Foreign exchange and Cryptocurrencies Forecast for October 23 – 27, 2023 – Analytics & Forecasts – 21 October 2023
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EUR/USD: No Curiosity Fee Hikes from the Fed and ECB within the Close to Future?
● Ranging from the final days of September, the U.S. Greenback Index (DXY) has been buying and selling inside a sideways channel. Macroeconomic knowledge launched final week didn’t present a transparent benefit to both the U.S. or the European forex. On Tuesday, October 17, U.S. retail gross sales knowledge was printed, exhibiting a month-to-month enhance of 0.7%. Though this determine was decrease than the earlier 0.8%, it considerably exceeded the market’s common forecast of 0.3%. On the identical day, the ZEW Financial Sentiment Index for the Eurozone was additionally launched, outperforming expectations with a studying of two.3, significantly higher than the forecast of -8, and marking a full rebound from the earlier damaging determine of -8.9.
On Wednesday, October 18, revised knowledge on client inflation within the Eurozone was launched. The September Shopper Value Index (CPI) matched the forecast and was in the end assessed at 4.3% year-on-year (YoY), in comparison with 5.2% the earlier month. On Thursday, October 19, the variety of preliminary jobless claims within the U.S. got here in at 198K, surpassing expectations and falling under each the prior determine of 211K and the market forecast of 212K.
● Taking a broader view of the U.S. economic system, we typically observe sturdy employment and GDP progress charges, a deceleration in inflation, elevated client exercise, and an actual property market that is still comparatively secure regardless of rising mortgage charges. All these elements level to the appropriateness of one other price hike, which ought to, in flip, push the DXY greater. Nevertheless, primarily based on statements from Federal Reserve officers, it appears unlikely {that a} price hike will happen on the upcoming Federal Open Market Committee (FOMC) assembly on November 1.
Particularly, Patrick Harker, President of the Federal Reserve Financial institution of Philadelphia, said that financial stress shouldn’t be created by growing borrowing prices. Echoing Harker’s sentiments, Lorie Logan, President of the Federal Reserve Financial institution of Dallas, famous that though “desired progress is being noticed within the battle towards inflation, it’s nonetheless too excessive.” She added that “the economic system continues to show sturdy efficiency, and labour markets stay tight,” but “the Fed nonetheless has a while to look at the economic system and markets earlier than making a choice on financial coverage.”.
Analysts on the Netherlands’ largest banking group, ING, opined that whereas the Fed Chairman’s feedback have been perceived as dovish and led to some weakening of the U.S. forex, the greenback seems extra inclined to rise than to additional fall within the brief time period. Economists at Germany’s Commerzbank characterised the temper amongst Fed officers as cautiously hawkish reasonably than dovish. In addition they see little likelihood for one more price hike within the present local weather. “Certainly, plainly the Fed has reached its peak, though Jerome Powell didn’t rule out the opportunity of one other price hike relying on incoming knowledge. Nevertheless, financial coverage at the moment performs a secondary position for the market. Geopolitical dangers have taken the forefront, and the greenback continues to be in demand as a secure haven,” they commented. The financial institution’s consultants forecast that though it could be difficult for the greenback to proceed rising in such a situation, excessive oil costs will present help.
At France’s Societe Generale, it’s believed that “the narrative a couple of greater price over a long term, each from the Fed and the ECB, factors to a gradual decline of the euro.” In line with the financial institution’s consultants, “knowledge from the Eurozone isn’t good, and the divergence between progress forecasts within the U.S. and the Eurozone suggests {that a} gradual motion towards parity [1.000], however not past it, seems seemingly.”.
● As of the time of penning this evaluation, EUR/USD has evidently not reached parity and concluded the previous week at 1.0593. Knowledgeable opinions on its near-term future are divided as follows: 50% voted for a stronger greenback, 35% foresee the pair trending upward, and 15% have adopted a impartial stance.
Turning to technical evaluation, the outlook can be combined. Among the many pattern indicators on the D1 chart, the ratio stands at 1:1: 50% in favour of reds (bearish) and 50% on the facet of greens (bullish). Oscillators present 40% siding with the European forex, a mere 15% in favour of the greenback, with the remaining 45% taking a impartial place. The quick help ranges for the pair are located round 1.0550, adopted by 1.0485-1.0510, 1.0450, 1.0375, 1.0255, 1.0130, and 1.0000. Bulls will encounter resistance within the 1.0600-1.0620 zone, then at 1.0670-1.0700, 1.0740-1.0770, 1.0800, 1.0865, and 1.0945-1.0975.
● The upcoming week guarantees to be extremely eventful. On Tuesday, October 24, a slew of Buying Managers’ Index (PMI) knowledge will likely be launched throughout varied sectors of the German, Eurozone, and U.S. economies. The next day, October 25, will carry U.S. housing market knowledge, together with remarks from Federal Reserve Chair Jerome Powell. On Thursday, the European Central Financial institution (ECB) will maintain its assembly the place Governing Council members are anticipated to decide on the euro rate of interest, which in accordance with consensus forecasts, is prone to stay at its present degree of 4.50%. Importantly, not solely the choice itself but additionally subsequent statements and feedback from the ECB management will likely be of significance. On the identical day, the U.S. will launch sturdy items orders knowledge in addition to preliminary GDP figures for Q3 of the present yr. The workweek will conclude on October 27 with the discharge of U.S. private consumption expenditure knowledge.
GBP/USD: Will the BoE Fee Stay Unchanged as Nicely?
● In the beginning of this month, particularly on October 4, GBP/USD trended upwards, shifting from a degree of 1.2037 to succeed in 1.2337 inside per week. Nevertheless, resistance across the 1.2320 zone and a trendline clearly seen on the D1 and W1 timeframes halted the bullish momentum, sending the pair again downwards. In consequence, the British forex has misplaced roughly 7.5% towards the greenback since mid-July. The driving elements behind this usually are not merely technical evaluation but additionally the prevailing financial and geopolitical panorama.
Amid tensions within the Center East and the continuing escalation of armed battle between Israel and Hamas, traders are turning again to the greenback, viewing it as a safe-haven forex. Naturally, the rising price of power commodities can be affecting costs in the UK, which is able to undoubtedly put stress on the nation’s economic system and its forex, usually thought of by traders to be a riskier asset.
● It is price noting that firstly of the yr, consultants predicted that the UK would slide right into a recession. To this point, these forecasts haven’t materialized, though the economic system is teetering on the sting, with the present annual GDP progress price at 0.6% (in comparison with 2.1% in the USA). The scenario may deteriorate by year-end, as excessive power costs amid winter chilly spells may additional gasoline inflation. It is already observable that the nation’s inflation slowdown has stalled, and the Shopper Value Index (CPI) has been hovering round 6.8-6.7% year-on-year for the third consecutive month.
In such a situation, the Financial institution of England (BoE) may very nicely decide to deal with supporting the economic system over combating inflation. Though some representatives of the central financial institution have said that the problem of elevating rates of interest stays open, the current interview given by BoE Governor Andrew Bailey to the Belfast Telegraph appeared reasonably dovish, neutralizing the impact of Jerome Powell’s equally dovish feedback. Mr. Bailey indicated that he expects “a noticeable lower” in inflation within the coming month. ” September’s inflation knowledge, we are able to say that core inflation has dropped a bit in comparison with our expectations, which is kind of encouraging,” added Bailey, sending GBP/USD right into a minor knockdown.
● Stress on the pound was additionally exerted by the UK retail gross sales knowledge launched on Friday, October 20. In line with the Workplace for Nationwide Statistics, retail gross sales declined by -0.9% month-on-month in September, considerably under the -0.1% forecast and the earlier 0.4% worth.
In the intervening time, the scenario for the pound stays difficult. It is unclear how the BoE will react to the newest knowledge. Most probably, till the upcoming assembly on November 2, the central financial institution will undertake a “shut your eyes and hope for the perfect” strategy. In the meantime, analysts from Financial institution of America, Deutsche Financial institution, Goldman Sachs, and RBC are in settlement that the speed hike cycle in the UK has seemingly come to an finish. On the very least, the chance of a price hike within the upcoming BoE assembly is estimated to be under 50%.
● The weekly low for GBP/USD was recorded at 1.2089, whereas the week closed at 1.2163. When polled in regards to the near-term way forward for the pair, 40% of analysts voted for its rise. The bulk (60%), nonetheless, consider that the pair will proceed its transfer towards the 1.2000 goal. On the D1 timeframe, pattern indicators are unanimously (100%) pointing to a decline, displayed in crimson. Oscillators are much less decisive: 65% point out a decline, 15% level to an increase, and the remaining 20% are impartial.
By way of help ranges and zones, if the pair continues to maneuver southward, it would encounter 1.2085-1.2130, 1.2040, 1.1960, and 1.1800. On the flip facet, if the pair rises, it would face resistance at 1.2190-1.2215, 1.2270, 1.2330, 1.2450, 1.2510, 1.2550-1.2575, and 1.2690-1.2710 ranges.
● Tuesday, October 24 is noteworthy within the financial calendar for the upcoming week. Knowledge on the UK labor market and enterprise exercise will likely be launched on today.
USD/JPY: Amidst Extended Uncertainty
● Many occasions have we heard these reassuring statements from Japanese officers about all the pieces and… nothing! Let’s take, for instance, some quotes from Friday, October 20. First, from Financial institution of Japan (BoJ) Governor Kazuo Ueda: “The Japanese economic system is recovering at a reasonable tempo. […] Uncertainty relating to Japan’s economic system could be very excessive. […] Inflation charges will seemingly decelerate after which choose up once more. [But] total, Japan’s monetary system stays secure.”
Subsequent, from Finance Minister Shunichi Suzuki: “It’s important for currencies to maneuver stably and mirror basic indicators. […] Alternate charges are influenced by varied elements. [I] is not going to touch upon forex ranges in Forex. [And] I cannot touch upon our response to the forex market scenario.”
And, because the cherry on high, a quote from the Financial institution of Japan’s newest report, additionally printed on October 20: “Though the nation’s monetary system is usually secure, the ‘stress interval could also be additional extended because of the ongoing tightening of central banks’ financial coverage and issues about slowing financial progress charges in overseas nations.” In abstract, Japan, on one hand, is doing nicely, however on the opposite, is experiencing stress attributable to different central banks which might be tightening their financial coverage and elevating rates of interest.
● As consultants word, the BoJ continues to take care of an ultra-accommodative financial coverage, persistently ignoring the dangers of rising inflationary pressures within the nation. On Tuesday, October 17, Bloomberg reported that the Financial institution of Japan’s new core CPI forecast for the 2023 fiscal yr is prone to strategy 3.0%, in comparison with 2.5% beforehand.
The truth that rates of interest in Japan stay very low on account of yield curve management coverage ought to result in an extra decline within the yen towards the greenback. This decline may stop underneath two circumstances: if the greenback rates of interest decline or if the Financial institution of Japan abandons its YCC (Yield Curve Management) coverage. Each may doubtlessly start to occur as early as mid-2024, however actually not now. (Though one shouldn’t overlook the opportunity of forex interventions by the Japanese Ministry of Finance).
In line with strategists at Societe Generale, “if we see additional will increase in yields within the U.S. and not more than a change within the inflation forecast by the Financial institution of Japan at its assembly on October 31, then one other surge [in USD/JPY] above 150.00 is virtually inevitable.” “The yen has each likelihood of turning into probably the most profitable currencies in 2024,” Societe Generale believes, “however predicting when USD/JPY will peak is as straightforward or tough as figuring out when the yield on 10-year U.S. Treasury bonds will peak.”
● Amid a protracted ambiance of uncertainty, USD/JPY ended the earlier buying and selling week at 149.85. In the case of the pair’s short-term outlook, a mere 15% of consultants foresee a renewed push in direction of the 150.00 mark. A further 20% predict a downward correction, whereas the bulk, 65%, stay noncommittal. On the D1 timeframe, all pattern indicators are unanimously signalling ‘purchase’ with a inexperienced coloration. Likewise, 100% of oscillators are inexperienced, though 40% point out that the pair could also be overbought. Quick help may be discovered within the 149.60 space, adopted by zones at 148.30-148.65, 146.85-147.25, 145.90-146.10, 145.30, 144.45, 143.75-144.05, and at last 142.20. On the upside, resistance is current at 150.00-150.15, then at 150.40, adopted by the October 2022 excessive of 151.90, and 153.15.
● No important financial knowledge in regards to the state of the Japanese economic system is scheduled for launch within the upcoming week. The one noteworthy merchandise is the publication of the Tokyo Shopper Value Index on Friday, October 27.
CRYPTOCURRENCIES: The Actual Market Surge Triggered by Faux Information About BTC-ETF
● Undoubtedly, probably the most important day of the previous week was Monday, October 16. On today, the bitcoin value soared to $30,102 earlier than plummeting to $27,728. Following BTC, different digital property additionally noticed a pointy value enhance, adopted by a steep decline. In line with Coinglass knowledge, the value surge led to the liquidation of over 33,000 buying and selling positions, with merchants incurring losses totalling $154 million. Of this quantity, bitcoin accounted for $92.0 million in losses, Ethereum for $22.7 million, and Solana for $4.6 million.
The surge in quotations occurred after Cointelegraph printed information that the U.S. Securities and Alternate Fee (SEC) had accredited BlackRock’s utility for a spot bitcoin exchange-traded fund (ETF). It was later revealed that the information was faux. Cointelegraph’s editorial group apologized for publishing the false information. The publication clarified that one in every of their employees had seen the information in regards to the SEC’s approval of the BTC-ETF on Platform X (beforehand Twitter) and determined to publish it as shortly as potential with out fact-checking or acquiring editorial approval. Representatives from the Fee additionally famous that “the perfect supply of details about the SEC is the SEC itself” and suggested customers to “be cautious about what they learn on-line.”.
● To grasp this challenge extra deeply, it is useful to look again to its origins in 2021. That yr, a sequence of corporations submitted functions to create such funds. Three years in the past, Bitwise Chief Funding Officer Matt Hougan defined that cryptocurrency futures ETFs usually are not significantly appropriate for long-term traders on account of excessive ancillary prices. It is just when spot bitcoin exchange-traded funds change into out there that institutional traders will start large-scale capital inflows.
For clarification: A spot BTC-ETF is a fund whose shares are traded on an alternate, and which tracks the market, or spot value, of bitcoin. The first concept behind such ETFs is to provide institutional traders entry to bitcoin buying and selling with out bodily proudly owning the asset, by means of a regulated and financially acquainted product.
● All functions submitted to the SEC in 2021 have been rejected, resulting in a hiatus that was interrupted on June 15, 2023. On that day, the scenario dramatically modified: the monetary world was abuzz with the information that funding big BlackRock had submitted its utility for a spot bitcoin belief. In an interview with Bloomberg, Hougan heralded the daybreak of a brand new period. He said, “We now have BlackRock elevating the flag and declaring that bitcoin issues: that it’s an asset institutional traders need to put money into. I consider we’ve entered a brand new period in cryptocurrency, which I name the foundational period, and I anticipate a multi-year bull pattern that’s simply starting.”
Below the banner raised by BlackRock, seven extra main monetary establishments additionally submitted related functions to the SEC. Amongst them have been world asset managers like Invesco and Constancy, who, consultants consider, have the capability to soak up trillions of {dollars}. The ninth on the record was the asset administration firm GlobalX. They, together with a number of different monetary giants, had entered the ETF race again in 2021, however have been then thwarted by the SEC. Now, in August 2023, GlobalX made one other try.
● Owing to the initiatives of those funding titans, bitcoin skilled a meteoric rise beginning within the latter half of June. It shattered the $25,000 resistance barrier, soared past $30,000, and peaked at $31,388 on June 23. This resulted in a weekly acquire exceeding 26%. Following bitcoin’s lead, altcoins like Ethereum additionally noticed important upward motion, registering roughly a 19% enhance throughout the identical interval. Nevertheless, on account of subsequent regulatory pressures from the SEC and actions by the U.S. Federal Reserve, together with different damaging information, the BTC/USD buying and selling pair started to say no. It reached a low level of $24,296 on August 17.
● And now, two months later, we see one other surge and subsequent drop. What’s subsequent? It is a pertinent query, because the approval of spot bitcoin ETFs is predicted to unleash a big wave of adoption of this asset class by institutional traders. In line with analysts at CryptoQuant, this might shortly propel the market capitalization of the crypto house by $1 trillion. Of their opinion, the percentages of this taking place have considerably elevated following the authorized victories of Ripple and Grayscale towards the SEC. Bloomberg analysts at the moment estimate these odds at 90%.
It is price noting that the deadline for the SEC’s selections on the functions from BlackRock and different corporations will arrive in March 2024. Nevertheless, Mike Novogratz, the CEO of Galaxy Funding, believes that spot bitcoin ETFs may change into a actuality as early as this yr. Larry Fink, the top of BlackRock, declined to touch upon the standing of their utility however added that the October 16 rally was pushed not a lot by rumours of its approval however reasonably by a need amongst folks to make use of high quality property, which he believes consists of bitcoin, gold, and Treasury bonds.
● Anthony Scaramucci, founding father of SkyBridge Capital and former White Home Communications Director, believes that the main cryptocurrency is “in some ways much more beneficial than gold,” and will “simply” obtain a market capitalization of $15 trillion. In line with his calculations, such a capitalization would propel the value of bitcoin to roughly $700,000.
Scaramucci asserts that the present monetary system is “damaged.” “Unusual issues may occur if you see nations which might be hostile to the U.S. buying and selling in bitcoin or different property to distance themselves from the greenback. It’s because the USA has used its forex to say its personal geopolitical will,” he stated.
● Opinions inside the crypto business relating to the near-term way forward for bitcoin (BTC) are divided. A research carried out by Finbold revealed {that a} substantial variety of consultants don’t rule out the opportunity of BTC/USD climbing to $100,000 and even $200,000. Finbold specialists additionally sought forecasts from the factitious intelligence PricePredictions. In line with AI calculations, after the approval of a bitcoin ETF, the flagship crypto asset may swiftly attain the $100,000 vary. PricePredictions famous that further elements like mainstream bitcoin adoption, institutional investor actions, regulatory exercise, and total macroeconomic circumstances will likely be important.
Dealer, analyst, and founding father of enterprise agency Eight, Michael Van De Poppe, believes that the October sixteenth faux information is not going to hinder the cryptocurrency’s progress. In line with his observations, the coin has already entered a section of optimistic momentum. “The pattern is already upward. The lows we’re seeing now supply a shopping for alternative. A bitcoin ETF will finally enter the market; it is simply not taking place at present,” stated the Eight CEO.
Authors of the analytical channel Root in X (previously generally known as “Twitter”) additionally suppose that the faux information didn’t exert important stress on the cryptocurrency. Of their opinion, the coin’s pump, regardless of the following correction, has really helped enhance its place. Nevertheless, there’s additionally a large portion of the crypto neighborhood that helps a bearish outlook, suggesting the coin may drop to the $19,000-$23,000 vary.
● On Friday, October 20, BTC/USD made one other try to breach the $30,000 mark, reaching a excessive of $30,207 earlier than retreating. On the time of penning this overview, it’s buying and selling at $29,570. The general market capitalization of the crypto market stands at $1.120 trillion, up from $1.046 trillion per week in the past. The Crypto Worry & Greed Index has risen over the week from 44 to 53 factors, shifting from the ‘Worry’ zone into the ‘Impartial’ zone.
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