Forex. Euro/dollar forecast (EUR/USD)
The quotations of the euro/dollar pair rose slightly last week and reached the mark of 1.1555.
During the trading week, the euro/dollar pair quotes reached the lowest value since August at 1.1432, but then the decline was replaced by an upward movement. The main reason for the fall of the dollar against most assets was the data of inflation in the United States for September. The basic and main consumer price indices came out worse than expected. In the annual value, the base rate growth was 2.2%, which is likely to lead to a fall in the price index on personal consumption expenditures, which is the Main Benchmark of the Fed on inflation. For now, it seems unlikely that the US regulator will be ready to change its plans for an interest rate increase in December. However, the value of the index is already in the boundary value and further reduction of inflationary pressures may lead to a slowdown in the rate hike in 2019.
The U.S. stock market collapsed at the end of the week, and the yield on ten-year government bonds fell by 3.12%. The U.S. stock market has been declining amid fears that some corporations may be under-matching profits amid trade wars. The quarterly reports will be published in the U.S. as early as next week. Against this background, the depreciation of the dollar was relatively modest, which indicates the strength of the US currency in the global perspective. Forecasts of economic growth in the third and fourth quarters of 2018 imply significant growth, and the Fed is planning several more interest rate hikes in the next six months.
Last week, the minutes of the ECB meeting, which took place two weeks earlier, were published. Following the meeting, the European regulator confirmed plans to wind down the bond purchase program by the end of this year and raise the interest rate in autumn 2019. Representatives of the ECB said that the economy of the Eurozone has a great resilience, which allows to mitigate the risk factors that negatively affect economic growth. Trade tensions remain the main factor, and this factor may increase significantly in the near future.
The next week will publish data on inflation in the Eurozone for September. The growth of the basic consumer price index is projected to strengthen slightly, but overall, inflation in the EU remains low in defiance of the quantitative easing programme, which is already coming to an end. Further development of the trade war between the U.S. and China may put pressure on the dollar, but the growth of the pair will be limited by a strong resistance level of 1.1600. It is very likely that the euro/dollar pair will continue to trade in the range of 1.1475 to 1.1600 in anticipation of more clear signals for the development of the trend.
In our forecast for the coming week, we expect the growth of the euro/dollar pair to resistance levels of 1.1575 and 1.1600, after which we expect a reversal and decline to support 1.1550, 1.1530 and 1.1500.
Forex. Pound/dollar currency pair forecast (GBP/USD)
The pound/dollar quotations strengthened for most of the week ended and reached a local high since mid-September at 1.3258. However, on Friday the pair fell sharply and ended the weekly trading session at 1.3140.
THE UK's GDP was unchanged in August compared to July. Manufacturing output fell 0.2 percent in August and the industry grew 0.2 percent. In annual terms, the growth of both sectors increased above forecasts. The UK economy has remained weak since the start of this year amid continued uncertainty around Brexit and low levels of investment and consumer activity.
The past week has once again been rife with rumours and views on a possible uk-EU deal. European Commission President Jean-Claude Juncker said the EU could reach an agreement with the UK in the coming weeks. An EU summit on Brexit will be held on Wednesday-Thursday, and another meeting will be held in November, if necessary. The two meetings will be crucial to the possible resolution of the main issue regarding the status of the Irish border. Juncker also confirmed that the European Union is preparing for the option of the UK's exit without an agreement. The pound strengthened against the weakened US dollar amid hopes for a Brexit agreement, but investor fears about the Irish border issue eventually returned the pair to the range. Michel Barnier, the EU negotiator, said an agreement could be reached as early as this week before the START of the EU summit. Barnier said the UK should accept possible checks on goods crossing the border into Northern Ireland, but the Union party, which is a key ally of the Conservatives led by Prime Minister Theresa May, is adamant disagreed with that option and would protest against such an option until the coalition was broken. Thus, even if formally the EU and the UK reach an agreement, it is possible that this could lead to a political crisis in the UK. Obviously, the main event of the coming week will be the EU summit in Brussels, which will be devoted to Brexit. Depending on the outcome of the upcoming meeting, the movement of the British currency against the American currency may amount to several hundred points. In addition, the UK will publish data of the labor market and inflation for September. Average wage growth is expected to be lower, as is the underlying consumer price index, so the pressure on the British pound will continue even if the Brexit summit does not lead to any concrete solution.
In our forecast for the coming week, we expect the pound/dollar to rise to resistance levels of 1.3175, 1.3200, 1.3240, 1.3290 and 1.3350. The alternative scenario, which is envisaged in the absence of a Brexit agreement, will lead to a reduction in quotations to the support levels of 1.3110, 1.3080, 1.3050, 1.3020 and 1.2980.
Forex. Gold price forecast
Gold prices were able to move out of the price range in recent months, reached a local high at 1226 dollars per troy ounce and ended the trading session at 1218 dollars.
The price of gold rose by 2.5% on Thursday, interrupting the fleet movement of recent months. This sharp increase was the maximum intraday price movement since June 24, 2016, when british residents voted to leave the European Union. This time the reason for the rise of quotations was not one specific factor, but a combination of several. U.S. stock markets fell sharply at the end of the week ended. The Dow Jones index fell 2.13% in one session, the biggest drop since February this year. The Nasdaq and the Nasdaq lost about the same amount, with the Nasdaq falling more than 10% from a record close at the end of August during Thursday's session. U.S. 10-year bond yields fell more than 3 percent. U.S. Treasury Secretary Steven Mnuchin said that the fall in indices is a natural correction, but many investors have long feared a possible collapse of markets, so quickly increased the volume of purchases of safe assets.
The International Monetary Fund recently published its forecast for the global economy for the remainder of 2018. According to the IMF, the current situation in the world will act as a supporting factor for the gold market. The IMF predicts a protracted downtrend in financial markets until the end of the year, which will lead to an increase in demand for gold. The global economy is forecast to contract by 0.2% due to the development of the trade conflict between the United States and China, the possible conflict between Italy and the European Union, the protracted Brexit negotiations and the emerging signs of a crisis in developing countries. The decline in stock markets could trigger a global crisis that will further increase demand for safe assets, including gold. Symbolically, the threat of a new crisis looms exactly ten years after the mortgage crisis in the United States, which began with the bankruptcy of a large bank Lehman Brothers in the fall of 2008. The fall of stock markets at the end of last week has already led to a change in the situation in ETFs of funds that track the dynamics of gold. The largest funds have already recorded capital inflows after several months in a row of outflows.
The vast majority of analysts assume further development of the uptrend of gold in the near future. Even if the time for a global crisis is not yet high, the recent strong correction will be able to remind markets of the risks. After the break out of the upper boundary of the trading range, the price of gold will continue to rise to the resistance level of 1250 dollars per ounce, which will be the main benchmark until the end of this year.
In our forecast for the coming week we expect further growth of gold quotations to resistance levels of 1220, 1224, 1227, 1230 and 1235 dollars per troy ounce.
Forex. North American Oil Forecast (WTI)
WTI crude oil fell sharply last week to $71.45 per barrel.
After weeks of growth amid fears of a decline in supplies from Iran following the imposition of U.S. sanctions, prices have fallen, with formally the reasons also linked to the Iranian problem. Saudi Arabia and Russia are increasing oil production, explaining this compensation for the likely shortage of supply in the global market due to the fall in exports from Iran. Russia produced 11.35 million barrels of oil per day in September, 100,000 barrels higher than October 2016 and 300,000 barrels of June production. At the same time, Russian Energy Minister Alexander Novak said that if necessary, Russia can increase production by another 200,000 to 300,000 barrels per day. Saudi Arabia is increasing the rate of raw material production even more aggressively. As early as September, Saudi Arabia's production rose by 700,000 barrels per day to 10.7 million barrels, while the reduction quota was 486,000 barrels.
OPEC in its monthly report lowered its forecast for global oil demand growth by 80,000 barrels per day in 2018 and 50,000 barrels per day in 2019. The forecast of global oil demand for 2018 has been lowered to 98.79 million barrels per day. In 2019, daily oil demand is expected at 100.15 million barrels, which is 80,000 barrels lower than the organization's previous forecast. At the same time, OPEC raised its forecast for daily oil production in Russia to 11.19 million barrels in 2018 and to 11.19 million in 2019. The report notes that Russian oil companies have great potential to further increase production through the development of new oil fields.
Meanwhile, Iran has announced that it has found new buyers for its oil. Earlier it was reported that India plans to continue buying raw materials in Iran in November after the formal imposition of U.S. sanctions. In addition, it is not yet known how hard the U.S. plans to monitor the implementation of sanctions. State Department Chairman Michael Pompeo said the U.S. government may consider partially preserving Iranian oil imports at the request of some countries. Thus, the fall in supplies from Iran will not be complete, and it will be necessary to compensate only a partial loss of exports.
In our forecast for the coming week we expect a decline in WTI oil quotations to support levels of 71.25 and 71.00, after which we expect a reversal and price growth to resistances of 71.50, 71.80, 72.20 and 72.50 dollars per barrel.
Forex. Cryptocurrency forecast
As we expected in the forecast for the last week, the rates of major cryptocurrencies continued to decline slightly. Bitcoin fell to 6350, ethereum fell to 200 and XRP reached the price level of 0.42 dollars.
At the end of the week there was another online conference of ethereum developers dedicated to the update of Constantinople. It was originally scheduled for November this year, but due to a failed test it had to be postponed. Constantinople will be the largest ethereum update in its history. The most significant change in this update will be the reduction of the block award from 3 to 2 esters every 14 seconds. According to one of the developers, the reduction of the award for the block by 33% will significantly increase the inflation of the cryptocurrency, which currently stands at 7.4% per year. Many miners of this cryptocurrency took it in bayonets. In their opinion, mining ethereum after that can become a non-profit occupation. The upgrade test was scheduled for the weekend. The unit with a serial number 43,300,000 was supposed to be the first after the hard fork, but mining stopped after the block's 4299,000 production. This can be due either to a code error or to the reluctance of miners to update. According to one version there was a problem with consensus, because of which the test blockchain was divided into three parts. Lack of agreement within the ethereum development community puts Constantinople on. However, no official information about the postponement of the update was given, perhaps, it will still happen before the end of this year.
MasterCard has received a patent for a system that will allow you to run different types of blockchain, including those that support multiple currencies. MasterCard is considered the record holder for the number of patent applications for blockchain technology for its products and services. The company has already patented the blockchain to link the account to the cryptocurrency and to make anonymous transactions. The company intends to patent another 30 proprietary developments based on blockchain technology, in particular to protect identification data, verify coupons and payment cards in retail outlets, as well as to track payments.
In November, the South Korean government will consider lifting the ban on ICOs. In September 2017, the Korean regulator banned ICOs in South Korea, shortly after the Chinese government made the same decision. Since May, members of the Korean parliament, the National Assembly, have demanded the ban be lifted, and in September the FSC launched an investigation into the issue. Among other things, the regulator reaffirmed the government's commitment to support blockchain technology, which is expected to allocate more than $30 million in the coming years.
In our forecast for the coming week we assume a reversal and recovery of bitcoin quotes to the levels of 6400, 6450, 6500, 6600 and 6700, the growth of the ethereum to the marks 205, 210, 215, 225 and 240, as well as the strengthening of the XRP to resistances 0.43, 0.44, 0.45 dollars 0.45 and 0.47 .