First, a review of last week’s events:
- EUR/USD. Recall that, when giving the last week's forecast, 60% of experts had expected the euro to grow to the zone 1.1480-1.1525, and turned out to be 100% right: by Wednesday November 7, the pair had risen to the height of 1.1500.
The remaining 40% of analysts had suggested that the pair would still go down and re-test support for 1.1300 against the background of weak economic indicators of the Eurozone and problems with the Italian budget. This script has also been implemented. On Thursday, November 8, the euro began to decline after the report of the European Commission, which lowered its GDP forecast for 2019 from 2.0% to 1.9%. A further fall in the euro and a strengthening of the dollar was facilitated by a press release from the US Federal Reserve, which showed that the US currency was expecting another increase in the interest rate until the end of 2018.
As a result, the dollar has won back 175 points from the euro, groping for a local bottom at the level of 1.1325, followed by a slight rebound, and as a result, the pair froze at 1.1335; - GBP/USD. The situation with the British pound was similar to the euro last week. Supported by graphical analysis and almost 90% of oscillators and trend indicators on H4, 40% of experts had voted for the continuation of the pair’s growth to 1.3100-1.3220, and on November 7, the pair reached the height of 1.3173. This was followed by a reversal, and, as the bears' supporters had proposed, the pair rushed down to reach the support at the level of 1.2955 on Friday, pushed by the US Federal Reserve comments. It met the end of the weekly session in the zone 1.2970;
- USD/JPY. The dollar strengthened towards the Japanese currency as well. However, the pair did not manage to overcome the key resistance level of 1.1400, and finally finished the week at 113.80, demonstrating a weekly gain of only 60 points;
- Cryptocurrencies. It turns out that the mid-term elections held in the US can be viewed not only as a struggle of Republicans and Democrats, but also as a fight between supporters and opponents of cryptocurrencies. And, judging by the comments, the blockchain supporters won in a number of states. The positive background is complemented by the information that the major American digital companies are actively and successfully creating lobbies to promote their interests in the Senate, Congress and the US government.
As for the negative news one can mention the appeal of the South Korean Bar Association to the government to regulate the crypto-market, as well as accusations from the US Securities Commission (SEC) against the founder of the EtherDelta cryptocurrency exchange Zachary Coburn in illegal activities.
As for the top virtual currencies, as we predicted, most of them reacted calmly to all these pieces of news. Thus, the bitcoin has not only stayed within the specified range of $6,200-6,660, but also narrowed its scope to $6,320-6,610. The altcoins, following the reference cryptocurrency, showed a moderate increase over the week: the Ethereum (ETH/USD) went up 4%, the Litecoin (LTH/USD) 0.5%, the Ripple (XRP/USD) - 8%. The most impressive dynamics was demonstrated by the BCH/USD: the Bitcoin Cash quotes rose from $425 to $570 from the beginning of the month to the evening of November 9, that is, by 34%.
As for the forecast for the coming week, summarizing the opinions of a number of analysts, as well as forecasts made on the basis of a variety of methods of technical and graphical analysis, we can say the following:
- EUR/USD. According to 70% of experts, the Fed's statement will still have some time to influence the strengthening of the dollar. That is why they believe that the pair will not only be able to drop to the year's low of 1.1300, but, in case the economic statistics of the Eurozone are weak and there is positive news from the USA, it will break through this support and reach values in the area of 1.1200-1.1250. Both graphical analysis on H4, and the vast majority of oscillators as well as trend indicators agree with this forecast. However, about 20% of the oscillators on H4 already give signals the pair is oversold, which may be a precursor for a close correction.
30% of analysts also expect a trend reversal up. In their opinion, the dollar is now overvalued, and we can expect the pair to return to the zone 1.1435-1.1525.
This week one should, first of all, pay attention to the data on GDP in the Eurozone and on the inflation in the United States, which will be released on Wednesday, November 14 and Thursday, November 15, and on inflation in the Eurozone on Friday November 16;
- GBP/USD. Important macroeconomic data is expected next week from the UK. The data on the labor market will be made public on Tuesday, November 13, and the next day data on consumer price inflation will be published, which, according to forecasts, may increase by 0.1%. And the higher its performance, the more likely it is that the interest rate on the British pound will rise.
However, at the moment the majority of analysts (65%), along with graphical analysis on H4 and 90% of indicators, are pessimistic, predicting the “Briton” a further fall. The nearest target is 1.2850, the next one is 1.2810.
An alternative point of view is represented by 40% of experts and 10% of oscillators, signaling the pair is oversold. The targets for growth are 1.3150, 1.3175 and 1.3235. The nearest resistance is 1.3040; - USD/JPY. The strong dollar has raised the pair to the horizon of 114.00. The expectations of a rise in interest rates by the Bank of Japan are almost close to zero, so 55% of experts, as well as about 60% of indicators on H4 and D1, support bullish sentiment, expecting the pair to continue to grow to resistance levels of 114.55 and 115.40.
At the same time, there is a divergence between the indications of a number of oscillators and the quotes of the pair. In addition, we must bear in mind that the height of 114.55 is the high of 2018, which can be a serious barrier to the further growth of the pair. Therefore, 45% of analysts together with 40% of indicators and graphical analysis on H4, expect that the pair will be able to return to the support of 113.10 in the near future, and then to the level of 111.75. And as for the medium-term forecast, more than 60% of experts already side with the bears; - Cryptocurrencies. Quotes of these pairs are still largely determined by the news. But as mentioned above, cryptocurrencies have already developed a fairly strong immunity against the news. Therefore, we should not expect strong jumps in the bitcoin market value yet.
The actions of a number of regulators, such as the SEC, will deter the growth. The CoinDesk website has reported that the fines imposed on Zachary Coburn are only the first signs, further sanctions against a number of crypto exchanges may follow. The vice-premier of Thailand is also thinking of bringing order to the virtual market, as reported by the Bangkok Post.
On the other hand, no major players are interested in the collapse of the main cryptocurrency, and the lower limit of volatility is still determined by the mining profitability level. When it is reached, the active buying up of coins begins, and the quotes are going up.
Therefore, the forecast remains almost unchanged for the second month: the BTC/USD will continue to move in a narrow range of $6,200-6,660. The next resistance is $6,780, the next support is around $6,100.
Roman Butko, NordFX
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.
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