Forex and Cryptocurrencies Forecast for July 05 - 09, 2021
First, a review of last week’s events:
- EUR/USD. Making a forecast for the previous week, the majority of analysts (60%), supported by 85% of oscillators and trend indicators, voted for the strengthening of the dollar and the decline of the EUR/USD pair to the June 18 low of 1.1845. The forecast turned out to be absolutely correct, and the pair reached the set goal as early as Wednesday, June 30. But the dollar did not stop there and its DXY index renewed a three-month high on Friday, July 02, peaking at 92.699.
The growth of the American currency was due to the expectation that the pace of the US economic recovery will force the Fed to accelerate plans to reduce the programs of financial and credit stimulus (QE). And the market expected the strong labor market data, which was due out in mid-Friday, to push the dollar even higher.
According to the Department of Labor, the number of new jobs created in the non-agricultural sectors in the United States (Nonfarm Payrolls) actually turned out to be higher than the forecast by 150 thousand: 850 thousand instead of the estimated 700 thousand. The EUR/USD pair fell further downward, however, having reached the level of 1.1805, it unexpectedly turned around and soared to the north no less rapidly. The reason was the second published indicator: according to forecasts, the unemployment rate should have decreased from 5.8% to 5.7%, however, contrary to expectations, it rose to 5.9%.
This result showed a weak recovery in the US labor market, investors' expectations regarding the imminent tightening of the Fed's monetary policy weakened, and this supported the risk sentiment. The Dow Jones index went up, and the S&P500 and Nasdaq Composite renewed all-time highs once again. The DXY fell to 92.24 and EUR/USD closed the weekly session at 1.1863;
- GBP/USD. Concerns about the Delta COVID-19 strain are putting a lot of pressure on the pound sterling. Investors were not pleased with the data on the UK GDP for Q1, which turned out to be worse than the forecast (minus 1.6% versus minus 1.5%).
With regard to inflation, in his speech on Thursday July 1, the head of the Bank of England Andrew Bailey stressed that its high rates are temporary, as the British economy returns to the average and slows down the growth rate. This announcement pushed the pound further down. And if not for the disappointing US unemployment data, the GBP/USD pair would probably have tested the 1.3670 support. In reality, its fall was stopped at the 1.3730 horizon, and the last chord of the week sounded 100 points higher, at 1.3830;
- USD / JPY. the Bank of Japan published the value of the Tankan index for Q2 of this year on July 1. This index reflects the general business conditions for large companies in the country. A reading above 0 is considered to be a positive factor for the JPY, while a reading below 0 is considered negative. The index was projected to rise to 15, up from 5 in Q1 2021. Tankan did grow, though not to 15, but to 14. But neither its growth nor its value have had virtually any impact on the USD/JPY pair. As it was not strongly influenced by the decline in the yield of US Treasury bonds. The pair basically just copied what was happening with the DXY index. The dollar grew, and the pair also grew, breaking through the important resistance of 111.00 and finding itself at a height of 111.65 - very close with the high of March 24, 2020 - 111.70. Then the dollar collapsed, and so did the pair. True, it was able to stay above the horizon at 111.00 and finished at 111.05;
- cryptocurrencies. The forecast, which was given seven days ago, said that "with a high degree of probability, the fight between bulls and bears in the $30,000 area will continue." This is exactly what happened. The local bottom was reached at $30,200. Then the bulls managed to raise the BTC/USD pair to $36,590, but they could not keep it above the psychologically important level of $36,000, and the price of bitcoin dropped to $32,700 on Friday, July 02.
The lack of significant victories on both sides was facilitated by a fairly calm news background. We list just a few, more or less noticeable, of these news stories:
- There was a rumor that Paraguay could be the next country after El Salvador to recognize bitcoin as legal tender. However, then it was clarified that the purpose of the bill, which will be presented to Parliament on July 14, is completely different and is to regulate digital assets, and not to turn bitcoin into a national currency.
- The panic after the mining ban in China is gradually subsiding. In China itself, authorities have banned energy companies from supplying electricity to miners. In theory, this should have brought the hash rate down to zero in the country. However, some enterprising crypto miners are trying to continue their business using small private hydroelectric power plants. Another part of mining companies migrates - some to the USA, and some, for example, to Kazakhstan. Against this background, the President of Kazakhstan signed a law on the introduction of additional payments for electricity when mining cryptocurrencies, which may negatively affect the country's attractiveness for this industry.
- Ark Invest, managed by Katie Wood, is the ninth company to apply to the US Securities and Exchange Commission to launch a Bitcoin Exchange Traded Fund (ETF).
- According to the analytical service Chainalysis, the number of crypto investors in India has exceeded 15 million, and investments in cryptocurrency over the past year have grown from about $200 million to almost $40 billion, which means an increase of 20,000%.
- A veteran of the crypto market and one of the largest holders of BTC, 41-year-old Mircea Popescu, drowned in Costa Rica. He was known as a blogger and self-proclaimed "greatest erotic writer in the world." The crypto community called him "the evil genius of bitcoin maximalism", "the father of toxicity around bitcoin" and the "sleeping giant" who "could at one moment bring bitcoin to virtually zero and hold the price for some time." The actual number of coins owned by Popescu could be between 50,000 and 300,000 BTC, making him one of the largest cryptocurrency holders in the world. Now, this huge number of bitcoins seems to have disappeared forever.
And a few words about Elon Musk (we can't do without him!). Perhaps the billionaire has already played enough with bitcoin and Dogecoin, and now he has a new hobby - BabyDoge. After his tweet with three repeated unpretentious text "Baby Doge, doo, doo, doo, doo, doo, ...", the value of this coin has increased by 500% in two weeks, and the trading volume has tripled. It is still unknown whether Musk himself made money on such a "pump".
As for the crypto market as a whole, unlike BabyDoge, its capitalization increased very slightly over the week: from $1.336 trillion to $1.381 trillion. The Bitcoin Dominance Index fell from 47.05% to 45.52%, and the BTC Crypto Fear & Greed Index found itself in the Extreme Fear zone once again, at around 21 points.