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March 13, 2021

First, a review of last week’s events:

  • EUR/USD. Recall that   the head of the Fed Jerome Powell literally brought down the American stock markets with his speech on February 4. Powell stayed indifferent to the surge in US Treasury yields, which closed at an annual high. At the same time, he hinted at the possibility of premature tightening of monetary policy.
    And although the head of the Fed stressed that the economy is far from overheating, and he does not yet see the need to raise the interest rate, the market has had a hint of a possible change in monetary policy. In response, the Treasury yields rushed up with the dollar, and the stock market rolled down. The S&P500 lost over 120 points and the Dow Jones Industrial Average lost over 300 points.
    And then, everything changed on Tuesday March 09. Strong growth in technology stocks, positive statistics from the labor market, growth in household assets and a bill signed by US President Joe Biden on a new stimulus package for $1.9 trillion pushed the American stock market up. The S&P500 index not only fully recovered from losses, but also updated its historical high, reaching the mark of 3.960. As for long-term treasuries, their profitability, on the contrary, has stabilized. And this despite the fact that the volume of submitted applications exceeded the volume of the issue by 2.38 times, and foreign investors purchased about 20% of securities of the total volume of $38 billion.
    The EUR/USD pair reached a height of 1.1990 on Thursday March 11 due to these factors. However, it failed to reach the 1.2000 level. The fall of the pair and the weakening of the euro was facilitated by the statement of the ECB management on the increase in the rate of buying bonds under the PEPP (Pandemic Emergency Purchase Program). But it turned out to be not convincing enough, and nothing was said about scaling up the PEPP. As a result, the fall of the pair was insignificant, and it ended the week at the level of 1.1950;
  • GBP/USD. More and more experts are wondering if the pound has passed its high on February 24. Is it time to consolidate with the dollar? The British currency has shown an impressive growth of 2830 points against its American “colleague” (from 1.1410 to 1.4240) starting from the third decade of March 2020. And we have been observing the sideways movement of the GBP/USD pair along the Pivot Point of 1.3900 for the last two weeks. The upper border of the trading range is drawn quite clearly: this is the resistance at 1.4000. Two support levels can be considered as the lower one: the nearest one - 1.3850 and the next one - 1.3775.
    The GBP/USD chart of the last week is very similar to the EUR/USD chart. This suggests that both the pound and the euro are not so much independent players in the market now as hostages of the US Federal Reserve's monetary policy and rates on US government bonds. Having started the five-day week at 1.3840, the pair was moving within the above range for the whole week, and set the last chord at 1.3925;
  • USD/JPY. The yen has passed one milestone after another in recent weeks, and the USD/JPY pair reached the eight-month highs. Many traders are afraid to open both long and short positions in such a situation. On the one hand, the pair was already overbought, and on the other, it could still fly further upward by inertia. This is what happened in fact: it first rose to the level of 109.25, then a correction to 108.35 followed, and a new rise to the horizon of 109.00, where the pair ended the working week;

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 A meeting of the US Federal Reserve will take place on March 16-17. We are waiting for the Summary of Economic Forecasts from the Open Market Committee (FOMC), the decision on the interest rate, commentary on monetary policy and a press conference by the Fed management following the meeting. The interest rate is likely to remain unchanged at 0.25%. Therefore, the regulator's forecasts will be of particular interest. High expectations will once again highlight the gap between the pace of economic recovery in the US and the Eurozone. Investors will also be concerned about the possibility of tightening monetary policy and the attitude of the Fed management to changes in government bond yields. Consolidation of 10-year yields in the 1.5-1.6% range will help the stock market and push the EUR/USD pair above 1.2000.
    So far, the advantage is on the side of the dollar. 70% of experts, supported by graphical analysis, 85% of oscillators and 80% of trend indicators on D1, expect the pair to drop to the 1.1800-1.1850 zone. Support here is still the 200-day SMA at 1.1826. The nearest support is 1.1900.
    An alternative view is held by 30% of analysts, supported by graphical analysis on H4. As for the technical indicators on this time frame, their readings are still confusing. Note that when switching from a weekly to a monthly forecast, the number of experts supporting bulls increases to 60%. Resistance levels are 1.2025, 1.2060, 1.2170, 1.2200 and 1.2270;

Forex Forecast and Cryptocurrencies Forecast for March 15-19, 20211

  • GBP/USD. In addition to the meeting of the US Fed, a meeting of the Bank of England will take place on Thursday March 18. It is likely that its results will not affect investors as much as those of their peers on the other side of the Atlantic. However, information on the course of the British economic recovery and its prospects will certainly be given. The market will also be concerned about what is going on in relations with the European Union after Brexit.
    The opinions of experts are divided equally at the moment. A third of them, together with graphical analysis on H4, believe that the pair will hold within the 1.3775-1.4000 trading range. Another third, supported by graphical analysis on D1, expects a rise to the February 24 high of 1.4240. And finally, the remaining third is waiting for the pair to fall to the 1.3600 zone;
  • USD/JPY. It should become clear in the coming week whether the Japanese currency will stop its decline, and the USD/JPY pair - its rapid rise. There are three determinant factors: the yield of American bonds, the US Federal Reserve meeting and the meeting of the Bank of Japan on Friday, March 19, at which it should determine its policy for the near future.
    The rise in US bond yields is pushing the yen down, and the Japanese regulator is expected to react to this catastrophic collapse. Whether the BOJ will insist on controlling the yield curve is open for now.
    It should be noted that the last fall in the yen and the growth of USD/JPY on March 12 took place at increased volumes. This indicates that the interest of major players in the continuation of the uptrend of the pair has still not dried up. The trend can be reversed down by either the consolidation of the yield on US securities, or an active sale of risky assets.
    But at the time of this writing, 55% of experts expect that the pair will still be able to rise to the 109.50-110.00 zone. 20% are in favor of sideways movement and 25% are for the fall of the pair. Almost 100% of the trend indicators on both H4 and D1 are painted red. Among the oscillators on H4, there are 80% of those, but on D1, 35% are already giving signals that the pair is overbought, which indicates an imminent possible downward correction. In the transition from a weekly to a monthly forecast, 80% of analysts are already expecting the pair to decline and return to the 105.00 zone,. Support levels are 108.35, 106.65, 106.10 and 105.70;

NordFX EU


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