First, a few words about the events of the past week:
- EUR / USD . The past week was marked by a coronavirus, which defined the lion's share of what was happening in the markets. Most affected commodities and currencies, most obviously associated with China.
As it is well known, closely correlated with the economy of China and the euro area economy in the first half of the week it played into the hands of the dollar. As expected, most (55%) of experts, supported by 85% of oscillators and trend indicators 100% not only in the D1 and H4, but also on the W1, the EUR / USD has gone down, and on Wednesday, January 29 has reached 1.1000 support.
Reaching local bottom at 1.0992, she turned and headed back north.
This movement could stop the WHO statement (World Health Organization), but its officials have done everything in order not to cause panic in the markets, and finally not to undermine economic activity. On the one hand, the WHO announced the epidemic coronavirus emergency of international importance, but on the other - to offer people to behave as usual.
As a result, the European currency has continued to grow, despite the release of weak economic data from the Eurozone. Support for the pair not only had the US GDP data, but the Bank of England to keep interest rate (more on that below). Throughout 2019 the pound and the euro supported each other in the fight against the dollar, so the growth of the British currency could not push up and its European "counterpart". Contributed to the growth of the pair EUR / USD on Friday as the liquidation of short positions ahead of the weekend. As a result, the end of the week-long session, the pair returned to the area of the mid-Pivot Point, around which ranges from mid-July 2019 - 1.1085-1.1100, confirming the hypothesis of a state of equilibrium between these two currencies in recent months;
- GBP / USD . Bank of England Minutes of January 30: the amount of asset purchases by the Bank of England - unchanged (£ 435B), the interest rate - unchanged (0.75%), the number of votes cast for the preservation rates unchanged - unchanged (7), the number of votes its slide - without change (2). That it is all just like a month ago. And this "no change" suddenly pushed the British pound up against the dollar, and to a number of other currencies, including the euro. Why?
January 31 -. Official UK release date of the European Union, however, until the end of 2020, with the agreement of the transition period, any significant developments on this front do not have to wait long to wait for the next negotiations with the EU. Shake the market could coronavirus. Because of its outbreak likely to cut interest rates by the Bank of England has gone up. However, this did not happen. The Monetary Policy Committee considered that the improvement of the economic situation after the December elections to the Parliament of the United Kingdom will continue in the future, and decided to leave the rate unchanged.
The incident has been fully justified the forecast for which last week voted in bulk (65%) of the analysts. In their view, the pair GBP / USD was first to break the resistance of 1.3160, and then approach the height of 1.3200. What happened in fact - the final chord of the British currency set at 1.3202;
- USD / JPY . Many investors believed that this currency is a safe haven, as the Yen is able to protect them from the onset of the coronavirus. It is this confidence and reversal of risky assets contributed to the protective another strengthening of the Japanese currency last week. As the main support for the USD / JPY 40% of the experts called the level of 108.40, which is near to the level of 108.36, and she completed the work week;
- cryptocurrency. It should be noted that only 20% of the experts supported the view that the end of January bitcoin able to gain a foothold above the horizon $ 9,000 last week. The vast majority (70%) expect that this will happen only 2-3 weeks later. However, coronavirus has done his job.
US stocks started the week with a big sell-off. All three main indicators tumbled amid fears of the spread of coronavirus outbreak. Dow Jones Industrial Average fell index 400 points, the index Nasdaq Composite - 1.8%, and the S & P 500 lost 1.4%. At the same bitcoin increased, reaching in the night from Thursday to Friday at the level of $ 9,550 USD. "Every time the regulated markets are falling because of the fear and apprehension, bitcoin is growing. And it reinforces the concept of the main cryptocurrency as a safe-haven asset, "- said in an interview that happens BlockTV analyst Nathaniel Whittemore (Nathaniel Whittemore).
Growth leading cryptocurrency also gave impetus to kriptorynku, pushing the top coin, including Ethereum (ETH / USD), laytkoyn (LTC / USD) and Ripple (XRP / USD), the green zone. The total market capitalization cryptocurrency also gone up: if the January 25, it was $ 235mlrd, then five days later has reached the level of almost $ 267 billion, showing an increase of 13.5%.
As for the forecast for the coming week, then, summing up the views of several experts, as well as the forecasts made on the basis of a wide variety of technical and graphical analysis methods, we can say the following:
- EUR / USD . Some Americans believe that everything that happens outside the US, does not concern them. But it is not so. The United States economy is largely dependent on what happens in other countries. And, realizing this, the Fed is quite sensitive to international calls, which is why it is sometimes called the "tail", which turns the dog in the face of global GDP. At the moment, another challenge was the coming out of China coronavirus. Although obvious reaction of the "tail" has not yet followed.
Coronavirus is not yet possible to localize, so panic, entailing the sale of risk assets, can become a major trend in the coming week. The positive news is, for example, the successful creation of a vaccine against this infection, can dramatically "turn the rivers back." To predict in this case, something very difficult.
If we talk about technical analysis, most of the indicators on the H4 colored green, on the D1 is dominated by neutral gray. But in both time frames of about 15% oscillators provide signals about overbought that can serve as a harbinger if no trend change, then at least a certain correction to the south. I agree with this development and graphical analysis on H4, heralding a return to the very strong support of 1.0990-1.1000.
Expert opinion is currently, as well as on the indicators D1 may be called neutral gray. However, during the transition from weekly to monthly forecast, it has become increasingly green, reaching a maximum at 70%. That's the number of analysts believe that by overcoming the resistance zone of 1.1100-1.1115, during February the pair consistently take stormed the height of 1.1145 first, then 1.1170, 1.1200 and reaches a maximum 31 December 2019. at the level of 1.1240.
With regard to macroeconomic data, the next week will be known values ISM business activity index in the manufacturing sector and the US service sector, as well as traditional for the first Friday of the month data on the US labor market (including the NFP).
However, the surprise may be waiting for the markets on Monday 03 February, when the index for January will be published by Caixin management activity procurement (PMI), which is a leading indicator of the state of the manufacturing sector in China. Its value can give the market a signal that is affected by the coronavirus on the economic situation in China.
Surprises Monday can not over - February 3 offers a real season of "hunting" in the chair of the US President. the first Democratic primaries in Iowa will be held on this day. And in the case of a strong result Bernie Sanders may follow at least a strong market response;
- GBP / USD . After such an impressive leap up to 230 points at the end of last week, the vast majority of indicators and on the H4 and D1 are green. However, as is the case with the previous pair, about 15% oscillators are already overbought. Following them, and graphical analysis on D1 draws possible drop British currency first to horizon 1.2970, and finally to the level of 1.2800. The nearest strong support - 1.3100.
It should be noted that, starting from six weeks ago oscillations in the range of 1.2900-1.3285, steam gradually lowered to the limits of volatility 1.2975-1.3200. The majority of analysts (55%) believes that in the near future it will be able to stay within the corridor. However, slightly less (45%) of those who expect the pound to continue the positive dynamics of the breakdown of resistance in the zone of 1.3285-1.3300 and rise to highs of December last year in the area of 1.3500;
- USD / JPY . Upcoming quotes the pair are directly dependent on the success of scientists and virologists. If they manage to tame in the coming days coronavirus, win a dollar. If the epidemic will begin to capture new territories, and the number of victims will continue multiplying, the advantage is on the side of the Japanese currency's safe-haven.
As financial analysts currently have no information on what is happening in laboratories, their opinions were divided 50 to 50. As for the technical analysis, 100% of trend indicators and oscillators 80% on H4 and D1 predict a fall in the pair. I agree with them on the graphical analysis of the H4. Support levels - 107.70, 107.00 and 106.60. The opposite opinion is held by graphical analysis on D1 and 20% oscillators signaling an oversold. Resistance Levels - 109.25, 109.70, goal - 110.25;
- cryptocurrency. During the first month of 2020. pair BTC / USD showed an increase of 30% or $ 2,200. Fear and greed index Bitcoin (Crypto Fear & Greed Index) crossed the Equator and now stands at 55 out of 100 possible. Rose and optimistic analysts. If before, remembering unexpected collapses main cryptocurrency, they were afraid to give positive forecasts, now 60% of them feel free to indicate the level of $ 10,000. And it is here that investors need to be especially careful - it is in the moments of greatest optimism large speculators may begin active game for a fall. And the examples not far to seek - just look at what happened last year.
Roman Butko, NordFX
Disclaimer: This material is not a recommendation to invest or guidance on working in the financial markets and are purely exploratory in nature. Trading on the financial markets is risky and can lead to complete loss of funds contributed.