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September 26, 2020

First, a review of last week’s events:

  • EUR/USD. The overwhelming majority of experts (75%), supported by the oscillators indicating that this pair is overbought, expected its correction to the south. The argument was that the pair ended the week near the strong resistance zone of 1.1900 on Friday, September 18. The above scenario came true 100%, and finally breaking through the mid-term support at 1.1700, the EUR/USD pair flew downward last week, finding the local bottom at 1.1610.
    There are several macro-reasons for the growth of the dollar and the fall of the euro. First, it is the deterioration of the epidemiological situation in the EU countries. Secondly, skepticism about the prospects for the recovery of the American economy. Fed Chairman Robert Powell has once again urged the government to discuss the issue of additional incentives in the framework of QE. We must not lose sight of the situation with the growth of the yield on US government bonds. All this made investors once again turn their backs on the stock market and commodities and think of the dollar as a protective asset. As a result, active buying of the American currency followed, the DXY index, reflecting the value of the USD against a basket of major currencies, went up sharply, reaching the height of 94.70, and the EUR/USD pair finished at 1.1625;
  • GBP/USD. First, a few words about a non-standard pair, BTC/GBP. Rather, about what will happen to bitcoin if the Bank of England decides to lower the interest rate to negative values. Recall that at the last meeting, on September 17, the Bank's management did not adjust this rate, but it became clear from the published transcript that this is not excluded and could happen in the foreseeable future.
    The appearance of such a news report has not been overlooked in the crypto sphere. Billionaire and bitcoin investor Tyler Winklevoss stated immediately that “if the Bank of England decides to move to negative interest rates, they will pay extra if you borrow money from them. It is difficult to imagine a better motive for investors to start taking out such loans and investing in bitcoins for a long time."
    Great prospect for Winklevoss and the core cryptocurrency. But so far this has not happened, let's return to the GBP/USD chart. On Monday-Tuesday, the pound was retreating facing the American currency onslaught, however, the pair moved to a sideways movement in the second half of the week. Despite the fact that the UK, like France, reported a record increase in the number of infected with the coronavirus, the new government employment program helped, unlike the euro, to keep the British currency from further falling, allowing it to complete the five-day period at 1.2745;
  • USD/JPY. As expected by 40% of analysts, the pair was unable to gain a foothold in the 104.00 zone, after which it went up 155 points. The week's results showed that investors at this stage decided to consider the dollar as the main protective asset, not gold or yen. Evidence of this is the sharp change in the correlation of the Japanese currency with the volatility of US stock indices, which determine the rise or fall of risk sentiment. The result of the last five-day period was the return of the pair within the two-month channel 105.20-106.55 and the final chord at 105.57;

As for the forecast for the coming week, summarizing the views of a number of experts, 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. It is difficult to predict whether the correction of this pair last week will develop into a long-term trend, or it will return to the limits of channel 1.1700-1.2010. But it is clear that a further sell-off of the European currency and a rise in the US dollar as a protective asset could cause the stock and commodities markets to collapse. This will be facilitated by an increase in the yield of US government bonds as well. Some forecasts suggest it could rise from the current 1.2% to 1.5%.
    On the other hand, the largest multinational corporations in the United States do not need a strong dollar at all, since this will lead to higher prices for their goods and, as a result, decrease in sales and profits.
    The upcoming presidential elections are catching up even more fog, since their results could radically affect the monetary policy of the US government, as well as Washington's relations with Brussels and Beijing.
    In general, the situation is more than ambiguous. Therefore, the experts' votes were distributed as follows: 30% - for the fall of the EUR/USD pair, 30% - for its growth, and 40% took a neutral position.
    As for technical analysis, the dollar wins with a clear advantage. Graphical analysis, 100% of trend indicators on H4, 80% on D1, and 85% of oscillators on both timeframes have voted for its growth and further decline in the pair. The remaining 15% of the oscillators give signals that the pair is oversold. Support at levels 1.1400, 1.1285, 1.1240 and 1.1165. Resistance levels are 1.1700, 1.1765, 1.1900 and 1.2010.
    As for the macro events of the coming week, it is worth paying attention to data on the consumer market of the US, Germany, and Eurozone, which will be released on Wednesday 30 September. It will become known on the same day how much the US GDP fell in the second quarter of 2020. And of course, do not forget that traditionally on the first Friday of the month, October 02, the data on the US labor market will become known, including the number of new jobs created outside the agricultural sector of this country (NFP);
  • GBP/USD. Against the backdrop of the pandemic, unsettled Brexit conditions, weak economic data and the prospect of negative interest rates, the British currency can hardly boast of strong, impenetrable support. That is why 65% of experts believe that after a temporary respite, the pound will go down again. 85% of oscillators and 90% of trend indicators on D1 fully agree with this. The nearest target of the bears is the 1.2500 zone.
    An alternative point of view is supported by 35% of analysts, graphical analysis and 15% of oscillators, signaling that the pair is oversold. The bulls' task is to break through the resistance at 1.3000 and return the pair to the echelon 1.3000-1.3200;

  • USD/JPY. 60% of analysts, as well as the graphical analysis on D1, still hope that the yen will be able to play back the last week's losses and return the pair to the level of 104.00. At the same time, they, as before, do not exclude that it can reach first the low of 09 March 101.17, and then the psychologically important level of 100.00 in the medium term.
    As for the remaining 40% of experts, supported by technical and graphical analysis on H4, they expect the pair to at least rise to the upper border of the 105.20-106.55 corridor, and possibly test the 107.00 height;

NordFX EU


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