European macro statistics turned out to be quite diverse. On Thursday, March 30, the value of the Harmonized Consumer Price Index (HICP) in Germany became known, which rose in March by 7.8% y/y. This is less than a month ago (9.3%), but higher than the forecast (7.5%). As a result, looking at these figures, the market decided that the ECB would have to continue actively tightening monetary policy and raising euro rates in order to fight inflation. The yield of German government bonds outperformed the yield of similar US bills, and EUR/USD reached weekly highs. Friday's statistics, on the contrary, reassured bears on the dollar to a certain extent, as Eurostat reported that the Harmonized Consumer Price Index (HICP) fell in March in the euro area from 8.5% in February to 6.9% year-on-year (with a forecast of 7.1%).

The market reaction to this and other statistics on Friday (such as the US Personal Consumption Expenditure Index) was rather sluggish, as this day coincided with the last day of the Q1 2023, when many market participants have already recorded quarterly results in their reports.

Regarding the medium- and long-term prospects for EUR/USD, Bank of America (BoA) economists believe that “the market is again running ahead of the locomotive, incorporating early Fed rate cuts into prices, and reassessing these expectations is likely to put pressure on the pair in the short term.” According to the BoA forecast, “the EUR/USD rate will be 1.05 in the first half of the year, it will rise to 1.10 by the end of this year, and to 1.15 by the end of 2024, which is still below the long-term equilibrium value.” “We assume that the worst of the recent banking turmoil is behind us, but we remain concerned about two risks for the euro: the ongoing conflict over Ukraine and possible pressure on the Italian market from a hawkish ECB,” BoA explained.

If we talk about the outlook for the near term, at the time of writing, the evening of Friday, March 31, 55% of analysts expect further weakening of the dollar, 35% - its strengthening, and the remaining 10% have taken a neutral position. Of the oscillators on D1, 90% are colored green, and another 10% are colored red. Among trend indicators, 80% recommend buying, 20% - selling. The nearest support for the pair is located at 1.0800, then 1.0740-1.0760, 1.0680-1.0710, 1.0620 and 1.0500-1.0530. Bulls will meet resistance in the area of 1.0865, 1.0925, 1.0985-1.1030, 1.1110, 1.1230, 1.1280 and 1.1355-1.1390.

Of the upcoming week's events, the publication on Monday, April 03, of data on business activity (PMI) in the manufacturing sectors of Germany and the USA is of interest. This will be followed by a whole stream of information from the US labor market. This will be statistics on the number of open JOLTS vacancies on Tuesday, April 4, the change in the number of people employed in the non-agricultural sector from ADP on Wednesday, and the number of initial applications for unemployment benefits on Thursday. And on Friday, April 7, we will have data on the unemployment rate and the number of new jobs created outside the US agricultural sector (NFP). It must be borne in mind that April 07 is Good Friday in Europe, the USA and a number of other countries, a day off, so the reaction to these figures will follow next week, on Monday April 10.

GBP/USD: Will the Pair Continue to Grow?

The dollar weakened not only against the euro, but also against the British pound. GBP/USD has risen by more than 600 points since March 08, in just three weeks. Only the key resistance in the area of 1.2425-1.2450 could stop its growth. But does the pound have the strength to climb further?

On March 23, the Bank of England (BoE) raised its key interest rate by 25 bp. to 4.25% (for comparison, the current rate of the US Federal Reserve is 5.00%). At the same time, the situation with inflation in the country is not improving. The United Kingdom remains the only developed economy where inflation has hardly fallen throughout the year and remains at double-digit multi-year highs. The main Consumer Price Index (CPI) in March was 10.4%, and the basic CPI was 6.2%. Therefore, many analysts expect that the increase in interest rates will be one of the main steps taken by the BoE at the upcoming meetings. Moreover, the regulator will have to keep the rate at high values for a long time, even though this will stifle the country's economy. (GDP growth rates are now at near-zero levels. Thus, the data published on March 31 showed GDP growth in Q4 2022 by only 0.1%).

Pressure on the economy makes a number of analysts talk about the pound's limited potential. However, despite this, many strategists believe that a recession will be avoided, and the rate hike will continue to push the pound higher. Thus, ANZ Bank economists expect the pair to rise to 1.26 by the end of the year. The forecast of their colleagues from the French Societe Generale looks even bolder: in their opinion, GBP/USD will follow EUR/GBP and gradually move up to 1.30.

The pair closed last week at 1.2330. At the moment, 45% of experts side with the dollar, the same number (45%) side with the pound, the remaining 10% have taken a wait-and-see attitude. Among the oscillators on D1, the balance of power is as follows: 85% vote in favor of green and 15% have turned neutral gray. Among the trend indicators, the absolute advantage is on the side of the green ones, those are 100%. Support levels and zones for the pair are 1.2270, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, 1.1800-1.1840. When the pair moves north, it will face resistance at levels 1.2390-1.2425, 1.2450, 1.2510, 1.2575-1.2610, 1.2700, 1.2750 and 1.2940.

Statistics on the UK economy include the publication of the Business Activity Index (PMI) in the country's manufacturing sector on Monday, April 3. The values of PMI in the services sector, as well as the composite value of this Index, will become known on Wednesday. And we remind you that Friday is a day off in the Kingdom.

USD/JPY: Will BoJ Change Course in the Summer?

Unlike its DXY “colleagues”, the Japanese currency has shown absolutely the opposite trend against the dollar. While the euro and pound were strengthening their positions last week, the yen was losing them. There are two reasons for this, in our opinion. First, the yen was pressured by the fact that March 31 is not only the end of the quarter, but also the end of the fiscal year in Japan. The second one, which has been said many times already, is the ultra-soft policy of the Bank of Japan (BoJ).

Kazuo Ueda, the new head of the regulator, who takes office on April 09, has repeatedly spoken out in favor of continuing the dovish course of his predecessor Haruhiko Kuroda. And of course, such statements do not contribute to the attractiveness of the national currency.

Since November 2022, concerns about financial instability have led to a surge in purchases of the yen as a safe haven. However, as Societe Generale strategists write, even the "safe harbor" needs change. USD/JPY needs more action from the BoJ to justify its big decline. If the Central Bank does nothing, USD/JPY is likely to rise even more. Societe Generale expects that any moves to change the monetary policy of BoJ will be made in June, which could send the pair to the 125.00 level. A sharp easing of the US Federal Reserve's policy can also help the Japanese currency.

The comments of economists from ANZ Bank look similar. “In the short term, [BoJ] policy change looks unlikely,” they write. “If it does change, which we expect to happen after the second quarter of this year, the Japanese yen will rise on more favorable yield differentials. We expect USD/JPY to fall gradually to 124.00 by the end of the year.”

Here, however, one must take into account the statement of the Deputy Governor of the Bank of Japan, Shinichi Uchida, made on Wednesday, March 29. According to him, the adjustment of the regulator's monetary policy to control bond yields is possible only if economic conditions and price stability improve, which will justify a gradual reduction in monetary stimulus.

So, the fall of USD/JPY to the zone of 124.00-125.00 is still a big question. It finished the last week at the level of 132.80. And as for the immediate prospects, at the moment, 40% of experts vote for the further movement of the pair to the north, 30% point in the opposite direction, and another 30% have abstained from forecasts. Among the oscillators on D1, 15% point south, 40% look in the opposite direction, and 35% are neutral. For trend indicators, 40% point to the north, the remaining 60% point to the south. The nearest support level is located in the zone 131.25, then there are levels and zones 130.50, 129.70-130.00, 128.00-128.15 and 127.20.  Resistance levels and zones are 133.00, 133.60, 134.00-134.35, 135.00-135.35, 135.90-136.00, 137.00, 137.50 and 137.90-138.00.

No important macro data on the Japanese economy is expected to be released this week. The only thing that can be noted in the calendar is Monday, April 03, when the Tankan Major Producers Sentiment Index for Q1 2023 will be published.

CRYPTOCURRENCIES: What Will Happen to Binance?


The crisis that crippled Silvergate, Silicon Valley Bank (SVB) and Signature and hit Credit Suisse has certainly helped the crypto market by reminding what decentralized finance was created for. However, investors' fears about a new wave of the banking crisis in the US and Europe are gradually fading away, which is clearly seen on the BTC/USD chart. If during the March 10-17 rally, digital gold gained almost 45% in weight, it has been unsuccessfully trying to storm the important $29,000 resistance for the last two weeks. Bitcoin needs not only to rise, but to sustainably gain a foothold above this horizon. Then, according to a number of experts, starting from this, it will be able to reach the next goal of $35,000. In the meantime, BTC is supported by the $26,500 level.

This support survived even when the CFTC (U.S. Commodity Futures Trading Commission) filed a lawsuit against Binance on Monday, March 27, accusing the crypto exchange of conducting unregistered futures and options transactions, serving US customers bypassing restrictions, illegal operations (in including in favor of Hamas, recognized as a terrorist organization in many countries) and market manipulation.

In relation to the last accusation, analyst Cory Swan has theorized that it was the founder of the Binance Changpeng Zhao (CZ) crypto exchange who was all this time the bear who tried to crash bitcoin to $12,000. “CZ held a large short position against BTC, hoping for $12,000, and paying for his personal big trade with unsecured BUSD and unsecured altcoins,” Swann writes.

At the moment, opinions are divided regarding the future of Binance. Some believe that no one needs the funeral of such a giant, as this will be a collapse for the entire crypto industry. Others are confident that the CFTC will seek the most severe punishment for the exchange. Even in the event of a pre-trial settlement, she will face billions in fines and a ban on work in the United States. If the court nevertheless takes place and finds Binance and its management guilty, both many clients and financial counterparties around the world will immediately turn away from them.

According to a CNBC survey of industry influencers, the market remains bullish on the future of the first cryptocurrency at this stage. So Tether CTO Paolo Ardoino believes that bitcoin can “retest” the all-time high of $69,000. And Marshall Beard, strategic director of the Gemini crypto exchange, predicts that the coin may reach $100,000 this year. In his opinion, if the first cryptocurrency manages to overcome the previous maximum, it “would not take much time to rise even higher.” However, a new bullish rally requires powerful new triggers, both economic and news. But neither the first nor the second has yet been observed.

Bloomberg strategist Mike McGlone believes that gold and bitcoin will be the most popular instruments for investors in 2023. The precious metal will confirm the status of the safest asset. The cost of a troy ounce of gold will soon exceed $2,000. At the same time, the attractiveness of bitcoin, which is seen as an instrument independent of the traditional banking system, will increase. As the global economy worsens, the number of investors who prefer to keep their capital in BTC, gold, as well as in treasuries, will grow, according to a note prepared by McGlone.

The collapse of the banking sector is reminiscent of the crisis of 1929, so the Fed is tightening monetary policy. After the latest rate hike, investment in bitcoin has increased, although many observers expected its value to fall, Bloomberg strategist emphasized. In his opinion, the BTC rebound can be seen as a positive signal, as more traders continue to buy cryptocurrency even amid global uncertainty.

Place Holder partner and former head of Ark Invest crypto company Chris Burniske, like Mike McGlone, believes now is the time to buy bitcoin and ethereum, as they are created for precisely such crisis moments.

Venture capitalist and billionaire Tim Draper made similar recommendations. Draper wrote in a report aimed at entrepreneurs that companies "can no longer rely" on just one bank or regulator. “For the first time in many years, governments are taking over banks at the risk of becoming insolvent. Bitcoin is a hedge against the financial domino effect and over-control mismanagement.”

Draper suggested keeping short-term deposits for no more than six months in two separate accounts, at a local bank and an international bank. In his opinion, organizations should also transfer an amount equal to two salary funds into bitcoin or other digital assets. The billionaire stressed the importance of such a contingency cushion, as management is responsible for meeting payroll deadlines "even in times of crisis."

Of course, as always, the voices of "crypto gravediggers" are heard. Thus, the analyst under the nickname Grinding Poet believes that “a retest of the 2018 lows is inevitable” and “the new target is $3,150.” The well-known gold bug and bitcoin critic Peter Schiff continues to stand his ground. Back in 2017, Schiff promised that the coin would soon be completely worthless. Despite the past 6 years, the entrepreneur has not changed his position. And now, in March 2023, he stated that “bitcoin’s zero price hike just dragged on a bit.”

Steve Hanke, professor of applied economics at Johns Hopkins University, criticized bitcoin again, saying that the fundamental value of the first cryptocurrency is zero. He called BTC a highly speculative asset with no economic value or utility.

Cake Defi CEO Julian Hosp told Hanke that bitcoin is debatable, but it certainly has value. According to Hosp, there are undoubtedly people who need bitcoin, so the claim that the first cryptocurrency has zero value is fundamentally wrong.

We tend to agree with Hosp, because at the time of writing the review, on the evening of Friday, March 31, BTC definitely has value and is expressed in a very specific figure of $28,375 per coin. The total capitalization of the crypto market has grown slightly over the week, from $1.169 trillion to $1.185 trillion. The Crypto Fear & Greed Index also rose from 61 to 63 points in seven days and is still 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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March 2023 Results: the Japanese Yen Helped NordFX Traders Enter the TOP-3

NordFX Brokerage company has summed up the performance of its clients' trade transactions in March 2023. The services of social trading, PAMM and CopyTrading, as well as the profit received by the company's IB-partners have also been assessed.

- The maximum monthly profit of 38,150 USD was received by a client from East Asia, account No. 286XX, on transactions with USD/CHF, USD/CAD and USD/JPY.
- This time, the second step was taken by their compatriot, account No. 1505XXX, who earned 26,955 USD trading the USD/JPY pair.
- And finally, a trader from South Asia, account No. 9605XXX, came in third place with a profit of 18,347 USD, their main trading instrument was the GBP/JPY pair.

The situation in NordFX passive investment services is as follows:

CopyTrading still pleases fans with a "veteran" signal, KennyFXPRO - Prismo 2K. It increased its profit to 355% in 697 days. Recall that despite the relative stability of the results, this supplier had a serious failure last November: the maximum drawdown on this signal approached 67% then. This can be called force majeure, but you should always keep in mind that trading in financial markets is a risky business, and can lead not only to impressive profits, but also to a complete loss of funds.
    
Another signal is Bull trader, which started on July 22, 2022, it has reached a profit of 183% over the past 248 days, with a drawdown of less than 23%. In addition, we drew the attention of algo trading fans a month ago to a startup called ATFOREXACADEMY ALGO 1. It celebrated a round date on March 31: it turned exactly 100 days old. It showed a very good profitability of 202% during this time, although its maximum drawdown turned out to be rather big, 38%.
    
In the PAMM service, two accounts continue to struggle in the financial markets, which we have repeatedly mentioned in previous reviews. These are KennyFXPRO-The Multi 3000 EA and TranquilityFX-The Genesis v3. They suffered serious losses in mid-November 2022: the drawdown at that moment approached 43%. However, PAMM managers managed to stabilize the situation, and profit on the first of these accounts reached 91% as of March 31, 2023, on the second - 58%, which is approximately the same as a year ago. |
    
This time, the Trade and earn account also attracted attention. It was opened more than a year ago, but was in a state of hibernation, waking up only in November. As a result, the yield on it has exceeded 55% over the past 5 months with a very small drawdown of less than 10%.

Among the IB partners of NordFX, the TOP-3 include representatives of East, South, and West Asia:
- the largest commission, 8,418 USD, was credited to a partner with account No.1259ХXХ;
- the next is the partner (account No. 1621ХХХ), who received 5,701 USD;
- and, finally, the partner with account No. 1618xxx, who received 4,536 USD as a reward, closes the top three.
 

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 Cryptocurrency Forecast for March 20 - 24, 2023

EUR/USD: ECB Not Fazed by Banking Crisis


The past week was marked by a large black candle when EUR/USD plummeted from 1.0759 to 1.0515. And this happened not on Thursday, March 16, when the ECB made a decision on the interest rate, but the day before. The reason for the weakening of the European currency was none other than the head of the National Bank of Saudi Arabia.

Here's what happened. Following the collapse of three banks in the United States, Silvergate, Silicon Valley, and Signature, the banking crisis spread to Europe, hitting Credit Suisse. This largest Swiss financial conglomerate has long been experiencing serious liquidity problems amid corruption scandals in Mozambique and rumors of dirty money from Bulgarian drug lords fueled by the media. And on Wednesday, March 15, it became known that the National Bank of Saudi Arabia, which is the largest shareholder of Credit Suisse, decided not to help the troubled Swiss with money anymore.

Credit Suisse's stocks fell more than 30%. But it didn't end there, and a wave of panic hit other major European banks. Societe Generale's shares fell by 12%, BNP Paribas - by 10%, Commerzbank - by 9%. In this situation, investors decided that the ECB would not dare to raise the rate by 50 basis points (bp), the likelihood of such a move dropped from 90% to 20%, which led to euro sales.

But as often happens, investors were wrong. Thursday came, and the European Central Bank did what it promised a month ago: raised the rate by 50 bp. In addition, concerns about the banking sector began to decline. The National Bank of Switzerland took on the salvation of Credit Suisse, and US authorities extended a helping hand to American banks, including the Treasury and the Federal Reserve. In addition, 11 more private banks joined the rescue operation, allocating $30 billion for these purposes. As a result, the storm subsided, EUR/USD returned to its comfortable zone of 1.0650, and market participants began discussing how much the US regulator would raise the interest rate on Wednesday.

Let's remind that the nearest FOMC (Federal Open Market Committee) meeting of the US Federal Reserve is scheduled for Wednesday, March 22. However, despite the hawkish statements of Jerome Powell and his colleagues, macroeconomic statistics suggest rather easing than further tightening of the Fed's monetary policy.

The data from the US labor market published on March 9 and 10 vividly demonstrate the slowdown of the country's economy. Thus, the number of initial jobless claims was 211K, exceeding the expected 195K and 190K a month earlier. This indicator exceeded the 200K mark for the first time and reached a maximum since December 2022. As for the number of new jobs created outside the agricultural sector (NFP), it was 311K, significantly less than in January - 503K. Together with the rise in unemployment to 3.6% (3.4% in January), the decrease in retail sales growth rates, and the banking crisis, these data may cool down the hawkish fervor of FOMC members. Currently, the likelihood of raising the federal funds rate by 25 basis points (from the current 4.75% to 5.00%) on March 22 is 80%. Moreover, derivatives predict a drop in the rate below 4% by the end of 2023, which is bad news for the dollar.

However, the European economy is not doing well either, which could prompt the ECB to take a less aggressive step. The swap market is almost 100% sure that on May 4, the euro regulator will raise the rate only by 25 basis points - from 3.00% to 3.25%.

EUR/USD closed the past five-day period at 1.0664. At the time of writing this review, on Friday evening, March 17, 40% of analysts expect the strengthening of the dollar, while the same percentage predicts its weakening, and the remaining 20% take a neutral position. Among the oscillators on D1, 75% are painted in green, another 10% are in red, and 15% are in neutral gray. Among the trend indicators, 90% recommend buying and 10% recommend selling. The nearest support for the pair is located in the area of 1.0590-1.0620, followed by levels and zones of 1.5000-1.0530, 1.0440, 1.0375-1.0400, 1.0300, and 1.0220-1.0255. Bulls will face resistance in the area of 1.0680-1.0700, 1.0740-1.0760, 1.0800, 1.0865, 1.0930, 1.0985-1.1030.

It is clear that the main event of the upcoming week will be the Fed meeting on March 22, the summary of forecasts, and the subsequent press conference of the organization's leadership. In addition, on Monday, March 20, the People's Bank of China will make its decision on the interest rate, which may affect the dynamics of the DXY dollar index. As for the end of the working week, on Thursday, March 23, another batch of data from the US labor market will be released, and on Friday, March 24, the indicators of business activity (PMI) in Germany and the Eurozone, as well as the volume of orders for capital goods and durable goods in the United States, will become known.

GBP/USD: UK Treasury Boosts the Pound

GBP/USD also marked a black candle on March 15, albeit slightly shorter at 170 pips. However, by the end of the week, the pound had fully recovered and even strengthened compared to the first ten days of March, finishing at 1.2175. This was due to increased optimism about the prospects of the British economy. The UK Chancellor of the Exchequer, Jeremy Hunt, presented the budget for the current year, the main goal of which, he said, was to stabilize the country's economy. It is expected that the UK GDP will decrease by only 0.2% this year, rather than 1.5% as previously expected, thus avoiding a technical recession. In addition, the inflation rate should decrease to 2.9% by the end of 2023, which is almost 3.5 times less than the peak value of 10.1%. Furthermore, the Chancellor announced a package of measures and benefits for individuals to help compensate for the shortage of labor.

Following the Federal Reserve's decision on interest rates next week, the Bank of England (BoE) will announce its own decision just 18 hours later. It should be noted that the head of the BoE, Andrew Bailey, speaking on Wednesday, March 1, was vague, stating that a final decision regarding the prospects of the monetary policy of the British central bank had not yet been made, and that the bank should be flexible in the coming months to avoid alarming the markets. Now, the regulator's caution will be further exacerbated by the banking crisis initiated primarily by the aggressive actions of colleagues on the other side of the Atlantic. And if previously, market participants were confident in raising interest rates by at least 25 basis points from the current 4.00% (and perhaps even by 50 basis points), now they have doubts – what if the BoE decides to take a pause to assess the situation and avoid making any mistakes?

At the moment, the majority of experts (50%) are on the side of the dollar, with only 10% voting for the rise of the British currency, while the remaining 40% remain in a wait-and-see position. Among the oscillators on D1, the balance of power is as follows: 85% voted in favor of the greenback (a quarter of them are in the overbought zone) and 15% in favor of the red. Among the trend indicators, the absolute advantage is on the side of the greenback, with 100%. The support levels and zones for the pair are 1.2145, 1.2075-1.2085, 1.2000-1,2025, 1.1960, 1.1900-1.1920, 1.1800-1.1840, 1.1720, and 1.1600. If the pair moves north, it will encounter resistance at levels 1.2200-1.2210, 1.2270, 1.2335, 1.2390-1.2400, 1.2430-1.2450, 1.2510, 1.2575-1.2610, 1.2700, 1.2750, and 1.2940.

As for events related to the UK economy, in addition to the BoE meeting, the next week's calendar includes Friday, March 24, when data on retail sales and business activity in the country's service sector will be released.

USD/JPY: Will the Interest Rate Go Even Lower?

The yen is the currency that is absolutely unaffected by the banking crisis in the US and Europe, on the contrary, it adds attractiveness to the Japanese currency as a quiet harbor capable of protecting against financial storms. Not even the statement by the departing governor of the Bank of Japan (BoJ), Haruhiko Kuroda, about the possible further reduction of the interest rate, which is already negative at -0.1%, has discouraged investors. As a result, USD/JPY ended the trading session where it had already been in early February, at the level of 131.80.

As for the nearest prospects, currently, 50% of experts have voted for the pair to move north, 25% have pointed in the opposite direction, and another 25% have refrained from making any forecasts. Among the oscillators on D1, 90% are pointing south (a third of them are signaling oversold), while 10% are looking in the opposite direction. All trend indicators are pointing south. The nearest support level is located in the zone of 131.25, followed by levels and zones of 130.50, 129.70-130.00, 128.00-128.15, and 127.20. Resistance levels and zones are at 132.80-133.20, 134.00-134.35, 135.00-135.35, 135.90-136.00, 137.00, 137.50, and 137.90-138.00.

No significant macro statistics related to Japan's economy are expected to be released next week. However, traders should keep in mind that Tuesday, March 21is a holiday in Japan: the Spring Equinox Day. And, of course, it should not be forgotten that the FOMC meeting of the US Federal Reserve is scheduled for March 22.

CRYPTOCURRENCIES: What's Bad for Banks Is Good for Bitcoin

In our last review, we listed a number of factors that negatively affect the crypto market. Among them are crypto repressions by US authorities, including the Treasury Department, SEC, Federal Reserve, Attorney General, Senate, and even the Biden administration. However, problems with altcoins and even upcoming changes in tax legislation pale in comparison to the crisis in the American banking sector. On March 8, the crypto bank Silvergate announced voluntary liquidation, followed by Silicon Valley Bank (SVB) and Signature Bank, which were actively used by crypto companies as fiat gateways. And last week, European banks were added to the list, as discussed above.

Silvergate suffered due to the debts of the collapsed crypto exchange FTX, while SVB and Signature were sunk by the Federal Reserve's monetary policy, including aggressive interest rate hikes and balance sheet reductions. "The 18th largest bank [SVB] has collapsed. We learned how the record sale of US Treasury bonds led to billions of dollars in unrealized losses in the banking sector. Thus, we received another example that a partial reserve system has creditors, not depositors," commented The Bitcoin Layer on the event. According to FDIC data, just in the last year, unrealized losses of US banks increased from $3 billion to $652 billion.

So, regulators first sent banks to the bottom, and then set about saving them. SVB and Signature have come under the control of the Federal Deposit Insurance Corporation. The latter, along with the Treasury and the Federal Reserve, stated that SVB and Signature Bank depositors will have access to all funds in full. In addition, the Federal Reserve announced the creation of the Bank Term Funding Facility (BTFP) to provide emergency financing to banks that may face similar problems, with $25 billion allocated for this purpose.

Against this background, the author of the bestseller Rich Dad Poor Dad and entrepreneur Robert Kiyosaki once again called for investment in gold, silver, and bitcoin. In his opinion, to save the "sick economy," regulators will print "even more fake money." "Take care of yourself. An emergency landing is ahead," Kiyosaki wrote.

Market analyst Tedtalksmacro called this move by the Fed the beginning of unofficial quantitative easing. And former CEO of BitMEX, Arthur Hayes, was even more categorical: "Get ready for a rapid rally in risky assets. The money printer is on! - he wrote. - Helping depositors of failed banks means injecting money into an economy from which liquidity has only been withdrawn over the course of a year. This is excellent fuel for risky assets."

Recall that at the beginning of March, we saw active outflows from institutional investors, who were scared off by regulators. In just one week, outflows from bitcoin funds amounted to a record $244 million. And now everything has changed: the BTC rate has jumped by more than 30%, and the overall cryptocurrency market capitalization has once again risen above $1 trillion. Market participants have remembered the potential of cryptocurrency as a capital protection tool and that Bitcoin was created precisely to withstand such shocks. Observers draw parallels with the Cypriot crisis of 2013, which highlighted the shortcomings of the fractional reserve system and drew attention to decentralized hedging in opposition to centralized banking.

According to some experts, what happened has been excellent advertising for bitcoin, whose price is expected to soar. However, there are skeptical voices as well. For example, CNBC's Mad Money host Jim Cramer continued to criticize the crypto industry, calling bitcoin a "strange animal." In his opinion, large financial institutions and wealthy investors manipulate cryptocurrencies in secret. "Please don't think everything is happening on its own," Cramer warned the audience, adding that he never believed in bitcoin.

The forecast given by well-known macro analyst and trader Henrik Zeberg also looks bleak. He evaluated the correlation between the level of unemployment in the US, the NAHB housing index, the stock market index, and cryptocurrencies, and noted the scary similarity of the current scenario to the 1929 crisis. According to the expert, all markets were "extremely overheated" and are now approaching an economic collapse that will last for several years. The impending recession may be much more severe than in 2007-2009. According to the analyst, the cryptocurrency market will also suffer greatly, and many digital coins will not withstand the pressure.

Zeberg presented a forecast for the macroeconomic recession based on Elliott wave theory. According to the research, wave 4 may reach its maximum level in early 2024. After that, major financial markets will be doomed to collapse. The specialist emphasized that all attention should be focused on the economic indicators of the third and fourth quarters of 2023, which may become the last "bullish" period of this market cycle.

As of the writing of this review on the evening of March 17, BTC/USD is trading around $27,500. The total market capitalization of the crypto market rose from $0.937 trillion to $1.155 trillion over the week. The Bitcoin fear and greed index increased from 34 to 51 points in seven days and moved from the Fear zone to 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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NordFX Broker Awarded for Outstanding Performance in Latin America and Asia

Over its 15 years in the financial markets, brokerage firm NordFX has accumulated more than 70 professional awards. In March this year, the company added two prestigious accolades from International Business Magazine to its collection. NordFX was honored as the "Most Reliable Forex Broker LATAM 2023" and the "Best CFD Broker Asia 2023".

International Business Magazine is a respected publication based in the United Arab Emirates, with global recognition and a substantial readership comprising professionals from various industries and regions. In 2019, the magazine was nominated for the esteemed European Digital Media Awards in the "Best News Publication" category. Receiving awards from such a renowned publication reaffirms NordFX's dominant position in areas like Latin America and Asia. The company offers its clients In these regions a comprehensive range of services, adhering to the highest industry standards in the Forex and CFD markets.
 

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 Cryptocurrency Forecast for March 13 - 17, 2023

EUR/USD: USA Labor Market Stops USD

Jerome Powell played on the dollar side last week. Of course, the Fed Chairman knew that markets expected an interest rate increase of 25 basis points (bps) from the next FOMC (Federal Open Market Committee) meeting. But he did not rule out that his organization could take a more decisive step in an effort to curb inflation and raise it by 50 bp on March 22 at once. Moreover, it had been earlier expected that the rate would reach 5.00-5.25% at the peak. Now Powell and his colleagues do not rule out that its maximum value will be 5.50%. (According to Commerzbank strategists, even an increase to 6.00% is possible).

And so, to avoid a shock, the head of the Fed decided to prepare the markets for this in advance. His speech to the US Congress on Tuesday, March 7, was extremely hawkish, as a result of which the DXY Dollar Index updated its 2023 highs, soaring to 105.86, and EUR/USD lost more than 170 points, finding a local bottom at 1.0523. The probability of a 50bp rate hike in March rose to 70% (it was 23-30% a week ago, and the markets estimated it at only 9% a month ago).

However, the dollar could not build on its success, and EUR/USD turned north in the middle of the week. Data from the US labor market helped to lose ground. The number of initial applications for unemployment benefits published on Thursday March 09 amounted to 211K against the expected 195K and 190K a month earlier. This indicator exceeded the 200K mark for the first time since the first half of January and reached its maximum since the end of December 2022. In addition, short-term speculators began to take profits on the USD ahead of the report on the US labor market for February, published on Friday, March 10. And they did the right thing, as the dollar continued to retreat. The report showed that the number of new jobs created outside the agricultural sector (NFP) was 311K, which is more than the forecast of 205K, but significantly less than in January - 503K. Together with an increase in unemployment by 3.6% (forecast 3.4% and 3.4% in January), these data indicate a cooling of the country's economy, which in turn may cool down the hawkish ardor of FOMC members. This was confirmed by the dynamics of EUR/USD, which soared to a height of 1.0700 just a few hours after the publication of the report.

As for the euro area, the macro data looked neutral last week. Thus, the Consumer Price Index (CPI) in Germany, the locomotive of the European economy, remained at the same level and fully met the forecasts - 8.7% in annual terms.

The last chord of the week sounded at 1.0638. And despite the fall of the dollar at the end of the week, 80% of analysts expect it to strengthen in the near future, the remaining 20% have taken a neutral position, not a single vote has been cast for the growth of the euro. Among the oscillators on D1, 25% are red, another 25% are green, and 50% are neutral gray. Among trend indicators, 80% recommend buying, 20% - selling. The nearest support for the pair is located at 1.0600-1.0620, then there are levels and zones 1.5000-1.0530, 1.0440, 1.0375-1.0400, 1.0300 and 1.0220-1.0255. Bulls will meet resistance in the area of 1.0650, 1.0700, 1.0740-1.0760, 1.0800, 1.0865, 1.0930, 1.0985-1.1030.

There will be quite a lot of economic statistics next week. Moreover, it will certainly play a very important role in the decisions of both the Fed and the ECB. Thus, data on consumer inflation (CPI) in the US will be received on Tuesday, March 14. Data on retail sales in this country, as well as the US Producer Price Index (PPI), will be released the next day. The European Central Bank will decide on the euro interest rate on Thursday, March 16, which is expected to be raised by 50 bp., from 2.50% to 3.00%. Of course, the subsequent comments of the ECB management on monetary policy are also of absolute interest to market participants. And finally, the value of CPI in the Eurozone will become known at the very end of the working week, on March 17.

GBP/USD: Volatility Is High, the Result Is Zero


The result of the past five days for GBP/USD, despite the volatility of 310 points, ended up being close to zero. The pair finished the working week at the level of 1.2025, returning to the central zone of the side channel 1.1920-1.2145. The reason for this dynamics is the same as for EUR/USD, since both pairs were actively reacting to what was happening in the US. There were no important macro statistics from the United Kingdom all week until Friday, March 10, when the data on GDP and industrial production for January were released.

The first indicator showed an increase from -0.5% to +0.3% with a forecast of +0.1%, the second one, on the contrary, fell. UK manufacturing output fell from 0.0% to -0.4% in January against the forecast of -0.1%, while total industrial output was -0.3% m/m versus -0.2% and +0.3% expected in December. Thus, the data on GDP added optimism to the bulls on the pound, while the data on industrial production reduced it slightly.

According to Commerzbank economists, the Bank of England (BoE) is unlikely to help the British currency. Recall that the head of the Bank of England (BoE), Andrew Bailey, speaking on Wednesday, March 01, further fogged the issue, saying that the final decision on the prospects for the monetary policy of the British Central Bank has not yet been made, and that the regulator should be flexible in the coming months so as not to scare the markets. And as long as this regulator sticks to its rather cautious stance, unlike the Fed and the ECB, the pound is likely to remain under downward pressure. The Bank of England, instead of actively fighting high inflation, is likely to act as a catch-up, which will lead GBP/USD to further decline.

Experts' median forecast for the near term is similar to the forecast for EUR/USD: 75% of experts vote for the strengthening of the dollar and the fall of GBP/USD, the remaining 25% prefer to abstain from forecasts. Among the oscillators on D1, the balance of power is as follows: 35% vote in favor of greens, another 35% in favor of reds, and 30% in favor of neutral grays. Among the trend indicators, a clear advantage is on the side of the greens: 75% to 25% in their favor. Support levels and zones for the pair are 1.1985-1.2000, 1.1960, 1.1900-1.1925, 1.1840, 1.1800, 1.1720 and 1.1600. When the pair moves north, it will face resistance at the levels 1.2055, 1.2075-1.2085, 1.2145, 1.2185-1.2210, 1.2270, 1.2335, 1.2390-1.2400, 1.2430-1.2450, 1.2510, 1.2575-1.2610, 1.2700, 1.2750 and 1.2940.

As for the release of British macro statistics, next week's calendar includes Tuesday, March 14, when data on the unemployment rate and wages in the United Kingdom will be received.

USD/JPY: The Dollar Decides Everything

The meeting of the Bank of Japan (BOJ) was held at the very end of last week, on Friday, March 10, which was chaired for the last time by the former head, Haruhiko Kuroda. It went exactly as expected: the Japanese Central Bank did not change the parameters of its ultra-stimulating monetary policy, the interest rate again remained at the previous negative level of -0.1%.

Haruhiko Kuroda, speaking at his last press conference and commenting on the results of the last meeting of the Central Bank, said that the positive effect of monetary policy easing has significantly exceeded its side effects. At the same time, he noted that the regulator "will not hesitate to continue easing monetary policy if necessary" and that "it is important to continue to ease it in order to stimulate companies to raise wages." Kazuo Uedu, the new CEO of BoJ, is likely to follow his predecessor's precepts. At least, one should not expect any sharp steps from him.

At the moment, the American currency is decisive in this, as in other dollar pairs. After the release of data on the US labor market, the dollar fell to new lows around the world, while futures for US stock indices turned positive. If USD/JPY was trading at 137.90 on Wednesday, March 08, it found the bottom at 134.10 on March 10, and ended the week after a correction at 135.05.

As for the immediate prospects, 75% of experts vote for the pair's movement to the south at the moment, 25% point in the opposite direction. Among the oscillators on D1, 25% point north, 40% look in the opposite direction, and the remaining 35% look east. For trend indicators, 40% point north, and 60% look south. The nearest support level is located at 134.75 zone, followed by levels and zones 134.00-134.35, 133.60, 132.80-133.20, 131.85-132.00, 131.25 130.50, 129.70-130.00.  Levels and resistance zones are 135.15, 136.00-136.30, 136.70-137.10, 137.50, 139.00-139.35, 140.60, 143.75.

Among the events of the upcoming week, we can mention the publication of the Report on the last meeting of the Bank of Japan on Wednesday, March 15. Although, this document is unlikely to make a serious impression on market participants.

CRYPTOCURRENCIES: It's Really Bad. Will it get worse?

Bitcoin continues to be under pressure from an avalanche of bad news. A record $94 million in bullish positions for 2023 was liquidated on Thursday, March 10 alone. Analysts at Santiment are recording massive negative sentiment towards cryptocurrencies. The gloomy mood of players and investors has been influenced by:

1. Liquidation of Silvergate crypto bank. After the close of trading on the New York Stock Exchange on March 8, Silvergate Capital Corp., the American company that manages this bank, announced its intention to curtail its activities and voluntarily liquidate it. Given Silvergate's impressive customer base, this could cause a domino effect similar to last year's.

2. Potential U.S. government sale of $1 billion in bitcoin.

3. Possible tightening of the Fed's monetary policy, which has collapsed the quotes of all risky assets, including stocks and cryptocurrencies.

4. Continued crackdown on crypto exchanges. On March 09, the New York prosecutor's office filed a lawsuit against KuCoin, due to the lack of registration of this exchange in the United States as a securities broker. The fact is that Attorney General Letitia James, as well as SEC Chairman Gary Gensler, consider altcoins to be securities.

5. And finally, as icing on the cake, the proposals of the US President Biden's administration to ban crypto companies from tax maneuvers and to establish a 30% electricity tax for miners. A tax maneuver is a financial transaction when a company, with an unrecorded loss, first sells crypto assets and immediately buys them again, which reduces the amount of tax. The introduction of a 30% tax on electricity can deal a crushing blow not only to American miners, but also to the industry as a whole.

In our opinion, there is plenty of bad news for one week. Now let's try to add at least a few tablespoons of honey to this barrel of tar. According to Credible Crypto experts, at the moment, about 73% of all BTC coins are concentrated in the hands of experienced holders who are used to taking a hit and able to withstand the most severe crypto frosts. And Santiment reminds that such a total negative led earlier to a noticeable upward rebound in prices.

Eight Global CEO Michael Van De Poppe noted the importance of the next few weeks for bitcoin. “Capitalization could drop to $860 million, dragging the entire market down with it,” he warned. According to the expert's forecast, the price of bitcoin may fall to $19,700. Recall that he said just recently that in the worst case, the bottom could be even lower, at the level of $18,000, after which the coin will go up and could reach $40,000 this year.

Felix Zulauf, founder of hedge fund Zulauf Consulting, has suggested that bitcoin will head into a clear bull run sometime in late spring. The expert does not rule out that the asset could reach $100,000 on a sharp uptrend. Despite the bearish dynamics, Credible Crypto experts also remain optimistic about the medium-term prospects for the flagship crypto asset. They agree with Felix Zulauf that bitcoin may reach its all-time high this year. However, before a sustainable bull trend begins, the asset, in their opinion, will face several obstacles. (We have already listed five of them above)

Arthur Hayes, former CEO and co-founder of the BitMEX crypto exchange, believes that the bitcoin rally will start at a time when the global economy is in an oil crisis. In his opinion, a sharp increase in hydrocarbon prices will create conditions for the growth of digital assets and, first of all, bitcoin.

Hayes's logic is as follows: against the background of geopolitical tensions in the world, demand for energy resources will increase, as oil exporters are likely to reduce production. In this situation, the United States, as a leading economic power, will have to increase its own oil production. The Fed will need to ease the monetary rate to stimulate business activity in the energy sector. As soon as the regulator starts lowering interest rates, capital will return to risky assets, including cryptocurrencies. In addition, the former head of BitMEX recalled that the limited supply of BTC will also contribute to its growth, as the US dollar will lose ground.

It is appropriate here to cite data from the analytical platform WooBull, according to which the inflation rate of bitcoin is now at least three times lower than that of the US dollar. This allows BTC to act as a possible hedge against capital depreciation and economic uncertainty. Statistics show that the inflation rate of the first cryptocurrency has been steadily declining since its inception in 2009 and amounted to 1.79% as of March 04. At the same time, the same indicator for USD reached 6.4% in 2023, which is 3.57 times higher than that of BTC.

The decrease in bitcoin inflation is due to the asset's deflationary model, supported by halvings, which reduce the speed of coin mining and halve miners' rewards. Experts also believe that this indicator remains low due to the decentralization of BTC, which avoids most of the political and economic risks typical of the US dollar, whose inflation rate, on the contrary, will increase. This is primarily due to an excessive increase in the money supply, a decrease in demand and/or a reduction in production.

In the meantime, at the time of writing the review (March 10, 23:00 NordFX server time), BTC/USD is trading in the $20,070 zone. (the report on employment in the US has slightly supported the quotes). The total capitalization of the crypto market for the week fell below the psychologically important level of $1 trillion and is $0.937 trillion ($1.024 trillion a week ago). The Crypto Fear & Greed Index fell from 50 to 34 points in a week and moved from the Neutral zone to the Fear zone.

The forecast made by well-known cryptanalyst and host of DataDash YouTube channel Nicholas Merten causes fear as well. He did not rule out a new major drop in ethereum. According to the specialist, if we take into account previous bear markets when forecasting, ETH could fall by more than 90% from its historical high, that is, find itself at the level of several hundred dollars. “ETH/USD has a long way to go. “We're only 67% from the record,” Merten says. “And if we see again what we had in previous bear markets, say, a 92 percent correction or a 94 percent correction, the price of ETH will drop to several hundred dollars. The difference is huge, from $870 to about $500.”

We usually try to end our review on an optimistic note. But what if after a long crypto winter, instead of spring, we'll get another harsh winter? Although, let's still hope that the crypto calendar will be directly correlated with the regular calendar. And it is now the first month of spring, which should be followed by a warm sunny summer.


NordFX Analytical Group


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 Cryptocurrency Forecast for March 06 - 10, 2023

EUR/USD: Pause in the 1.0600 Zone


On Thursday, March 02, the DXY dollar index broke again through the bar at 105.00 points but could not stay there. As usual, the dollar was supported by an increase in US government bond yields. The yield on 10-year securities rose to its high since November 10 at 4.09%, the yield on 2-year securities rose to 4.91% and updated its maximum since 2007. The revision of US labor market statistics in Q4 2022 and the ISM Manufacturing Business Activity Index (PMI) in the country's manufacturing sector also supported the US currency. On the other hand, the dollar was pressured by the yuan, which is getting stronger against the backdrop of macro-economic statistics from China. The PMI manufacturing index in China was the highest since 2012. Activity in the service sector has also increased, and the Chinese real estate market has stabilized.

However, the main factor determining the dynamics of the USD is still the expectation of the Fed's further actions in an attempt to curb inflation. Since the Consumer Price Index (CPI) rose more than expected in January, reaching 6.4%, market participants started talking about the fact that the regulator may raise the rate not by 25 basis points (bp) in March, but immediately by 50. (At the moment, CME's FedWatch tool estimates the probability of such a move at 23%).

This forecast was supported by hawkish comments by some FOMC (Federal Open Market Committee) members. The head of the Atlanta Fed, Rafael Bostic, said that the key interest rate should eventually be raised to 5.00-5.25% and kept at this level until 2024. Minneapolis Fed chief Neil Kashkari has yet to decide whether he will vote for a 25bp or 50bp rate hike in March, but hinted that the Fed's own dot plot could be raised. At the same time, both officials stressed the need to fight inflation, emphasizing that a strong labor market and the US economy are able to withstand the pressure caused by the aggressive monetary policy of the Central Bank. However, Rafael Bostic then softened his hawkish mood and said that the regulator may suspend the rate hike cycle in the summer. After that, the dollar slightly retreated from its gains.

Some analysts do not rule out that the peak USD rate will reach 5.5% in September, and maybe even 6.0%. There is no question of reducing it at the end of the year at all. And these expectations play on the side of the US currency, which is confirmed by the futures market. But when talking about EUR/USD, one cannot focus only on the actions of the Fed. They don't sleep on the other side of the Atlantic either. Inflation data for a number of European countries suggest that the ECB will also be forced to maintain a hawkish position for longer than previously expected. The opening of the Chinese economy could put pressure not only on the US, but also on Europe, making it difficult for both regulators to curb inflation. Therefore, market participants expect further tightening of monetary policy on the part of the European Central Bank, which currently keeps the pair in the 1.0600 area.

Last week's finish was at 1.0632. At the time of writing this review (the evening of March 03), the analysts' forecast looks as uncertain as the flat quotes of EUR/USD: 50% of them have taken a neutral position, 30% of experts are counting on further strengthening of the dollar, and the remaining 20% side with the euro. Among the oscillators on D1, 50% are colored red, 15% are green and 35% are neutral gray. Among trend indicators, 35% recommend selling, 65% - buying. The nearest support for the pair is located at 1.0575-1.0605, then there are levels and zones 1.5000-1.0530, 1.0440, 1.0375-1.0400, 1.0300 and 1.0220-1.0255. Bulls will meet resistance in the area of 1.0680-1.0710, 1.0740-1.0760, 1.0800, 1.0865, 1.0930, 1.0985-1.1030.

There will be quite a lot of economic statistics and events in the coming week. Data on retail sales in the Eurozone will be released on Monday, March 06. Fed Chairman Jerome Powell will address the US Congress on Tuesday and Wednesday. Also, there will be data on retail sales in Germany, Eurozone GDP and employment in the US on Wednesday, March 08. The number of initial claims for unemployment benefits in the US and the inflation rate (CPI) in China will be known on Thursday. Friday 10 March will show what is happening with consumer prices in Germany. We are traditionally waiting for a portion of important statistics from the US labor market on the same day, including the unemployment rate and the number of new jobs created outside the agricultural sector (NFP). 

GBP/USD: Sentiment Color Is Red

GBP/USD has been in a sideways channel for the second week in a row, although it has demonstrated rather high volatility. The range of its fluctuations (1.1942-1.2147) exceeded 200 points, and the last chord of the week was placed in the middle of this channel, at the level of 1.2040. We described above what gives strength to the dollar. The British currency received some support from information received last week that an agreement was reached between the UK and the EU on the Northern Ireland Protocol. Trade disputes have now been resolved, and while this is positive for the UK economy as a whole, many experts believe that the positive effect of this agreement for the pound will be short-term.

Quotes of the pair are still determined by the actions of the Central Banks. And the head of the Bank of England (BoE), Andrew Bailey, speaking on Wednesday, March 01, further fogged the issue., saying that the final decision on the prospects for the monetary policy of the British Central Bank has not yet been made, and that the regulator should be flexible in the coming months so as not to scare the markets.

Experts' median forecast for the near future is as follows: 70% of experts vote for the further weakening of the pound and the fall of GBP/USD, only 10% expect the pair to grow, and 20% prefer to refrain from forecasts. Among the trend indicators on D1, the balance of power is 65% to 35% in favor of the greens. The picture is different among oscillators. The reds have a convincing advantage here, 70%, 10% side with the greens, and 20% have taken a neutral position. Support levels and zones for the pair are 1.1985-1.2025, 1.1960, 1.1900-1.1925, 1.1840, 1.1800, 1.1720 and 1.1600. When the pair moves north, it will face resistance at the levels 1.2055, 1.2075-1.2085, 1.2145, 1.2185-1.2210, 1.2270, 1.2335, 1.2390-1.2400, 1.2430-1.2450, 1.2510, 1.2575-1.2610, 1.2700, 1.2750 and 1.2940.

As for next week's economic calendar, no important macro data from the UK is expected until Friday March 10, when UK GDP and industrial production data for January are released.

USD/JPY: Patience and Only Patience

USD/JPY rose to 137.10 on Thursday, March 02 after the release of US economic data. This is the highest level since December 20, 2022. The yen was opposed by the divergence between Fed and BoJ politicians, as well as the yield spread between 10-year US and Japanese bonds, which rose to its highs in March since November 2022.

Another blow to the Japanese currency was dealt by Kazuo Ueda, who was elected as the new head of the Bank of Japan (BoJ). His position only exacerbated the disappointment of those who hoped for major changes in the regulator's monetary policy. Investors have failed to pick up a clear "hawkish" signal in his speeches, which would have spurred the resumption of speculative demand for the yen, which was already weakening against the background of the growth of DXY and the rise in yields of 10-year treasuries.

USD/JPY met the beginning of February at the level of 130.08, and now it ends at 135.84 on March 03. However, a number of experts do not lose hope that the Japanese currency will strengthen. “Since the dollar peaked at the end of September, the yen became the second best-performing G10 currency by the end of January,” economists at MUFG Bank wrote. - Some backtracking in this context is quite understandable. But we believe that inflation will decline and yields around the world are close to peaks, which indicates a recovery in the yen, especially since the policy of the Bank of Japan will also change.”

Strategists from HSBC, the largest financial conglomerate, echo their colleagues. “We will remain yen bulls in the medium term,” their forecast sounds, "but we suspect that it will take some patience for the currency to gain independent strength thanks to the Bank of Japan. For now, USD/JPY is likely to remain influenced by developments in the US, where we see the balance of risk tilting towards a weaker dollar.”

The next meeting of the Bank of Japan will take place on Friday March 10. It will last be chaired by the former head, Haruhiko Kuroda, after which he will hand the reins over to Kazuo Ueda. Analysts at JPMorgan (like most others) do not expect BoJ policy to change or signal correction at this meeting. It is unlikely that Kuroda will slam the door loudly when he leaves; most likely, the interest rate will remain at the same negative level of -0.1%. Therefore, yen supporters can only follow HSBC's advice and be patient.

So, as already mentioned, a number of experts expect a serious strengthening of the Japanese currency in the future. In addition to MUFG Bank and HSBC strategists listed above, BNP Paribas Research has a similar position, while Danske Bank economists predict that USD/JPY rate will fall to the level of 125.00 in three months. In their opinion, in the event of a tightening of monetary policy, positive yields in Japan could stimulate the repatriation of funds by local investors, as a result of which USD/JPY will be around 121.00 by the end of 2023. But these are still rather shaky assumptions, although 60% of analysts agree with them. As for the immediate prospects, only 10% of experts are counting on the movement of the pair to the south at the moment, 45% are looking in the opposite direction, and the remaining 45% stay neutral. 

Among the oscillators on D1, 85% point north, the remaining 15% look in the opposite direction. For trend indicators, 65% look north and 35% look south. The nearest support level is located in the zone 134.90-135.20, followed by the levels and zones 134.40, 134.00, 133.60, 132.80-133.20, 131.85-132.00, 131.25 130.50, 129.70-130.00.  Levels and resistance zones are 136.00-136.30, 136.70-137.10, 137.50, 139.00-139.35, 140.60, 143.75.

Among the events of the coming week, in addition to the above-mentioned meeting of the Bank of Japan, the calendar includes Thursday, March 9, when the country's GDP data for Q4 2022 will be published.

CRYPTOCURRENCIES: Bitcoin Awaiting a New Catalyst

The first sentence of the previous review was: “Bitcoin is under pressure, but it is holding up”. Starting the current review, we can only repeat: bitcoin is under pressure, but it is holding up. Let's talk about global news now. The good news is that the leading regulators will not completely ban cryptocurrencies. The bad news is that regulatory pressure on the industry will continue to grow.

The regulation of the crypto market was one of the topics that finance ministers and central bank representatives discussed at the G20 meeting. As a result, US Treasury Secretary Janet Yellen said that regulation of the crypto industry is important, while Washington is not considering a complete ban. “It is very important to create a reliable regulatory framework. And we are working [on this] with other governments,” she said in an interview with Reuters. IMF Managing Director Kristalina Georgieva agrees with her colleague: her organization also advocates for adequate regulation of digital assets and against their complete ban.

It should be noted here that the increase in regulatory control, while forcing a number of players out of their comfort zone, could ultimately have a positive impact on the industry, relieving shocks like the collapse of FTX. In addition, clear rules will attract a significant number of new institutional investors, raising the capitalization of the crypto market to unprecedented heights.

But this is in the future. In the present, the “herd” of whales (more than 1,000 BTC) continues to decline, reaching a three-year low of 1,663 individuals. There were almost 2,500 of them at its peak in February 2021. And this despite the fact that the crypto market showed a much better result at the beginning of 2023 than most of its participants and experts expected. These are the findings of Bank of America researchers.

At the moment, bitcoin quotes are supported mainly by small and medium-sized investors. According to analytics company Glassnode, the number of wallets with a volume of 1 BTC is constantly updating highs, approaching 1 million. The 30-day capital inflow to the market exceeded the outflow for the first time in 9 months and returned to the "green" zone. The cumulative net realized market value position also turned positive for the first time since April 2022 (the metric has been negative for the past nine months). Long-term holders have also updated their four-month high in savings.

By the way, according to Glassnode analysts, the drop in the number of whale wallets can be considered a positive factor. This means that the asset has become more distributed and less concentrated among a handful of large holders. This option is preferable for the entire ecosystem, as it eliminates the possibility of market manipulation by several players.

Another positive factor, according to some experts, is the weakening of the correlation of cryptocurrencies with US stocks and macroeconomic indicators. The flagship cryptocurrency was moving in a narrow range of $23,000-24,000 for almost the entire past week, and it sank a little only on Friday, March 03. Perhaps this was facilitated by the news that another representative of the crypto industry, Silvergate Bank from California (USA), was on the verge of bankruptcy.

According to analysts at the investment company Bernstein, the correlation of the first cryptocurrency with the Nasdaq Composite index has fallen from 0.94 to 0.58 since early February. According to them, the market is balancing between bulls and bears, "waiting for further catalysts", and its susceptibility to events in the world of traditional finance "is not the same as before."

We could also observe a weakening and then strengthening of the correlation with the stock market last August-September. And it is quite possible that the current “decoupling” of BTC from stock indices is a temporary phenomenon. It is clear that the main concerns for all risky assets are related to the continued increase in the key rate by the US Federal Reserve, which could become a catalyst for the resumption of the bearish trend of BTC/USD.

The Eight CEO Michael van de Poppe, a well-known trader, believes that bitcoin is currently the most undervalued asset. He has released a video review in which he predicts the growth of the coin to $40,000 this year. At the same time, both worsening macroeconomic data and the forecast for the Fed's rate failed to dampen Van de Poppe's optimism. From his point of view, a pronounced bullish divergence on the weekly chart indicates that we have already reached the bottom. What is happening now is just a bounce off the 200-week moving average and consolidating. According to the trader, a sideways movement is most likely at this stage. In the worst-case scenario, BTC/USD will fall to the low of the $18,000 range, and this fall will be a great investment opportunity.

According to Van de Poppe, there is no recession at the moment, but it may begin due to the collapse of the debt market and the real estate market. But before that happens, bitcoin could rise to $40,000, as the crisis usually unfolds 6-12 months after the Fed's significant rate hike. The signal for the start of a new bull rally could be either the lifting of the mining ban in China, or the adoption of cryptocurrency in Hong Kong.

Global financial disaster is also predicted by Robert Kiyosaki, author of a number of books on investing, including the bestseller Rich Dad Poor Dad. He has long been a critic of the Fed's monetary policy and has expressed concern about the devaluation of the dollar. And now the economics writer has made a bold statement that, in his opinion, the fake dollar is leading to the decline of the American empire. This stance of Kiyosaki has drawn approval from the crypto community as it shows the benefits of bitcoin. Experts note that digital assets such as BTC, unlike fiat currencies, are not subject to inflationary pressure, since their supply is limited and predetermined by appropriate algorithms.

Recall that Kiyosaki has recently predicted that the bitcoin rate will rise to $500,000 by 2025. “A giant crash is coming. Depression is possible. The Fed has been forced to print billions in counterfeit money. Gold at $5,000, silver at $500, and bitcoin at $500,000 by 2025,” he wrote. And he added that gold and silver are the money of the gods, and bitcoin is like a dollar for ordinary people.

Matt Hougan, chief investment officer at Bitwise, said in a recent interview that he is “epically optimistic for the next three years.” In his opinion, there will be a massive adoption of cryptocurrency in 2023-2025 and its prices will grow. “This bull market cycle is going to be the biggest cycle in terms of user adoption, in terms of the cumulative increase in market capitalization, in terms of just about every other thing we care about,” the financier says. “But it won’t happen perfectly up and to the right.” Also, “I'm actually optimistic about regulation,” Matt Hougan added.

Apple co-founder Steve Wozniak was also bullish last week. In his opinion, the main cryptocurrency has a huge potential and will increase in value in the coming years, reaching $100,000.

In the meantime, at the time of writing this review (Friday evening, March 03), BTC/USD is trading in the $22,250 zone. The total capitalization of the crypto market is $1.024 trillion ($1.059 trillion a week ago). The Crypto Fear & Greed Index fell from 53 to 50 points in a week and is in the very center of the Neutral zone.

And finally, news that can be attributed to our crypto life hacks section. It concerns those who do not like the regulatory press, which we talked about at the beginning of the review. So, it became known that the government of Ras Al Khaimah (RAK), one of the UAE's emirates, plans to create a free zone for companies in the digital asset industry. According to the announcement, RAK Digital Assets Oasis will become a hub for unregulated industry activity, with applications open as early as Q2 2023.


NordFX Analytical Group


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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