Daily Market Analysis and News From NordFX

[Stan NordFX]

Forex and Cryptocurrency Forecast for May 1 - 5, 2023​

EUR/USD: Awaiting Fed and ECB Meetings

The main factor determining the dynamics of the US Dollar Index (DXY) and, consequently, the EUR/USD pair last week was… silence. If recently, the speeches of Federal Reserve representatives were almost the most important market guide, then a silence regime has been in effect since April 21. Leading up to the press conference by Fed Chairman Jerome Powell following the FOMC's May meeting, all officials are instructed to maintain silence. Only a few days remain until the FOMC (Federal Open Market Committee) meeting, where a decision regarding the regulator's future monetary policy will be made, scheduled for May 2/3. Furthermore, on Thursday, May 4, there will be a meeting of the European Central Bank, where an interest rate decision will also be made. In general, the upcoming five-day period promises to be, at the very least, not dull.

Of course, macroeconomic data and events from both sides of the Atlantic caused certain fluctuations in EUR/USD last week. However, the final result was close to zero: if on Friday, May 21, the last chord sounded at the 1.0988 mark, then on Friday, May 28, it was placed not far away: at the 1.1015 level.

One event worth highlighting was the publication of the First Republic Bank (FRC) report, which ranks among the top 30 US banks by market capitalization. It was this report that led to the dollar's decline and the pair's surge by more than 100 points on Wednesday, April 26.

It seemed that the banking crisis caused by the tightening of the Federal Reserve's monetary policy (QT) was beginning to fade... US Treasury Secretary Janet Yellen even assured the public of the resilience of the banking sector. But then... a new flare-up called First Republic Bank (FRC). To prevent its bankruptcy and support its liquidity in Q1 2023, a consortium of banks transferred $30 billion in uninsured deposits to FRC. Another $70 billion in the form of credit was provided by JPMorgan. However, this was not enough: the bank's clients began to scatter, and FRC shares collapsed by 45% in two days and by 95% since the beginning of the year. In March alone, clients withdrew $100 billion from the bank. Thus, First Republic Bank has a very high chance of becoming number 4 in the lineup of bankrupted major US banks. And if the Fed does not stop its QT cycle, there is a very high probability that numbers 5, 6, 7, and so on will appear on this list.

However, as we have already detailed in our previous review, at the meeting on May 2/3, the key rate will be raised by only 25 basis points (FedWatch from CME estimates the probability of this at 72%). After that, the US Central bank is likely to take a pause. As stated by the President of the Federal Reserve Bank of Atlanta, Raphael Bostic, "one more increase should be enough for us to step back and see how our policy is reflected in the economy." It should be noted that the 25 bp rate hike has long been factored into market quotations. Therefore, immediately after the news about FRC and the surge to 1.1095, EUR/USD returned to a comfortable state for itself.

At the time of writing the review, on Friday evening, April 28, analysts' opinions were divided as follows: 35% of them expect the dollar to weaken and the pair to rise, 50% expect it to strengthen, and the remaining 15% have taken a neutral position. As for technical analysis, among oscillators on D1, 85% are coloured green, 15% are neutral-grey, among trend indicators, 90% are green, and 10% have changed to red. The nearest support for the pair is located in the area of 1.0985-1.1000, followed by 1.0925-1.0955, 1.0865-1.0885, 1.0740-1.0760, 1.0675-1.0710, 1.0620, and 1.0490-1.0530. Bulls will encounter resistance in the area of 1.1050-1.1070, then 1.1110, 1.1230, 1.1280, and 1.1355-1.1390.

In addition to the aforementioned FOMC and ECB meetings, we can expect a substantial amount of economic data next week. On Monday, May 1, the ISM Manufacturing PMI for the US will be published. The next day, the value of a similar index, but for Germany, will become known. Also, on Tuesday, May 2, we will learn about the inflation situation in the Eurozone, as the Consumer Price Index (CPI) will be released. Furthermore, on May 2, 3, 4, and 5, we will get a flurry of US labour market data. Important indicators such as the unemployment rate and the number of new non-farm jobs in the US (NFP) are among these, they will traditionally be published on the first Friday of the month, May 5.

GBP/USD: BoE vs. Fed: Who Will Win the Battle of Interest Rates?

The Bank of England (BoE) meeting will take place a week after the Fed's meeting, on Thursday, May 11. Most experts believe that the cycle of interest rate hikes for the pound is not yet over, which supports the British currency.

Recent data on inflation for March contribute to these forecasts. The Consumer Price Index (CPI) in annual terms once again reached a double-digit figure, 10.1%, which is higher than the forecast of 9.8%. To bring this indicator below the psychologically important mark of 10.0%, the BoE is highly likely to continue following the Fed's example. Market participants expect the regulator to raise the interest rate by 50 basis points on May 11: from 4.25% to 4.75%. No more effective ways to curb inflation have been devised so far. And if it continues to remain so high, it will harm both the consumer market and the overall UK economy.

Since the beginning of April, we have observed a sideways trend. However, GBP/USD finished the past five-day period at the 1.2566 mark, unexpectedly breaking the upper boundary of the channel. Perhaps the reason for the jump was the closing of trading positions at the end of the month. Currently, 75% of experts are in favor of the dollar, and only 25% side with the British pound. Among oscillators on D1, the balance of power is as follows: 85% vote in favor of the green (with a third of them being in the overbought zone), and the remaining 15% have turned neutral-grey. Trend indicators are 100% on the green side. Support levels and zones for the pair are 1.2450-1.2480, 1.2390-1.2400, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, and 1.1800-1.1840. As the pair moves north, it will encounter resistance at the levels of 1.2510-1.2540, 1.2575-1.2610, 1.2700, 1.2820, and 1.2940.

Regarding important statistics on the state of the UK economy for the upcoming week, on Tuesday, May 2, the Manufacturing Purchasing Managers' Index (PMI) will be published. Then, on May 4, we will learn the value of the PMI for the services sector as well as the composite business activity indicator for the UK as a whole. Traders should also be aware that there will be a bank holiday in the country on Monday, May 1.

continued below...

 

[Stan NordFX]

USD/JPY: Bank of Japan - Heading for Softer Ultra-Soft Policy

Forecasting the interest rate of the Bank of Japan (BoJ) is quite simple and very, very boring. As a reminder, it is currently at a negative level of -0.1% and was last changed on January 29 of the distant 2016, when it was lowered by 20 basis points. This time around, at its meeting on Friday, April 28, the regulator left it unchanged at the same -0.1%.

But that's not all. Many market participants were expecting that with the arrival of the new Central bank governor, Kazuo Ueda, the regulator would eventually change course towards tightening. However, contrary to these expectations, during his first press conference following his first meeting on April 28, Ueda stated, "We will continue to ease monetary policy without hesitation if necessary." One might wonder how much softer it could get, but it turns out that the current -0.1% is not the limit.

The result of the BoJ governor's words can be seen on the chart: in just a few hours, USD/JPY soared from 133.30 to 136.55, weakening the yen by 325 points. Of course, it's still far from the October 2022 peak, but a rise to the 137.50 level no longer seems entirely unrealistic.

The pair ended the past week at the level of 136.30. Regarding its near-term prospects, analysts' opinions are distributed as follows: currently, only 25% of experts vote for the pair's further growth, 65% point in the opposite direction, expecting the yen to strengthen, and 10% simply shrug. Among the oscillators on D1, 85% point upward (a third of them are in the overbought zone), while the remaining 15% remain neutral. Trend indicators show 90% looking north, and 10% pointing south. The nearest support level is in the 136.00 area. Next are the levels and zones at 135.60, 134.75-135.15, 132.80-133.00, 132.00-132.40, 131.25, 130.50-130.60, 129.65, 128.00-128.15, and 127.20. Resistance levels and zones are at 137.50 and 137.90-138.00, 139.05, and 140.60.
Regarding events characterizing the state of the Japanese economy, none are expected in the coming week. Moreover, the country is looking forward to a series of holidays: May 3 is Constitution Day, May 4 - Greenery Day, and May 5 is Children's Day. As a result, the dynamics of USD/JPY will depend entirely on what is happening on the other side of the Pacific Ocean, in the United States.

CRYPTOCURRENCIES: Awaiting the 2024 Halving

BTC/USD continued to decline on Monday, April 24 and, after breaking the support at $27,000, fell to $26,933. Market participants were already prepared to see bitcoin go even lower at the strong support level of $26,500. However, it unexpectedly soared to $30,020 on April 26. The main cryptocurrency was saved, as it has been many times before and will be many times again, by a weakened dollar. The cause of the shock was the problems of First Republic Bank, which followed a series of bankruptcies of crypto-friendly banks, as discussed above.

The correlation between the crypto and banking industries arises thanks to the following chain of events: 1) Tightening of the Federal Reserve's monetary policy hits banks, lowering their asset prices, reducing demand for their services, and causing customers to flee. 2) This situation creates serious difficulties for some banks and leads to the bankruptcy of others. 3) This can force the Fed to pause its cycle of raising interest rates or even lower them. Additionally, the regulator may restart the printing press to support bank liquidity. 4) Low rates and a flow of new cheap money lead to a decrease in the value of the dollar and allow investors to direct these funds into risky assets such as stocks and cryptocurrencies, which leads to an increase in their quotes. We have already seen this during the COVID-19 pandemic and may see it again in the near future.

According to former Goldman Sachs top manager and macro-investor Raoul Pal, the Federal Reserve (Fed) is likely to have finished its saga of raising interest rates. He has also predicted an upcoming recession that will force the regulator to "change course" and support the markets by printing money. In that case, he believes that risky assets are in for an "inevitable liquidity wave." This capital influx will "enlighten" the crypto industry with new innovations, and the number of people using digital assets will increase from the current 300 million to over 1 billion.

According to experts from the British bank Standard Chartered, bitcoin has benefited from its status as a "brand refuge" for savings at the beginning of 2023, and the current situation indicates the end of the "crypto winter". Standard Chartered believes that recent turmoil in the banking sector, stabilization of risky assets due to the end of the Fed's interest rate hike cycle, and increased profitability in the crypto mining industry will contribute to BTC's further growth. In addition, the adoption of the first EU framework for regulating crypto markets by the European Parliament could also support the leading cryptocurrency. The upcoming halving event will also impact BTC's growth, with bitcoin potentially reaching $100,000 by the end of 2024.

It should be noted that the topic of halving is becoming more and more prevalent. The Bitcoin Archive press service reminds us that it is less than a year away, with the procedure scheduled for April 6, 2024, as of April 24, 2023. However, this date is not final and may change, as it has in the past.

Some market participants believe that this event will be crucial for the future price of the flagship cryptocurrency. They believe that cycles for cryptocurrencies are consistent, and BTC quotes will reach new record highs a year or a year and a half after halving, as happened in previous cycles. Others argue that the market situation has changed. Bitcoin has become a mass phenomenon, and now "other laws and rules apply to the cryptocurrency", so other factors will become decisive, not just the halving of mining rewards.

It is worth noting that the second group of specialists includes Bloomberg Intelligence analyst Jamie Coutts, who predicts that the price of bitcoin will rise to $50,000 before April 2024. "The price of bitcoin bottoms out when there are 12-18 months left until the halving. The structure of the current cycle is similar to previous ones. However, many factors have changed: the network has become significantly more resilient, and bitcoin has never experienced a prolonged economic downturn," Coutts said. If his forecast is correct, the asset will appreciate by about 220% from the low reached last November before the halving.

The expert and trader known as Doctor Profit reminded of his previous statement that the bottom for bitcoin was reached at the level of $15,400, and it is unlikely that we will see another drop to this level. The dump in November 2022 was a complete capitulation, including for bitcoin miners, some of whom were forced to sell their coins and equipment at a loss. According to Doctor Profit, BTC is currently in an accumulation phase, neither in a bull nor in a bear market. At the same time, the specialist has advised traders to closely monitor the correlation between the Chinese stock market and bitcoin, believing that China will lift the ban on cryptocurrencies and legalize them, which will have a very positive long-term effect on their price.

Another analyst under the nickname DonAlt also excludes a drop in BTC/USD to the lows of November 2022. At the same time, he allows for a correction down to $20,000, which, in his opinion, will be a good level to replenish the reserves of the main cryptocurrency.

It's been a while since we quoted the popular analyst under the nickname PlanB, known for his Stock-to-Flow (S2F) model. He continues to assert that the predictions he makes based on this model continue to come true. "Before the halving, we can expect $32,000 for bitcoin, then $60,000. Then [after the halving] $100,000 will become the minimum, and the maximum rate could reach $1 million. But on average, after the next halving, the BTC rate should reach $542,000," wrote PlanB. At the same time, the analyst emphasized that the behaviour of the crypto market fully corresponds to S2F, so its critics are simply unfounded.

It is worth noting that PlanB is not alone in his super-optimistic predictions for the price of bitcoin, which legendary Warren Buffett called "rat poison squared." Robert Kiyosaki, the author of the popular book Rich Dad Poor Dad, believes that the value of the flagship cryptocurrency will rise to $500,000 by 2025. And at Ark Invest, looking a decade ahead, they named a figure of $1 million per coin.

As of the evening of Friday, April 28, BTC/USD is trading at $29,345. The total market capitalization of the crypto market is $1.205 trillion ($1.153 trillion a week ago). The Crypto Fear & Greed Index has increased from 50 to 64 points over the past seven days, moving from Neutral to the Greed zone.


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]

CryptoNews of the Week

- The idea of launching a digital dollar CBDC (Central Bank Digital Currency) in the US has faced active criticism from Republican politicians. In February, Congressman Tom Emmer introduced a bill to protect "financial privacy" when using central bank digital currencies. He also stated that CBDC technology offends American values and may contribute to "financial control" over citizens.
In April, another Republican senator, Ted Cruz, called the launch of the digital dollar "extremely dangerous" for society, as the government would gain access to every transaction. At the same time, he praised Bitcoin and talked about his investments in the asset.
Best-selling author of "Rich Dad Poor Dad" and entrepreneur Robert Kiyosaki joined the chorus of Republicans, consistently urging people to buy "more gold, silver, and bitcoins." "In his book '1984,' George Orwell warned, 'Big Brother is watching.' Biden's CBDC is that Big Brother," Kiyosaki wrote.

- Jenny Johnson, CEO of investment firm Franklin Templeton, which manages assets worth $1.5 trillion, criticized bitcoin, stating that it is the biggest distraction from real innovation - blockchain technology. She also warned that the crypto industry should prepare for tighter regulatory rules. The head of Franklin Templeton further cautioned that bitcoin will never be able to become a global currency, as the US government will not allow it to happen. "I can tell you that if bitcoin becomes so important that it threatens the dollar as a reserve currency, the US will restrict its use." In contrast to the US, Johnson listed Singapore, Hong Kong, and the United Arab Emirates as crypto-friendly jurisdictions.

- The White House released a report last September stating that cryptocurrency miners consume more energy than the entire country of Australia and account for between 0.9% and 1.7% of the total electricity consumption in the United States. In response to this, the Council of Economic Advisers under President Joe Biden (CEA) has proposed a 30% tax on miners to discourage their negative impact on the climate. This new measure is expected to generate approximately $3.5 billion in revenue for the government over the next ten years and serve as another method for authorities to exert pressure on an industry they consider a threat.
According to Republican Senator Cynthia Lummis, President Joe Biden will sign a law within the next 12 months that will establish new regulations for the cryptocurrency market.

- Legendary trader, analyst, and head of Factor LLC, Peter Brandt, believes that bitcoin will soon outpace other digital assets. "I hold the view that bitcoin will bury all the pretenders. In the end, there will be only one king of the hill," he wrote.
The expert drew attention to the Bitcoin dominance chart, which tracks the share of the first cryptocurrency in the total market capitalization of the crypto market. According to Brandt, the indicator is preparing for a breakthrough after a two-year consolidation in the form of a large rectangle. While the trend is in a "constraining range," the breakout from this range will be crucial for the asset, the analyst explained. Over the past five years, BTC's share has dropped to 32.4% in 2018 and risen to 71.9% in 2021. At the time of writing, it stands at 47.0%. The indicator likely needs to surpass the 50% mark to initiate a bullish movement.

- Investor and billionaire Ray Dalio admitted that although he owns bitcoin, he prefers gold. In his opinion, the first cryptocurrency serves as good inflation insurance, but not a full-fledged alternative to the precious metal. "I don't understand why people lean more towards bitcoin than gold," he wrote. "At the international level, gold is the third-largest reserve asset for central banks, following dollars, euros, gold, and then Japanese yen."
According to Dalio, the precious metal is "timeless and universal." Bitcoin, on the other hand, requires close attention from investors due to its volatility. "You have to be prepared for a significant drop, around 80% or so," the billionaire warned.

- Coinbase Business Director Conor Grogan claims to have found a "jailbreak" (vulnerability) in ChatGPT's software. This "jailbreak" allows for obtaining AI (artificial intelligence) predictions concerning various events. "ChatGPT predicts the future on absolutely any topic (including a person's time of death) and quantifies the probability of the event," Grogan wrote, adding that "ChatGPT clearly sympathizes with BTC while being much more sceptical about altcoins." According to its forecast, there is a 15% chance that BTC will lose 99.9% of its value by 2035 and become irrelevant. In the case of Ethereum, the chances of such a scenario are 20%, with LTC - 35%, and with DOGE - 45%.
ChatGPT stated previously that the price of bitcoin could reach $150,000 by 2024, after which it would increase on average by $25,000 per year and reach $300,000 by 2030. However, the AI honestly warned that it cannot confidently predict cryptocurrency prices. There are many factors that the chatbot cannot account for, such as regulatory changes, government actions, wars, catastrophes, and more. Therefore, while it may be interesting to consider ChatGPT's forecasts, relying on them when developing trading strategies would be unwise, to put it mildly.

- Bitcoin could surge by $20,000 if the US defaults on its debts, according to Geoff Kendrick, Head of Currency Research at British bank Standard Chartered. In an interview with Business Insider, he stated that this could happen in July 2023 if Congress does not approve raising the debt limit to a new level. However, the expert called such a default an "unlikely event" but with "massive consequences."
Kendrick believes that bitcoin will not grow linearly. More likely, after the default, its price will fall by $5,000 in the first days or a week, then sharply increase by $25,000. As for Ethereum, which the analyst considers to be traded like stocks, it is more likely to fall in the case of a default. Kendrick's optimal trading strategy involves opening a long position in bitcoin and a short position in ethereum.
Previously, the Standard Chartered analyst stated that the first cryptocurrency could rise to $100,000 by the end of 2024. Among the main reasons, he cited a banking crisis, halving, and a loosening of the US Federal Reserve's monetary policy.

- Research firm Chainalysis discovered that an anonymous hacker has identified 986 crypto wallets allegedly belonging to Russia's Main Intelligence Directorate, Federal Security Service, and Foreign Intelligence Service, and has begun hunting for their digital assets. Initially, the hacker destroyed over $300,000 worth of bitcoin stored in these wallets. To do this, they used the OP_RETURN script, which marks transactions as invalid and effectively burns the coins. However, after the start of the Russian military operation in Ukraine, the hacker changed their attack strategy. Instead of liquidating digital assets, they began transferring them to wallets owned by organizations providing support to Ukraine.

- Trader under the nickname Bluntz, who predicted the bottom of the BTC bear market in 2018, believes that the leading cryptocurrency is unlikely to sustainably consolidate above $30,000 in the foreseeable future. His opinion is based on the fact that BTC has already completed a five-wave bullish trend on the daily chart. Bluntz believes that Bitcoin is currently in the middle of an ABC correction formation, and this could lead to a drop to around $25,000. According to the trader, this drop will be followed by a rise in BTC to $32,000, which will occur in the second half of 2023.


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 #forex #cryptocurrencies #bitcoin #stock_market

 

[Stan NordFX]

Forex and Cryptocurrencies Forecast for May 08 - 12, 2023​

EUR/USD: The Market Is at a Crossroads

Everything happened as it was supposed to. The Federal Open Market Committee (FOMC) of the US Federal Reserve raised the federal funds rate by 25 basis points (bps) to 5.25% during its meeting on May 2 and 3. Similarly, the European Central Bank did the same on May 4, increasing the euro interest rate by the same 25 bps to 3.75%. This increase had long been factored into market quotations. Of much greater interest were the statements and press conferences of the leaders of both central banks.

Attention to Federal Reserve Chairman Jerome Powell's speech was heightened by the fact that the banking crisis had escalated earlier in the week. Shares of First Republic Bank plummeted following poor financial reports, dragging down the shares of many other banks. The US banking sector had dropped by more than 10% since the beginning of the week. This situation provided grounds for expecting that the Fed would finally shift from a tightening policy (QT) to a more accommodative one (QE), as high interest rates had been the cause of the banking crisis.

The statements made by the Fed Chairman were characteristically vague. While acknowledging some issues, Jerome Powell did not insist on maintaining peak interest rates until the end of 2023. He also indicated that although a decision to pause in the current monetary tightening cycle had not been made, it was not ruled out that the rate was already approaching its peak levels.

As a result, the derivatives market decided that the rate would be 90 basis points lower by the end of the year than it is now. Based on these forecasts, the DXY Dollar Index and Treasury yields went down, while EUR/USD moved upward. However, its growth was relatively moderate, at about 100 points. It failed to surpass the 1.1100 level, and after the ECB meeting on May 5, it even rolled back.

Statistics published on Tuesday, May 2 showed that retail sales in Germany fell from -7.1% to -.6% (forecast -6.1%), and inflation (CPI) in the Eurozone as a whole increased from 6.9% to 7.0%, according to preliminary data. Against this backdrop, the European Central Bank, like the Fed, indicated its concern about the delayed effect of tightening monetary policy, which could cause new problems in the economy. Consequently, the pace of monetary tightening should be reduced.

Although the ECB announced that, starting from July, asset sales from the balance sheet would be increased from €15 billion to €25 billion per month, investors remained unimpressed. The short-term market reacted to the possibility of winding down QT in the Eurozone by lowering the deposit rate forecast from 3.9% to 3.6% by the end of the year. This time, the euro and German bond yields fell together.

As a result, EUR/USD returned to the centre of the sideways channel of 1.0940-1.1090, in which it had been moving for two consecutive weeks. (In fact, if you exclude spikes, the channel appears even narrower: 1.0965-1.1065.)

Data from the US labour market arrived on the first Friday of the month, May 5, and provided the dollar with brief support. The number of new jobs created outside the US agricultural sector (NFP) amounted to 253K, significantly exceeding both the previous value (165K) and the forecast (180K). The unemployment situation also improved, with the rate falling from 3.5% to 3.4%, instead of the expected increase to 3.6%.

As a result, EUR/USD ended the five-day period at the 1.1018 level. At the time of writing this review, on the evening of May 5, analysts' opinions are divided as follows: 60% of them expect the dollar to weaken and the pair to rise, 30% anticipate its strengthening, and the remaining 10% have taken a neutral stance. Regarding technical analysis, among oscillators on the D1 chart, 60% are green (with 10% signalling being overbought), while the remaining 40% are neutral grey; among trend indicators, 90% are green, and only 10% are red. The nearest support for the pair is located around 1.0985-1.1000, followed by 1.0925-1.0955, 1.0865-1.0885, 1.0740-1.0760, 1.0675-1.0710, 1.0620, and 1.0490-1.0530. Bulls would encounter resistance around 1.1050-1.1070, then 1.1109-1.1110, 1.1230, 1.1280, and 1.1355-1.1390.

As for the events of the upcoming week, Wednesday, May 10, is likely to be the most important day. Inflation data (CPI) for Germany and the US will be released then. The preliminary Michigan Consumer Sentiment Index, to be published on Friday, May 12, will complement the economic picture.

continued below...

 

[Stan NordFX]

GBP/USD: Pound Forecast Mostly Positive

When forecasting the past five-day period, the majority of experts (75%) had sided with the US currency. Indeed, at the beginning of the week, the dollar recouped 130 points from the pound. However, then the UK's Chartered Institute of Procurement and Supply (CIPS) began publishing PMI figures, which indicated an increase in business activity in the country. With a previous value of 52.2 and a forecast of 53.9, the Composite PMI actually grew to 54.9 points. The UK's services sector PMI showed an even more convincing increase: from 52.9 to 55.9 (forecast 54.9).

The pound received additional support from across the Atlantic Ocean. The banking crisis in the US and the vague statements from the Federal Reserve's chair allowed GBP/USD to rise to the 1.2652 mark. It had not soared that high since the beginning of June 2022. As for the final note of the past week, it sounded slightly lower, at the 1.2631 level.

There will be a bank holiday in the United Kingdom on Monday, May 8. However, a whole avalanche of events related to the country's economy awaits us afterwards. Preliminary data on manufacturing output and the UK's overall GDP will be revealed on Thursday. In addition, a meeting of the Bank of England (BoE) will be held on the same day. Most experts believe the pound's interest rate hike cycle has not yet come to an end and will be raised from 4.25% to 4.50%. After the BoE meeting, a press conference will follow, led by its governor, Andrew Bailey. As for the end of the workweek, we will learn the revised data on manufacturing output and the country's GDP on Friday, May 12.

At the moment, many experts anticipate further strengthening of the British currency and growth of GBP/USD. Here are just a few quotes.

"It seems that the belief that European banks, including British ones, are better regulated than banks in the US provides some protection for European currencies," economists from Internationale Nederlanden Groep (ING) write. "This also helps support expectations (with which we disagree) that the Bank of England may raise rates two or three more times this year. According to our latest estimates, the Bank of England may not counteract these expectations next week, leading to sterling retaining its recent achievements." ING economists believe that the GBP/USD pair could rise to 1.2650-1.2750.

Scotiabank specialists believe that upward pressure will continue to develop towards 1.2700-1.2800, although they do not rule out that this growth could be very slow. In their opinion, support is in the 1.2475-1.2525 zone.

Credit Suisse also sees the "potential for a final upward surge towards the main target at 1.2668-1.2758 – the May 2022 high and the 61.8% correction of the 2021/2022 decline." "Here, we will expect an important top to form," the specialists say. Credit Suisse also warns that if the pound weakens, the 1.2344 support should hold. However, if it is broken, a deeper pullback towards the 55-DMA and 1.2190-1.2255 support is threatened.

Strategists at HSBC, one of the largest financial conglomerates in the world, join the positive sentiment of their colleagues. "At present, the pound sterling benefits from both an improvement in investor risk appetite and a cyclical upswing," states HSBC. "We believe that the positive cyclical momentum will continue to support the British pound in the coming months. [...] Nevertheless, amid weakening lending dynamics and the waning positive impact of disinflation, GBP/USD rate may not be able to move far beyond the 1.3000 level."

As for the median forecast, currently 50% of experts are siding with the pound, 10% side with the dollar, and 40% remain neutral. Among trend indicators on D1, 100% are in favour of the green (bullish), and oscillators show a similar picture, although a third of them are in the overbought zone. Support levels and zones for the pair are 1.2575-1.2610, 1.2510, 1.2450-1.2480, 1.2390-1.2400, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, and 1.1800-1.1840. If the pair moves north, it will face resistance at levels 1.2650, 1.2695-1.2700, 1.2820, and 1.2940.

USD/JPY: Yen Finds Support from the US

At its latest meeting, the Bank of Japan (BoJ) maintained its negative interest rate at -0.1% (The last time it changed was on January 29, 2016, when it was lowered by 20 basis points). Recall that during the press conference following this meeting on April 28, the new head of the Central Bank, Kazuo Ueda, stated that "we will continue to ease monetary policy without hesitation if necessary." It seems like there's not much room left for easing, but perhaps the current -0.1% is not the limit.

The result of BoJ's head's words can be seen on the chart: within just a few hours, USD/JPY soared from 133.30 to 136.55, weakening the yen by 325 points. The growth continued during the past week: the pair recorded a local high at 137.77 on Tuesday, May 2. After that, the yen, acting as a safe haven, was supported by the banking crisis in the US. Jerome Powell's statements finished the "job" of strengthening the yen, ultimately causing the pair to drop by 428 points to 133.49.

On Friday, May 5, strong US labour market data allowed the US currency to recover some of its losses, and USD/JPY ended the workweek at 134.83.

The next BoJ meeting will take place only on June 16. Until then, the USD/JPY rate will most likely depend mainly on the dollar. Regarding the short-term prospects of the pair, analysts' opinions are distributed as follows. At the moment, only 25% of experts vote for its further growth, the same number point in the opposite direction. The majority (50%) simply shrugg, confirming that investors are currently at a crossroads and are waiting for signals that could move the market in one direction or another.

Indicators on D1 are also in doubt. Among oscillators, 50% point north, 25% have taken a neutral position, and the remaining 25% indicate south (with a third of them in the oversold zone). The ratio of forces for trend indicators is 60% to 40% in favour of the greens. The nearest support level is located in the 134.35 area, followed by levels and zones at 133.60, 132.80-133.00, 132.00, 131.25, 130.50-130.60, 129.65, 128.00-128.15, and 127.20. Resistance levels and zones are at 135.15, 135.95-136.25, 137.50-137.75, and 139.05, 140.60.

The report of the April meeting of the Bank of Japan's Monetary Policy Committee will be published on Monday, May 8. No other important economic information related to the Japanese economy is expected during the upcoming week.

continued below...

 

[Stan NordFX]

CRYPTOCURRENCIES: When Will Bitcoin Wake Up?

Of course, the price of bitcoin is influenced by many specific factors. These include industry-related regulatory actions, bankruptcy of crypto exchanges and banks, and statements made by influencers shaping the crypto community's opinion. All of these factors play a role. However, one of the most important factors affecting BTC/USD is the latter half: the US dollar. The better the world's main currency performs, the worse it is for the leading cryptocurrency, and vice versa. This inverse correlation is clearly visible when comparing bitcoin charts and the US Dollar Index (DXY).

In March, anticipation of the Federal Reserve's interest rate decision locked DXY and BTC/USD in a sideways channel. The 25 basis point increase fully coincided with the forecast and was already factored into the market quotes, so the DXY's calm reaction to this move was quite logical. Bitcoin also reacted calmly to this step, remaining in the $26,500-30,000 range.

The current background remains neutral. The "bulls" are conserving their energy. In addition to the predictable Fed decision on the key interest rate, their reluctance to buy is influenced by investors' general lack of appetite for risky assets. Weak macroeconomic data from China plays a significant role here.

Another factor putting pressure on bitcoin is the profit-taking by some holders, which followed the impressive growth of the coin in Q1 of this year. Most of these were short-term speculators, who accounted for over 60% of the total realized profit.

As for the "whales," having liquidated part of their holdings, they have either gone into hibernation or returned to insignificant accumulation, prompted by the banking crisis. Recall that BTC/USD dropped to $26,933 on April 24. Market participants were already prepared to see bitcoin even lower, at the $26,500 support level, breaking which would open the way to $25,000. However, the coin unexpectedly soared to $30,020 on April 26. The reason for the surge was the fourth bankruptcy of an American bank, this time being the First Republic Bank.

According to experts at the British bank Standard Chartered, bitcoin took advantage of its status as a "brand-safe haven" for savings at the beginning of 2023, and the current situation indicates the end of the "crypto-winter." Geoff Kendrick, the head of currency research at the bank, believes that bitcoin could grow by $20,000 if the US defaults on its debts. In an interview with Business Insider, he stated that this could happen in July 2023 if Congress does not agree to raise the debt limit to a new level. However, the specialist called such a default an "unlikely" event, albeit with "massive consequences."

Kendrick believes that bitcoin will not grow linearly. Most likely, after the default, its price will fall by $5,000 in the first days or week, and then sharply increase by $25,000. As for ethereum, which, according to the analyst, trades like stocks, it is more likely to fall in the event of a default. Kendrick considers the optimal trading strategy to be opening a long position in bitcoin and a short position in ethereum. Recall that earlier, Standard Chartered stated that the first cryptocurrency could grow to $100,000 by the end of 2024. The main reasons cited were the banking crisis, halving, and the easing of the US Federal Reserve's monetary policy.

Investor Ray Dalio agrees that the first cryptocurrency is a good hedge against inflation. He admitted that he owns bitcoins, but still prefers gold. According to the billionaire, bitcoin cannot be a full-fledged alternative to the precious metal. "I don't understand why people are more inclined towards bitcoin than gold," he wrote. "Gold is the third-largest reserve asset for central banks internationally. First dollars, then euros, gold, and Japanese yen." In Dalio's opinion, the precious metal is "timeless and universal." Bitcoin, on the other hand, requires close attention from investors due to its volatility. "You have to be prepared for its significant drop, about 80% or so," warned the billionaire.

Jenny Johnson, the CEO of investment company Franklin Templeton, criticized bitcoin as the biggest distraction from real innovation, blockchain technology. She believes that bitcoin will never become a global currency because the US government will not allow it. Johnson warned that the crypto industry should prepare for tougher regulatory rules.

Senator Cynthia Lummis suggests that President Joe Biden will sign a law establishing basic guidelines for the crypto industry within the next 12 months. Meanwhile, the White House Council of Economic Advisers has proposed a 30% tax on miners to prevent them from damaging the environment, which is expected to be another way for authorities to pressure the industry seen as a threat by many officials.

Upcoming regulatory changes, along with wars and catastrophes, are just some of the many factors that Artificial Intelligence is currently unable to take into account. Therefore, relying on ChatGPT's predictions when developing trading strategies would be, to put it mildly, reckless. However, they are still of interest. According to the statement of Coinbase's Business Director, Conor Grogan, "ChatGPT clearly sympathizes with BTC, while being much more skeptical towards altcoins." Thus, according to the AI's forecast, there is a 15% chance that BTC will lose 99.9% of its value by 2035 and become obsolete. In the case of ethereum, the chances of such a scenario are 20%, with LTC - 35%, and with DOGE - 45%.

Earlier, ChatGPT stated that the price of Bitcoin could reach the mark of $150,000 already in 2024, after which it will grow on average by $25,000 per year and reach the mark of $300,000 by 2030.

Unlike ChatGPT, the trader known as Bluntz possesses human, not artificial intelligence. It was this intelligence that allowed him to correctly predict the bottom of the bearish BTC market in 2018. Now, however, he believes that the leading cryptocurrency is unlikely to sustainably establish itself above $30,000 in the foreseeable future. This opinion is based on the fact that BTC has already passed a five-wave bullish trend on the daily chart. According to Bluntz's calculations, bitcoin is currently in the middle of a corrective ABC formation, which could lead to a drop to around $25,000. After that, the trader believes the coin will rise to $32,000, and this will happen in the second half of 2023.

As of the writing of this review, on the evening of Friday, May 5, BTC/USD is trading at $29,450. The total market capitalization of the crypto market is $1.219 trillion ($1.204 trillion a week ago). The Crypto Fear & Greed Index decreased from 64 to 61 points over the past seven days, and it remains in the Greed zone.

The Bitcoin Dominance Index (the share of the first cryptocurrency in the total market capitalization of the crypto market) is currently at 46.9%. According to the legendary trader, analyst, and CEO of Factor LLC, Peter Brandt, this indicator is preparing for a breakthrough after a two-year consolidation in the form of a large rectangle. While the trend is within a "limiting range," the exit from it will be crucial for the asset, explained the expert. Over the past five years, the BTC share has fallen to 32.4% in 2018 and risen to 71.9% in 2021. The indicator is likely to surpass the 50% mark to begin a bullish movement. "I believe that bitcoin will bury all the imposters. In the end, there will be only one king of the hill," Peter Brandt wrote.


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]

CryptoNews of the Week

- The flagship cryptocurrency market has been under significant selling pressure in recent days. Experts from the WhaleWire publication note that transaction fees in the bitcoin ecosystem have reached global extremes for the third time in history (similar occurrences were observed in 2017 and 2021). Binance, the largest cryptocurrency exchange, has twice suspended bitcoin withdrawals due to network congestion. To expedite the processing of the accumulated transactions, Binance raised its withdrawal fees. The situation is exacerbated by an investigation that US authorities have launched against the exchange. According to Bloomberg, it is suspected of violating sanctions imposed on Russia due to its invasion of Ukraine.
All of this has caused fear, uncertainty, and doubt (FUD) among cryptocurrency market participants, leading to a decrease in the number of active addresses to yearly lows. Against this backdrop, bitcoin has plunged below $28,000. Analysts believe that a "head and shoulders" pattern is forming on bitcoin's daily chart, and the possibility of a deep correction down to the $24,000 mark cannot be ruled out. However, CoinGape experts emphasize that the supply of bitcoin on centralized platforms is at its lowest level since 2017, indicating that the upcoming correction may be of a local nature.

- People may be losing faith in the dollar, but that doesn't mean bitcoin can become the world's reserve currency. Billionaire Warren Buffett made this statement at the annual Berkshire Hathaway shareholders' meeting. He clarified that he does not see any candidates to replace the US dollar as the global reserve currency. At the same time, Buffett called the continued money printing "madness," while simultaneously expressing confidence in the person responsible for it: US Federal Reserve Chairman Jerome Powell. According to Buffett, nobody understands the situation with government debt better than the head of the regulatory body.
The legendary investor also believes that the top management of First Republic Bank, Silicon Valley Bank, Signature Bank, and Silvergate Bank should be held accountable for the issues that have arisen in the operations of these banks.

- Representatives of CNBC criticized Warren Buffett for his extremely negative attitude towards bitcoin. In response, Six Sigma Black Belt founder James Ryan stated that it's not right to criticize the wealthiest investor. However, Ryan emphasized that Buffett does not believe in gold either, as he thinks that "the precious metal does not produce anything and does not generate cash flow."
- Best-selling author of Rich Dad, Poor Dad and economist Robert Kiyosaki often reiterates that the American and global economies are heading towards difficult times. This time, he told his 2.4 million Twitter followers that the sharp increase in the yield of one-month US Treasury bills indicates that a recession is likely approaching. "Does this mean the global banking system is collapsing? [...]", wrote the crypto enthusiast. "So, now focus on gold, silver, and bitcoin." It is worth noting that Kiyosaki predicts that the price of bitcoin will soon rise to $100,000.

- Michael Van de Poppe, an analyst, trader, and founder of the consulting platform EightGlobal, analysed the relationship between the banking sector and the crypto market.
Shares of American banks fell in response to US Federal Reserve Chairman Jerome Powell's attempt to calm the financial markets. Within a few hours after the official's speech on May 3, shares of the banking holding company PacWest Bancorp fell almost 58%, and Western Alliance dropped more than 28%. Other financial institutions in the market also experienced declines, such as Comerica (-10.06%), Zion Bancorp (-9.71%), and KeyCorp (-6.93%).
Using a 30-minute chart, Van de Poppe showed that while bank stocks were falling in price, bitcoin and gold were growing in value. According to the EightGlobal founder, uncertainty and distrust towards authorities' statements are growing among bankers. Such sentiments may lead to even greater problems in traditional markets and trigger further growth for both digital and physical gold.

- According to Justin Chapman, Senior Vice President at Northern Trust, institutional investors lost interest in cryptocurrencies after March 2022. Their appetite did not return even after the bullish growth this year. Executives of major financial institutions have shifted their focus to blockchain technology, particularly its potential in tokenizing real assets such as gold for clients.
"Since 2022, things have calmed down on the institutional side," Chapman said. "Before that, we saw traditional fund managers eager to launch crypto funds, ETPs in Europe, which are the equivalent of ETFs in the US – all of that has subsided. Even hedge funds, which are quite active in the crypto market, have definitely reduced their presence."

- The government of Liechtenstein will allow citizens to use bitcoin to pay for government services. This was announced by the country's Prime Minister, Daniel Risch, although he did not specify a timeline. According to him, the government will accept cryptocurrency from citizens and exchange it for the national currency. A similar approach is already used by some Swiss municipalities, particularly the canton of Zug.

- More and more Latin American (LATAM) countries are considering the possibility of adopting bitcoin as a legal means of payment for goods and services. Some of them want to follow in the footsteps of El Salvador, which has already done so at the legislative level. Among these countries are Ecuador, Peru, Mexico, and Argentina. However, experts point out a key barrier to this initiative: the rise in transaction fees, which could make the move impractical.

- The Governor of the Central Bank of Ireland (BCUS), Gabriel Makhlouf, has urged citizens to be sceptical about investing in cryptocurrencies, calling such investments high-risk and dangerous. He stated that the value of crypto assets is not backed by anything, which means they have no social or economic value. Moreover, they are not properly regulated, causing numerous disagreements among lawmakers and officials. "Investing in such products is like buying a lottery ticket: you might win, but most likely, you will lose. Therefore, it's hardly appropriate to call them investments. 'Ponzi scheme' provides a more accurate definition of cryptocurrencies," said the head of the Irish Central Bank.
Makhlouf's speech took place just a few weeks after the European Parliament voted for a bill on regulating cryptocurrencies in the EU (MiCA). The Irish official assured that he welcomes the document, but he doubts that MiCA will be fully implemented by 2025.

- Trader and analyst under the pseudonym Altcoin Sherpa suggested that the price of the leading cryptocurrency could soon drop to $25,000. According to his opinion, this price largely coincides with the 200-day EMA, the Fibonacci 0.382 level, and serves as a level that was previously tested twice as support/resistance. If the bearish trend continues in the coming days, he wrote, the BTC price will fall to the $26,800 support level. If this support is breached, the next target will be the $25,200 level.

- Researchers from DocumentingBTC have named bitcoin the best investment of the decade. An investor who bought BTC for $100 exactly 10 years ago would now have $25,600 in their account. In second place are NVIDIA stocks - $8,599. The honourable third place goes to Tesla - $4,475.
Apple investors could have received $1,208, Microsoft - $1,111, Netflix - $1,040, Amazon - $830, Facebook - $818, and by purchasing Google stocks, investors would now have $504 in their account. Finally, investing in physical, not digital, gold would have turned the initial $100 into just $134.

- Artificial Intelligence ChatGPT has joined the quest to unravel one of the biggest mysteries in the crypto universe: it attempted to identify the creator of BTC, Satoshi Nakamoto. According to the chatbot's calculations, there is a 60% probability that Satoshi is indeed an individual, rather than a group of developers, and most likely, it is Nick Szabo, a well-known computer scientist and cryptographer. It was this scientist who once proposed the idea of smart contracts and the BitGold protocol, which many consider a predecessor to bitcoin.
Szabo emerged as the winner on ChatGPT's list of contenders, with 30%. Hal Finney and Craig Wright ranked second and third, respectively, with 20% and 10%. However, the chatbot acknowledged that it cannot provide any direct "evidence". You can read more about each of these individuals on the NordFX website.


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 #forex #cryptocurrencies #bitcoin #stock_market

 

[Stan NordFX]

Forex and Cryptocurrencies Forecast for May 15 - 19, 2023​

EUR/USD: Why the Dollar Rose

We named the previous review "Market at a Crossroads." We can now say that it finally made a decision and chose the dollar last week. Starting from 1.1018 on Monday, May 8, EUR/USD reached a local low of 1.0848 on Friday, May 12. Interestingly, this growth occurred despite the cooling of the U.S. economy. Not even the prospects of a U.S. debt default or the possibility of a reduction in federal fund rates could stop the strengthening of the dollar.

The slowdown in the American economy is further evidenced by a decline in producer prices (PPI) to the lowest level since January 2021, at 2.3%, and an increase in the number of unemployment benefit claims to the highest level since October 2021, reaching 264K (compared to a forecast of 245K and a previous value of 242K). Inflation in the United States, measured by the Consumer Price Index (CPI), decreased to 4.9% on an annual basis in April from 5.0% in March (forecasted at 5.0%), while the monthly core inflation remained unchanged at 0.4%.

It may have seemed that this situation would finally prompt the Federal Reserve (Fed) to start easing its monetary policy. However, based on recent statements by officials, the regulator does not intend to do so. For instance, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated that although inflation has softened slightly, it still significantly exceeds the target level of 2.0%. Kashkari agreed that a banking crisis could be a source of economic slowdown. However, he believed that the labour market remains sufficiently strong.

Following the head of the Minneapolis Fed, Federal Reserve representative Michelle Bowman also confirmed the regulator's reluctance to change course towards a more dovish stance. According to Bowman, "inflation is still too high" and "the interest rate will need to remain sufficiently restrictive for some time." Moreover, Bowman added that there is no certainty that the current policy is "sufficiently restrictive to bring down inflation," and if inflation remains high and the labor market remains tight, additional rate hikes are likely to be appropriate.

Similar conclusions have been reached by many analysts. For example, according to experts from Commerzbank, "given the slow decline in inflation, which remains well above the target level, the Fed is unlikely to consider the possibility of lowering the key rate this autumn.".

The market reacted to the prospects of maintaining (and possibly further increasing) the interest rate with a rise in the dollar. The strengthening of the American currency could have been even more significant if not for the banking crisis and the issue of the US debt ceiling.

A hawkish stance from the European Central Bank (ECB) could have aided the euro and reversed EUR/USD to the upside. However, after the May meeting of the European regulator, it appears that the end of monetary restraint is near. It is quite possible that the rate hike in June will be the last. "At this point, the ECB can only surprise with a dovish tone. [...] Euro bulls should be prepared for this," warn economists from Commerzbank.

The final note of the past week for EUR/USD was set at 1.0849. As for the near-term prospects, at the time of writing this review on the evening of May 12, the majority of analysts (65%) believe that the dollar has become too overbought, and it's time for the pair to correct to the upside. Only 15% expect further strengthening of the dollar, while the remaining 20% hold a neutral position. In terms of technical analysis, among the oscillators on the daily chart (D1), 90% are coloured red (although one-third of them are signalling the pair's oversold condition), with only 10% in green. Among the trend indicators, there are more green ones, 35%, while red ones account for 65%. The nearest support for the pair is located around 1.0800-1.0835, followed by 1.0740-1.0760, 1.0675-1.0710, 1.0620, and 1.0490-1.0530. Bulls will encounter resistance around 1.0865, followed by 1.0895–1.0925, 1.0985, 1.1090-1.1110, 1.1230, 1.1280, and 1.1355-1.1390.

The upcoming week will be quite eventful with important economic events. On Tuesday, May 16, we will see retail sales data from the United States and the ZEW Economic Sentiment indicator from Germany. Additionally, preliminary GDP data for the Eurozone for Q1 will be published on the same day. On Wednesday, May 17, inflation data (CPI) for the Eurozone will be released. Thursday, May 18th, will bring a series of US statistics, including unemployment data, manufacturing activity, and the US housing market. Furthermore, speeches by ECB President Christine Lagarde are expected on May 16 and May 19. The week will conclude with a speech by Federal Reserve Chair Jerome Powell on the last working day.

GBP/USD: BoE and GDP Upset Investors

The bulls managed to push GBP/USD higher until Thursday. Although the forecast suggested that the Bank of England (BoE) would raise the interest rate by 25 basis points at its meeting on May 11, investors were hopeful for a miracle: what if it's not 25, but 50? However, the miracle did not happen, and after reaching a high of 1.2679, the pair reversed and started to decline.

The decline continued the next day. The strengthening dollar played a role, and mixed preliminary GDP data for the UK added to the negative sentiment. The country's economy grew by 0.1% in Q1 2023, which fully matched the forecast and the growth in Q4 2022. On an annual basis, GDP increased by 0.2%, which, although in line with the forecast, was significantly lower than the previous value of 0.6%. However, in monthly terms, the GDP showed an unexpected contraction of -0.3% in March, against expectations of 0.1% growth and a previous value of 0.0%. Despite the optimistic statement by UK Chancellor of the Exchequer Jeremy Hunt that this was "good news" as the economy is growing, it did not help the pound. It was evident that the growth occurred only in January, stalled in February, and began to contract in March.

Economists at Commerzbank note that the indecisiveness of the Bank of England (BoE) in combating inflation is a negative factor for the pound. "Future data will be crucial for the BoE's next rate decision," Commerzbank states. "If a swift decline in inflation becomes evident, as expected by the BoE, they are likely to refrain from further rate hikes, which will put pressure on the sterling."

Strategists at Internationale Nederlanden Groep (ING) also believe that the rate hike on May 11 may be the last. However, they add that "the Bank of England has maintained flexibility and left the door open for further rate hikes if inflation proves to be persistent."

The plunge on May 11 and 12 resulted in GBP/USD failing to hold above the strong support level of 1.2500, and the week ended at 1.2447. However, according to 70% of experts, the bulls will still attempt to reclaim this support level. 15% believe that 1.2500 will now turn into resistance, pushing the pair further downward. The remaining 15% preferred to refrain from making forecasts. Among the oscillators on the daily chart (D1), 60% recommend selling (with 15% indicating oversold conditions), 20% are inclined towards buying, and 20% are neutral. Among the trend indicators, the balance between red and green is evenly split at 50%.

The support levels and zones for the pair are at 1.2390-1.2420, 1.2330, 1.2275, 1.2200, 1.2145, 1.2075-1.2085, 1.2000-1.2025, 1.1960, 1.1900-1.1920, and 1.1800-1.1840. In the event of an upward movement, the pair will encounter resistance at levels of 1.2500, 1.2540, 1.2570, 1.2610-1.2635, 1.2675-1.2700, 1.2820, and 1.2940.

There are several notable events on the calendar in the upcoming week. The Inflation Report hearing will take place on Monday, May 15. Data on the UK labor market will be released on Tuesday, May 16. And the Governor of the Bank of England, Andrew Bailey, is scheduled to speak on Wednesday, May 17.

continued below...

 

[Stan NordFX]

USD/JPY: Yen as a Shelter from Financial Storms

The yen was the worst-performing currency in the DXY basket in April. USD/JPY soared to a height of 137.77 on the ultra-dovish statements of the new Governor of the Bank of Japan (BoJ), Kadsuo Ueda. However, after that, the yen, acting as a safe haven, was aided by the banking crisis in the United States, causing the pair to reverse downwards.

As for Japanese banks, Ueda stated on Tuesday, May 9 that "the impact of recent bankruptcies of American and European banks on Japan's financial system is likely to be limited" and that "financial institutions in Japan have sufficient capital reserves." Assurances of the stability of the country's financial system were also expressed by the Minister of Finance, Shunichi Suzuki.

Currency strategists at HSBC, the largest British bank, continue to believe that the Japanese yen will strengthen further, aided by its status as a "safe haven" amidst the banking crisis and US debt issues. According to their analysis, the yen may also strengthen because the current review by the Bank of Japan does not exclude changes in its yield curve control (YCC) policy, even if it happens slightly later than previously expected. The shift in the BoJ's course could be influenced by the fact that core inflation in Japan remained stable in March, and excluding energy prices, it accelerated to a 41-year high of 3.8%. However, when comparing this level with similar indicators in the US, EU, or the UK, it is difficult to consider it a significant problem.

Meanwhile, analysts at Societe Generale, a French bank, believe that considering yield dynamics, geopolitical uncertainty, and economic trends, USD/JPY may "get stuck in narrow ranges for some time." However, they also mention that the sense that the dollar is overvalued, and the anticipation of the Bank of Japan's actions will not be easy to dismiss. The perception that the yen's recovery is only a matter of waiting for actions by the Bank of Japan lingers.

The next meeting of the Bank of Japan (BoJ) is scheduled for June 16. Only then will it become clear whether or not there will be any changes in the monetary policy of the Japanese central bank. Until that day, the USD/JPY exchange rate will likely depend largely on events in the United States.

The pair concluded the past week at 130.72. Regarding its immediate prospects, analysts' opinions are divided as follows. At present, 75% of analysts have vote for the strengthening of the Japanese currency. 15% of experts expect an upward movement, while the same percentage remains neutral. Among the oscillators on the daily chart (D1), the balance leans toward the dollar, with 65% indicating an upward trend, 20% remaining neutral, and the remaining 15% showing a downward direction. Among the trend indicators, the balance of power is 90% in favour of the green zone. The nearest support level is located in the range of 134.85-135.15, followed by levels and zones at 134.40, 133.60, 132.80-133.00, 132.00, 131.25, 130.50-130.60, 129.65, 128.00-128.15, and 127.20. The resistance levels and zones are at 135.95-136.25, 137.50-137.75, 139.05, and 140.60.

As for economic data releases, the preliminary GDP data for Japan's Q1 2023 will be announced on Wednesday, May 17. However, there are no other significant economic information expected to be released concerning the Japanese economy in the upcoming week.

continued below...

 

[Stan NordFX]

CRYPTOCURRENCIES: Bitcoin Hopes for a Banking Crisis

Bitcoin has been under selling pressure for the eighth consecutive week but continues to attempt to hold within the strong support/resistance zone of $26,500. The past week once again did not bring joy to investors. As noted by WhaleWire, transaction fees within the bitcoin ecosystem reached global highs for the third time in history (similar to what was observed in 2017 and 2021). The average network speed does not exceed 7 transactions per second. As a result, those wishing to make transfers increase the amount of the transaction fee to expedite its execution. This caused the average fee on May 8 to soar to $31 per transaction. This was very frustrating for users but welcomed by miners, as for the first time since 2017, fees surpassed block rewards.

Some operators, including Binance, were unprepared for this and did not adjust the fees in time for users. Hundreds of thousands of transactions got stuck in the mempool. In order to speed up their "clearing," the largest cryptocurrency exchange suspended withdrawals twice and increased the transfer fee. The situation was exacerbated by an investigation launched by US authorities against Binance. According to Bloomberg reports, the exchange is suspected of violating sanctions related to Russia due to its invasion of Ukraine.

Panic sentiment was further heightened by the news that the cryptocurrency exchange Bittrex filed for bankruptcy on the same day, May 8 (although this procedure is expected to only affect its US subsidiary). The problems faced by Binance and Bittrex reminded investors of the FTX crash. All of this has instilled fear, uncertainty, and doubt (FUD) among participants in the crypto market, leading to a decrease in the number of active addresses to yearly lows. Bitcoin experienced a sharp decline against this backdrop.

BTC is forming a "head and shoulders" pattern on the daily chart. A trader and analyst known as Altcoin Sherpa suggested that the price of the leading cryptocurrency may soon drop to $25,000. According to his analysis, this price level coincides with the 200-day EMA, the 0.382 Fibonacci level, and has previously been tested as support/resistance. The possibility of a deeper correction, down to the $24,000 level, cannot be ruled out. However, experts at CoinGape point out that the supply of bitcoins on centralized platforms is at its lowest level since 2017. They believe this indicates that the upcoming correction may have a local character.

The strengthening of the US dollar last week also played against bitcoin. However, hopes that the banking crisis in the US will continue to support the digital market are still in the air. For many cryptocurrency enthusiasts, bitcoin is considered a safe haven and a store of value similar to physical gold, protecting against loss of funds.

The tightening of monetary policy by the Federal Reserve has reduced the value of certain assets on banks' balance sheets and decreased demand for banking services. Therefore, the likelihood of new disruptions in the traditional financial sector remains quite high. Four US banks (First Republic Bank, Silicon Valley Bank, Signature Bank, and Silvergate Bank) have filed for bankruptcy, and a dozen more are facing difficulties. According to surveys by the Gallup polling agency, half of US citizens are concerned about the safety of their funds in bank accounts.

Robert Kiyosaki, the author of the bestseller Rich Dad Poor Dad, often emphasizes that challenging times lie ahead for the US and global economy. This time, he addressed his 2.4 million Twitter followers, stating that the sharp increase in the yield of one-month US Treasury bills indicates that a recession may be approaching. He questioned whether this implies that the global banking system is collapsing and advised people to focus on gold, silver, and bitcoins. It is worth noting that Kiyosaki has previously predicted that the price of bitcoin will soon rise to $100,000.

Michael Van de Poppe, an analyst, trader, and founder of the consulting platform EightGlobal, conducted a detailed analysis of the relationship between the banking sector and the crypto market. The stocks of American banks reacted with a decline to an attempt by Jerome Powell, the head of the US Federal Reserve, to calm the financial markets. Within a few hours after the official's speech on May 3, shares of PacWest Bancorp fell by almost 58%, and Western Alliance by more than 28%. Other credit institutions such as Comerica (-10.06%), Zion Bancorp (-9.71%), and KeyCorp (-6.93%) experienced a decline as well.

Using a 30-minute chart, Van de Poppe demonstrated that while banks were falling in price, bitcoin and gold were rising. According to the founder of EightGlobal, there is growing uncertainty and distrust among bankers towards the statements made by government officials. Such sentiments may lead to further problems in traditional markets and contribute to the continued growth of digital and physical gold.

Warren Buffett, the billionaire investor, remains steadfastly sceptical of the flagship cryptocurrency, bitcoin. At the annual Berkshire Hathaway shareholders' meeting, Buffett stated that while people may lose faith in the dollar, it does not mean that bitcoin can become the world's reserve currency. In response to this, James Ryan, the founder of Six Sigma Black Belt, pointed out that Buffett does not believe in gold either, as he believes the precious metal does not produce anything and does not generate cash flow.

By the way, Warren Buffett may be right about gold. According to research by DocumentingBTC, an investor who invested exactly $100 in physical gold ten years ago would now have only $134 in their account. But if they had invested in digital gold, they would have $25,600! That's why bitcoin is considered the best investment of the decade.

Second are NVIDIA stocks, which would have grown to $8,599. The honourable third spot goes to Tesla with an investment growth from $100 to $4,475. Apple investors could have gained $1,208, Microsoft - $1,111, Netflix - $1,040, Amazon - $830, Facebook - $818, and investing in Google stocks would have yielded $504 in the present.

To further justify the hopes of bitcoin enthusiasts, technically bitcoin needs to rise above $28,900, test $30,400, and firmly fix above the $31,000 level. However, at the time of writing this review on Friday evening, May 12, BTC/USD is trading at $26,415. The total market capitalization of the crypto market stands at $1.108 trillion ($1.219 trillion a week ago). The Crypto Fear & Greed Index has decreased from 61 to 49 points over the past seven days, moving from the Greed zone to the Neutral zone.


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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