Sample Category Title
GBP/JPY Daily Outlook
Daily Pivots: (S1) 169.66; (P) 170.52; (R1) 172.16; More...
Intraday bias in GBP/JPY remains on the upside at this point. Current rally should target 100% projection of 148.93 to 165.69 from 159.71 at 176.47 next. On the downside, break of 168.71 minor support will turn intraday bias neutral and bring consolidations, before staging another rally.
In the bigger picture, up trend from 123.94 (2020 low), as part of the trend from 122.75 (2016 low) is still in progress. Further rise would be seen to 161.8% projection of 122.75 to 156.59 (2018 high) from 123.94 at 178.69. This will now remain the favored case as long as 148.93 support holds.
Yen Mildly Lower in Quiet Trading; RBA, Fed and BoE to Hike This Week
Yen trades generally lower in quite Asian session today, but markets are relatively steady elsewhere. Stock markets are mixed with Nikkei closing higher, following the rebound in the US last Friday. But China is weighed down by poor PMI data. Generally speaking, traders are cautious ahead of many key events ahead in the week, including rate decisions of Fed, BoE and RBA, as well as some heavy weight data like non-farm payrolls.
GBP/AUD is an interesting one to watch this week. The cross is now back above pre-Truss level while BoE is expected to outpace RBA's tightening for the next few months. As long as 1.7670 support holds, an upside breakout should happen sooner rather than later. Rise from 1.5925 should then be on track to take on 1.9218 medium term resistance, probably later in the quarter.
In Asia, Nikkei closed up 1.64%. Hong Kong HSI is up 0.08%. China Shanghai SSE is down -0.72%. Singapore Strait Times is up 1.78%. Japan 10-year JGB yield is up 0.0009 at 0.243.
ECB Knot: We're not in even half-time yet in inflation fight
ECB Governing Council member Klaas Knot said on Sunday, "we will take a significant interest step again in December," adding that next hike would either be 50bps or 75bps.
He said, "we are not in even half-time yet" in the fight against inflation. "We are still returning interest rates towards their neutral level, for which we will also need the December meeting."
"From 2023 we will play the second half, with smaller interest rate steps and by shrinking our balance sheet," he said. "Then we will be in the zone where we will effectively cool down the economy, which is necessary to bring inflation down from 10% to 2% in the next 18 to 24 months."
Japan industrial production dropped -1.6% mom, as auto-related production dived
Japan industrial production declined -1.6% mom in September, below expectation of -1.0% mom. That's also the first contract in four months. The fall was driven by -12.4% mom decline in auto-related production, the steepest fall in eight months.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to fall another -0.4% in October and then rise 0.8% in November.
Retail sales rose 4.5% yoy in September, above expectation of 4.1% yoy. Housing starts rose 1.0% yoy, below expectation of 2.3% yoy.
In October, consumer confidence dropped from 30.8 to 29.9, below expectation of 31.5.
Australia retail sales rose 0.6% mom in Sep
Australia retail sales rose 0.6% mom in September, matched expectations.
Ben Dorber, ABS head of retail statistics said, "This month's rise was again driven by the combined strength in the food industries. Food retailing rose 1.0 per cent, while cafes, restaurants, and takeaway food services rose 1.3 per cent.
"Many retailers remained open for the National Day of Mourning, an additional one-off public holiday in September, and this boosted spending on food, alcohol and dining out."
China PMI manufacturing and services fell to contraction
China PMI Manufacturing fell from 50.1 to 49.2 in October, below expectation of 50.0.
PMI Non-Manufacturing dropped from 50.6 to 48.7, below expectation of 50.2. Both readings were below 50-mark which separates growth from contraction on a monthly basis.
"In October, affected by the spread of the pandemic and other factors within the country, China's PMI fell, with the manufacturing PMI, non-manufacturing PMI and comprehensive PMI standing at 49.2 per cent, 48.7 per cent and 49.0 per cent, respectively, and the foundation of China's economic recovery needs to be further consolidated," said senior NBS statistician Zhao Qinghe.
"In October, the composite PMI stood at 49.0 per cent, down 1.9 percentage points from the previous month, falling below the critical point, indicating a general slowdown in the production and operating activities of Chinese enterprises."
RBA, Fed and BoE to hike; lots of data featured
Three central banks will meet this week. RBA is expected hike by 25bps to 2.85%. There are expectations that tightening will continue with two more 25bps hike in December and February before a pause. So, focuses will be on any indication from the Monetary Policy Statement.
Fed is expected to continue with another 75bps hike to 3.75-4.00%. There are also speculations that tightening pace will start to slow in December. Hence, markets will look for hints from Fed Chair Jerome Powell's press conference to confirm this view.
BoE is also widely expected to hike 75bps to 3.00%. The new economic projections might not be too meaningful, as the outlook will be heavily affected by the new government's new budget to be released in mid-November. Yet, the voting will still reveal some hints on the hawk/dove split in the MPC.
In addition to these central bank activities, economic data calendar is also ultra-busy. Non-far payroll report in the US, and ISM indexes should carry a large weight on Fed's decision in December. Other data to watch include Eurozone GDP and CPI flash, Swiss CPI, Canada employment, New Zealand employment and China PMIs.
Here are some highlights for the week:
- Monday: Japan industrial production, retail sales, consumer confidence, housing starts; Australia MI inflation gauge, private sector credit, retail sales; China PMIs; Germany retail sales; Swiss retail sales; UK M4 money supply, mortgage approvals; Eurozone CPI flash, GDP; US Chicago PMI.
- Tuesday: New Zealand building permits; Japan PMI manufacturing final; RBA rate decision; China Caixin PMI manufacturing; Germany import prices; Swiss SECO consumer climate, PMI manufacturing; UK PMI manufacturing final; Canada PMI manufacturing; ISM manufacturing, construction spending.
- Wednesday: Australia AiG manufacturing, building approvals; New Zealand employment, labor cost index; Japan monetary base, BoJ minutes; Germany trade balance, unemployment; Eurozone PMI manufacturing final; US ADP employment, FOMC rate decision.
- Thursday: Australia trade balance; China Caixin PMI services; Swiss CPI;UK PMI Services final, BoE rate decision; Eurozone unemployment rate; Canada building permits, trade balance; US jobless claims, non-farm productivity, trade balance, ISM services, factory orders.
- Friday: Australia AiG services; Germany factory orders; France industrial production; Eurozone PMI services final, PPI; UK PMI construction; Canada employment, Ivey PMI; US non-farm payroll employment.
GBP/JPY Daily Outlook
Daily Pivots: (S1) 169.66; (P) 170.52; (R1) 172.16; More...
Intraday bias in GBP/JPY remains on the upside at this point. Current rally should target 100% projection of 148.93 to 165.69 from 159.71 at 176.47 next. On the downside, break of 168.71 minor support will turn intraday bias neutral and bring consolidations, before staging another rally.
In the bigger picture, up trend from 123.94 (2020 low), as part of the trend from 122.75 (2016 low) is still in progress. Further rise would be seen to 161.8% projection of 122.75 to 156.59 (2018 high) from 123.94 at 178.69. This will now remain the favored case as long as 148.93 support holds.
Economic Indicators Update
| GMT | Ccy | Events | Actual | Forecast | Previous | Revised |
|---|---|---|---|---|---|---|
| 23:50 | JPY | Industrial Production M/M Sep P | -1.60% | -1.00% | 3.40% | |
| 23:50 | JPY | Retail Trade Y/Y Sep | 4.50% | 4.10% | 4.10% | |
| 00:00 | AUD | TD Securities Inflation M/M Oct | 0.40% | 0.50% | ||
| 00:30 | AUD | Private Sector Credit M/M Sep | 0.70% | 0.80% | 0.80% | |
| 00:30 | AUD | Retail Sales M/M Sep | 0.60% | 0.60% | 0.60% | |
| 01:00 | CNY | Manufacturing PMI Oct | 49.2 | 50 | 50.1 | |
| 01:00 | CNY | Non-Manufacturing PMI Oct | 48.7 | 50.2 | 50.6 | |
| 05:00 | JPY | Consumer Confidence Oct | 29.9 | 31.5 | 30.8 | |
| 05:00 | JPY | Housing Starts Y/Y Sep | 1.00% | 2.30% | 4.60% | |
| 07:00 | EUR | Germany Retail Sales M/M Sep | -0.50% | -1.30% | ||
| 07:30 | CHF | Real Retail Sales Y/Y Sep | 3.30% | 3.00% | ||
| 09:00 | EUR | Italy GDP Q/Q Q3 P | -0.10% | 1.10% | ||
| 09:30 | GBP | M4 Money Supply M/M Sep | 0.10% | -0.20% | ||
| 09:30 | GBP | Mortgage Approvals Sep | 66K | 74K | ||
| 10:00 | EUR | Eurozone GDP Q/Q Q3 P | 0.10% | 0.80% | ||
| 10:00 | EUR | Eurozone CPI Y/Y Oct P | 9.90% | 10.00% | ||
| 10:00 | EUR | Eurozone CPI Core Y/Y Oct P | 4.80% | 4.80% | ||
| 13:45 | USD | Chicago PMI Oct | 47.1 | 45.7 |
Technical Outlook and Review
USD/JPY:
The current general bias for USDJPY on the H4 chart is bullish. Towards the end of last week, USDJPY had some bullish momentum upwards due to the strengthening of the DXY. Price is currently trading above the support at 148.214. If this bullish momentum continues, expect USDJPY to head upwards and retest the 1st resistance at 149.343 where the 161.8% Fibonacci extension line is located.
Areas of consideration:
- H4 time frame, 1st resistance at 149.343
- H4 time frame, 1st support at 147.410
DXY:
On the H4 chart, the overall bias for DXY is bearish. To add confluence to this, the price is below the Ichimoku cloud which indicates a bearish market. Towards the end of last week, DXY had bullish momentum going above the 1st support at 110.459 where the 61.8% Fibonacci line is located and is currently trading above it. If this bearish momentum continues, expect price to possibly head towards the 2nd support at 109.340, where the 78.6% Fibonacci line is located.
Areas of consideration:
- H4 time frame, 1st resistance at 112.572
- H4 time frame, 1st support at 110.459
EUR/USD:
On the H4, price is dropping to the long term descending trendline, the price may drop to the 1st support at 0.98810, which is in line with the 38.2% fibonacci retracement and overlap support. Alternatively, as the price is above ichimoku cloud and short term ascending trendline, we can expect the price to rise to the 1st resistance at 1.00914, which is in line with the previous swing high. If the 1st resistance is broken, the 2nd resistance is at 1.01939, where the 161.8% fibonacci extension and previous swing highs are.
Areas of consideration :
- H4 1st support at 0.98810
- H4 1st resistance at 1.00914
GBP/USD:
On the H4, price is crossing the ichimoku cloud and breaking the descending trendline, we have a bullish bias that the price may test the 1st resistance at 1.16463, which is in line with the previous swing high. If the 1st resistance is broken, the 2nd resistance is at 1.18641, where the 78.6% fibonacci retracement sits. Alternatively, the price may drop to the 1st support at 1.12688, where the swing low support and 23.6% fibonacci retracement are. If the 1st support is broken, the 2nd support is at 1.09364, which is in line with the 50% fibonacci retracement.
Areas of consideration:
- H4 1st resistance at 1.16463
- H4 2nd resistance is at 1.18641
USD/CHF:
On the H4 chart, the overall bias for USDCHF is bearish. To add confluence to this, the price is below the Ichimoku cloud which indicates a bearish market. Towards the end of last week, USDCHF had some bullish momentum with price bouncing off the 2nd support at 0.98532 with price currently trading above the 1st support at 0.99250 where the 23.6% Fibonacci line is located. Expecting price to possibly head back up to retest the 1st resistance line at 1.00678 where the 78.6% Fibonacci line is located.
Areas of consideration
- H4 1st support at 0.99250
- H4 2nd support at 0.98532
- H4 1st resistance at 1.00678
XAU/USD (GOLD):
On H4, with the price within the descending channel and crossing ichimoku cloud, we have a bearish bias that the price may drop to test the 1st support at 1617.866, where the previous swing lows are. If the 1st support is broken, the 2nd support could be at 1587.046, which is in line with the 78.6% fibonacci projection. Alternatively, the price may rise to retest the 1st resistance at 1673.515, which is in line with the 50% fibonacci retracement and previous swing high. If the 1st resistance is broken, the 2nd resistance is at 1729.540, where the 61.8% fibonacci retracement and previous swing high are.
Areas of consideration:
- H4 time frame, 1st resistance at 1673.515
- H4 time frame, 1st support at 1617.866
AUD/USD:
On the H4, with the price breaking the descending channel and above ichimoku cloud, we have a bullish bias that the price may retest the 1st resistance at 0.65190, which is in line with the overlap resistance, if the 1st resistance is broken, the 2nd resistance is at 0.66748, where the 50% fibonacci retracement is. Alternatively, the price may drop to the 1st support at 0.63414, which is in line with the 50% fibonacci retracement. If the 1st support is broken, the price may drop to the 2nd support at 0.61921, where the previous swing low is.
Areas of consideration
- H4, 1st resistance at 0.65190
- H4, 1st support at 0.63414
NZD/USD:
On the H4 chart, as the price is breaking the descending trendline and the price is above ichimoku cloud, we have a bullish bias that the price may rise to the 1st resistance at 0.58647, which is in line with the previous swing high. If the 1st resistance is broken, the 2nd resistance is at 0.59963, where the 50% fibonacci retracement is. Alternatively, the price may drop to the 1st support at 0.57207, where the previous swing low and 50% fibonacci retracement are.
Areas of consideration:
- H4 time frame, 1st resistance at 0.58647
- H4 time frame, 2nd resistance is at 0.59963
USD/CAD:
On the H4 chart, the overall bias for USDCAD is bearish. To add confluence to this, the price is below the Ichimoku cloud which indicates a bearish market. Towards the end of last week, price reflected off the 1st support at 1.35029 where the previous low is. If this bearish momentum continues, expect price to break the 1st support and head towards the 2nd support at 1.34675 where the -61.8% Fibonacci expansion line and 50% Fibonacci line is located.
Areas of consideration:
- H4 time frame, 1st resistance at 1.36751
- H4 time frame, 1st support at 1.35029
- H4 time frame, 2nd support at 1.34675
OIL:
Looking at the H4 chart, the current overall bias for Oil is bullish. To add confluence to this, the price is above the Ichimoku cloud which indicates a bullish market. Towards the end of last week, price reflected off the 1st resistance line at 96.538 where the 100% and 23.6% Fibonacci lines are. If this bullish momentum continues, expect price to possibly break above the 1st resistance and head towards the 2nd resistance at 99.439 where previous swing high and 0% Fibonacci line is located.
Areas of consideration:
- H4 time frame, 1st resistance at 93.381
- H4 time frame, 2nd resistance at 99.439
- H4 time frame, 1st support at 93.381
Dow Jones Industrial Average:
On the H4 chart, the overall bias for DJI is bullish. To add confluence to this, the price is above the Ichimoku cloud which indicates a bullish market. Towards the end of last week, price had massive bullish momentum upwards due to the weakening of the DXY. Price has closed above the 1st support at 31896.61, where the 61.8% and 50% Fibonacci lines are. If this bullish momentum continues, expect the price to possibly head towards the 1st resistance at 34293.93 where the previous swing high and 100% Fibonacci line is located.
Areas of consideration:
- H4 time frame, 1st support at 31896.61
- H4 time frame, 1st Resistance at 34293.93
DAX:
On the H4 chart, the price has now closed above the Ichimoku cloud which indicates a breakout of a descending trendline. Expecting price to possibly continue this bullish momentum and head towards the 1st resistance at 13490.91, where the 78.6% Fibonacci line is located. If the 1st resistance is broken, the 2nd resistance could be at 14717.44, which is in line with the previous swing high. Alternatively, the price may drop to the 1st support at 12548.42, which is in line with the swing low.
Areas of consideration:
- H4 time frame, current price
- H4 time frame, 1st resistance at 13490.91
ETHUSD:
Looking at the H4 chart, the current overall bias for ETHUSD is bullish. To add confluence to this, the price is above the Ichimoku cloud which indicates a bullish market. Over the last week, price had bullish momentum upwards with the price currently trading above the 1st support level at 1561.62 where 2 of the 61.8% Fibonacci lines are located. If this bullish momentum continues, expect the price to head towards the 1st resistance at 1792.55 where the previous swing high and 100% Fibonacci line is located.
Areas of consideration:
- H4 time frame, 1st resistance of 1792.55
- H4 time frame, 1st support at 1561.62
BTCUSD:
On the H4 chart, the overall bias for BTCUSD is bullish. To add confluence to this, the price is above the Ichimoku cloud which indicates a bullish market. Towards the 3nd of last week, price continued to consolidate along the 1st support at 20440.00 where the 2 of the 50% Fibonacci lines are located. If this bullish momentum continues, expect the price to head towards the 1st resistance at 21892.00, where the 78.6% Fibonacci line is located.
Areas of consideration:
- H4 time frame, 1st resistance 21892.00
- H4 time frame, 1st support at 20440.00
S&P 500:
On the H4 chart, the overall bias for S&P500 is bearish. However due to the weakening of the DXY, S&P500 had bullish momentum during the course of last week. Towards the end of last week, price reflected off the 1st support at 3805.83 where the 38.2% Fibonacci line is located. If this bullish momentum continues, expect price to possibly head towards the 1st resistance at 4016.04 where the 61.8% Fibonacci line and 23.6% Fibonacci projection line is located.
Areas of consideration:
- H4 time frame, 1st support at 3805.83
- H4 time frame, 1st resistance at 4016.04
China PMI manufacturing and services fell to contraction
China PMI Manufacturing fell from 50.1 to 49.2 in October, below expectation of 50.0.
PMI Non-Manufacturing dropped from 50.6 to 48.7, below expectation of 50.2. Both readings were below 50-mark which separates growth from contraction on a monthly basis.
"In October, affected by the spread of the pandemic and other factors within the country, China's PMI fell, with the manufacturing PMI, non-manufacturing PMI and comprehensive PMI standing at 49.2 per cent, 48.7 per cent and 49.0 per cent, respectively, and the foundation of China's economic recovery needs to be further consolidated," said senior NBS statistician Zhao Qinghe.
"In October, the composite PMI stood at 49.0 per cent, down 1.9 percentage points from the previous month, falling below the critical point, indicating a general slowdown in the production and operating activities of Chinese enterprises."
Australia retail sales rose 0.6% mom in Sep
Australia retail sales rose 0.6% mom in September, matched expectations.
Ben Dorber, ABS head of retail statistics said, "This month's rise was again driven by the combined strength in the food industries. Food retailing rose 1.0 per cent, while cafes, restaurants, and takeaway food services rose 1.3 per cent.
"Many retailers remained open for the National Day of Mourning, an additional one-off public holiday in September, and this boosted spending on food, alcohol and dining out."
Japan industrial production dropped -1.6% mom, as auto-related production dived
Japan industrial production declined -1.6% mom in September, below expectation of -1.0% mom. That's also the first contract in four months. The fall was driven by -12.4% mom decline in auto-related production, the steepest fall in eight months.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry (METI) expected output to fall another -0.4% in October and then rise 0.8% in November.
Retail sales rose 4.5% yoy in September, above expectation of 4.1% yoy.
ECB Knot: We’re not in even half-time yet in inflation fight
ECB GoverningCouncil member Klaas Knot said on Sunday, "we will take a significant interest step again in December," adding that next hike would either be 50bps or 75bps.
He said, "we are not in even half-time yet" in the fight against inflation. "We are still returning interest rates towards their neutral level, for which we will also need the December meeting."
"From 2023 we will play the second half, with smaller interest rate steps and by shrinking our balance sheet," he said. "Then we will be in the zone where we will effectively cool down the economy, which is necessary to bring inflation down from 10% to 2% in the next 18 to 24 months."
EUR/USD Could Resume Increase If It Holds This Support
Key Highlights
- EUR/USD tested 1.0090 before it corrected lower.
- A major bullish trend line is forming with support at 0.9820 on the 4-hours chart.
- GBP/USD gained pace above 1.1500, and gold price slowly moved lower.
- The Euro Zone GDP could grow 0.2% in Q3 2022 (Preliminary) (QoQ), down from 0.8%.
EUR/USD Technical Analysis
The Euro started a steady increase above the 0.9900 resistance against the US Dollar. EUR/USD cleared the 1.0000 resistance and extended gains.
Looking at the 4-hours chart, the pair even broke the 1.0050 resistance level and settled well above the 100 simple moving average (red, 4-hours) plus the 200 simple moving average (green, 4-hours).
A high was formed near 1.0091 before there was a downside correction. The pair declined below the 1.0050 and 1.0020 support levels. The bears pushed the pair below the 23.6% Fib retracement level of the upward move from the 0.9704 swing low to 1.0093 high.
An initial support is near the 0.9890 level. It is near the 50% Fib retracement level of the upward move from the 0.9704 swing low to 1.0093 high.
The next major support is near the 0.9840 zone and the 100 simple moving average (red, 4-hours). There is also a major bullish trend line forming with support at 0.9820 on the same chart.
A downside break below the 0.9840 zone could push the pair into a bearish zone. In the stated case, it could decline towards the 0.9750 support. On the upside, EUR/USD is facing a major resistance near the 1.0020 zone.
The next major resistance may perhaps be near 1.0050. Any more gains could set the pace for a move towards the 1.0120 level, above which it could even test 1.0180.
Looking at GBP/USD, the pair gained pace for a move above the 1.1500 resistance zone and there are chances of more upsides.
Economic Releases
- German Retail Sales for Sep 2022 (MoM) – Forecast -0.3%, versus -1.3% previous.
- German Retail Sales for Sep 2022 (YoY) – Forecast -0.4%, versus -4.3% previous.
- Euro Zone GDP for Q3 2022 (Preliminary) (QoQ) - Forecast 0.2%, versus 0.8% previous.
Forex and Cryptocurrency Forecast
EUR/USD: Is the Interest Rate Race Close to Its End?
EUR/USD grew until Thursday, October 27, and even rose above the landmark level of 1.0000, reaching 1.0092. The reason for this, most likely, was the hope of a number of investors that the ECB would raise the rate not by 0.75, but by 1.0 or even more basis points (bp) at its meeting. However, their dreams remained dreams. There happened exactly what most market participants expected: the European regulator raised the rate by 0.75 bp, from 1.25% to 2.0%. (Although this figure is the highest over the past 10 years).
The final statement of the Central Bank says that the ECB Governing Council has already made significant progress in abandoning the stimulating monetary policy (QE). There is not a single word in the text either that the interest rate will be raised regularly at the next meetings. The head of the ECB, Christine Lagarde, also noted at a press conference that economic activity in the Eurozone is likely to slow down significantly in Q3 2022. Based on all this, market participants concluded that the ECB is counting on the recession in Europe to help it cope with inflation without a further sharp increase in rates. If the regulator acts as aggressively as the US Federal Reserve, such steps, along with rising energy prices, could simply plunge the European economy into the abyss.
Many analysts believe that the ECB will raise the rate not by 75 bp, but by only 50 bp at its next meeting on December 15. There is no January meeting in the calendar, and the rate will be increased by some "pathetic" 25 bp in February, reaching 2.75%. where it all will end.
Against this backdrop, EUR/USD went below the 1.0000 horizon once again. The growth of US GDP helped strengthen the dollar. With a forecast of +2.4%, this indicator increased by +2.6% q/q in Q3 2022, breaking a series of falls: -1.6% in Q1 and -0.6% in Q2.
On the one hand, this economic growth shows that it is able to withstand even greater monetary tightening by the Fed. On the other hand, it turned out that such an important component as the real estate market is actively shrinking. Investments here have fallen by more than 26%, and rates on 30-year mortgages have reached 7% per annum, which has sharply reduced demand for housing.
Of course, this is unlikely to stop the Fed from fighting inflation. But it may force it to act more cautiously. As for the next meeting of the regulator on November 02, the market is still confident that the rate will be increased by 0.75 bp, from 3.25% to 4.0%. However, regarding the Fed's next move in December, the federal funds futures market is inclined to a more moderate rise by 50 bps. But even if this forecast turns out to be correct, the difference between rates on the euro and the dollar will remain, which will support the US currency.
EUR/USD closed last week at 0.9964. 50% of analysts support the fact that it will continue to move south in the near future, another 20% expect a correction to the north, and the remaining 30% vote for a sideways trend. It should be noted here that when moving to the forecast by the end of the year, 80% of experts vote for the bearish scenario. Among the trend indicators on D1, only 40% are red, 60% are green. Among the oscillators, all 100% advise to buy the pair.
The immediate support for EUR/USD is at 0.9900, followed by 0.9765, 0.9700, 0.9645, 0.9580 and finally the September 28 low at 0.9535. The next target of the bears is 0.9500. For the bulls, the first priority will be to break the 1.0000 barrier. Then they will meet resistance at the levels of 1.0100, 1.0250, 1.030 and 1.0370.
The most important event of the upcoming week will certainly be the meeting of the FOMC (Federal Open Market Committee) of the US Federal Reserve on Wednesday, November 02, and the subsequent press conference of the regulator's management. In addition, the economic calendar can mark Monday October 31, when the data on GDP and the consumer market (CPI) of the Eurozone, as well as on the volume of retail sales in Germany, will be released. The value of the ISM Business Activity Index (PMI) in the manufacturing sector will become known the next day, on Tuesday, November 01, and that of the US services sector on Thursday, November 03. In addition, we are traditionally waiting for a portion of statistics from the US labor market on November 02 and 04, including the unemployment rate and the number of new jobs created outside the agricultural sector (NFP) of the country.
GBP/USD: Stake Larger Than Life
In general, the dynamics of GBP/USD followed the dynamics of the EUR/USD last week.The five-day low was recorded at 1.1257, the high was 1.1645, and the finish was at 1.1615. The coming week, or rather its second half, is expected to be much more turbulent, since in addition to the FOMC meeting of the US Federal Reserve, a meeting of the Bank of England is also due on Thursday, November 03.
There was such an old Polish adventure series called Stake Larger Than Life. In our case, the decision of the British Central Bank on the interest rate will determine how the pound will continue to live. And the fact that it will face numerous "adventures" is for sure.
At the height of the fiscal policy fiasco, the market briefly predicted that the pound rate would reach 3.90% after the November meeting. However, investors' appetites have subsided considerably, and they would like it to rise from the current 2.25% to at least 3.0%, that is, by 75 bp. However, strategists at ING, the largest banking group in the Netherlands, believe that the chances of a 50 bp rate hike are now higher, and this is a negative factor for the pound. Therefore, its further growth will be difficult. "The GBP/USD correction may continue to the 1.1750 area, but we doubt that this increase will last long," ING says.
The opposite view is shared by their colleagues at Scotiabank. In their opinion, although the pound failed to break above 1.1650 on October 27, the pair will maintain a positive trend in the next few weeks. And the main support for it will be the level of 1.1400.
As for the median forecast, here the majority of analysts (50%) side with the bears, 15% have taken a neutral position, while the number of supporters of the strengthening of the pound is 35%. Among the oscillators on D1, 100% are on the green side, but a quarter of them are in the overbought zone. Among trend indicators, only 35% are red, 65% are green. The levels and zones of support for the British currency are 1.1550, 1.1475-1.1500, 1.1400, 1.1350, 1.1230, 1.1100, 1.0985-1.1000, 1.0750, 1.0500 and the September 26 low at 1.0350. When the pair moves north, the bulls will meet resistance at the levels of 1.1645, 1.1720, 1.1830, 1.1900, 1.1960, 1.2135 and 1.2200.
Of the events of the upcoming week, in addition to the mentioned meeting of the Bank of England, we can note the publication of the Business Activity Index (PMI) in the construction sector of the United Kingdom on Friday, November 04.
USD/JPY: The Mystery of the Pair's Collapse Is Revealed
As we predicted back in May, USD/JPY reached 115.00 in autumn, and it reached 151.94 on Friday, October 21, hitting a 32-year high this time. However, everything was clear in advance as for the growth of the pair. But what came as a shock was its subsequent massive collapse. The pair collapsed by more than 500 points within a few minutes: from 151.63 to 146.24. According to the Financial Times, the Bank of Japan (BOJ) sold at least $30 billion at that moment, in an attempt to support the yen. The pair turned around and soared again after this intervention: apparently, $30 billion was not enough. Another intervention followed on Monday, October 24, causing the pair to fall to 145.48. And then, a bounce up again. Last week's low was fixed at 145.10, while the last chord sounded much higher at 147.40. It is curious that all these jumps in the Japanese currency occurred against the backdrop of recent statements by Japanese Prime Minister Fumio Kishida that "sharp, one-sided movements of the yen are undesirable."
Such over-volatility in USD/JPY suggests that the Ministry of Finance and the Bank of Japan will have to work hard to stop demand for the dollar against the troubled yen. "The Japanese authorities are really in a quandary," ING analysts comment. "We can easily understand their interest in not drawing the 150.00 line, given the market is very volatile, but by allowing the yen to break higher, they risk causing a sharp sell-off of the currency that Tokyo would like to contain in the first place."
"Unless the BoJ moves to a less dovish stance, foreign exchange intervention remains the most viable option," ING adds. But, apparently, BoJ is not going to tighten its monetary policy. The regulator remained true to itself at its last meeting last Friday, October 28 and kept the interest rate at a negative, ultra-dove level of -0.1%. So now the pair's dynamics depends on whether the BoJ has enough money to intervene to withstand a rise in rates by the US Federal Reserve.
At the moment, half of the analysts believe that there will be enough money. And therefore, they vote for the downtrend of the pair. 30% have taken a neutral position and 20% are waiting for another victory for the dollar. The oscillators on D1 have a mixed picture: 50% are looking north, 30% are looking south, and 20% are gray neutral. Among the trend indicators, 85% are on the green side and 15% are on the red side. The nearest support level is 146.90, then 145.30, 143.75, 140.60, 140.00, 138.35-139.05 and 137.40. Resistance levels are 148.45, 149.45, 150.00, 151.55. The purpose of the bulls is to rise and gain a foothold above 152.00. Next are the 1990 highs around 158.00.
No important statistics on the state of the Japanese economy are expected to be released this week. The only interest is the publication of the report on the meeting of the Bank of Japan Monetary Policy Committee on Wednesday, November 02, in which market participants will try to catch at least hints of a possible change in the regulator's position. In addition, traders should keep in mind that the country has a day off on Thursday, November 03, the National Day of Culture. And of course, one should not forget about possible "surprises" in the form of BoJ interventions in support of the yen.
CRYPTOCURRENCIES: Just a Rise? Or a Rise Before a Fall?
Following the growth of US stock indices (S&P500, Dow Jones and Nasdaq) last week, bitcoin and ethereum went up, bringing joy to investors. Against the background of the fact that BTC/USD has not been able to gain a foothold above the $20,400 mark since September 13, the bulls can consider what is happening to be their success. However, it should be noted that the pair has been migrating along the $20,000 Pivot Point in the medium-term $18,100-25,000 side corridor for 19 weeks, since mid-June. So, the rise to the last seven-day high of $21.015 can only be considered a local micro-success, but not a reversal of the bearish trend.
Intense tightening of the Fed's monetary policy has already put the US economy on the brink of a recession. One more step, and recession will become inevitable. Some experts believe that the economic downturn could force the US Central Bank to abandon quantitative tightening (QT), at least for a while, without curbing inflation to the end. Against this background, the correlation between the prices of bitcoin and gold over the past 40 days has reached a significant value of 0.5, which is a strong increase after this indicator was almost zero in mid-August. Bank of America opined that "the rapidly growing relationship with gold indicates that investors may view bitcoin as a relatively safe haven in a situation where there remains macroeconomic uncertainty in the world, and the market bottom may eventually be fixed".
The bitcoin community is divided over whether BTC will rise or fall next year. There is reason to believe that BTC is likely to collapse sharply in the coming months but will then rise in middle to late 2023. Most analysts and technical indicators suggest that bitcoin could drop to $12,000-$16,000 in the coming months. This correlates with a volatile macro environment, stock prices, inflation, Fed data, and (at least according to Elon Musk) a possible recession that could last until 2024.
For example, the well-known trader Ton Weiss believes that against the backdrop of the upcoming halving-2024, the quotes of the first cryptocurrency will reach $100,000 next year. But at the same time, he does not exclude the possibility of a fall in the price of digital gold to the level of $10,000-14,000 before the onset of the bull market. According to Weiss, capital flows from Europe to the United States and the syndrome of lost profits can become the engine of growth. "They missed their chance to catch the low in 2018. This is another possibility. If bitcoin ever drops below $10,000, investors will immediately take advantage of this," the trader explained.
Many experts say that the upcoming halving could significantly push the BTC price up. This opinion is also shared by a well-known specialist aka PlanB, who predicts the price movement of the main cryptocurrency based on the Stock-to-Flow (S2F) model. He is supported by fellow trader and analyst Josh Rager, who also expects a significant increase in bitcoin, but only after halving in 2024. In his opinion, growth should not be expected before this event.
As you know, the last bitcoin halving occurred on May 11, 2020, when the reward for each created block was halved to 6.25 BTC. This reward will again be halved to 3.125 BTC per block during the fourth halving, which is expected to take place in May 2024.
The legendary trader and analyst Peter Brandt is of the same opinion. He said that bitcoin would reach a new all-time high in about 32 months, but it would first fall to $13,000. The expert believes that the first cryptocurrency will find this bottom at the beginning of 2023 and will not show "impressive" performance over the next year and a half.
According to Brandt, the US Federal Reserve is not going to ease monetary policy. He assumes that the regulator will raise interest rates by another 75 basis points at least twice more by the end of 2022 in order to combat inflation. However, the analyst expects that the value of the first cryptocurrency will no longer depend on other markets at some point. "Bitcoin will eventually correlate with bitcoin," Brandt explained. The expert also noted that the cryptocurrency will become the "main store of value" in the next 10 years.
Recall that Peter Brandt has been working in the financial markets for more than 40 years, he is the creator of the Factor Trading service, which provides expert reports and analysis of asset value charts. Brandt has repeatedly noted that bitcoin is one of the largest parts of his investment portfolio.
Now more details about the forecast for the next 2 months. Most of the 564 crypto investors surveyed by MLIV Pulse think that bitcoin will continue to trade in the $17,600-25,000 price range. According to an October survey conducted by financial company Finder, the first cryptocurrency will be trading at $21,344 by the end of this year.
The forecast of Eight trading firm CEO Michael van de Poppe is a little more optimistic. He believes that bitcoin has been consolidating around $20,000 for too long and should soon get out of the corridor to shake things up. "Bitcoin will break through all levels within two to three weeks. And I think it will be up. I think we'll get to $30,000." This growth is evidenced by the outflow of BTC from centralized exchanges: investors withdraw funds to cold wallets in anticipation of the strengthening of the first cryptocurrency.
Other experts, on the contrary, believe that we will not see a surge either in the near future or in 2023. Gareth Soloway of InTheMoneyStocks has pointed out that there is a small chance that the coin could even crash to $3,500. "I think we will see a small bounce in the near future, then a wave down to $12,000-13,000, and then, I am afraid, we will move to $8,000-10,000, maybe even see a drop to $3,500," he says. At the same time, Gareth Soloway warns that if BTC falls to $12,000 or below, it may not be profitable for miners to manage the ecosystem. This would mean that transactions are no longer being processed. And this, in turn, can not only damage the industry, but also destroy the bitcoin market.
According to billionaire Frank Giustra, the end of the bitcoin era will be actively promoted by the US authorities, who will destroy cryptocurrencies sooner or later. "I think the US authorities really want to be ahead of the rest of the planet in terms of blockchain, not in bitcoin, but in a state-owned digital currency that they can fully control. Like all other countries, they don't need bitcoin competition. Therefore, I see BTC as a game against sovereign fiat money," Giustra said, adding that bitcoin has no chance of standing up to world governments.
Of course, such statements are alarming. But we wouldn't be us if we hadn't finished our review on an optimistic note. According to the mentioned survey conducted by the financial company Finder, the median forecast of analysts is that the price of BTC will reach $270,722 by 2030.
In the meantime, at the time of writing the review, on the evening of Friday October 28, the BTC/USD pair is trading in the $20,600 zone, the total capitalization of the crypto market is $1.005 trillion ($0.913 trillion a week ago). The Crypto Fear & Greed Index rose 7 points in seven days from 23 to 30 and moved from the Extreme Fear zone to the Fear zone. According to the creators of the Index, it is worth thinking about opening long positions at this point. Although, in our opinion, the situation is very shaky, and traders need to act as carefully and cautiously as possible.