First review of last week’s events: EUR/USD. As expected, the European Central Bank has left the interest rate unchanged at the same level of 0%. The euro has had a chance to weaken slightly against the dollar. However, this was not achieved due to the ECB’s decision to increase the volume of the Emergency Pandemic Programme (PEPP) by a further €500 billion, followed by a comment from the bank’s head, Christine Lagarde. Actually, there was nothing unexpected about this decision, we predicted such a result a week ago. Moreover, it has definitely fallen into the middle of market participants’ forecasts of €400-600 billion. But it was this predictability that prevented the EUR/USD pair from turning south. The hawkish sentiment of Christine Lagarde also supported the European currency. It seems to have tried to lower the euro by announcing that the ECB is closely monitoring the euro. However, the regulator’s decision not to interfere in foreign exchange markets affected investors more than the mere statement of “exchange rate monitoring”. And ms. Lagarde’s unexpectedly hawkish remark that if the situation with the eurozone economy improves sufficiently, it may not be necessary to use all these EUR 500 billion, to put a definitive end to the bearish efforts to move the pair south. As a result, after falling to 1.2060, the pair rushed north again, rising to 1.2165 and completed a five-day period in the middle of that range, in zone 1.2113, practically at the same point where it began on Monday; GBP/USD. The weakening pound has overtaken the weak dollar. The British currency has s slipped as the threat of a “hard” Brexit becomes more apparent. Recent statements by British Prime Minister Boris Johnson and European Commission chief Ursula von der Leyen indicate that there will be no real agreement on the terms of britain’s separation from the EU. Johnson advised his citizens to prepare for a “hard” exit, von der Leyen said. It is worth emphasing the word ‘true’ here, as some agreement can still be reached and we will not see ‘iron blocking the Channel Tunnel. Neither side needs it, much less at the height of the COVID-19 pandemic. Most likely, the document, which will be called “Agreement”, will have many empty seats, which the parties will begin to fill as early as 2021. But such a worse contract will certainly not benefit the pound. Proof of this is what happened to the GBP/USD pair last week. From Friday 04th December to the lowest on Friday 11th December the pound lost more than 400 points! And this despite the fact that the couple did not follow the EUR/USD, as it was until recently, but began to live completely independently. After reaching the local bottom at 1.3135 on Friday 11 December afternoon, it managed to regain about 90 points by evening, putting the final chord at 1.3225. However, this reflection may prove to be only a slight correction in the steam’s southward trend; USD/JPY. As risk sentiment increased, investors lost interest in protective assets such as the dollar and yen. As a result, these currencies reached a temporary subsea and shifted to a side trend. However, the couple never went beyond the medium-term channel, along which it smoothly moves south from the end of March. And, giving a forecast for last week, the vast majority of experts (70%), backed by a graphical analysis of D1, suggested that lateral movement with bearish mood dominance would continue. In general, everything happened like this. The pair continued to move east, gradually reducing the amplitude of the oscillation to a range of 103.85-104.55 and creating a medium-term number of “pennant” with a main support of about 103.65. As for the end of the trading session, this time at 104.00 the end of the session was set. cryptocurrencies. Financial conglomerate Wells Fargo, one of the “big four” U.S. banks, has published a new investment report in which a separate page under the heading “Bitcoin – the best-functioning and most volatile asset of 2020” is dedicated to the cryptocurrency market. The authors do not directly encourage clients to invest in digital resources, but generally remain optimistic about their prospects. “Over the past 12 years, they have grown from literally nothing to a $560 billion market capitalization,” Wells Fargo writes. “Hobbies usually don’t last 12 years.” The bank notes that bitcoin is up 170% over the year, but warns of high volatility. “Investing in cryptocurrencies in the early days of the gold rush in the 1950s was more speculating than investing,” the bank’s analysts said. And yet they add that cryptocurrencies attract a lot of attention, but not necessarily a lot of investments. (Here, the title of William Shakespeare’s play immediately comes to mind: “Much Ado About Nothing.”) It’s hard to disagree: the total capitalization of the cryptocurrency market is now far from even high at the beginning of January 2018, $830 billion. And this is in a world where, according to billionaire Paul Tudor Jones, “there is a $90 trillion stock market, and God knows how many trillions are in fiat currency.” The cryptocurrency market fell another $50 billion last week, starting at $575 billion, down to $525 billion. Optimists call the downward trend a seasonal correction and associate it with the end of the year and the willingness of investors to set profits after such an impressive upward jump. Recall that the BTC/USD pair has never been able to beat the $20,000 mark. Analysts estimated that by the end of December it would be able to gain a foothold above this iconic level, which gives a 30% probability. The probability of it falling into the $15,000-15,700 zone is estimated to be the same 30%. In the meantime, the Bears were able to lower the stock to $17,600 and did so twice: December 9 and 11. And also twice, during these failures, buyers came to the rescue of bitcoin. However, they have failed to radically reverse the trend, and since Friday evening, December 11, bitcoin has been trading in a strong support/resistance zone at $18,000. It should be noted that the Crypto Fear & Greed Index has fallen very slightly in seven days, from 92 to 89, still signaling the BTC/USD pair is heavily overbought, which could herald an even deeper correction. As for the forecast for the coming week, summarizing the opinions of many experts, as well as forecasts made on the basis of various methods of technical and graphic analysis, we can say the following: EUR / USD. The dollar is weakening. In the last month and a half only, it has awarded more than 550 points to the European currency. Finally, the couple moved sideways traffic in the range of 1.2060-1.2165 last week. And although most oscillators (75%) and trend indicators (95%) are still green on the D1, the market is waiting for a downward revision. If you look at the statistics of many leading UK brokers, around 65% of their traders hold short positions. 55% of analysts agree with them, as well as graphical analysis on H4 and D1, predicting a drop in steam to the zone 1.1965-1.2010. Both a sharp drop in demand for risky assets and a “hard” Brexit could push it south. However, given the ECB’s cautious optimism about reviving the European economy, improving the epidemiological situation in EU countries and the overall weakness of the dollar, many experts believe that the pair will move north again after the correction, to the q1 2018 highs in the 1.2400-1.2565 zone. In addition to analysts, the possibility of such a scenario is also confirmed by the readings of graphical analysis. And the resistance here can be round levels of 1.2200 and 1.2300. As regards the events of the coming week, it is worth noting the publication of business data in Germany and the euro area, as well as in the US consumer market on Wednesday 16 December. But the most interesting events await us on Thursday, December 17th, when, in addition to the US Fed’s decision on interest rates, a summary of the Fed’s economic forecasts will be published and a press conference of the fed’s management will be held. GBP/USD. We will have a lot of macro-fascists about the UK in the coming week. The country’s labour market data will be published on Tuesday, 15 December, consumer prices and business activity in the services sector (Markit) will be published the following day and a meeting of the Bank of England will take place on Thursday, 17 December, where decisions will be taken on both the interest rate and the planned volume of asset purchases. However, all these events pale in front of the threat of a “hard” Brexit. It is what happens at the negotiating table between the UK and the EU that will decide the fate of the pound. On Sunday 13 December, a communication should be issued on the state of play of the negotiation process, or its completion, as well as its continuation. The most delicate (and realistic) solution would be to extend the the current conditions for a transitional period of a further six months or one year with a view to progressively moving to rules similar to those of the World Trade Organisation. In this case, although the downward trend of the pair would continue, it would be possible to avoid a catastrophic collapse of the British currency. The closest level of support in this case is 1.3100, followed by 1.3000 and 1.2850. The second option is the “toughest” Brexit, with no agreements or extensions, which will lead the pair to a fall in value from mid-May 2020 in the area of 1.2075 and even to the March minimum of 1.1420. There is, of course, the third most unlikely option in which the EU suddenly resigns and completely submits to British demands. In this case, we will see the pound rise first to 1.3500 and then perhaps to 1.4350 highs in 2018. Although, we repeat, this result is rather in the field of fiction; USD/JPY. The yen expects the market’s appetite for risk investments to eventually reverse, and will turn its attention again to haven currencies. But it also awaits the dollar. The opportunity for the Japanese currency could be a “hard” Brexit, which will cause investors to flee the euro and the pound. But what a “safe haven” will give preference to, dollar or yen, is another question. 85% of oscillators and 100% of trend indicators are still painted red, waiting for the pair to fall further down the medium-term channel, which began at the end of March. Supports are 103.65 and 103.15. But the average expert forecast is very different from the indicators. 90% of them, supported by a graphical analysis of D1, prefer the dollar and expect the pair to first rise to the upper limit of this channel in the area of 104.60, and then, breaking through it, will be tested resistance of 105.00. Although it is entirely possible that before the arrival of the new year, 2021, neither bulls nor bears will make sharp movements, and the couple will continue to move sideways, consolidating in the zone 104.00; cryptocurrencies. So, correction or repetition of the fall from the end of 2017-2018? The question is still open. Bloomberg experts believe there is no reason to change the direction of bitcoin traffic, and its cost could rise to $50,000 in 2021. “The dollar is gradually losing its position, avoiding other fiat currencies”, writes this authoritative agency, “All this investors who are forced to switch to alternative assets.” Bitcoin now has much more support, minimizing the likelihood of withdrawal. CME’s open interest in the bitcoin futures market has exceeded $1 billion for the first time ever, which also speaks to growing investor support. A similar point of view follows american billionaire Paul Tudor Jones, head of Tudor Investment Corporation, who said that “cryptocurrencies are facing a crazy rocket flight with climbs and descents along the way.” “In 20 years bitcoin will be much higher than when it is now. Hence the road to it lies north,” yahoo! Finance quoted him. But Galaxy Digital CEO Mike Novogratz is less optimistic. In his opinion, bitcoin will certainly not return to zero, but it can fall to $14,000. Therefore, although the losses of investors will not reach 80-90%, they can also be about 30-40%. The report from fintech company Cindicator is very interesting. This is due to the fact that the data presented in it is not the opinion of individual specialists, but the average results of the survey of more than 156,000 participants in the cryptocurrency market, according to which bitcoin will rise to 29,569 USD next year. Respondents with the most accurate forecasts, the so-called “superforcasters”, expect an average increase of up to $32,056. As for the lower bar, according to the average forecast, it is $15,000. “Superforcasters” are less optimistic and expect a drop to $12,000. Cindicator’s “hybrid intelligence,” which uses machine learning algorithms to process data from a team of analysts, predicts similar values only in a narrower range. According to his calculations, the BTC rate next year will not exceed $25,222 and will not fall below $16,000. At the same time, the total capitalization of the cryptocurrency market in 2021 is likely to exceed the 2018 record of $828 billion. In addition to institutional investors, additional serious support for the cryptocurrency market in 2021 should be provided by countries with a difficult economy and countries subject to sanctions. Swift’s International Banking System, together with the Financial Crime Agency (FinCEN) and the Financial Anti-Money Laundering Development Group (FATF), controls every transaction international law in dollars. For this reason, countries that have been sanctioned are deprived of the possibility of international trade and are literally forced to turn to cryptocurrencies. So, for example, Venezuela, which initially paid in 10 000, has now switched to settlements for imports from Turkey and Iran in bitcoins. At least this is evidenced by anonymous sources from the Central Bank of that country. NordFX Analytical Group Note: These materials are not investment recommendations or guidelines for working in the financial markets and are for informational purposes only. Trading on the financial markets is risky and can result in a complete loss of deposited funds.
20 Dec