Daily Market Analysis and News From NordFX

[Stan NordFX]

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.

continued below...

 

[Stan NordFX]

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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[Stan NordFX]

CryptoNews of the Week

– Robert Kennedy Jr., a U.S. presidential candidate from the Democratic Party, advocates for the support of the U.S. dollar using hard assets such as gold, silver, platinum, and bitcoin. The politician believes that this move could stabilize the economy, curb inflation, and usher in a new era of financial stability and prosperity in America.
Market strategist Todd "Bubba" Horwitz responded to Robert Kennedy Jr.'s inclusion of bitcoin in the basket of hard assets. According to him, this will enable bitcoin to reach a price of $35,000, and then $40,000, within the next six months. Horwitz highly praised the growing recognition of BTC by regulatory bodies such as the Commodity Futures Trading Commission (CFTC), which will also contribute to the growth of the leading cryptocurrency.

– The implementation of central bank digital currencies (CBDCs) worldwide varies significantly: projects are divided into retail ones, intended for citizen use, and so-called wholesale ones, geared towards interbank transfers and large businesses. Currently, 125 central banks are working on launching national CBDCs, but only three countries, Nigeria, the Bahamas, and Jamaica, have already put their CBDCs into full operation. Meanwhile, Ecuador and Haiti have abandoned this idea due to the high cost of the projects and low demand from the population. Ecuador launched its project as early as 2014 but withdrew it as the number of users did not exceed 3% of the country's population.
Even a number of senators resist the development of a digital dollar in the U.S. In a pre-emptive move, the governors of Texas and Miami banned its circulation within their states in May of this year.

– Bloomberg Senior Analyst Eric Balchunas believes that the approval of applications to launch spot bitcoin exchange-traded funds (ETFs) in the U.S. will open up the bitcoin market to $30 trillion in capital. According to forecasts by analytics firm Fundstrat, the launch of a bitcoin ETF could increase daily demand for bitcoin by $100 million. In this case, even before the halving scheduled for April 2024, the price of BTC could rise by 521% from current levels and reach up to $180,000.

– Craig Steven Wright, an Australian computer scientist and businessman, has claimed since 2016 that he invented bitcoin. He filed a lawsuit against 13 BTC developers and several crypto companies, including Blockstream, Coinbase, and Block, alleging they infringe his copyright to the first cryptocurrency.
However, Wright lost the copyright lawsuit in February. The court deemed his arguments insufficient. Now, a UK court has satisfied an appeal that has granted Wright the right to claim copyright over bitcoin.
Whether Wright truly created bitcoin and hid under the pseudonym Satoshi Nakamoto will be determined by the court during a trial in January 2024. "Copyright protection issues will be resolved during a full court hearing, but only if Dr. Wright demonstrates that he is Satoshi Nakamoto," the court statement said. Meanwhile, Wright's lawyers stated that he is "pleased" with the outcome of the case and acknowledged his high chances of winning.

– Experts at SlowMist reported the discovery of a phishing program in the App Store aimed at stealing user data and cryptocurrencies. It mimics legitimate applications and thereby ends up on the user's device. The victim is then asked to enter their Apple ID password. Once they have this information, the malicious actors add their phone numbers to the trusted list for Apple's two-factor authentication. This allows them to control account permissions and gain full access to its contents. To mask their activity, the hackers create additional Apple IDs and use the victim's resources through the family account access feature.

– Just like on traditional markets, changes in investor sentiment on the crypto market follow certain patterns. Considering the so-called "Wall Street Cheat Sheet," which describes the psychology of market cycles and the corresponding emotions of traders, after passing through the pessimistic phases of "panic," "capitulation," and "depression," bitcoin is moving towards the "hope" stage.
According to analyst CryptoYoddha's chart, the cryptocurrency is currently going through the "disbelief" or "sucker's rally" stage. The next step is the "hope" of price recovery, potentially to $50,000 and above by the end of 2023. The upward movement will correspond to the passage through the stages of "optimism," "belief," "thrill," and finally, "euphoria."

– An analyst known as Trader Tardigrade believes that bitcoin is replicating the same price structure as it did in the period from 2013 to 2018, when it followed the pattern of transitioning from the "previous peak" to the "top-1", which preceded "top-2" and the "retest" (the stage at which bitcoin currently stands). If this model holds true, the next step would be a price "boom" which could lead to bitcoin rising to $400,000 by 2026.

– According to another expert, Stockmoney Lizards, bitcoin has just emerged from its third historical cycle, during which it reached an all-time high of $68,900, and has entered its fourth price cycle. The culmination of this cycle could be a new record between $150,000 and $200,000 in Q2 or Q3 of 2025.

– Cody Buffington, the host of the Altcoin Buzz YouTube channel, holds the view that a surge in bitcoin's volatility will occur sooner than everyone anticipates. According to him, the upcoming volatility of the flagship cryptocurrency could rival its growth since January 2023.
Buffington noted that in July, the price of bitcoin oscillated in a narrow range around the $30,000 mark, which served as a kind of test for both bulls and bears. And more often than not, such flat trading occurs before major movements. As proof, he pointed to the Bollinger Bands and a visual display of the indicator, which shows that the bitcoin price chart is in its narrowest state since the start of 2023.

– Ripple recently released a review examining the impact of the cryptocurrency and blockchain industry on business and the financial sector. According to the document, more than 90% of global financial leaders believe that blockchain technology will significantly influence business and finance over the next three years, indicating a substantial increase in their confidence in virtual currencies. 79% of business leaders expressed interest and confidence in using cryptocurrencies in their business. When considering various areas of cryptocurrency application, 44% of financiers chose their use for cross-border payments. Moreover, over 76% of company leaders are interested in institutional DeFi as a strategy for implementing innovations.

– According to a survey of 29 analysts conducted by Finder.com, their median forecast is as follows. Experts expect that by the end of the year, BTC will rise to $38,488, while the potential peak of bitcoin in 2023 could reach $42,000. By the end of 2025, according to the averaged opinion of analysts, the coin's price could reach $100,000, and by the end of 2030 - $280,000.
Naturally, individual forecasts of 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 the existing cryptocurrency, and 7% suggest selling it.

– At present, there is a certain hype around the artificial intelligence industry. Experts from the publication Finbold decided to ask Google Bard, a 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 bitcoin is very likely to reach a new all-time high. This will be facilitated not only by halving, but also by a more global implementation of BTC, as well as interest from institutional investors. Speaking of specific figures, Google Bard noted that after the halving, the coin could on a sharp impulse reach the $100,000 mark. On the other hand, Google Bard highlighted factors that could limit the growth of bitcoin. The AI also did not rule out the possibility that the crypto winter may continue in 2024.

– Sam Altman, founder and CEO of OpenAI, which created the popular AI chatbot ChatGPT, has launched his own cryptocurrency, Worldcoin, based on a blockchain system that uses eye recognition for user authentication and distinguishes between humans and bots. On July 24, the Binance cryptocurrency exchange listed the Worldcoin (WLD) token and preliminary trading began in the newly added spot pairs WLD/BTC and WLD/USDT.


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.

#eurusd #gbpusd #usdjpy #btcusd #ethusd #ltcusd #xrpusd #forex #forex_example #signals #cryptocurrencies #bitcoin #stock_market

 

[Stan NordFX]

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.

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[Stan NordFX]

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.

continued below...

 

[Stan NordFX]

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)


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.

#eurusd #gbpusd #usdjpy #btcusd #ethusd #ltcusd #xrpusd #forex #forex_example #signals #cryptocurrencies #bitcoin #stock_market

 

[Stan NordFX]

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.

#eurusd #gbpusd #usdjpy #btcusd #ethusd #ltcusd #xrpusd #forex #forex_example #signals #cryptocurrencies #bitcoin #stock_market

 

[Stan NordFX]

CryptoNews of the Week

– Michael Novogratz, the CEO of Galaxy Investment Partners, shared his investment advice in a recent Bloomberg interview. "For young investors who are comfortable with taking risks, I would advise buying Alibaba stocks and investing in silver, gold, bitcoin, and ethereum, which would make up my $100,000 portfolio," he said. For those who are more cautious, he recommends allocating only 30% of their investment to this portfolio, with the remaining balance to be invested in bonds and index funds.
Novogratz's confidence in the future of bitcoin has been bolstered after the largest investment company, BlackRock, filed for a spot bitcoin ETF. The businessman noted that Larry Fink, BlackRock's CEO, had never believed in bitcoin, but has now changed his opinion. "Now, he's saying that BTC will be a global currency, and people worldwide will trust it. He's taken the orange pill. He believes in bitcoin," said Michael Novogratz.

– Peter Brandt, a legendary trader and veteran of the financial industry, believes that over time, bitcoin, the first cryptocurrency, will "emerge from the shadow" of more traditional investment assets like stocks and gold, and in the future, it will be bitcoin that sets the tone in the financial market.
Brandt emphasized that U.S. regulators will certainly approve the launch of spot bitcoin ETFs. However, the analyst believes this approval, and even the halving, won't be news. Following these events, instead of rising, the price of BTC could decline. "In 48 years of speculation," Brandt writes, "I have always found that markets anticipate events before they happen." The Wall Street legend advises always adhering to the adage, "Buy on the rumour, sell on the facts."

– Robert Kiyosaki, the investor and author of the financial bestseller "Rich Dad Poor Dad", has stated that he still favours bitcoin, along with gold and silver. He has noted that the rise in the stock market won't save the U.S. economy as it occurred solely due to President Joe Biden raising the debt ceiling.

– Fernando Perez Algaba, a prominent crypto and forex influencer who disappeared on July 18, was found dead in Argentina, according to media reports. A group of children discovered the millionaire's mutilated body in a suitcase. His head was later found in a backpack, which had been shot three times.
Algaba, in the months prior to his death, had been sharing photos of his opulent lifestyle with his nearly 920,000 Instagram followers. He had also recounted a fairy tale-like story to the media about his rise from a simple pizza delivery man to a highly successful "Forex and crypto trader". However, it came to light at some point that Algaba was grappling with escalating debts, tax complications, and monetary demands from investors in a crypto scheme that he admitted had "spiralled out of control".
A threat to gouge out his eyes and cut off his hands was received by Algaba a week before his assassination. The New York Post reported that one suspect has already been apprehended by the police in relation to the murder of the crypto millionaire.

– Cryptocurrency traders lost digital assets amounting to $303 million due to hacking attacks in July, according to experts from CertiK. The latest major breach involved an attack on DEX Curve Finance's stablecoin pools, exploiting a vulnerability in the Vyper code. The exchange lost digital assets worth about $52 million. It's worth noting that, as per data from PeckShield, the crypto industry experienced at least 395 hacks from January to June 2023, resulting in a theft of approximately $480 million.

– Billionaire venture capitalist Tim Draper, in an interview with FOX Business, stated that the acceptance of the first cryptocurrency, bitcoin, by the world is simply a matter of time. "Retailers will eventually recognize the 2% savings they could make by accepting bitcoin, eliminating the need to pay banks and credit card companies," he explained.
Draper repeated his prediction in July that the value of bitcoin would ascend to $250,000, a milestone he expects will be reached by 2025. Notably, Draper had made the same price prediction back in 2018, although he then envisaged that bitcoin would hit this mark by 2022, a forecast that evidently did not materialize.

– An analyst under the pseudonym TechDev forecasts a slightly lower but still significant figure for BTC. To predict the price of BTC, he relies on the behaviour of traditional financial markets, such as the price of 10-year Chinese government bonds, the dynamics of the Dollar Index, as well as the balance sheets of Central Banks in major countries, and so on. According to him, the coin's price closely follows global liquidity indicators, and the current economic cycle should once again conclude with a substantial increase in the money supply. Therefore, bitcoin is gearing up for growth.
The analyst believes that the logarithmic growth curve indicator, which overlooks short-term asset fluctuations, suggests that by 2025, the leading cryptocurrency will reach a level of $140,000. "Note that this is a very rough approximation, based on specific parameters of the indicator and the steepness of the momentum," TechDev warned. He also noted that another indicator, Bollinger Bands, is in a very narrow range. The last time bitcoin exited such a range, a full-scale bull trend began.

– According to Crystal Blockchain, an analytics firm, Ukraine has received $225 million in cryptocurrencies since February 2022 to counteract the deployment of Russian troops. The bulk of these donations have been in USDT ($83 million), ethereum ($79 million), and bitcoin ($41 million), with additional contributions made in other cryptocurrencies. On the other hand, Russia has also solicited cryptocurrencies for military expenditure, though the total collected is significantly less, ranging between $2 million to $8 million.

– George Milling-Stanley, the Chief Gold Strategist at State Street Global Advisors, maintains that bitcoin cannot be considered a replacement for gold due to the risk of extensive losses. He emphasized that gold has a history spanning 6,000 years during which it has repeatedly proven its reliability and value, whereas bitcoin has only been around for a dozen years. "Bitcoin's volatility merely refutes claims that the primary cryptocurrency is a long-term strategic asset and can compete with gold. Gold is a hedge against inflation. Gold is insurance against a stock market fall. Gold is insurance against a weakening dollar," the strategist stated.
Notably, State Street Global Advisors manages the world's largest physically backed gold ETF. Therefore, it comes as no surprise that George Milling-Stanley is defending the positions of the precious metal.

– Arthur Hayes, the co-founder of BitMEX exchange, has published an article in which he predicts the flagship cryptocurrency will skyrocket to $760,000. In his view, the integration of Artificial Intelligence (AI) projects into the bitcoin blockchain will significantly increase the coin's attractiveness as the base asset of the ecosystem.
Hayes believes that ethereum should exhibit a similar development model. If AI-based projects are integrated into this altcoin, the investment attractiveness of ETH, the primary transaction tool in the network, will greatly intensify. In this case, the altcoin could appreciate by 1,556%. Thus, the BitMEX co-founder doesn't rule out the possibility that ETH might soar to $31,063.
Another factor Hayes considers will stimulate the growth of ETH over the next five years is the expansion of the decentralized finance (DeFi) market. The majority of protocols in this ecosystem are based on ethereum, and their popularity continues to increase. The growth in the number of decentralized exchange (DEX) users will lead to a rise in ETH transaction volumes and, consequently, an increase in the altcoin's price.

– A CME Group report reveals 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 U.S. dollar, changes in bitcoin market supply, and the performance of tech company stocks. The research states that ETH is more vulnerable to USD, and the ETH/BTC pair is more influenced by changes in BTC supply than ETH. Simultaneously, ETH often grows relative to BTC on days when tech company stocks increase in value.
According to CME Group economists' predictions: 1) ETH/BTC will follow the price dynamics of bitcoin. This is due to the fact that ETH strongly correlates with BTC, yet it's more volatile than bitcoin. 2) Increased demand for BTC due to geopolitical factors will also strengthen ETH. 3) ETH will strengthen ahead of the bitcoin halving in 2024, assuming BTC's price increases. However, the analysts noted that the growth in demand for crypto assets, which was very strong during the first eight years of bitcoin's existence, has noticeably slowed down in the past five years. Therefore, there is no guarantee that the halving will lead to a price increase for both BTC and ETH.

– A survey conducted on the financial platform Finder has given insights into the future prospects of Ethereum. Industry experts who took part in the survey predict that Ethereum (ETH) will reach an average value of $2,400 by the end of 2023. Furthermore, they estimate that Ethereum's price will escalate to $5,845 by the end of 2025, and by 2030 it will rise to $16,414. It's important to highlight that 56% of these experts believe the present time is the most favourable for purchasing ETH. Approximately 41% recommend holding onto the cryptocurrency, while a meagre 4% suggest selling it.

 

[Stan NordFX]

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.

continued below...

 

[Stan NordFX]

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.

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