Forex. Euro/dollar forecast (EUR/USD)
The euro/dollar pair fell last week to 1.1515 by the end of the trading session.
Remarkably, even the disappointing release on employment in the non-agricultural sector of the US, which came out on Friday, failed to change the trend of the decline of the pair. The number of new jobs created in September increased by only 134,000, although it was projected to grow by 190,000. At the same time, the unemployment rate fell to 3.7%, and wage inflation, as measured year-on-year, fell to 2.8%, as expected. Despite the mixed results, the US dollar index, which remained relatively calm during the first half of the day, rose to a daily high of 96.
Market confidence in the U.S. economy is now so high that even one of the weakest releases this year did not affect the dollar. The U.S. president noted the unemployment rate, which has reached its lowest level since 1969, and Fed officials on Friday spoke amicably about strong momentum and lack of risks in the economy. According to the latest forecasts, GDP growth in the third quarter of this year will be 3%-3.5%, and inflationary pressures will continue at current levels, which leaves wide opportunities for the Federal Reserve to continue to tighten monetary and monetary Policy.
The probability of an interest rate increase in the Us in December exceeds 80% at the moment. Given that economic growth will be high in the third quarter, it is difficult to imagine what needs to happen for the Fed to change its intentions. Against this background, the prospects of the European currency look much more modest. Inflation in the Eurozone remains low, eroding the prospects of the first rate hike at the end of summer 2019. In addition, political relations between Italy and the EU leadership may soon worsen in the Eurozone. The new Italian government intends to declare a budget deficit for next year of 2.4% of GDP, which contradicts the recommendations of the European Union. The Italian authorities declare their commitment to EU rules and desire to cooperate, but their actions speak only of a desire to remain popular among the electorate. It is unlikely that the confrontation will grow into a serious conflict and will affect the integrity of the European Union, but even minor political battles will negatively affect the European currency.
The increasing difference in the level of interest rates leads to pressure on the quotes of the euro/dollar pair. Last week, the pair's rate reached the lowest value since mid-August at 1.1463. Even after a corrective growth above the level of 1.1500, the pair still maintains a downward trend due to the underlying fundamentals.
In our forecast for the coming week we expect a further decline in the euro/dollar pair's quotations to support levels of 1.1500, 1.1475, 1.1440, 1.1420 and 1.1390.
Forex. Pound/dollar currency pair forecast (GBP/USD)
The British currency recovered at the end of trading last week, the quotes of the pound/dollar pair reached the resistance level of 1.3100 by the end of Friday's session. The meeting of the CONSERVATIVE Party of Great Britain last week predictably did not clarify the situation with the Brexit negotiations. The presence of a large number of intra-party opponents of Prime Minister Theresa May was known before, as well as their opposition to the current version of the deal proposed by the European Union. Both sides remained in their positions, May failed to convince her political opponents. In turn, the opposition Conservatives plan to declare a vote of no confidence in the Prime Minister. If such a vote is eventually initiated, it could lead to a significant increase in uncertainty and a sell-off of the British currency.
There is just over a month until the unscheduled EU meeting in mid-November. It is on this date that the negotiators are guided, calling it the last possible term of the treaty. Otherwise, the UK will start preparing for a hard Brexit, that is, without any agreement with the European Union. European Commission President Jean-Claude Juncker said on Friday that the absence of a Brexit deal would be a disaster for both the UK and the European Union. However, such statements appear not for the first time, but do not bring the parties closer to reaching a compromise.
On Thursday, Reuters reported that the UK had put forward new proposals to resolve the Issue of the Irish Border, with European authorities having previously approved them. Against this background, the British currency began to strengthen against the US from the local weekly low at 1.2917.
Unexpectedly weak release of the labor market in the U.S. supported the upward movement of the pair, which allowed the quotations to reach the resistance level of 1.3100. At the same time, the growth of the pair's quotations will continue to be limited, as no real progress in the Brexit negotiations has been recorded. In the near term, the pound/dollar pair will be traded at the key level of 1.3000, and short-term growth of quotations can be used to open positions for sale.
The coming week may become more lively for the British currency. On Wednesday, the data of industrial production and the monthly indicator of GDP change are released. According to preliminary forecasts, the growth of the economy in the UK will continue to decline and will be 0.2%, which will also put additional pressure on the pound. At the same time, the main event for the markets remains Brexit, so additional news and rumors about the negotiations will still carry much more weight than the real economic indicators.
In our forecast for the coming week, we expect the pound/dollar pair to rise to resistance levels of 1.3115 and 1.3135, after which we expect a reversal and decrease in quotations to support 1.3100, 1.3070, 1.3040 and 1.3000.
Forex. Gold price forecast
Gold prices rose last week, overcame the resistance level of 1200 dollars per troy ounce and reached the mark of 1203 dollars.
Gold is trading in a narrow range of around $1,200 per ounce starting in mid-August this year. In the near term, the price will remain near this level against the background of various key factors that can set the dynamics of movement for a longer period. Uncertainty around Brexit and the trade conflict between the US and China are contributing to the rise in the price of gold, while a strong US economy is supporting the dollar, leading to pressure on gold.
ETF funds that track the price of gold continue to record a decline in investment volumes. According to the World Gold Council, the volume of gold ETFs in North America decreased in September by 0.6% compared to August, at an absolute rate of 257.5 million dollars. Investors continue to hold a significant number of short positions on gold, expecting further increase in the interest rate in the United States.
A potential risk factor for the Eurozone and, as a result, the drager of gold growth could be Italy. The Italian government's approach to fiscal policy may lead to a violation of EU rules and a new crisis in the Eurozone, which in the most pessimistic version may even lead to the collapse of the bloc. Italy has long had one of the largest external debts, accounting for more than 130% of annual GDP. If the Italian government increases the deficit to 2.4%, as planned, it will lead to increased uncertainty in markets where investors are already wary of a possible repeat of the Greek scenario. At the same time, Italy is the third largest economy in the Eurozone, so the consequences may be much more severe than in the case of Greece. Italian bond yields rose more than 20% last week, and pressure on the European currency intensified.
Such a situation will support gold if the fears of the markets begin to be realized, and the Italian government will remain committed to the chosen course to increase social payments and reduce the retirement age due to the increase in the budget deficit and external debt. The next crisis may not come soon, but investors, taught by the bitter experience of 2008 and the Greek collapse, will actively invest in gold in advance.
In the short term, markets will await the final decision of the Italian government on the level of the budget deficit, as well as closely monitor the development of the trade conflict between the United States and China. A statement from the U.S. side last week that China was trying to interfere in U.S. security reduced the likelihood of a possible quick resolution of the conflict.
In our forecast for the coming week we expect the growth of gold quotations to resistance levels of 1205, 1207, 1210, 1215 and 1218 dollars per troy ounce.
Forex. North American Oil Forecast (WTI)
WTI crude oil prices rose slightly during the trading session last week and reached the level of 74.30 dollars per barrel, going in the middle of the week the price reached a new multi-year high at $76.90.
The main driver of the rise in oil prices last week remained the decline in Iran's exports against the background of the approaching imposition of U.S. sanctions. The growth of quotations continues for the fourth week in a row, and last Wednesday the quotes reached a four-year high, after which they fell sharply by more than two dollars.
One of the main reasons for the rally of quotations in the first half of the week was a complete halt in oil supplies from the United States to China. Last year, China became the second largest importer of oil from the United States, but the trade conflict between the two countries led to an end to cooperation in this area, even though oil was not formally subject to additional duties. As the world's largest oil importer, China remains a major influence on the future of the raw materials market after the imposition of U.S. sanctions against Iran in November this year. China's official position on further oil supplies from Iran is still unknown.
The decline in prices at the end of the week was largely due to the statement of the Prince of Saudi Arabia, who said that the country is fulfilling its promise to prevent a shortage of supply in the world market due to the decline in supplies from Iran. According to his data, Saudi Arabia together with OPEC partners increased oil production even more than the market is currently missing from Iran. So far, Exports of Iranian raw materials have fallen by an estimated 700,000 barrels, while OPEC production has increased by almost 1.5 million. Saudi Arabia is complying with a request from U.S. President Donald Trump to compensate for the shortage of supply in the global oil market and prevent price increases. Given that the request was in the best interests of the Saudis, it was not difficult to comply.
Earlier, the Saudi Energy Minister said that the country has an opportunity to increase oil production even more, as it has sufficient free capacity. Saudi Arabia's oil production is expected to grow even more significantly in November.
On Friday, it was reported that India will continue to buy Iranian oil, despite U.S. sanctions. According to some reports, refiners from India have already placed applications for the supply of 9 million barrels from Iran in November this year. This volume is only slightly lower than October, which is about 10 million barrels. Even at the official level, India has so far stated that it has no plans to give up Iranian oil, as Iran provides cheap shipping and extended credit periods.
In our forecast for the coming week, we expect the recovery of WTI crude oil prices to resistance levels of 74.50, 74.80, 75.15, 75.40 and 75.80 dollars per barrel.
Forex. Cryptocurrency forecast
Most cryptocurrency assets fell slightly last week. The price of bitcoin fell to 6550, ethereum to 220, and XRP fell to the level of 0.47 dollars.
Ripple's xRapid payment platform has been in commercial access since Monday. The platform was designed to speed up international payments. Thanks to the liquidity and technological features of the XRP cryptocurrency, the service allows you to make transactions faster and cheaper than it happens in traditional payment systems. The pilot launch of xRapid took place back in May with the participation of MercuryFX and Cuallix. Based on the test phase, it was noted that the savings in xRapid transactions are 40-70%, and the speed reaches a few minutes instead of a few days. Cuallix is currently the main money corridor between the U.S. and Mexico, and MercuryFX is between Europe and Mexico. Over the past month, the XRP has increased significantly and for some time the capitalization of XRP exceeded ethereum.
The Japanese Association of Cryptocurrency Exchanges is going to set for its participants the allowable limit of crypto assets stored on online wallets. It will be 10-20%, while the remaining 80-90% of assets will have to lie on cold wallets. The proposed rule change will be sent to the Financial Services Agency for review. The reason for this decision was the numerous break-ins of local exchanges, which happened several times this year. The latest example was the attack of the exchange, when hackers stole cryptocurrencies for 59 million dollars. All the stolen assets were stored in hot wallets, which made them vulnerable. Earlier this year, another Coincheck exchange was hacked, from where hackers withdrew $520 million worth of NEM tokens. In this case, the funds were also on hot wallets.
In general, the level of security of cryptocurrency exchanges raises many questions. So last week was published a study of the world's 100 most common cryptocurrency exchanges, according to which 54% of sites do not have sufficient protection of client accounts. In terms of registry and domain security, the findings were even worse. In general, only 4% of cryptocurrency exchanges meet all security criteria on this point. It is noteworthy that the hacked Japanese exchange zaif was in the security rating only in 89th place with 29 points out of 100 possible.
The European Securities and Markets Authority has allocated more than 1 million euros to monitor activity in the field of cryptocurrencies and financial technologies. ESMA will monitor current trends in the fintech and crypto industries, identify all sorts of problems and risks associated with financial innovation, and provide recommendations to market participants and consumers if necessary. The agency will also ensure compliance with the requirements set out in the EU Markets and Financial Instruments Directive. The latter, in particular, affect suppliers of financial instruments such as difference contracts and binary options. The directive proposes a ban on CFD marketing among retail investors and other restrictions for this segment of the market.
In our forecast for the coming week we assume an unknown decline in bitcoin quotes to the levels of 6500, 6450, 6400, 6300 and 6200, the fall of ethereum to the levels 215, 210, 205, 200 and 190, as well as the continuation of the decline of XRP to the levels of 0.46, 0.45, 0.0.00, 0.00. Dollars.