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June 27, 2021

First, a review of last week’s events:

  • EUR/USD. The data on the labor market and the US economy released last week did not have much positive to please. Q1 GDP growth (6.4%) coincided with forecast data, which is no better but also no worse than market expectations. And then there were some disappointments. Initial jobless claims were 411K with a forecast of 380K. The increase in durable goods orders for May was lower than expected at 2.3% instead of 2.7%. And capital goods orders fell into the negative zone, minus 0.1%. And all this is against the back of Markit's business growth in Germany (60.4 in June versus 56.2 in May) and in the Eurozone as a whole (59.2 vs. 57.1).
    Despite the slowing American economy, the risk appetite of those willing to invest in it has not subsided, but, on the contrary, even grew. They were backed by President Joe Biden's Senate-approved infrastructure plan. This plan includes the construction of new roads and bridges, ports, investments in water supply, clean energy and broadband internet. The total investment will amount to $1.2 trillion. Such an infusion will create thousands of new jobs and add points to the United States in the economic confrontation with China.
    The rise in related investor optimism has already led the Dow Jones to gain more than 1,400 points over the week, the S&P500 and Nasdaq Composite once again updating historic highs, and The VIX Fear and Volatility Index fell to a one-year low.
    The outflow of funds to the stock markets weakened the dollar. The DXY dollar index fell from 92.32 to 91.80, while the euro was winning back 110 points from the American currency at the week's high. Starting from 1.1865, the EUR/USD pair reached 1.1975 on Friday June 25, after which the bulls dried up, followed by a fightback and finish at 1.1940;
  • GBP/USD. A meeting of the Bank of England took place on Thursday, June 24. As for the specific momentary steps of the regulator, no one expected any surprises from it. It was clear to everyone that the Bank of England would not make drastic moves and would leave the parameters of its monetary policy unchanged. So it happened: the asset buyback program was maintained at £895bn and the interest rate at 0.1%.
    However, investors had hoped that positive UK labor market data would prompt the Bank's management to start discussing moves to wind down programs for quantitative easing (QE) soon. Just as their colleagues from the other side of the Atlantic intend to do.
    On these expectations, as most analysts predicted (55 per cent), the GBP/USD pair moved north, reaching the key 1.4000. However, then the degree of optimism went down. The first tub of cold water was poured on Wednesday June 23 following the publication of the June Markit PMI for the UK services sector. It turned out to be lower than in May: 61.7 compared to 62.9. And then a whole chilling waterfall followed: the Bank of England not only did not change the parameters of the quantitative easing (QE) program but did not give a hint that these parameters could be changed in the foreseeable future.
    Carried away by a stream of sobering water, the GBP/USD pair groped the local bottom only at 1.3870. And barely pushing off from it, it was able to complete the week 20 points higher, at the level of 1.3885;
  • USD/JPY. When making a forecast for the past week, the majority of experts (65%) voted for further strengthening of the dollar and the growth of the pair above the 111.00 horizon. They were supported by graphical analysis on H4, as well as 85% of oscillators and 95% of trend indicators on D1. And they were all right: despite the fact that the dollar was falling against the euro and the pound in the first half of the five-day period, it was growing against the Japanese yen, reaching the height of 111.10 on June 24. True, the Japanese currency failed to gain a foothold there, and it placed the last chord at 110.75;

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. Recall that after the June 16 meeting, the hawkish forecasts of Federal Reserve executives have dramatically revived the market's appetite for the dollar. Inspired by their rhetoric, investors rushed to buy USD even despite weak US macro statistics.
    As a result, having started on June 16 from a height of 1.2125 and flying down 280 points, the EUR/USD pair completed the five-day period at 1.1845 on Friday June 18. And it turned around again and went up on Monday, June 21.
    What is that? Have investors changed their minds? Or is it just a correction on the downtrend path?
    On the one hand, representatives of the FRS continue to insist that the US labor market is still far from the pre-crisis level, and therefore, for now, it is necessary to maintain soft financial conditions. Such statements, coupled with improved global risk appetite and positive economic data from the Eurozone, should push the EUR/USD pair higher.
    But on the other hand, Jerome Powell and his colleagues recognized the need to discuss the process of winding up stimulus programs (QE). There was also a signal of their intention to raise interest rates earlier than expected. The ECB, on the contrary, declares that they are not going to rush to reduce QE volumes, and that the current inflation rate in the Eurozone does not cause concern. And these factors are already not playing on the side of the dollar.
    The macroeconomic indicators published next week may tip the scales in one direction or another. Data on the German consumer market will be released on Tuesday June 29 and Thursday July 1, and a preliminary consumer price index will be released on Wednesday, showing the level of inflation in the Eurozone as a whole. As for the statistics from the United States, we will find out the change in the ISM business activity index in the country's manufacturing sector on July 1. And data on the US labor market will come out on June 30 and July 02, including such an important indicator as the number of new jobs created outside the agricultural sector (NFP).
    In the meantime, 60% of analysts, supported by 85% of oscillators and trend indicators on D1, expect the dollar to strengthen and the pair to decline to the June 18 low of 1.1845. The next target for the bears is the March 31, 2021 low. 1.1700. The nearest support is 1.1915 and 1.1880.
    The remaining 40% of the experts side with the bulls, which will try to regain the positions lost over the last month. The first serious resistance is in the 1.1985-1.2000 zone, the next one is 100 pips higher. The goal is to update the May 25 high at 1.2265;
  • GBP/USD. As a reminder, British Prime Minister Boris Johnson has postponed the full opening of the country's businesses for a month. This is due to an increase in cases of infection with the Delta coronavirus strain, first discovered in India, which doubles the risk of hospitalization. The number of infections has approached 20,000 a day, and this is putting pressure on the pound. (Although only 18 people died from COVID-19 during the same period. The ratio is less than 0.001, which is a very optimistic indicator).
    The increasingly unstable relations between London and Brussels after Brexit continue to put pressure on the pound. This is especially true for trade between Northern Ireland and the rest of the UK.
    However, at the same time, 50% of experts hope that the British currency will find the strength to retest the level of 1.4000 and rise another 100 points higher. The nearest resistance is 1.3940. More distant targets are 1.4150 and 1.4250.
    20% of analysts are betting on the victory of the dollar and the fall of the pair to the zone 1.3670-1.3700. The remaining 30% believe that the pair will remain in the sideways channel 1.3800-1.4000.
    The indicator readings look like this: 85% of the oscillators are colored red, the remaining 15% give signals that the pair is oversold. Trend indicators are also overwhelmingly in the red zone. Those are 100% on H4 and 85% on D1. Graphical analysis draws the following trading ranges: 1.3850-1.4050 for H4, 1.3770-1.4000 for D1.
    As for the events of the coming week, we can note the publication of UK GDP data on Wednesday June 30, as well as the speech of the head of the Bank of England Andrew Bailey on Thursday July 1;

Forex and Cryptocurrency Forecast for June 28 - July 02, 20211

  • USD/JPY. Who will win: USD haven currency or JPY's safe haven?  Or, if you like, you can ask the question the other way around: a safe haven currency JPY or a safe haven USD? 80% of oscillators and 90% of trend indicators on D1 bet on the dollar to win. However, the remaining 20% of the oscillators are signaling that the pair is overbought.
    Graphical analysis believes that having pushed off the support in the 109.75-110.100 zone, the pair will go up, break through the resistance at 111.00 and try to first update the high of last year March 24 at 111.70, and then the high of February 20, 2020, of 112.25.
    Experts’ opinions on the pair's movement in the coming week were divided equally, 50 by 50. However, in the transition to the forecast for July, 75% side with the bears, believing that the USD/JPY pair will be able to drop to the area of 108.00-108.55.
    In terms of macro statistics, the Bank of Japan will release the Tankan Index for Q2 of this year on July 01. This Large Producers Index reflects the general business environment for the country's large, mostly export-oriented companies. A reading above 0 is positive for the JPY, while a reading below 0 is negative. The index is projected to rise to 15, up from 5 in Q1 2021.

NordFX EU


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