Forex and cryptocurrency forecast for March 15-19, 2021
First review of last week’s events:
EUR/USD. Recall that Fed chief Jerome Powell literally lowered US stock markets with his speech on 4th February. Powell remained indifferent to the increase in the profitability of U.S. treasuries, which closed at an annual level. At the same time, he suggested the possibility of a premature tightening of monetary policy. And while the Fed chief stressed that the economy is far from overheating and does not yet see the need to raise interest rates, the market has had a trace of a possible change in monetary policy. In response, Treasury yields rushed against the dollar, and the stock market collapsed. The S&P500 lost more than 120 points and the Dow Jones Industrial Average lost more than 300 points. And then everything changed on Tuesday, March 9. Strong growth in technology stocks, positive labor market statistics, rising household assets and a bill signed by U.S. President Joe Biden on a new $1.9 trillion stimulus package pushed the U.S. stock market up. Not only did the S&P500 fully recover, but it also updated its historic level to 3,960. As regards long-term government bonds, their yields, on the contrary, have stabilised. This is despite the fact that the number of applications submitted exceeded the volume of issuance by 2.38 times, and foreign investors bought about 20% of the securities with a total value of 38 billion dollars. The EUR/USD rose to 1.1990 on Thursday 11 March due to these factors. However, the level of 1.2000 has not been reached. The collapse of the pair and the weakening of the euro facilitated the ecb’s management’s statement on the increase in the bond-buying rate under the Pandemic Emergency Purchase Program. However, this has proved to be not convincing enough and nothing has been said about increasing the PEPP. As a result, the fall of the pair was slight and ended the week at 1.1950; GBP/USD. More and more experts are wondering if the pound passed a high on February 24. Is it time to consolidate with the dollar? The British currency has seen an impressive 2,830 points increase over its US peer since the third decade of March 2020 (from 1.1410 to 1.4240). And we’ve seen sideways movement of the GBP/USD pair along the 1.3900 trading point over the past two weeks. The upper limit of the trading range is drawn quite clearly: it is a resistance of 1.4000. Two levels of support can be considered lower: the nearest – 1.3850, and the next – 1.3775. Last week’s GBP/USD chart is very similar to the EUR/USD chart. This suggests that both the pound and the euro are not currently as independent players in the market as hostages to the US Federal Reserve’s monetary policy and rates on US government bonds. After starting the five-day week at 1.3840, the pair moved in the above range throughout the week and set the final chord at 1.3925; USD/JPY. The yen has passed one milestone after another in recent weeks, and the USD/JPY pair has reached an eight-month high. Many traders are afraid to open both long and short positions in such a situation. On the one hand, the couple was already bought out, and on the other hand could still fly further up by inertia. This is what actually happened: first it rose to 109.25, then the correction to 108.35, and then a new increase to horizon 109.00, where the couple ended the working week; cryptocurrencies. Bitcoin reached $58,340 on February 21, before returning to $43,160, down 26%. According to material indicators, this decline was used by whales and institutions to buy assets from small investors. For example, the number of orders to buy BTC between $0.1 million and $1 million reached record highs on the Binance cryptocurrency exchange. And now, twenty days later, on March 12, Bitcoin has again broken the $58,000 bar. However, at the time of writing the review, It could not update the historic high, stopping at $58,240 BTC/USD the pair rose last week amid a rise in the US stock market. Although, most likely, this is only a formal reason, and not a real reason to activate bulls. It was clear that they would definitely try to grow above $60,000. The only question was when this would happen. According to CryptoQuant, demand for bitcoins continues to grow and their number on the exchanges has fallen to its lowest level in two years. As Bloomberg experts point out in a February Report, bitcoin is becoming an increasingly popular asset among many investors and is gradually replacing zlotys with their wallets. According to the report’s authors, the reduction in the range of price fluctuations signals that the main cryptocurrency has in fact become an alternative to traditional investment assets. The overall capitalization of the cryptocurrency market is also involved in new heights, along with bitcoin. In a week it increased from $1,444 billion to $1,756 billion. And now the size of $2 trillion will become an important psychological level for him. Interestingly, despite a weekly increase in the BTC/USD pair of 20%, the crypto Fear & Greed Index, on the contrary, fell from 77 to 70, which may indicate an overall bullish mood in the market. And another interesting observation. Since the beginning of 2021, bitcoin’s market dominance has fallen from 70.4% to 61.4%. Altcoins from the TOP-10 also fell or remained at the same level. But the total capitalization of smaller tokens increased from 10.3% to 14.4%. It is unlikely that these coins could arouse the interest of large investors. Therefore, such statistics can only indicate that players have started to use them more actively for short-term speculation.
A 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 meeting of the US Federal Reserve will take place on March 16-17. We look forward to a summary of the Open Market Committee’s (FOMC) economic forecasts, an interest rate decision, commentary on monetary policy and a press conference of Fed executives after the meeting. The interest rate is likely to remain unchanged at 0.25%. Therefore, the regulator’s forecasts will be of particular interest. High expectations will once again highlight the gap between the pace of economic recovery in the US and the euro area. Investors will also be concerned about the possibility of tightening monetary policy and the attitude of Fed executives to changes in government bond yields. Consolidating 10-year yields in the 1.5-1.6% range will help the stock market and pushed the EUR/USD pair above 1.2000. So far, the advantage is on the dollar side. 70% of experts, supported by graphical analysis, 85% of oscillators and 80% of trend indicators on D1, expects steam to fall to 1.1800-1.1850. Support here is still a 200-day SMA at 1.1826. The nearest support is 1.1900. The alternative view is 30% of analysts, supported by a graphical analysis of h4. As for the technical indicators in this time frame, their readings are still misleading. Keep in mind that when switching from weekly to monthly forecast, the number of experts supporting bulls increases to 60%. Resistance levels are 1.2025, 1.2060, 1.2170, 1.2200 and 1.2270;
GBP/USD. In addition to the US Fed meeting, the Bank of England meeting will take place on Thursday, March 18. It is likely that its results will not affect investors as much as their peers on the other side of the Atlantic. However, information on the course of the UK economic recovery and its prospects will certainly be given. The market will also be concerned about what is happening in relations with the European Union after Brexit. Expert opinions are divided equally at the moment. A third of them, along with a graphical analysis on H4, believe the pair will stick in the range of 1.3775-1.4000. Another third, supported by the d1 graphic analysis, expects a high of 1.4240 by February 24. And finally, the remaining third waiting for the pair to fall to zone 1.3600; USD/JPY. In the coming week, it should be clear whether the Japanese currency will stop falling and the USD/JPY pair will rise rapidly. There are three determinants: U.S. bond yields, the U.S. Federal Reserve meeting and the Bank of Japan meeting on Friday, March 19, at which it should determine its policy for the near future. Rising U.S. bond yields are pushing the yen down, and the Japanese regulator is expected to respond to this catastrophic collapse. Whether the BOJ will insist on controlling the yield curve is open for now. It should be noted that the recent fall in the yen and the rise of USD/JPY on March 12 took place with increased volumes. This means that the interest of the main players in continuing the upward trend of the pair has still not dried up. This trend can be reversed by consolidating the profitability of US securities or actively selling risky assets. But at the time of writing, 55% of experts expects that the couple will still be able to rise to the zone 109.50-110.00. 20% are in favour of sideways movement and 25% are in favour of the fall of the pair. Almost 100% of trend indicators on both H4 and D1 are painted red. Among the oscillators on H4 there are 80%, but at D1 35% already gives signals that the pair is taken out, indicating an imminent possible downward revision. In the transition from weekly to monthly forecast, 80% of analysts already expect the pair to fall and return to the 105.00 zone. Support levels are 108.35, 106.65, 106.10 and 105.70; kryptocurrencies. Recall that in early March the head of cryptobank Galaxy Digital Mike Novogratz abruptly changed the forecast for the BTC rate at the end of 2021. “It feels like,” said the banker, “we’ll stay at a little between $42,000 and $60,000 and then see the next big jump to $100,000. Bloomberg’s team is also positive about the further exchange rate of the main cryptocurrency. “After the coin exceeded $50,000, she was given the opportunity to test higher values. Demand for this asset is increasing and its macroeconomic indicators are improving,” the February report reads. According to Bloomberg analysts, bitcoin will be able to reach $100,000 this year, and its value will also continue to grow in the long run. So how long will he spend his time, in the words of Mike Novogratz, between $42,000 and $60,000? Or are we on the eve of a big jump? Many experts are pessimistic. As a reason they point to miners who buy more and more graphics cards on new chips, leading to higher prices and a shortage of such cards in the market. This situation is somewhat reminiscent of the end of December 2017 – January 2018, when the mining boom ended in the collapse of the market, the destruction of many miners and the arrival of the crypto of winter. There may be a new winter this time, experts say, but severe frosts are not entirely asking the question. In the longer term, electricity costs for mining will also hamper the growth of digital resources. They are constantly evolving, and this process consumes energy comparable to that of a country like the Netherlands. At some point, it will require the energy of the whole world to generate only one unit. And this, according to futurologists at Singularity University, will become an insurmountable obstacle for the cryptocurrency market. However, if there are pessimists of bears, then there will certainly be bull optimists. So, according to ARK Investment boss Cathie Wood, the price of bitcoin is currently most correlated with property prices. But in the future, she believes, bitcoin will become similar to low-risk instruments such as bonds and will enter the recommended portfolio of investors. “I think the first cryptocurrency will behave like fixed income markets,” Wood told CNBC. “We survived a 40-year bond hossa. And we won’t be surprised if this new asset class becomes part of the investment portfolio. Perhaps it will be 60% of shares, 20% of bonds and 20% of cryptocurrency.” The forecast that bitcoin could reach $1 million or more in the next 10 years has been announced by Kraken cryptocurrency exchange CEO Jesse Powell. “At the moment we’re just guessing, but if you value bitcoin in dollars, then you have to understand that its value tends to infinity,” he said. In an interview with Bloomberg journalists, Kraken’s boss also said that bitcoin could eventually replace all major fiat currencies that are not backed by gold and other precious metals. However, he agreed that there was a risk of sharp market fluctuations and prices could “rise or fall by 50% every day.” Therefore, according to Powell, when investing in bitcoin, it is necessary to be ready to keep it in your wallet for at least five years.
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.