Daily Market Analysis and News From NordFX

[Stan NordFX]

Forex and Cryptocurrencies Forecast for December 04 – 08, 2023​

EUR/USD: December – A Formidable Month for the Dollar

Who will start loosening the grip on their monetary policies earlier, the Federal Reserve (FRS) or the European Central Bank (ECB)? The discussion on this topic remains active, as clearly seen in the quotes' charts. The statistics from the past week did not allow EUR/USD to solidify above the significant level of 1.1000. It all began on Wednesday, November 29, with the publication of inflation data in Germany. The preliminary Consumer Price Index (CPI) in annual terms amounted to 3.2%, which is lower than both the forecast of 3.5% and the previous value of 3.8%. In monthly terms, the German CPI went even deeper into the negative territory, reaching -0.4% (against a forecast of -0.2% and 0.0% the previous month).

These data marked the beginning of the euro's retreat. EUR/USD continued its decline after the release of the Harmonized Index of Consumer Prices (HICP) for the Eurozone. Eurostat reported that, according to preliminary data, the HICP fell to the lowest level since June 2021, amounting to 2.4% (y/y), which is lower than both the 2.9% in October and the expected 2.7%. The monthly indicator was -0.5%, decreasing from 0.1% in the previous month.

All these data have shown that deflation in the Eurozone significantly outpaces the American one. As a result, many market participants, including strategists at the largest banking group in the Netherlands, ING, have started talking about the imminent victory of the ECB over inflation. They have concluded that the European Central Bank will be the first to ease its monetary policy, including lowering interest rates and engaging in monetary expansion. According to forecasts, this process may begin in April, and with a 50% probability, even a month earlier, in March. The likelihood that the key interest rate will be reduced by 125 basis points (bps) during 2024, from 4.50% to 3.25%, is estimated at 70%. Indirectly, the move towards a more dovish policy was recently confirmed by a member of the ECB's Executive Board and the head of the Bank of Italy, Fabio Panetta, who spoke about the "unnecessary harm" that can be caused by persistently high-interest rates.

As for the United States, FOMC officials speak not of harm but, on the contrary, of the benefits of high-interest rates. For instance, John C. Williams, the President of the Federal Reserve Bank of New York, stated that it is appropriate to keep borrowing costs on a plateau for an extended period. According to him, this would allow for a complete restoration of the balance between demand and supply and bring inflation back to 2.0%. Williams predicts that the Personal Consumption Expenditures (PCE) Index will decrease to 2.25% by the end of 2024 and stabilize near the target level only in 2025.

Therefore, it is unlikely that we should expect the hawks of the Federal Reserve to turn into doves in the near future. Especially considering that the U.S. economy allows maintaining such a position: stock indices are rising, and the GDP data published on November 29 showed a growth of 5.2% in Q3, surpassing both market expectations of 5.0% and the previous value of 4.9%.

Given this situation, it's not surprising that EUR/USD experienced a decline.

On Friday afternoon, it reached a local low at the level of 1.0828 and would have continued to decline further if it were not for the head of the Federal Reserve. Jerome Powell spoke at the very end of the workweek and stated that he considers premature the discussion of when the U.S. central bank can begin to ease its monetary policy. He hinted that the Fed will keep the interest rate unchanged at the current level of 5.50% at the December meeting. Powell also noted that the core inflation in the U.S. is still significantly higher than the target of 2.0%, and the Federal Reserve is ready to continue tightening its policy if necessary. In general, he said the same things as John Williams. However, if the words of the President of the New York Fed strengthened the dollar, somehow similar words from the Fed Chair weakened it: during Powell's speech, the DXY Index lost about 0.12%. Market reactions are truly unpredictable! As a result, the final chord of the week sounded at the level of 1.0882.

What awaits us in December? Following the logic mentioned above, the dollar should continue its advance against the euro. However, a seasonal factor may intervene, indicating a bearish movement for the dollar in December against a range of currencies. According to economists at Societe Generale, the average decline of the Dollar Index (DXY) over the last 10 years in December is 0.8%. Seasonally, the euro (EUR), Swedish krona (SEK), British pound (GBP), and Swiss franc (CHF) tend to rise, while the movements of the Australian dollar (AUD), Canadian dollar (CAD), Japanese yen (JPY), and Mexican peso (MXN) can be considered mixed.

Specialists at the Japanese MUFG Bank also confirm bullish indicators for EUR/USD in the last month of the year. "The seasonal tendency in December," they write, "is quite convincing: over the last 20 years, December has seen EUR/USD rise 14 times, with an impressive average gain of 2.6% over these 14 years. If we exclude December 2008 (+10.1%), the average gain in the other 13 cases was still significant at +2.0%. Moreover, in 8 out of 11 cases when EUR/USD rose in November, it was followed by a rise in December" (and it rose indeed!). "But this does not mean," caution MUFG, "that we can ignore fundamental factors." It is relevant to remind here that based on such factors, the Federal Reserve (FRS) and the European Central Bank (ECB) will make decisions at their meetings on December 13 and 14, respectively.

At the moment, experts' opinions on the near future of EUR/USD are divided as follows: 50% voted for the strengthening of the dollar, 30% sided with the euro, and 20% remained neutral. Regarding technical analysis, 50% of oscillators on the D1 chart are coloured green, 30% are in a neutral grey, and only 20% are red. Interestingly, half of these 20% are already signalling oversold conditions. Among trend indicators, 65% favour the bullish side, while 35% point in the opposite direction.

The nearest support for the pair is located in the area of 1.0830-1.0840, followed by 1.0740, 1.0620-1.0640, 1.0480-1.0520, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0900, 1.0965-1.0985, 1.1070-1.1110, 1.1150, 1.1230-1.1275, 1.1350, and 1.1475.

A substantial flow of data is anticipated from the American labour market in the upcoming week of December 5 to 8. The highlight will be on Friday, December 8, when crucial indicators such as the unemployment rate and the number of new non-farm jobs (NFP) will be published. Additionally, on Tuesday, December 5, we will learn about business activity (PMI) in the U.S. service sector. Data on retail sales in the Eurozone will be available on Wednesday, December 6, and the following day, we will find out about GDP. Finally, on Friday, December 8, revised data on consumer inflation (CPI) in Germany will be released.

GBP/USD: Three Reasons in Favor of the Pound

The likelihood that the US Federal Reserve has likely concluded its cycle of monetary restriction and interest rates have plateaued has been mentioned earlier. Similar sentiments were expressed regarding the historical seasonal advantages of the British pound over the dollar in December.

Verbal support for the British currency was provided by the rhetoric of the Bank of England (BoE) leadership, which currently has no plans to adjust its current monetary policy trajectory. As known, this trajectory is aimed at tightening. Deputy Governor of the BoE, Dave Ramsden, stated that monetary policy should continue to be restrictive to curb inflation. A similar hawkish position was taken by BoE Governor Andrew Bailey, who emphasized that rates should rise for longer, even if it negatively affects the economy.

Currently, the key interest rate for the pound is at a 15-year high of 5.25%. Its last increase occurred on August 3, after which the Bank of England took a pause. However, this does not necessarily mean that they won't resume and increase the rate by 25 basis points at their December or January meeting.

Similar hawkish statements from the leaders of the Bank of England contribute to bullish sentiments for the pound. Even despite the dollar's rise in the second half of the past week, GBP/USD couldn't breach the support at 1.2600. According to economists from the Singaporean United Overseas Bank (UOB), as long as this strong level remains unbroken, there is a possibility for the pair to move slightly higher in the next 1-3 weeks before an increased risk of a pullback. UOB believes that, at the moment, the likelihood of the pound rising to the resistance level of 1.2795 is not substantial.

Following Jerome Powell's remarks, GBP/USD settled at the level of 1.2710 at the conclusion of the past week. Regarding its immediate future, 20% are in favour of further ascent, while the majority of surveyed analysts (55%) have taken the opposite position, and the remaining 25% remain neutral. On the D1 chart, all trend indicators and oscillators unanimously point north, with the latter indicating overbought conditions at 15%.

In the event of a southward movement, the pair will encounter support levels and zones at 1.2600-1.2635, followed by 1.2570, 1.2500-1.2520, 1.2450, 1.2370, 1.2330, 1.2210, and 1.2040-1.2085. In case of an upward movement, resistance awaits at levels 1.2735-1.2755, then 1.2800-1.2820, 1.2940, 1.3000, and 1.3140.

No significant economic events related to the United Kingdom are anticipated for the upcoming week.

continued below...

 

[Stan NordFX]

USD/JPY: Caution, More Caution, and Even More Caution

We mentioned in the previous overview that the dynamics of USD/JPY in the coming weeks would be almost entirely dependent on the dollar's performance. Additionally, its volatility would be influenced by the oversold condition of the yen: in mid-November, the pair reached a peak at 151.90, a level not seen since October 2022, and before that, 33 years ago in 1990. The result of the synergy between these two factors was observed last week. Following the Dollar Index (DXY), the pair initially dropped by 300 points, from 149.67 to 146.67, then rose in two waves to 148.51. On December 1, it responded with a significant red candle to the statement from the head of the Federal Reserve, finishing at 146.79.

The influence of the United States on the dynamics of USD/JPY is consistently evident. However, will the Bank of Japan (BoJ) impact the strength of its national currency? Hopes for this are diminishing. BoJ board member Toyoaki Nakamura made comments on Thursday, November 30, expressing his opinion on the possibility of transitioning from an ultra-easy monetary policy. He stated that tightening it prematurely is risky, and for now, it is necessary to patiently maintain the current course. As for the timing of when this can be done, according to the official, it is currently challenging to determine. 'We can change our policy when the Japanese economy sees sustainable growth in wages and inflation,' Nakamura explained. 'Now is the time to exercise caution in our policy.'

One might think, was the Bank of Japan not cautious before this? Judging by its monetary policy, BoJ can confidently contend for the title of the 'Most Cautious Central Bank in the World.'.

According to economists at the Singaporean United Overseas Bank (UOB), in the next 1-3 weeks, USD/JPY is likely to trade in a range between 146.65 and 149.30, then start declining. Regarding the median forecast, in the near term, only 20% of experts anticipate further strengthening of the dollar, while 60% are in favour of the yen, and 20% have refrained from making any predictions. As for trend indicators on D1, 85% favour the yen, recommending buying the pair in only 15% of cases. All oscillators are in the red, with 100%, and a quarter of them are in the oversold zone. The nearest support level is located in the 146.65 zone, followed by 145.90-146.10, 145.30, 144.45, 143.75-144.05, and 142.20. The closest resistance is at 147.25, then 147.65-147.85, 148.40, 149.20, 149.80-150.00, 150.80, 151.60, 151.90-152.15, 152.80-153.15, and 156.25.

Among the events in the upcoming week's calendar, it is worth noting Tuesday, December 5, when data on consumer inflation in the Tokyo region will be released, and Friday, December 8, when the GDP volume of Japan for Q3 2023 will be announced.

continued below...

 

[Stan NordFX]

CRYPTOCURRENCIES: A Year Between a Bear Past and a Bull Future

December is upon us, making it a fitting time not only to review the week's outcomes but also to assess the entire passing year. Apparently, 2023 has the potential to serve as a transition between the bear 2022 and the bull 2023, supported by an impressive 11% growth in the leading cryptocurrency in November and a staggering 130% increase since the beginning of the year.

The share of potentially profitable bitcoins has reached 83.7% of the total supply, marking the highest level since November 2021. According to analysts at Bitfinex, the balance between short-term and long-term holders of digital gold is tilting in favour of the latter. The active supply of bitcoin has dropped to a five-year low, with only 30% of coins moving over the year. Consequently, approximately 70% of bitcoins, or an "unprecedented" 16.3 million BTC, remained stagnant throughout the year. Moreover, 60% of these coins have been motionless for two years. According to Bitfinex experts, these metrics indicate that the market is in a "relatively strong position" as coin holders are experiencing positive returns on their investments and are not rushing to liquidate assets in anticipation of even greater profits.

Positive sentiments have increased, especially among large investors (those with investments of $1 million or more). Over the first 11 months of 2023, they have increased their investments in crypto funds by 120%, bringing the total to $43.3 billion. Bitcoin remains the leader in this regard, with its volume growing to $32.3 billion, a 140% increase. Among altcoins, Solana has also attracted institutional interest. However, Ethereum had been showing negative dynamics for a while, although it has recently started to recover.

The rise in optimism in the market is attributed to: 1) the resolution of the issues between the U.S. authorities and the crypto exchange Binance, 2) the anticipation of the imminent launch of spot bitcoin ETFs, and 3) the upcoming bitcoin halving in April next year.

Regarding point 1, as a result of a settlement agreement between the U.S. authorities and Binance, bitcoin is now expected to exceed $40,000 by the end of the year, according to Matrixport. Various estimates suggested that Binance could face fines of up to $10 billion and might be accused of unauthorized appropriation of user funds or market manipulation. However, on November 21, an agreement was reached that Binance would pay a $4.3 billion fine, cease operations in the U.S., and its CEO, Changpeng Zhao, stepped down and posted a $175 million bail to remain free. This outcome is considered by Matrixport experts as a 'turning point in the crypto industry,' indicating that Binance will maintain its position among the largest crypto exchanges for at least the next two to three years.

In light of this news, bitcoin initially experienced a temporary correction but then bounced back from $36,000. This confirmed a strong trend, and according to Matrixport experts, a rise above $40,000 in December appears 'inevitable.' However, they assess the probability of this 'inevitable' outcome at 90%, acknowledging that unforeseen events could still impact the situation.

According to some experts, the "peaceful" withdrawal of Binance from the U.S. market should ease tensions and facilitate the approval by the Securities and Exchange Commission (SEC) of applications for the creation of exchange-traded funds (ETFs) for spot bitcoin. In November, the SEC held a series of meetings with applicants to allow them to edit their submissions in accordance with the regulator's requirements. The presence of this dialogue was viewed as a positive factor. It is not ruled out that by January 10, 2024, the Commission will approve a significant portion, if not all, of the applications for launching bitcoin ETFs. This date marks the deadline for approving the joint application from ARK Invest and 21Shares. If the regulator makes a negative decision, it risks getting involved in legal proceedings again. The SEC has already lost a legal battle with an investment giant like Grayscale, with the court deeming the SEC's actions "arbitrary and capricious." So, is it worth stepping on the same rake again and risking similar humiliations?

Trader, analyst, and founder of the venture company Eight, Michael Van De Poppe, expects the first bitcoin ETFs to be approved by the SEC in the next five to six weeks. Consequently, the price of BTC could rise in December as investors try to profit from the potential rally. The expert forecasts its growth to $48,000. However, after approval, according to Van De Poppe, BTC/USD could sharply decline. The lower target of this potential pullback is the 200-week exponential moving average (EMA) line, which is currently around $26,500. This downward trend may continue even after the upcoming halving, Van De Poppe believes. The analyst suspects that it is then that traders will actively accumulate coins, triggering the next bullish rally with a target ranging from $300,000 to $400,000.

The strategists at Standard Chartered believe that BTC could reach $50,000 by the end of this year and $120,000 by the end of 2024. The bank's initial forecast indicated a possible rise to $100,000 but was later increased. The price of $120,000 is three times higher than the current level. This optimism from Standard Chartered experts is linked to the increased profitability of mining when selling a smaller quantity of tokens to maintain the same cash flow volume, leading to price growth.

The Managing Partner and CEO of 10T Holdings, Dan Tapiero, is confident in the inevitable growth of the first cryptocurrency and believes that bitcoin is becoming an increasingly attractive means of savings. However, in his opinion, the next bullish trend will not occur in 2024 but in 2025. "And we will see bitcoin surpass $100,000," predicts Tapiero, adding that this is a rather conservative estimate. The businessman believes that negative interest rates on US Treasury bonds will be a special "mega-bull signal" for BTC.

(Note that the former CEO of the crypto exchange BitMEX, Arthur Hayes, intends to withdraw the funds he invested in US Treasury bonds and invest them in cryptocurrency in the near future, without waiting until 2025.)

We have repeatedly noted earlier that the leading cryptocurrency has "decoupled" from both stock indices and the dollar exchange rate, disrupting direct and inverse correlations. However, now analysts at the Santiment analytical company are observing an increase in the correlation between the crypto and stock markets. In November, bitcoin, Ethereum, and the S&P 500 index grew on average by 9.2%. The strengthening connection was recorded after bitcoin traded in a narrow price range in late October to early November, showing no significant fluctuations. "If bitcoin continues to grow, surpassing stocks," say the analysts at Santiment, "this will once again disrupt the correlation, which, according to historical data, is one of the factors for the formation of a bullish crypto market.

BTC/USD set a new high for 2023 on Friday, reaching $38,950, aided by the surge in risk assets, including cryptocurrencies, mentioned in this review by the Federal Reserve Chair Jerome Powell in his speech. As of the evening of December 1, BTC/USD is trading around $38,765. The overall market capitalization of the crypto market is $1.45 trillion ($1.44 trillion a week ago). The Crypto Fear and Greed Index rose from 66 to 71 points and still remains in the Greed zone.

So, December has arrived, and many members of the crypto community are once again talking about the "Bitcoin Santa Rally." This phenomenon mirrors the historical "Santa Claus Rally" in the stock market when stocks rise between Thanksgiving and Christmas. On the crypto market, a similar rally first occurred at the end of November 2013 when the price of BTC was less than $1,000. Throughout December, the price of bitcoin steadily rose, reaching a peak of $1,147 by December 23. The next significant surge happened four years later during the holiday season of 2017. Bitcoin embarked on a steep upward trajectory, surpassing $19,000 by mid-December and touching $20,000 for the first time. However, in 2021, Santa Claus didn't bring joy to traders; the result was the opposite. On November 10, the asset reached an all-time high, approaching $69,000, but in December, the price was influenced by volatility and low trading volumes during the holiday days. By the end of the year, bitcoin was trading in the $46,000 range.

Naturally, this year, members of the crypto community are hoping for a convincing rise in digital gold. It remains to be seen whether Santa Claus will fulfil these hopes.


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

– On the night of December 5 to 6, the flagship cryptocurrency reached a peak of $44,464. The last time BTC traded above $40,000 was in April 2022, before the collapse of the Terra ecosystem triggered a massive crypto market downturn. The current positive sentiments in the market are linked to the potential approval of spot Bitcoin ETFs in the United States. Bloomberg analyst James Seyffart stated that the approval of these fund launches is likely to occur between January 5 and 10. Among other reasons for the rise in BTC are the increasing network hash rate and investor optimism regarding the recovery of the U.S. economy. Investor hopes are also fuelled by upcoming changes in crypto industry regulations.

– Bitcoin's price is expected to surpass the $100,000 level even before the upcoming halving in April 2024, according to Blockstream CEO Adam Back. The cryptocurrency industry veteran noted that his forecast does not take into account a potential bullish impulse in the event of the SEC approving spot Bitcoin ETFs. Regarding the long-term movement of digital gold quotes, the entrepreneur agreed with the opinion of BitMEX co-founder Arthur Hayes, who predicts a range of $750,000 to $1 million by 2026.
For reference: Adam Back is a British businessman, a cryptography expert, and a cypherpunk. It is known that Back corresponded with Satoshi Nakamoto, and a reference to his publication is included in the description of the bitcoin system. Adam Back, who had not previously made public price forecasts for BTC, garnered significant attention from many members of the crypto community due to these statements.

– Ledger's CEO Pascal Gauthier, Lightspark's Chief Marcus David, and CoinDCX's top executive Vijay Ayyar also anticipate the bitcoin price to reach $100,000 in 2024. They shared this outlook in an interview with CNBC. "It seems that 2023 was a year of preparation for the upcoming growth. The sentiments towards 2024 and 2025 are very promising," stated Pascal Gauthier.
"A number of market participants expect bullish growth sometime after the halving, but considering the news about ETFs, we could very well start seeing growth before that," believes Vijay Ayyar. However, in his opinion, a "complete rejection of ETF could disrupt this process," and this is something that should always be kept in mind.

– Cardano's leader, Charles Hoskinson, ridiculed CoinDesk's annual list of "Most Influential Personalities in the World of Cryptocurrency." According to Hoskinson's calculations, "appearing on Coindesk's most influential list carries an 18 percent chance of a prison sentence." Since Ethereum co-founder Vitalik Buterin has topped this list four times, he has a very high chance of ending up behind bars.
Previously, leaders of crypto projects who now face legal issues were included in this prestigious list. This includes the founder of the collapsed Terra project, Do Kwon, and the former CEO of the bankrupt crypto exchange FTX, Sam Bankman-Fried. According to observations by Hoskinson and other prominent figures who appeared on the CoinDesk list multiple times, they have encountered legal problems.
Some members of the crypto community responded to Cardano's leader, suggesting that he might be envied for not being on this list. It's worth noting that last year, Hoskinson expressed displeasure with CoinDesk for not including him in the top 100 most influential figures in the cryptocurrency industry and for not mentioning him in surveys over the eight years.

– Jim Lee, Chief of Internal Revenue Service, Criminal Investigation (IRS), has stated that investigations related to cryptocurrency occupy more than 50% of the agency's working hours. While almost 90% of cases were related to money laundering three years ago, last year, over half of various tax violations were related to failure to report income from capital gains in cryptocurrency or mining, as well as concealing ownership of crypto assets.
"The desire to evade cryptocurrency taxes spans a wide range of taxpayers, from individuals to various levels of corporate institutions intentionally not disclosing their cryptocurrency income. Therefore, the IRS Criminal Investigation Division is forced to initiate an increasing number of cases of tax crimes involving crypto assets every year," lamented the official.
Jim Lee reminded that cryptocurrency is subject to taxation, and failure to pay or report accurate information about crypto income to the authorities can result in both penalty sanctions and imprisonment for up to five years.

– According to the well-known bitcoin maximalist Max Keiser, bitcoin may soon surpass the $150,000 mark and continue to rise. Keiser shared that, according to unconfirmed rumours, the Sovereign Wealth Fund of Qatar is preparing to enter the crypto market with massive investments, intending to allocate up to $500 billion into the leading cryptocurrency. "This will be a seismic shift in the cryptocurrency landscape," believes Keiser.
He noted that, in his observations, many major financial institutions such as BlackRock, Fidelity, Ameritrade, Bakkt, JP Morgan, and others are gearing up to launch crypto products. These products could potentially encourage institutional investors, including hedge funds, pension funds, and sovereign wealth funds, to invest in digital assets.

– Not all influencers are confident in the optimistic prospects of BTC's value growth and strongly recommend exercising maximum caution when it comes to cryptocurrency investments. For instance, one of the prominent public crypto sceptics and advocate for physical gold, Peter Schiff, is certain that the speculative frenzy surrounding bitcoin ETFs will soon come to an end, and the collapse of bitcoin will be more impressive than its recent rallies.

– Renowned analyst Ali Martinez believes that if Ethereum closes above $2,150 for the week, this altcoin could pave the way for an upward movement with a target level of $2,600, and possibly even up to $3,500. These targets are determined by Martinez based on the analysis of graphic patterns.
Martinez also notes that approximately 5.85 million crypto wallets hold 43.8 million ETH acquired at prices ranging from $1,900 to $2,100. Therefore, this range could become a "significant support level for years to come."

– Military forces should prioritize the study of the underlying algorithm of bitcoin, Proof-of-Work (PoW), to ensure the defense capability of the country, according to U.S. Space Force Major and author of the book "Softwar," Jason Lowery. In an open letter to the Defense Innovation Board of the U.S. Department of Defense, he highlighted that the issue holds "national strategic significance." According to him, the blockchain of the first cryptocurrency is not only a "monetary system" but also provides the foundation for securing "all forms of data, messages, or command signals."

– Bloomberg Intelligence's Senior Macro Strategist, Mike McGlone, asserts that currently, bitcoin exhibits much greater strength than gold. The expert noted that on December 4th, the price of gold reached a record high, fuelled by investors' expectations of a potential interest rate cut by the U.S. Federal Reserve. Subsequently, gold declined by 5.1%, while bitcoin continued to rise, surpassing $44,000.
However, the analyst cautioned that bitcoin's volatility may hinder its ability to trade reliably, similar to physical gold, during periods of "risk aversion." According to McGlone, for bitcoin to compete with the precious metal as an alternative asset, it must establish key reliability indicators. These include achieving a negative correlation of BTC with the stock market and attaining a high deficit during periods of money supply growth.

– Alejandro Cao de Benos was detained at the Madrid railway station. According to the U.S. Department of Justice, in April 2019, Benos demonstrated to North Korean officials how a state could use cutting-edge technologies for money laundering and evading international sanctions. Before his arrest, the Spaniard had been on the Federal Bureau of Investigation's (FBI) most-wanted list for over a year, hiding in Barcelona under a fictitious name.
As a supporter of the North Korean regime, in 2000, Benos founded the Korea Friendship Association and appeared in documentaries about North Korea. The U.S. Department of Justice claims that Benos began planning a blockchain conference in North Korea in 2018. Among its participants was former Ethereum developer Virgil Griffith, who was also arrested for involvement in the event. In 2022, Griffith was sentenced to five years in prison.
On Friday, December 1, Benos appeared before the High Court of Spain. He refuted the charges brought by the U.S. prosecution, deeming them false. The man faces up to 20 years of imprisonment in a U.S. prison, but extradition proceedings have not yet begun.


Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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

 

[Stan NordFX]

Forex and Cryptocurrencies Forecast for December 11 – 15, 2023​

EUR/USD: Continuation of the Rate War

The labour market and inflation: these are the factors that Central Banks closely monitor when making decisions regarding monetary policy and interest rates. It is sufficient to recall the significant shift that occurred after the publication of October's inflation data in the United States. In November, the dollar weakened significantly, and the classical portfolio of stocks and bonds yielded the highest profit in 30 years! EUR/USD, starting at 1.0516, reached a monthly peak on November 29 at 1.1016.

Regarding the labour market, crucial indicators were released on Friday, December 8, including the unemployment rate and the number of new non-farm payrolls (NFP) in the United States. The first indicator revealed a decline in unemployment: in November, the rate dropped to 3.7%, surpassing both the forecast and the previous value of 3.9%. The second indicator showed an increase in the number of new jobs: 199K were created in a month, surpassing both the October figure of 150K and the market expectations of 180K. It cannot be said that such statistics significantly supported the dollar. However, at the very least, it did not harm it.

Two to three months ago, the market's reaction to such data would have been more intense, as there were still hopes for further increases in the Federal Reserve's interest rates in 2023. Now, those expectations are nearly reduced to zero. The discussions revolve not around how the key rate will rise, but rather how long it will be maintained at the current level of 5.50% and how actively the regulator will reduce it.

An economist survey conducted by Reuters revealed that just over half of the respondents (52 out of 102) believe that the rate will remain unchanged at least until July. The remaining 50 respondents expect the Federal Reserve to start cutting before that. 72 out of 100 respondents believe that by 2024, the rate will gradually be reduced by a maximum of 100 basis points (bps), possibly even less. Only 5 experts still hold hope for further rate increases, even if it's just by 25 bps. It's worth noting that Reuters' survey results do not align with the immediate market expectations, which forecast five rate cuts of 25 bps each starting from March.

A Citi economist, as part of the Reuters survey, noted that an increase in core inflation would disrupt the narrative of the Federal Reserve lowering interest rates and delay this process. The upcoming inflation data in the United States will be available on Tuesday, December 12, and Wednesday, December 13, with the release of the November Consumer Price Index (CPI) and Producer Price Index (PPI), respectively. Following this, on Wednesday, we can expect the Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve, where decisions on interest rates will be made. Market participants will undoubtedly focus on the economic forecasts presented by the FOMC and the comments from the leadership of the Federal Reserve.

However, it's not only the Federal Reserve that influences the EUR/USD pair; the European Central Bank (ECB) also plays a significant role, and its meeting is scheduled for next week on Thursday, December 14. Currently, the base rate for the euro stands at 4.50%. Many market participants believe it is too high and could push the fragile economy of the region into recession.

Deflation in the Eurozone is considerably outpacing that in the United States. Last week, Eurostat reported that, according to preliminary data, the Harmonized Index of Consumer Prices (HICP) fell to its lowest level since June 2021, at 2.4% (y/y), which is lower than both October's 2.9% and the expected 2.7%. This is very close to the target level of 2.0%. Hence, to support the economy, the ECB may soon initiate the process of easing its monetary policy.

Market forecasts suggest that the first cut in the key rate could occur in April, with a 50% probability even a month earlier in March. There is a 70% probability that by 2024, the rate will be reduced by 125 bps. However, the consensus estimate among Reuters experts is more conservative, anticipating a decrease of only 100 bps.

So, the rate war between the Federal Reserve and the European Central Bank will continue. While the one who previously prevailed was the one with faster advancing rates, now the advantage will be with the one whose retreat occurs more slowly. It is entirely possible that investors will receive some information regarding the regulators' plans after their meetings next week.

As for the past week, EUR/USD concluded at the level of 1.0760. Currently, expert opinions regarding the pair's immediate future are divided as follows: 75% voted for the strengthening of the dollar, while 25% sided with the euro. Among trend indicators on D1, the distribution is the same as with experts: 75% for the dollar and 25% for the euro. For oscillators, 75% favor the red side (with a quarter of them in the overbought zone), while 10% point in the opposite direction, and 15% remain neutral.

The nearest support for the pair is situated around 1.0725-1.0740, followed by 1.0620-1.0640, 1.0500-1.0520, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0800-1.0820, 1.0865, 1.0965-1.0985, 1.1020, 1.1070-1.1110, 1.1150, 1.1230-1.1275, 1.1350, and 1.1475.

In addition to the events mentioned earlier, the economic calendar highlights the release of the summary data on the U.S. retail market on Thursday, December 14th. On the same day, the number of initial claims for unemployment benefits will be traditionally published, and on December 15th, the preliminary values of the Purchasing Managers' Index (PMI) in the manufacturing and services sectors of the United States will be released. Additionally, on Friday, preliminary data on business activity in Germany and the Eurozone as a whole will be disclosed.

GBP/USD: Should We Expect a Surprise from the BoE?

The Bank of England (BoE) conducted its quarterly survey on December 8. It turns out that inflation expectations for the UK population in November 2024 are 3.3%, which is lower than the previous quarter's figure of 3.6%. Meanwhile, 35% of the country's population believes that they would personally benefit from a decrease in interest rates. In other words, the majority (65%) is not concerned about this indicator. However, it is a matter of concern for market participants.

The BoE meeting will also take place next week, on Thursday, December 14, shortly before the ECB meeting. What will be the decision on the interest rate? Lately, the hawkish rhetoric of the Bank of England's leadership has verbally supported the British currency. For instance, BoE Governor Andrew Bailey recently stated that rates should rise for longer, even if it may negatively impact the economy. However, experts predict that the regulator will likely maintain the status quo at the upcoming meeting, keeping the key interest rate at 5.25%, which is already the highest level in the last 15 years.

Expectations for the rate in 2024 imply an 80 bps decrease to 4.45%. If the Federal Reserve lowers its rate to 4.25%, it would give the pound some hope for strengthening. However, this is a matter of the relatively distant future. Last week, the dollar actively recouped November losses, resulting in the GBP/USD pair finishing the five-day period at 1.2548.

Speaking of its immediate future, 30% voted for the pair's rise, another 30% for its fall, and 40% remained indifferent. Among trend indicators on D1, 60% point north, while 40% point south. Among oscillators, only 15% are bullish, 50% bearish, and the remaining 35% remain neutral. In the event of the pair moving south, it will encounter support levels and zones at 1.2500-1.2520, 1.2450, 1.2370, 1.2330, 1.2210, 1.2070-1.2085, and 1.2035. In case of an upward movement, the pair will face resistance at levels 1.2575, then 1.2600-1.2625, 1.2695-1.2735, 1.2800-1.2820, 1.2940, 1.3000, and 1.3140.

Among the important events in the upcoming week, in addition to the Bank of England meeting, the release of a comprehensive set of data from the United Kingdom labour market is scheduled for Tuesday, December 12. Additionally, the country's GDP figures will be published on Wednesday, December 13.

continued below...

 

[Stan NordFX]

USD/JPY: Is the Bank of Japan Losing Caution?

The strengthening of the Japanese currency has taken on a sustained character since the beginning of November. This occurred a couple of weeks after the peak in yields of U.S. ten-year Treasury bonds when the markets were convinced that their decline had become a trend. It's worth noting that there is traditionally an inverse correlation between these securities and the yen. If Treasury yields rise, the yen weakens against the dollar. Conversely, if bond yields fall, the yen strengthens its positions.

A significant moment for the Japanese currency was on Thursday, December 7, when it strengthened across the market spectrum, gaining approximately 225 points against the U.S. dollar and reaching a three-month peak. USD/JPY recorded its minimum at that moment at the level of 141.62.

The main reason for the yen's advance has been the growing expectations that the Bank of Japan (BoJ) will finally abandon its negative interest rate policy, and this is expected to happen sooner than anticipated. Rumours suggest that regional banks in the country are pressuring the regulator, advocating for a departure from the yield curve control policy.

As if to confirm these rumours, the BoJ conducted a special survey of market participants to discuss the consequences of abandoning the ultra-loose monetary policy and the side effects of such a move. Additionally, the visit of the BoJ Governor, Kadsuo Ueda, to the office of Prime Minister Fumio Kishida, added fuel to the fire.

The yen is also benefiting from market confidence that the key interest rates of the Federal Reserve (FRS) and the European Central Bank (ECB) have reached a plateau, and further reductions are the only expectation. As a result of such a divergence, an accelerated narrowing of yield spreads between Japanese government bonds on one side and similar securities from the US and Eurozone on the other can be predicted. This is expected to redirect capital flows into the yen.

Furthermore, the Japanese currency might have been supported by the slowdown in the growth of stock markets over the past three weeks. The yen is often used as a funding currency for purchasing risky assets. Therefore, profit-taking on stock indices such as S&P500, Dow Jones, Nasdaq, and others has additionally pushed USD/JPY lower.

Graphical analysis indicates that in October 2022 and November 2023, the pair formed a double top, reaching a peak at 151.9. Therefore, from this perspective, its retracement downward is quite logical. However, some experts believe that a definitive reversal on the daily timeframe (D1) can only be discussed after it breaks through support in the 142.50 zone. However, at the time of writing this review, on the evening of Friday, December 8th, thanks to strong US labor market data, USD/JPY rebounded from a local low, moved upward, and concluded at 144.93.

In the immediate future, 45% of experts anticipate further strengthening of the yen, 30% side with the dollar, and 25% remain neutral. As for indicators on D1, the advantage is overwhelmingly in favour of the red colour. 85% of trend indicators are coloured red, 75% of oscillators are in the red, and only 25% are in the green.

The nearest support level is located in the 143.75-144.05 zone, followed by 141.60-142.20, 140.60, 138.75-139.05, 137.25-137.50, 135.90, 134.35, and 131.25. Resistances are positioned at the following levels and zones: 145.30, 146.55-146.90, 147.65-147.85, 148.40, 149.20, 149.80-150.00, 150.80, 151.60, and 151.90-152.15.

Except for the release of the Tankan Large Manufacturers' Index on December 13 for Q4, there is no anticipation of other significant macroeconomic statistics regarding the state of the Japanese economy.

continued below...

 

[Stan NordFX]

CRYPTOCURRENCIES: Rational Growth or Speculative Frenzy?

Late in the evening on December 8, the flagship cryptocurrency reached a peak of $44,694. The last time BTC traded above $40,000 was in April 2022, before the Terra ecosystem crash triggered a massive crypto market collapse. Among the reasons for the sharp rise in BTC, growing network hash rate, investor optimism about the U.S. economic recovery, and expectations of a Federal Reserve policy easing are mentioned. However, the main reason for the current bull rally is undoubtedly the potential approval of spot Bitcoin ETFs in the U.S.

Twelve companies have submitted applications to the Securities and Exchange Commission (SEC) to create ETFs, collectively managing over $20 trillion in assets. For comparison, the entire market capitalization of bitcoin is $0.85 trillion. These companies will not only offer existing clients the opportunity to diversify their assets through cryptocurrency investments but also attract new investors, significantly boosting BTC capitalization. Franklin Templeton CEO Jenny Johnson, overseeing $1.4 trillion in assets, recently explained the increased institutional interest, stating, "The demand for bitcoin is evident, and a spot ETF is the best way to access it." Bloomberg analyst James Seyffart believes that the approval of these fund launches is 90% likely to occur from January 5 to 10.

According to Bitfinex experts, the current active supply of bitcoin has dropped to a five-year low: only 30% of the coins have moved in the past year. Consequently, approximately 70% of bitcoins, or "unprecedented" 16.3 million BTC, remained dormant over the year. At the same time, 60% of the coins have been in cold wallets for two years. Simultaneously, as noted by Glassnode, the average deposit amount on cryptocurrency exchanges has approached absolute highs, reaching $29,000. Considering that the number of transactions is continuously decreasing, this indicates the dominance of large investors.

Alongside the bitcoin rally, stock prices of related companies have also surged. In particular, shares of Coinbase, MicroStrategy, miners Riot Platforms, Marathon Digital, and others have seen an increase.

Senior Macro Strategist at Bloomberg Intelligence, Mike McGlone, believes that bitcoin is currently demonstrating much greater strength than gold. He noted that on December 4, the price of gold reached a record high, after which it decreased by 5.1%, while bitcoin continued to rise, surpassing $44,000. However, the analyst warned that bitcoin's volatility could hinder it from being traded as reliably as physical gold during "risk-off" periods. According to McGlone, for bitcoin to compete with precious metals as an alternative asset, it must establish key reliability indicators. This includes a negative correlation of BTC with the stock market and achieving a high deficit during periods of monetary expansion.

McGlone's warning pales in comparison to the forecast of Peter Schiff, President of the brokerage firm Euro Pacific Capital. This well-known crypto sceptic and advocate for physical gold is confident that the speculative frenzy around BTC-ETF will soon come to an end. "This could be the swan song... The collapse of Bitcoin will be more impressive than its rally," he warns investors.

Former SEC official John Reed Stark echoes his sentiments. "Cryptocurrency prices are rising for two reasons," he explains. "First, due to regulatory gaps and possible market manipulation; second, due to the possibility of selling inflated, overvalued cryptocurrency to an even bigger fool [...] This also applies to speculation about a 90% probability of approving spot ETFs."

In the interest of fairness, it should be noted that the current surge is not solely the fault of spot BTC-ETFs. The excitement around them gradually started building up since late June when the first applications were submitted to the SEC. Bitcoin, on the other hand, began its upward movement from early January, growing more than 2.6 times during this period.

Several experts point out that the current situation remarkably mirrors previous BTC/USD cycles. Currently, the drawdown from the all-time high (ATH) is 37%, in the previous cycle for the same elapsed time, it was 39%, and in the 2013-17 cycle, it was 42%. If we measure from local bottoms instead of peaks, a similar pattern emerges. (The first rallies are an exception, as young Bitcoin grew significantly faster in the nascent market.)

According to Blockstream CEO Adam Back, the price of bitcoin will surpass the $100,000 level even before the upcoming halving in April 2024. The industry veteran noted that his forecast doesn't take into account a potential bullish impulse in the event of SEC approval of spot bitcoin ETFs. Regarding the long-term movement of digital gold quotes, the entrepreneur agreed with the opinion of BitMEX co-founder Arthur Hayes, forecasting a range of $750,000 to $1 million by 2026.

For reference: Adam Back is a British businessman, a cryptography expert, and a cypherpunk. It is known that Back corresponded with Satoshi Nakamoto, and a reference to his publication is included in the description of the bitcoin system. Previously, Adam Back did not make public price forecasts for BTC, so many members of the crypto community paid close attention to his words.

The CEO of Ledger, Pascal Gauthier, the head of Lightspark, David Marcus, and the top manager of the CoinDCX exchange, Vijay Ayyar, also anticipate the bitcoin exchange rate to reach $100,000 in 2024. They shared this information in an interview with CNBC. "It seems that 2023 was a year of preparation for the upcoming growth. Sentiments regarding 2024 and 2025 are very encouraging," said Pascal Gauthier. "Some market participants expect a bullish trend sometime after the halving, but considering the news about ETFs, we could very well start the rise before that," believes Vijay Ayyar. However, unlike Adam Back, in his opinion, "a complete rejection of ETFs could disrupt this process."

Renowned bitcoin maximalist, television host, and former trader Max Keiser shared unconfirmed rumors that the sovereign wealth fund of Qatar is preparing to enter the crypto market with massive investments and plans to allocate up to $500 billion in the leading cryptocurrency. "This will be a seismic shift in the cryptocurrency landscape, allowing bitcoin to potentially surpass the $150,000 mark in the near future and go even further," stated Keiser.

Unlike the television host, we will share not rumors but absolutely accurate facts. The first fact is that as of the review writing on the evening of December 8, BTC/USD is trading around $44,545. The second fact is that the total market capitalization of the crypto market is $1.64 trillion ($1.45 trillion a week ago). And finally, the third fact: the Crypto Fear and Greed Index has risen from 71 to 72 points and continues to be in 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

– On the morning of December 11, bitcoin fell sharply to $40,145. This abrupt decline lasted no more than five minutes. Multiple theories explain this event. One suggests that strong U.S. job market data released on December 8 triggered the drop. Alternatively, it could have been a result of someone's nerves giving way, a technical glitch, or a trading error in transaction size by a platform, trading robot, or trader, which led to cascade stop-loss execution in futures trading. Coinglass data indicates that over 24 hours, long positions amounting to more than $400 million were liquidated, including $85.5 million in bitcoin.
Since mid-August, the growth has been about 85%, and more than 160% since the start of the year. Thus, some analysts believe that a major player might have decided to secure profits ahead of the year's end. Two days before this event, the head of DecenTrader, known as FibFilb, warned, "We have grown significantly this year, and a correction is expected. […] It's been overdue," he declared on December 9.

– Trader and analyst Michael Van De Poppe, founder of Eight, encouraged the community not to worry, noting that corrections, particularly deep ones, are common in the illiquid altcoin market. After recent events, he updated his bitcoin forecast, identifying the key support zone at $36,500-$38,000. He believes bitcoin's momentum is waning and anticipates Ethereum will outperform in the upcoming quarter.
Crypto expert William Clemente also isn't concerned about the bitcoin price drop, viewing it as inevitable. He argues that such corrections set the stage for the next bullish trend by eliminating overleveraged long positions.

– EQI Bank's director, Eli Taranto, agrees with Van De Poppe's prediction and also foresees a decline in bitcoin's value. He noted that as traders secure profits and await decisions on ETF applications, bitcoin's price will continue to fluctuate, subject to the butterfly effect, where minor influences can have significant and unpredictable consequences. Taranto specifically suggested a potential fall in BTC's price to $39,000.

– In early December, El Salvador launched a program offering residency and a chance for citizenship for a $1 million investment via bitcoin or USDT. The "Salvadoran Freedom Visa," in partnership with Tether, is limited to 1,000 participants. If fully subscribed, it will bring $1 billion into the country, with plans to expand the program further.
El Salvador's offer is notably more expensive than similar programs in nearby Caribbean countries like Antigua, Barbuda, Dominica, and Saint Lucia, which start at $100,000. Alistair Milne, founder of Altana Digital Currency hedge fund, criticized the program as uncompetitive, highlighting that some EU countries offer citizenship for less, like Malta's €750,000 (~$810,000) option.
However, early interest is evident, as 153 individuals have already applied for the Salvadoran program despite Milne's scepticism.

– CryptoQuant experts suggest the possibility of bitcoin breaking the $50,000 mark in early 2024, as reported by The Block. This forecast is based on analysing the activity of digital gold holders and includes transaction volume dynamics, market capitalization, and Metcalfe's law in the context of cryptocurrencies. "Bitcoin could aim for the [$50,000-$53,000] range," the experts noted. However, CryptoQuant believes the market is nearing an "overheated bullish phase," historically followed by pauses and corrections. They highlighted that over 88% of coin supply is "in profit," indicating potential seller pressure and likely short-term corrections, often aligning with local peaks historically.

– The ongoing discussion revolves around a law proposed by U.S. Senator Elizabeth Warren to tighten control over cryptocurrency transactions. In December 2022, Warren suggested equating crypto companies with financial institutions regulated under the Bank Secrecy Act, requiring digital asset entities to adhere to the same requirements as banks. Her drafted "Digital Asset Anti-Money Laundering Act" mandates customer identification for crypto platforms. However, Alex Thorn of Galaxy Research argues this is impractical for decentralized platforms lacking user verification capabilities, potentially leading to an effective ban on bitcoin in the U.S. Neeraj Agrawal, CEO of Coin Center, criticizes the bill as an attack on technological progress and privacy, urging it not to proceed in the Senate. Many experts believe the bill has little chance of passing; during her 11-year career, only a small fraction of Warren's 330 drafted bills have been enacted, mostly as parts of other laws, with only one passing unchanged – a minor law concerning flag display rules on U.S. federal property.

¬– The governments of the U.S., South Korea, and Japan have started developing joint measures to combat North Korean hackers who attack cryptocurrency projects. These hackers use the stolen funds to finance weapons of mass destruction programs, including nuclear bombs and ballistic missiles, with damages amounting to billions of dollars. The largest incident in the industry's history was the $625 million hack of the Ronin sidechain of Axie Infinity by the Lazarus group. Additionally, the U.S. is investigating cryptocurrency use by terrorists, with calls in the Senate to hold companies like Binance and Tether accountable for facilitating transfers to illegal groups. Subsequently, Tether voluntarily froze all wallets on the sanction list.

– The $4.3 billion fine did not resolve Binance's issues. The U.S. Securities and Exchange Commission (SEC) continues to accuse Binance of illegal securities trading and other violations. U.S. Department of Justice officials intend to thoroughly scrutinize the trading platform's activities for compliance with legal norms. Binance is required to grant continuous access to its documents and records, including employee, agent, intermediary, consultant, partner, contractor, and trader information, to the Department of Justice, Financial Crimes Enforcement Network, and other financial regulators and law enforcement agencies. John Reed Stark, former head of the SEC, mockingly referred to this scrutiny as a "financial colonoscopy."

– Goldman Sachs investment banking experts released a report on the global economy, including the cryptocurrency market. They predict bitcoin prices may soon rise, driven by anticipated approvals of spot BTC-ETFs, the upcoming halving of mining rewards, and falling yields of U.S. 10-year treasury bonds. Importantly, in 2024, when the Federal Reserve begins a cycle of lowering interest rates, bitcoin could receive an additional bullish boost. The analysts explain that lower interest rates make borrowing cheaper, thereby encouraging risk-taking in both the economy and financial markets, including in the cryptocurrency sector. This outlook contrasts with the scenario of rapid rate increases seen in 2022.

– Analyst using the pseudonym Doctor Profit has thoroughly analysed bitcoin's growth cycles. In his view, digital gold goes through five key phases that illustrate the overall dynamics of the cryptocurrency market. Doctor Profit believes that the foundation of the new bull market was laid in the price range of $16,000 to $25,000. According to the analyst, at this stage, investor sentiment is changing, laying the groundwork for an upcoming upward trend, and the market is gradually preparing for dynamic changes.
The next phase covers the range from $25,000 to $38,500: this marks a period of market recovery. Bitcoin holders' activity and optimism are on the rise, paving the way for subsequent stages. As the market gains momentum, BTC enters the third phase, with its price fluctuating between $38,500 and $48,000. This trend is significant in shaping expectations for the future, as investors seek to capitalize on dynamic price changes, and the crypto market enters a period of increased activity.
According to Doctor Profit's analysis, the fourth, "golden" phase will commence within the price range of $48,000 to $69,000. It is at this stage that the market surges to its peak values, and investor euphoria reaches its zenith. Finally, the fifth phase arrives. The peak of the previous bull market, around $69,000, heralds the beginning of bitcoin's super-cycle, during which the price of the leading cryptocurrency will reach historic highs.
However, despite all the optimism, Doctor Profit cautions that before transitioning to the next phase, a significant correction of 20-30% awaits the leading cryptocurrency.


Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.

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

 

[Stan NordFX]

Forex and Cryptocurrencies Forecast for December 18 – 22, 2023​

EUR/USD: Dovish Fed Reversal

The fate of EUR/USD was determined by two events last week: the FOMC (Federal Open Market Committee) meeting of the US Federal Reserve and the meeting of the Governing Council of the European Central Bank (ECB), which took place a day later. As a result, the euro emerged victorious: for the first time since November 29, the pair rose above 1.1000.

The Federal Reserve left its key interest rate unchanged at 5.5%. Meanwhile, the regulator's leadership acknowledged that it is discussing easing its monetary policy. The FOMC's forecast for the foreseeable future turned out to be significantly lower than market expectations. It is planned that by the end of 2024, the rate will be reduced at least three times: to 4.6% (instead of the expected 5.1%), and by the end of 2025, there are plans for four more stages of reduction, ultimately bringing the cost of borrowing down to 3.6% (expectations were 3.9%). In a three-year perspective, the rate will drop to 2.9%, after which in 2027 it will be 2.0-2.25%, while inflation will stabilize at the target level of 2.0%. Following the meeting, the market expects the Fed to take its first step towards easing as early as March. According to the FedWatch Tool, the likelihood of this scenario is currently estimated at 70%.

In addition to forecasts of a sharper rate cut, additional pressure on the dollar continues to be exerted by the declining yields of Treasuries, which also indicates an imminent change in the direction of monetary policy in the USA. Another confirmation of the dovish pivot was the reaction of the stock markets. Lower rates are good news for stocks. They lead to cheaper financing, and easier economic conditions stimulate domestic demand. As a result, last week the stock market indices S&P 500, Dow Jones, and Nasdaq soared again.

It is known that ECB President Christine Lagarde was previously involved in synchronized swimming. This time, she acted in sync with the Fed: the pan-European regulator also left the interest rate unchanged, at the previous level of 4.50%. However, the ECB expects the Eurozone's GDP to grow by only 0.6% in 2023, compared to the previously forecasted 0.7%, and by 0.8% in 2024 instead of 1.0%. Inflation in 2024 is forecasted at 5.4%, in 2024 at 2.7%, and in 2025 it is expected to almost reach the target mark of 2.1% (two years earlier than in the US).

The desynchronization with the Fed occurred following the Governing Council's meeting. In their comments, the ECB leadership did not mention the timing of the start of rate cuts. Moreover, it was stated that the European Central Bank's goal is to suppress inflation, not to avoid a recession, so borrowing costs will be kept at peak values as long as necessary. This stance benefited the pan-European currency and strengthened the euro relative to the dollar.

Given the Fed's dovish rhetoric and the ECB's moderately hawkish stance, EUR/USD may retain potential for further growth. It's worth noting that this pivot by the Fed surprised not only the markets. According to an insider report from Financial Times, Jerome Powell's comments following the FOMC meeting also caught the ECB Governing Council off guard. As a result, during her speech, Madame Lagarde threw several stones into the garden of her American colleague.

Currently, it appears that the Fed will lead in easing monetary policy. If the market does not receive a contrary signal, the dollar will remain under pressure. However, it's important to consider that the reality of 2024 may not necessarily align with statements made in December 2023. Objectively, the ECB has significantly more reasons for loosening its financial grip. The European economy is poorly adapted to high rates, it appears weaker than the American economy, its GDP volume has already been revised downward, and the reduction in inflation in the Eurozone is occurring much more rapidly than in the USA. Based on this, economists from Fidelity International, JPMorgan, and HSBC do not rule out that everything may change, and other regulators such as the ECB and the Bank of England may be the first to embark on a path of easing. However, we will not receive signals about this today or tomorrow, but only in the next year.

Regarding the past week, after the release of disappointing business activity data (PMI) in Europe on December 15th and mixed results in the US, EUR/USD ended the week at 1.0894.

According to economists from MUFG Bank, a sharp further rise in EUR/USD is on shaky ground. "The situation in the Eurozone and globally does not seem favourable for a further sustainable rally in EUR/USD," they write. "Fundamental factors as a driving force over the next few weeks during the Christmas and New Year period are never reliable, but if this rally continues during this period, we expect a reversal as we move towards the first quarter of next year."

At present, expert opinions regarding the near future of the pair are divided as follows: 40% voted for a strengthening dollar, 30% sided with the euro, and 30% remained neutral. Among trend indicators on D1, 100% are voting for the euro and the pair's rise. With oscillators, 60% are in favour, 30% are looking south, and 10% are pointing east. The nearest support for the pair is located around 1.0800-1.0830, followed by 1.0770, 1.0725-1.0740, 1.0620-1.0640, 1.0500-1.0520, 1.0450, 1.0375, 1.0200-1.0255, 1.0130, and 1.0000. Bulls will encounter resistance around 1.0925, 1.0965-1.0985, 1.1020, 1.1070-1.1110, 1.1150, 1.1230-1.1275, 1.1350, and 1.1475.

Next week, both Europe and the United States will be summarizing the year and preparing for Christmas. Notable economic events include the release of inflation data (CPI) in the Eurozone on Tuesday, December 19. On Wednesday, December 20, the U.S. Consumer Confidence Index will be published. The following day, the U.S. GDP volume for the third quarter and the number of initial jobless claims will be announced. The work week concludes on Friday, December 22, with a comprehensive package of data on the U.S. consumer market.

GBP/USD: BoE Refrains from Feeding Doves

Just as with the Fed and the ECB, the situation with the Fed and the Bank of England (BoE) is completely aligned. A simple copy-paste of the earlier discussion applies here. In its meeting, the British regulator also left the interest rate unchanged at 5.25%. And like the ECB, it did not provide any reason that could spur dovish expectations for 2024. BoE Governor Andrew Bailey noted that the Bank of England still has a path to tread, and three out of the nine members of the Monetary Policy Committee even voted for a further increase in the rate.

The economic indicators for the United Kingdom are varied. According to statistics, the real wage growth, adjusted for inflation, continues to increase annually. However, while the economy was forecasted to grow by 0.1%, it actually contracted by 0.3%, following a growth of 0.2% the previous month. Additionally, industrial production volumes in October decreased by 0.8%, and the annual figure dropped from 1.5% to 0.4%, significantly worse than the market's expectation of 1.1%. Data released on Friday, December 15th, showed a significant improvement in service sector activity in December. The PMI index reached 52.7, exceeding expectations of 51.0 and marking the best figure in the last five months. However, on the other hand, manufacturing activity in November decreased to 46.4 from 47.2, even though markets were expecting it to rise to 47.5.

Meanwhile, "the inflation genie is still out of the bottle." Based on this, the Bank of England is unlikely to abandon its strict monetary policy, which remains the only barrier to further inflation growth. Experts agree on this point. The only open question is when the regulator will finally be able to reduce the rate.

The last chord of the past week for GBP/USD sounded at the level of 1.2681. According to economists at ING, the 1.2820-1.2850 area poses strong resistance for GBP/USD. If this is breached, they believe, the pair could reach the heights of 1.3000, which would be a huge Christmas gift for the bulls. However, the team at Japan's Nomura Bank is quite sceptical about the growth prospects of the pair, believing that in both Q1 and Q2 of 2024, the pair will trade around 1.2700 and 1.2800.

At the time of writing this forecast, the median forecast of analysts offers no clear guidance: 25% voted for the pair's rise, another 25% for its fall, and 50% simply shrugged their shoulders. Among trend indicators on D1, as in the case of the previous pair, 100% point north. Among the oscillators, 65% look up, 30% down, and the remaining 15% maintain neutrality. In the event of the pair moving south, it will encounter support levels and zones at 1.2600-1.2625, 1.2545-1.2575, 1.2500-1.2515, 1.2450, 1.2370, 1.2330, 1.2210, 1.2070-1.2085, 1.2035. In case of an increase, the pair will meet resistance at levels 1.2710-1.2535, then 1.2790-1.2820, 1.2940, 1.3000, and 1.3140.

The upcoming week's calendar highlights Wednesday, December 20, as a significant day, when the United Kingdom's Consumer Price Index (CPI) will be published. On Friday, December 22, the day will be shorter in the UK due to Christmas preparations. However, that morning will see the release of significant economic macrostatistics, including data on retail sales and GDP.

continued below...

 

[Stan NordFX]

USD/JPY: Yen's Triumph Scheduled for 2024

On November 13, USD/JPY reached a high of 151.90. However, within a mere five weeks, the Japanese yen succeeded in regaining over 1000 points from the dollar. Thursday, December 7, marked a significant triumph for the yen, as it strengthened across the entire market, moving the dollar down by about 225 points. At that moment, the pair's minimum was recorded at 141.62. In the past week, it followed the lead of the Fed and the Dollar Index DXY, ending the five-day stretch at a level of 142.14.

The primary reason for this yen rally has been growing expectations that the Bank of Japan (BoJ) will finally abandon its negative interest rate policy, and this is anticipated to happen sooner than expected. Rumours suggest that regional banks in the country, lobbying for a departure from yield curve control policy, are pressuring the regulator. Seemingly to confirm these rumours, the BoJ conducted a special survey in early December among market participants to discuss the consequences of moving away from ultra-loose monetary policy and the side effects of such a step.

The yen is also being favoured by the outcomes of the recent meetings of the Fed and the ECB, which have reinforced market confidence that interest rates for the dollar and euro have plateaued and are only expected to decrease going forward. This divergence allows for the prediction that investors will unwind their carry trade strategies and reduce the yield spreads between Japanese government bonds and their counterparts in the US and Eurozone. Such developments should lead to a return of capital to the yen.

The Bank of Japan's (BoJ) final meeting of the year is scheduled for Tuesday, December 19. However, it is likely that the regulator will keep its monetary policy parameters unchanged at this meeting. Economists at Japan's MUFG Bank expect the BoJ to end its YCC (Yield Curve Control) and NIRP (Negative Interest Rate Policy) at its January meeting. This is partially already factored into the quotes, but the tone of the Bank of Japan at the December meeting could further fuel expectations for a tightening of policy in 2024. MUFG believes that the yen has the greatest potential for growth among G10 currencies next year. "The global inflationary shock is reversing direction, and this has the most significant implications for the JPY," say the bank's strategists.

In the near term, 30% of experts anticipate further strengthening of the yen, 10% favour the dollar, and a substantial majority (60%) hold a neutral position. Regarding trend indicators on D1, there's again an absolute dominance of the red color, 100%. Among the oscillators, the same 100% are colored red, but 25% of them signal oversold conditions. The nearest support level is located in the 141.35-141.60 zone, followed by 140.60-140.90, 138.75-139.05, 137.25-137.50, 135.90, 134.35, and 131.25. Resistance levels and zones are situated at 143.75-144.05, followed by 145.30, 146.55-146.90, 147.65-147.85, 148.40, 149.20, 149.80-150.00, 150.80, 151.60, and 151.90-152.15.

Apart from the Bank of Japan's meeting on December 19 and the subsequent press conference by its leadership, no other significant events concerning the Japanese economy are expected in the coming week.

continued below...