First review of last week’s events:
EUR/USD. The dollar continues to fall, the euro continues to rise. The couple have traveled from 1.1600 to 1.2175 since the beginning of November. The main reasons for the weakening of the US currency are the growing appetite for risk in the world. Against the backdrop of positive news on coronavirus vaccines, the market believed in the imminent recovery of the global economy. Moreover, not the U.S. economy, but the economies of other countries, including developing ones. The situation in the United States alone is not encouraging: the main indicators, including economic activity and employment of the population, turned red last week. Suffice it to say that the number of new jobs created outside the agricultural sector (NFP) fell from 610K in October to 245K in November, due to new quarantine measures. Investment in the U.S. economy is becoming unpopular, the S&P500 and Dow Jones stock indices have shifted to a side trend, treasury yields (government debt) are not rising, but inflation expectations, on the contrary, have soared to annual highs. Interest rates are minimal, which contributes to the departure of investors to other assets abroad. It is interesting that Europe has enough problems. Based on the dynamics of purchasing managers’ indices, it is the EU, not the United States, that is now the main brake on the global economy. Yes, Joe Biden welcomed the compromise proposal for another $908 billion aid package for the US economy, adding that he would not limit himself to it. But the ECB, according to Bloomberg’s forecast, will extend its emergency asset purchase programme by €500 billion at its December 10 meeting, extending its period from mid-to-late 2021. In addition, the European regulatory authority will also increase the scale of the LTRO, banks’ long-term crisis refinancing programme. On the other side, the UK’s concerns about the Brexit deal, as well as disagreements with Poland and Hungary over the COVID-19 Rescue Fund and interest rates in the EU, are even lower than in the US. In general, there are enough problems on both sides of the Atlantic. Nevertheless, as expected by most experts, (60%), the EUR/USD continued to rise last week, ending the five-day period at 1.2120. And the point is, not so much in the strength of the euro, but in the weakness of the dollar, whose DXY index fell to 90.5 for the first time in two years; GBP/USD. The British currency has also risen against the dollar, which has risen 670 points since early November. This is despite the fact that London and Brussels cannot agree on the terms of Brexit, and France’s hard line at all makes it doubt that such agreements are possible. The forecast, which was supported by 75% of analysts last week, was absolutely correct: the pair rose to the upper end of channel 1.3300-1.3400. It was then smashed and the pair moved further north to 1.3540 and ended the session at 1.3435. The pound was obviously supported by a weakening dollar. In addition, the bulls also helped to announc the signing of an agreement between the UK Government and Pfizer to buy 40 million doses of COVID-19 vaccine, of which 10 million the UK will receive next week. The market was also pleased with the removal of a number of quarantine measures in the country, and the decision to partially admit spectators to national football league matches; USD/JPY. The forecast for this pair also turned out to be correct. Backed by a graphical analysis of the D1, 60% of experts said the pair would stop their decline and move east in the range of 103.70-105.30. In fact, this side channel turned out to be slightly narrower, 103.66-104.75. And the reason for the emerging balance between the dollar and the yen was the same increase in risk sentiment and a decrease in interest in protective assets such as the Japanese currency. The last chord of the week sounded in the central zone of the specified channel at 104.15; cryptocurrencies. Bitcoin has been pounding towards the psychologically important $20,000 level over the past two weeks. And although it updated its historic high to $19,930 on December 1, all attempts to raise $200,000 ended in profit and withdrawal. According to many experts, in addition to running stop orders, there are also political reasons that force investors to go to fiat. So, according to one version, the correction of the main cryptocurrency from 25-26 November from 19 480 USD to 16 280 USD, which had many chances to convert the disastrous collapse was linked to the decision of us President Donald Trump’s administration to tighten its control over the flow of digital content. Officials decided to change the rules for registering cryptocurrency wallets as one way to manage transactions. Many crypto companies have already begun developing new versions of portfolios that will receive approvals from the U.S. Securities and Exchange Commission before launching. Trump is probably trying to counter China, which is preparing to release its own cryptocurrency. If the digital yuan becomes a cross-border payment instrument, it can be used instead of a dollar. This will make sanctions against China ineffective and Washington lose its ability to put pressure on Beijing. “Bitcoin has an indirect connection to everything that happens,” Mark Usko, head of investment firm Morgan Creek, comments, “but even the first statements by representatives of the U.S. government about wanting to start controlling the industry have lowered it by several thousand dollars in a matter of hours.” After this decline, bitcoin returned very quickly to the $19,000 zone. With BTC/USD quotes, the total market capitalization of the cryptocurrency market has also increased. It was $582 billion on November 25 and dropped to $500 billion on November 27. And now, seven days later, on December 4, it’s $575 billion. According to analytics firms Glassnode and BitInfoCharts, the number of addresses containing more than one bitcoin is also steadily increasing, currently exceeding 820,000. These portfolios hold 95% of the total BTC market size. In total, there are 32.6 million addresses with a non-zero balance in the world. Despite the seemingly positive momentum, ofbitcoin’s decline of 16.4% on 25-26 November shows uncertainty about the current state. Both investors understand this and are ready to start massively closing long positions at any time. Bitcoin’s Crypto Fear & Greed index rose from 86 to 92 in seven days, showing that buying a coin is only getting worse, which could lead to another strong correction. Meanwhile, the couple chose the $19,000 horizon as the pivot point along which they have been moving all last week. When it comes to altcoins, they, rise and fall for the most part, after the cryptocurrency’s benchmark. Thus, despite the increase in the total capitalisation of the cryptocurrency market, bitcoin’s dominance remained virtually unchanged at 62.44% (62.33% a week ago). Similar altcoins ratios from the TOP-10 have hardly changed. Although we can highlight the ripple (XRP/USD), whose share of the total market capitalization increased 1.8 times in a month, from 2.69% to 4.89%. That’s because Flare Networks will airdrop coin sparks on December 12th based on a snapshot of all Ledger XRP addresses. Thanks to this, each ripple holder will receive a free spark in a ratio of 1:1, which is reflected in the popularity of this coin and the increase in its quotations. After a long stagnation in the region of $0.24, it rose to $0.77 at a high over the past three weeks, and is quoted in the $0.60 zone at the time of writing.
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 higher this pair grows, the greater the willingness of large speculators to start profiting from it. Moreover, the end of the financial year is just around the corner, it’s time to take stock. In order for the dollar to continue falling, risk sentiment requires constant charging, but the market may lose it. U.S. stock indexes have been on the sidelines since November 9. But this stability is very relative and threatens a sudden collapse, which will entail the withdrawal of investors from the stock exchange in favor of the dollar. For example, this could lead to a reassessing of optimistic expectations of COVID-19 vaccination. And there are reasons for that. Pfizer, for example, has already reported supply problems that will halve vaccine production in 2020, from 100 million to 50 million doses. Soaring yields on 10-year U.S. Government bonds could also hit the stock market. And you never know what else can happen this year rich in surprises! A European Council meeting, the ECB’s interest rate decision and a subsequent press conference of the bank’s management will take place on Thursday, 10 December. But the US Federal Reserve meeting on December 16 seems to be more interesting. At the moment, graphical analysis of H4, 90% of trend indicators and 75% of oscillators H4 and D1 are green. However, the remaining 25% of oscillators already give active signals that the pair is taken out. The pair is expected to fall into the 1.1850-1.1950 zone by a majority (65%) supported by graphical analysis d1. Immediate support is at 1.2000. Resistance levels are 1.2175, 1.2200, 1.2260 and 1.2320;
GBP/USD. Significant for this pair is the level of 1.3500, which reached late last week. Graphical analysis, 100% trend indicators and 85% oscillators on H4 and D1 predict further northward movement. Resistance levels are 1.3625 and 1.3725. However, only 40% of analysts agree with this scenario. The remaining 60% believe that this pair will also fall, after reversing the EUR/USD. Moreover, if the Brexit negotiations do not come out of the deadlock, its demise could turn into a collapse. However, even if a deal is concluded, it is likely to be formal and very limited and unlikely to please fans of the British currency. Support levels are 1.3400, 1.3285, 1.3175. The ultimate goal of the bears in December is to return to the horizon of 1.3000; USD/JPY. The dollar and yen reached a temporary u-government due to rising risk sentiment, moving into 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 the vast majority of experts (70%), supported by a graphical analysis of D1, believe that this downward trend will continue. More precisely, it will be a lateral movement with the dominance of bearish sentiment. The main resistance will be level 104.50, from which the pair will fall first 100 points lower and then reach 09 November in the zone 103.15. The alternative point of view is held by 30% of analysts, who expect the pair to first reach the upper end of channel 104.75 sideways and then try to consolidate above horizon 105.00. The bulls’ next target is 105.65; kryptocurrencies. Bitcoin fell by 16.4% between November 25-26, according to many experts, due to the Trump administration’s difficult decision on digital assets. However, if the current US President’s team is an obstacle to the development of the cryptocurrency market, things could change with joe biden’s appearance in the White House. Former professor Harvard and Oxford, and now a senior fellow of Stanford, Niall Ferguson, believe that the administration of the new president should focus on integrating bitcoin into the US financial system, rather than creating a digital dollar on the example of China. In a new article, a world-renowned economic historian looked at the US dollar, gold and bitcoin as the monetary revolution accelerated by the COVID-19 pandemic. Drawing parallels with the scourge of the 14th century, the historian noted that the pandemic let digital gold cover a ten-year path in just ten months. This was not only due to closed banks, but also because of the tightening of financial supervision. According to Mike Novogratz, head of the Galaxy Digital cryptocurrency trading bank, everyone should invest 2-3% of their funds in bitcoin. “After that, it is enough to wait a while, and you will be surprised, but cryptocurrencies will cost much more. If you wait five years, your assets will multiply several times,” he wrote. According to the head of Galaxy Digital, bitcoin volatility is expected in the near future, but it is unlikely to fall below $12,000, and even a correction of such levels is unlikely. This correction from November 25-26, according to experts at Stack Funds, is not only “healthy”, but will also allow Bitcoin to prepare for a new high of $86,000. Global Macro Investor CEO Raoul Pal expects even conservative institutional investors, who tend to prefer precious metals, to start investing in bitcoin next year. That’s why Pal boldly assumed that the price of the first cryptocurrency could reach 250,000 USD in a year and placed an order to sell all the gold that he had to invest in BTC and ETH in a ratio of 80 to 20. An even more inspiring prediction was given by the founder of the cryptocurrency exchange Gemini Tyler Winklevoss, one of the twin brothers who are called the first billionaires of cryptocurrencies. He said on CNBC that the value of bitcoin could exceed $500,000. He called the current price of the main digital coin an “opportunity to buy” as it could rise by 25 times in the future. “Bitcoin will outsmlock gold. If this happens, the capitalization of this cryptocurrency will exceed $9 trillion,” predicts Tyler Winklevoss. In the meantime, the likelihood that the pair BTC/USD will be able to gain a foothold above $20,000 by the end of this month estimated at 30%. The probability of it falling into the $15,000-15,700 zone is estimated to be the same 30%.
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.