Foreign exchange and Cryptocurrencies Forecast for September 18 – 22, 2023 – Analytics & Forecasts – 16 September 2023

EUR/USD: ECB Triggers Euro Collapse

● The previous week was marked by two important occasions. The primary was the discharge of Client Worth Index (CPI) knowledge in the US on September 13. The second was the assembly of the European Central Financial institution’s (ECB) Governing Council on September 14.

Concerning the primary occasion, the annual CPI in the US rose from 3.2% in July to three.7% in August, surpassing market forecasts of three.6%. On a month-to-month foundation, the CPI elevated from 0.2% to 0.6%, exactly in keeping with market expectations. Monetary markets reacted comparatively tepidly to this knowledge. In keeping with CME Group, there’s a 78.5% probability that the Federal Open Market Committee (FOMC) will preserve the important thing rate of interest at its present stage of 5.50% every year throughout its assembly on September 20. Nonetheless, the CPI statistics present the regulator some room for manoeuvre when it comes to tightening financial coverage sooner or later. If inflation in the US continues to rise, there’s a excessive chance that the Federal Reserve will enhance the refinancing price by one other 25 foundation factors (bps). That is particularly doubtless on condition that the U.S. economic system is demonstrating secure development and the nationwide labor market stays sturdy. The revealed variety of preliminary unemployment claims was 220K, which was decrease than the forecasted 225K.

● The second occasion triggered a significantly extra risky response. On Thursday, September 14, the ECB raised its key rate of interest for the euro by 25 foundation factors (bps) for the tenth consecutive time, shifting it from 4.25% to 4.50%. That is the very best it has reached since 2001. Specialists had various opinions on the transfer, labelling it as both hawkish or dovish. Nonetheless, in principle, an rate of interest enhance ought to have supported the widespread European forex. Contrarily, EUR/USD fell beneath the 1.0700 mark, recording a neighborhood low at 1.0631. The final time it reached such depths was within the spring of 2023.

The decline within the euro was attributed to dovish feedback made by the ECB’s management. One might deduce from these that the central financial institution had already introduced charges to ranges that, if sustained over an prolonged interval, ought to deliver inflation inside the Eurozone all the way down to the goal 2.0%. ECB President Christine Lagarde’s assertion, “I am not saying we’re on the peak of charges,” did not impress traders. They concluded that the present hike to 4.50% is probably going the final step on this tightening cycle of financial coverage. Because of this, with the backdrop that the Federal Reserve should still increase its price to five.75%, bears in EUR/USD have gained a noticeable benefit.

● Bearish momentum elevated even additional following Thursday’s launch of information indicating that U.S. retail gross sales for August elevated by 0.6% month-over-month (MoM), considerably exceeding the 0.2% forecast. On the identical time, the Producer Worth Index (PPI) for August rose by 0.7%, additionally surpassing expectations and the earlier studying of 0.4%.

● “We anticipate that the relative energy of the U.S. economic system will proceed to place strain on EUR/USD within the coming months, as the expansion differential will play a number one position. We preserve our forecast for the cross to be on the 1.0600-1.0300 vary over the following 6-12 months,” remark strategists at Danske Financial institution, one in every of Northern Europe’s main banks. They proceed: “On condition that it is laborious to ascertain a pointy shift within the present U.S. greenback dynamics, and with commodity costs at the moment rising, we could attain our 6-month forecast for the cross sooner than anticipated.”

HSBC strategists predict an excellent quicker decline for the pair, anticipating that it’ll attain the 1.0200 stage by the tip of this yr. In keeping with specialists at ING, the pair might drop to the 1.0600-1.0650 space across the time of the Federal Reserve assembly within the upcoming week. “We consider that, at this stage, the EUR/USD price can be more and more influenced by the greenback,” they write. “Markets have acknowledged that the ECB has more than likely reached its peak rate of interest, which signifies that Eurozone knowledge ought to turn out to be much less related. We’d see EUR/USD rise once more right this moment [September 15], however a return to the 1.0600/1.0650 space across the date of the Federal Reserve assembly appears extremely doubtless.”.

● As of the time of penning this evaluate, on the night of Friday, September 15, the pair certainly rose and ended the five-day buying and selling interval on the 1.0660 mark. 55% of consultants are in favour of a continued upward correction, whereas 45% agree with ING economists’ opinion and voted for a decline within the pair. As for technical evaluation, virtually nothing has modified over the previous week. Among the many development indicators and oscillators on the D1 timeframe, 100% are nonetheless favouring the U.S. forex and are colored in purple. Nonetheless, 25% of the newest indicators sign that the pair is oversold. Speedy assist for the pair is situated within the 1.0620-1.0630 space, adopted by 1.0515-1.0525, 1.0480, 1.0370, and 1.0255. Bulls will encounter resistance within the 1.0680-1.0700 zone, then at 1.0745-1.0770, 1.0800, 1.0865, 1.0895-1.0925, 1.0985, and 1.1045.

● The upcoming week can be fairly eventful. On Tuesday, September 19, client inflation knowledge (CPI) for the Eurozone can be launched. Undoubtedly, essentially the most important day of the week, and maybe even the upcoming months, can be Wednesday, September 20, when the FOMC assembly of the Federal Reserve will happen. Along with the rate of interest determination, traders count on to glean worthwhile info from the FOMC’s long-term forecasts in addition to through the press convention led by the Federal Reserve’s administration. On Thursday, September 21, the standard preliminary jobless claims knowledge can be revealed in the US, together with the Federal Reserve Financial institution of Philadelphia’s Manufacturing Exercise Index. Friday guarantees a deluge of enterprise exercise statistics, with the discharge of PMI knowledge for Germany, the Eurozone, and the US.  

GBP/USD: Awaiting the Financial institution of England Assembly

● In keeping with latest statistics, the UK economic system goes via a difficult interval. A few of the extra emotional analysts even describe its situation as dire. GBP/USD continued to say no in opposition to the backdrop of disappointing GDP knowledge for the nation. In keeping with the newest figures launched by the Workplace for Nationwide Statistics (ONS) on Wednesday, September 13, the British economic system contracted by -0.5% on a month-to-month foundation, in comparison with an anticipated decline of -0.2%.

The day earlier than, on Tuesday, the ONS revealed equally disheartening knowledge regarding the labor market. The unemployment price for the three months via July rose to 4.3%, in comparison with the earlier determine of 4.2%. Employment decreased by 207,000 jobs, whereas the economic system misplaced 66,000 jobs a month earlier. The market consensus forecast had been for a discount of 185,000 jobs.

● The Financial institution of England’s (BoE) efforts to fight inflation seem like quite modest. Though the annual price of worth development within the UK has decreased from 7.9% to six.8% (the bottom since February 2022), inflation stays the very best among the many G7 nations. Furthermore, the core Client Worth Index (CPI) remained unchanged from the earlier month at 6.9% year-on-year, solely 0.2% beneath the height set two months earlier.

Sarah Briden, the Deputy Governor of the BoE, believes that the “dangers to inflation […] are at the moment to the upside,” and that it’ll solely attain the goal stage of two% two years from now. In the meantime, in keeping with quarterly survey knowledge, solely 21% of the nation’s inhabitants is happy with what the Financial institution of England is doing to regulate worth development. This marks a brand new file low.

● Analysts at Canada’s Scotiabank consider that the decline of GBP/USD might proceed to 1.2100 within the coming weeks, and additional to 1.2000. Economists on the French financial institution Societe Generale maintain an analogous view. In keeping with them, whereas a fall to 1.1500 appears unlikely, the pair might very effectively attain 1.2000.

● GBP/USD concluded the previous week at a mark of 1.2382. The median forecast suggests that fifty% of analysts count on the pair to right upwards, 35% anticipate additional motion downwards, and the remaining 15% level eastward. On the D1 chart, 100% of development indicators and oscillators are colored purple, with 15% indicating that the pair is in oversold territory. If the pair continues to maneuver south, it can encounter assist ranges and zones at 1.2300-1.2330, 1.2270, 1.2190-1.2210, 1.2085, 1.1960, and 1.1800. Within the occasion of an upward correction, the pair will face resistance at 1.2440-1.2450, 1.2510, 1.2550-1.2575, 1.2600-1.2615, 1.2690-1.2710, 1.2760, and 1.2800-1.2815.

● Among the many key occasions associated to the UK economic system, the publication of the Client Worth Index (CPI) on Wednesday, September 20, stands out. This inflation indicator will undoubtedly impression the Financial institution of England’s determination on rates of interest (forecasted to rise by 25 bps, from 5.25% to five.50%). The BoE assembly will happen on Thursday, September 21. Moreover, towards the tip of the workweek, knowledge on retail gross sales and the UK’s Buying Managers’ Index (PMI) can be launched.

USD/JPY: No Surprises Anticipated from the Financial institution of Japan But

● For the reason that starting of this yr, the yen has been step by step dropping floor to the U.S. greenback, with USD/JPY returning to November 2022 ranges. It is value noting that it was a yr in the past at these heights that the Financial institution of Japan (BoJ) initiated energetic forex interventions. This yr, nonetheless, the BoJ has up to now engaged solely in verbal interventions, though fairly actively: high-ranking Japanese officers are often making public feedback.

In a latest interview with Yomiuri newspaper, BoJ Governor Kazuo Ueda acknowledged that the central financial institution may abandon its unfavorable rate of interest coverage if it concludes that sustainable inflation targets of two% have been achieved. In keeping with Ueda, by year-end, the regulator could have ample knowledge to evaluate whether or not circumstances are ripe for a coverage shift.

This verbal intervention had an impression: markets responded with a strengthening of the yen. Nonetheless, the “magic” was short-lived, and USD/JPY quickly resumed its upward trajectory, closing the five-day buying and selling interval at 147.84.

● Economists at Danske Financial institution consider that the worldwide setting favours the Japanese yen and forecast a decline in USD/JPY to 130.00 over a 6-12 month horizon. “We consider that yields within the U.S. are peaking or near it, which is the first argument for our bearish stance on USD/JPY,” they state. “Moreover, beneath present international financial circumstances, the place development and inflation charges are declining, historical past means that these are beneficial circumstances for the Japanese yen.” Danske Financial institution additionally anticipates {that a} recession might start in the US inside the subsequent two quarters, prompting the Federal Reserve to chop greenback rates of interest. Till the Federal Reserve concludes its easing cycle, the Financial institution of Japan is anticipated to keep up its financial coverage unchanged. Subsequently, any motion from the BoJ earlier than the second half of 2024 is unlikely.

● As for short-term forecasts, Societe Generale doesn’t rule out the likelihood that following the FOMC determination by the Federal Reserve on September 20, USD/JPY might transfer nearer to the 150.00 mark. As for the Financial institution of Japan’s assembly on Friday, September 22, no surprises are anticipated, and it’ll doubtless contain one other spherical of verbal intervention. In the meantime, the overwhelming majority of surveyed consultants (80%) consider that if the Federal Reserve price stays unchanged, USD/JPY has a excessive probability of correcting downward. Solely 10% count on the pair to proceed its upward trajectory, whereas one other 10% take a impartial stance. All development indicators and oscillators on the D1 time-frame are colored inexperienced, though 10% of those are signalling overbought circumstances.

The closest assist ranges are situated within the 146.85-147.00 zone, adopted by 145.90-146.10, 145.30, 144.50, 143.75-144.05, 142.90-143.05, 142.20, 141.40-141.75, 140.60-140.75, 138.95-139.05, and 137.25-137.50. The closest resistance is at 147.95-148.00, adopted by 148.45, 148.85-149.10, 150.00, and at last, the October 2022 excessive of 151.90.

● We’ve got already talked about the Financial institution of Japan’s assembly on September 22. No important financial knowledge regarding the state of the Japanese economic system is scheduled for launch within the coming week. Merchants ought to be conscious, nonetheless, that Monday, September 18, is a public vacation in Japan because the nation observes Respect for the Aged Day.

CRYPTOCURRENCIES: Demise Cross and Bitcoin Paradoxes

● A “Demise Cross,” indicated by the intersection of the 50-day and 200-day shifting averages, has appeared on bitcoin’s day by day chart. This sample final emerged in mid-January 2022, and was adopted by an almost threefold lower in bitcoin’s worth by November, which is trigger for concern. Curiously, an analogous Demise Cross was noticed in July 2021, however didn’t end in a worth decline, providing some reassurance.

● The present week within the cryptocurrency market has been marked by excessive volatility, with buying and selling volumes for the main cryptocurrency reaching $15 billion. Such ranges of exercise are usually solely seen round main macroeconomic occasions. On this case, they embrace the discharge of U.S. inflation knowledge on Wednesday, September 13, and the upcoming Federal Reserve assembly on September 20.

The BTC/USD weekly chart confirmed the next tendencies. On Monday, September 11, the worth of bitcoin fell beneath $25,000, regardless of a weakening greenback and rising inventory indices. This decline was fueled by rumors that the controversial FTX trade was planning to promote digital belongings as a part of a chapter continuing. On Tuesday, traders resumed shopping for at decrease ranges, pushing the coin’s worth above $26,500. On Thursday, following the ECB’s determination on rates of interest, bitcoin continued to strengthen its place, reaching a excessive of $26,838. This occurred even because the greenback was strengthening.

Actually, the latest worth dynamics are fairly paradoxical. Think about BTC/USD as a set of scales. When one facet turns into heavier, it goes down whereas the opposite goes up. But, we witnessed either side concurrently descending and ascending. In keeping with some analysts, there was no elementary rationale behind these bitcoin actions. With low liquidity and falling market capitalization, the asset was merely being “shifted” from one group of speculators to a different.

● Even the testimony of Gary Gensler, the Chairman of the U.S. Securities and Change Fee (SEC), earlier than the U.S. Senate didn’t spook market contributors. He acknowledged that the overwhelming majority of cryptocurrencies fall beneath the jurisdiction of his company. Consequently, all intermediaries available in the market, exchanges, brokers, sellers, and clearing companies, are required to register with the SEC.

Gensler in contrast the present state of the crypto business to the “wild west” years of the early twentieth century, when securities market laws was nonetheless being developed. Throughout these years, the company took a sequence of strict enforcement actions to rein within the business, and plenty of instances ended up in court docket. Comparable measures are wanted right this moment, not solely to function a deterrent to companies but additionally to guard traders, the SEC Chairman acknowledged. (It is value noting that, in keeping with Ripple CEO Brad Garlinghouse, the SEC is accountable for the U.S. turning into one of many “worst locations” to launch cryptocurrency initiatives.)

● However apart from the SEC, there are different regulators, such because the Federal Reserve. It is clear that the Fed’s selections and forecasts, which can be introduced on September 20, will impression the dynamics of dangerous belongings, together with cryptocurrencies. Mike McGlone, Senior Macro Strategist at Bloomberg Intelligence, has already warned traders that the close to future for the crypto sector seems to be difficult. In keeping with him, digital belongings gained reputation throughout a interval of near-zero rates of interest. Nonetheless, as financial coverage shifts, challenges might come up for the business. McGlone identified that the yield on U.S. Treasury bonds is anticipated to succeed in 5.45% by November, primarily based on futures contracts. In distinction, from 2011 to 2021, this yield was solely about 0.6% yearly, a interval throughout which bitcoin and different digital belongings noticed important development. Subsequently, a liquidity outflow from cryptocurrencies wouldn’t be stunning.

● As soon as once more, many analysts are providing constructive medium- and long-term forecasts however unfavorable short-term outlooks. Michael Van De Poppe, founding father of enterprise agency Eight, predicts a closing worth correction for the main cryptocurrency earlier than an impending bull rally. In keeping with him, if bears handle to breach the exponential shifting common line, at the moment at $24,689, the coin might drop to as little as $23,000 in a worst-case state of affairs. Van De Poppe believes this upcoming correction represents the final likelihood to purchase bitcoin at a low worth.

Dan Gambardello, founding father of Crypto Capital Enterprise, predicts that the following bull cycle might be essentially the most spectacular within the cryptocurrency market. Nonetheless, he additionally reminds traders that the crypto market follows cycles and seems to be in an accumulation section. Given this, Gambardello warns that there is a risk that bitcoin’s worth might drop to $21,000 within the coming weeks. He attributes this potential decline to market manipulation by main gamers who could also be driving down costs to build up cash in anticipation of the following bull run.

In keeping with a preferred knowledgeable often called CrypNuevo, the flagship cryptocurrency might quickly attain a $27,000 mark. Nonetheless, the analyst emphasised that that is more likely to be a false transfer, and a dip all the way down to round $24,000 ought to be anticipated thereafter. (It is value noting that on August 17, the BTC worth broke via the ascending development line that began in December 2022 and settled beneath it, indicating a excessive danger of a chronic bearish development.)

● As for the short-term prospects of the main altcoin, additionally they seem like lower than optimistic. Analysts at Matrixport have warned that if ETH drops to $1,500, the trail to $1,000 could be open: a stage the consultants contemplate justifiable primarily based on their income projections for the Ethereum blockchain ecosystem. Matrixport notes that ETH shouldn’t be a “tremendous sound cash” able to resisting inflation, because the variety of cash minted final week exceeded the quantity burned by 4,000. This represents a deviation from the deflationary mannequin that the blockchain adopted with the consensus algorithm transition from Proof of Work (PoW) to Proof of Stake (PoS).

Analyst Benjamin Cowen units an excellent decrease goal. He claims that Ethereum is on the point of “excessive volatility,” probably plummeting to a spread between $800 and $400 by the tip of the yr. The explanation stays the identical: a doable decline within the profitability of blockchain platforms constructed on ETH sensible contract applied sciences. In keeping with Cowen, each ETH bulls and bears “have crashed and did not execute their methods,” which is able to end in each events locking of their losses by the tip of 2023.

● With three and a half months remaining till the tip of the yr, the present state of the market on the time of penning this evaluate, Friday night, September 15, reveals ETH/USD buying and selling round $1,620 and BTC/USD at $26,415. The full market capitalization of the crypto market stands at $1.052 trillion, up from $1.043 trillion every week in the past. The main cryptocurrency accounts for 48.34% of the market, whereas the first altcoin makes up 18.84%. The Crypto Worry & Greed Index for bitcoin stays within the ‘Worry’ zone at 45 factors, albeit inching nearer to the ‘Impartial’ zone (it was 46 factors every week in the past).

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