Forex and Cryptocurrency Forecast for February 22 – February 26, 2021

First review of last week’s events: EUR/USD. The sharp rise in bond yields in the US and Europe has affected not only the stock market, but also carry trade, providing support for the financing of currencies, not especially the euro and the US dollar. Recall that the financing currency is usually a low-interest currency. When implementing a carry trade strategy, traders borrow it and then deposit it in another currency, such as developing countries, at a higher rate. And now the fall in sentiment in risk sentiment has led to the exit of such trades and the strengthening of both the EURO and the USD. This seems to explain the consolidation of this pair. And if the advantage was on the dollar side in the first half of the week, then investors began to buy cheaper euros starting on Wednesday, February 17. As a result, after starting the week at 1.2120, the EUR/USD pair ended it almost at 1.2115; GBP/USD. The pound continues to move north, approaching 2018 highs. The pair broke through a psychologically important level of 1.4000 on Friday, February 19, recording a weekly high of 1.4035. She finished the session at the same level of 1.4000, after a slight bounce. The US currency lost to the UK in the face of weak US labour market data. Investors expected the number of initial applications for unemployment benefits to fall from 848,000 to 765,000, while, on the contrary, it rose to 861,000 during the week. The number of secondary applications was also not encouraging, decreased from 4.558 million to 4.494 million, instead of the projected 4.413 million. Investors were quick to recall statements by FRS officials that it would take more than a year for the labour market to return to its previous level and that new measures needed to be taken to support the US economy. But consumer market and business data, released in the UK last week, looked pretty good. The Markit index was up 49.7 points at 39.5 in February, just below the 50 mark that separates economic activity growth from decline. These figures have once again strengthened the confidence of uk currency buyers that the Bank of England will refrain from allocating new qe funds and from interest rate cuts. As a result, the GBP/USD pair went up, taking another important milestone – 1.4000; USD/JPY. The best trends of this pair, as well as the EUR/USD, were determined last week by disappointing data from the US labour market and a sharp rise in government bond yields. The Japanese GDP data published on Monday 15th February, although much better than forecasts (3.0% vs. 2.3%), had no impact on market sentiment, once again showing that the us is shaping up to be in the exchange rate of this pair. Recall that the opinions of experts last week were divided almost equally: 40% supported the increase in steam, 30% were in favour of its collapse and so much for lateral movement. In general, everyone turned out to be right. The pair grew in the first half of the week, reaching a height of 106.20, then fell, and the end of the five-day period took place near the place where it began already on February 8 – at 105.40; cryptocurrencies. Bitcoin was expected to reach $50,000 and traded at $55,000 at the time of writing. As of February 1, the main cryptocurrency added about 60% of its weight, Ethereum’s (ETH/USD) growth was slightly less than 50%, the leader in this trio was Litecoin (LTC/USD) with 80%. Overall, the situation on the digital market is quite positive. Even conservative structures, such as American banks, have turned their views in their direction. The oldest U.S. bank, BNY Mellon, has announced the start of work with bitcoin and other digital assets. Another large U.S. bank, JPMorgan Chase, is also ready to support bitcoin trading. It turned out that JPMorgan Chase organized a virtual meeting in January with thousands of traders and sales specialists from different parts of the world, during which he asked about their interest in trading BTC. Last week, another bank, Goldman Sachs, organized a closed forum for employees and customers about cryptocurrencies, with Mike Novogratz, CEO of Galaxy Digital, voting. Statements by many U.S. politicians and officials also have a positive impact on digital resource prices. For example, Miami Mayor Francis Suarez announced that he had already taken a number of steps to legalize the cryptocurrency. “We made bitcoin available currency for potential investors. In addition, employees can receive salaries in the crypt, which is a huge step forward,” he wrote on Twitter. New York City mayoral candidate and former U.S. presidential candidate Andrew Young has backed his colleague, saying he will try to make the world’s financial center a hub for cryptocurrencies. St. Louis Fed chief James Bullard called bitcoin a rival for gold. Institutional investors continue to buy both cryptocurrencies, miners’ shares and crypto funds. Yes, the Grayscale Investments fund added 20,000 ETH to Ethereum’s portfolio last week, bringing its size to $6 billion. Another stimulus to the BTC/USD pair’s growth was MicroStrategy’s decision to raise another $900 million to buy bitcoins. Overall, the supply-demand ratio remains in bitcoin’s favour: 150,000 BTC coins have been mined and almost 360,000 have been repurchased in the last five months of 2020, and investors hope this balance will continue in the future. At the same time, buyers are looking at Tesla boss Elon Musk, whose tweets are pushing prices sharply upwards. However, the U.S. Securities and Exchange Commission (SEC) is now interested in its “creativity” on Twitter, given that the billionaire’s calls to buy digital assets are subject to securities offering and advertising laws and may be considered unregistered brokerage activities and attempts to manipulate the market. If proven, Elon Musk could be fined hugely. In the meantime, the trader has said that he is taking a break and will no longer post tweets, at least in the near future. When it comes to the total capitalization of the cryptocurrency market, even without Musk’s tweets, it increased in a week from $1.458 billion to $1.625 billion. A Crypto Fear & Greed Index is slowly but inexorably approaching a maximum of 100 points. It has now reached 93, indicating a strong overheating of the market. 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 European Union is still blocked due to the COVID-19 pandemic. But in the United States, not everything is as rosy as expected. Weak labour market data, an increase in initial applications for unemployment benefits put pressure on the dollar. According to statements by the ECB’s management, even if bond yields in Europe continue to rise, the bank is unlikely to increase the volume of its quantitative easing (QE) programme. Officials of the Governing Council of the ECB believe that the measures they have taken are sufficient, it will take some time to achieve the maximum positive effect. The situation is exactly the opposite on the other side of the Atlantic Ocean. Judging by Treasury Secretary Janet Yellen’s calls to the U.S. Congress and Federal Reserve minutes published February 18, QE volumes will continue to rise. Soft monetary policy will continue until the country’s economy shows steady growth. The next measure will be the adoption of another $1.9 trillion stimulus package. In such a situation, it is logical to expect the dollar to weaken over the medium term, and the EUR/USD pair to rise first to the 1.2200-1.2300 zone and then return to the January maximum of 1.2350. 65% of analysts agree with this scenario. But when it comes to the weekly forecast, the picture is different. The majority (70%) Experts believe the pair should retest support in zone 1.2020 in the near future and try to reach levels of 1.1955 from 1.1955. This bearish development is supported by 15% of oscillators on H4 and D1 that give signals that the pair is overbought. The remaining oscillators, as well as 75% of trend indicators, are green. But graphical analysis in both time intervals draws consolidation in the range of 1.2020-1.2155. As regards the events of the week, here are interesting speeches by ECB Chief Christine Lagarde on Monday 22 February and Federal Reserve Chief Jerome Powell at the US Congress on Wednesday 24 February, as well as annual data on GDP and the volume of orders for capital and durable goods in the United States, to be published on Thursday 25 February; GBP/USD. It is clear that 100% trend indicators and 85% oscillators on H4 and D1 point north. The remaining 15% of oscillators give signals that the pair is taken out. The vast majority of analysts (75%) are also awaiting a correction on the South. True, in their opinion, this may not happen in the coming week, but in the first half of March. Support levels are 1.3950, 1.3850, 1.3775, 1.3600. The potential of the UK currency for economic growth has not yet been exhausted. And it will all depend on whose structural problems, the US or the UK, will put more pressure on their national currencies. This applies not only to quantitative easing and interest rates, but also to the issuance and profitability of government securities, as well as to the risk of high inflation due to excessive budgetary expenditure. In the first part of the review, we presented how data from the U.S. labor market influenced the couple’s behavior. Similar macro statistics on the UK labour market are expected to be published in the coming week, on Tuesday 23 February. And if this looks rather optimistic, you can expect the upward trend of the GBP/USD pair to continue. Other events include a speech by the British Prime Minister the day before. Although, most likely, Boris Johnson will be without much specifics and will enthusiastically talk about his cabinet’s successes in the fight against the pandemic, the record rate of vaccination and how relations with the EU are developing after Brexit; USD/JPY 104.40-105.40 is a zone that the couple has visited many times in the last 30 weeks. This allows us to talk about this as a pivot point of the medium-term side channel 102.60-107.00. By the way, the maximum turnover range of 440 points in the semi-annual segment is not so great. In October, for example, the pair made 240-point kicks in just one day. At the moment, only 35% of experts believe that the couple has not yet completed the move to the upper limit of this trading range. True, 75% of oscillators and 80% of trend indicators on D1 are on their side, which gives extra weight to this forecast. Resistance levels are 105.70, 106.20, target is 107.00. 65% of analysts disagree, rising to 80% when moving from weekly to monthly forecast. They have a similar number of indicators on their side, this time on H4. Support levels are 105.00, 104.40, 103.60, target is 102.60. Graphical analysis shows the pair’s fluctuations in the trading range 104.40-106.20 with a predominance of bearish sentiment. cryptocurrencies. As bitcoin prices rise, there are fewer buyers on the market. The most cautious of these came in December, when the coin reached the previous record level of $20,000. The next phase of closing long positions occurred after bitcoin’s rise to $40,000. Only the most aror investors and crypto fans reached $50,000. Bitcoin is overbought. But after the price exceeded $55,000 on Friday evening February 19, there were no active sales. The market froze in anticipation. Worrying signals, however, are already coming. First, the share of sellers is growing, which has increased from 18% to 35% in the last two weeks. Secondly, around two thirds of traders buy perpetual futures using leverage, resulting in higher funding rates and commission costs while maintaining long positions. Third, miners’ shares fell. According to CoinDesk, the weekly earnings of bitcoin miners reached a new high of $354 million from February 8 to 14. The previous record in seven days was $340 million and was registered in December 2017. But despite this positive, for example, Riot Blockchain Inc shares lost 20% in price only on February 18. However, according to many experts, it is not worth waiting for the beginning of a new crypto-winter. While it may be profound, it’s just a correction. Moreover, with small volumes, bitcoin is likely to grow to $60,000-65,000 even through inertia. And there a new wave of purchases can be triggered by FOMO – Lost Profit Syndrome (Fear Of Missing Out). After all, fear and greed are known to drive the market. Lisa Edwards, sister of self-proclaimed bitcoin creator Craig Wright, predicted that the first cryptocurrency would rise to $142,000. Based on Elliott Wave Theory, it suggested that digital gold would rise to $90,000 by May 2021, fall to $55,000 by January 2022 and rise to $142,000 in March 2023. After that, according to Edwards, the cryptocurrency market expects a downward trend. But even if the increase in the BTC/USD pair can continue in the near future, you need to be very careful in shopping at current levels. Most analysts consider them quite risky and suggest waiting for a withdrawal, and only then open new long positions. NordFX Analytical Group Note: These materials are not investment recommendations or guidelines for working in financial markets and are intended for information purposes only. Trading on the financial markets is risky and can result in a complete loss of deposited funds.