Forex. Euro/dollar forecast (EUR/USD)
Last week, the European currency showed a confident downtrend. The euro/dollar pair showed the maximum growth at the end of five working days on Monday, rising from 1.1400 to 1.1450. Friday's trading session was completed at 1.1330, which was a weekly low.
The news agenda was crucial to the pair's dynamics. Throughout the week, the situation with the Italian budget was a destabilizing factor for the euro. On Wednesday, the European Commission rejected Rome's revised draft budget due to non-compliance with agreed deficit parameters. In addition, Brussels said it could initiate disciplinary proceedings against Rome, which threatens multibillion-dollar penalties.
A key driver for the euro is a significant spread between the ten-year bonds of the German and Italian public debt. At the end of the week, the difference in the yield sat on Italian and German bonds was 307.70 basis points.
Macroeconomic indicators worse than expected also caused a negative trend of the euro and lowered the expectations of traders of the recovery of the Eurozone economy in the fourth quarter. The consumer confidence index for November in the Eurozone again showed a decline from -2.7 to -3.9, which was a factor in the pullback of the European currency.
Friday's release of the index of business activity in the manufacturing sector in the Eurozone and Germany was the catalyst for the strongest fall of the euro for the week. The German manufacturing PMI at the end of November was 51.6 with analysts forecasting a value of 52.3 and thus reached a 32-year low. The index of industrial activity within the Eurozone was also quite weak – 51.5, although it was expected to remain the value for the previous period. These changes in German GDP at the end of the third quarter showed a decline of 0.2%, putting additional pressure on the European currency.
In the coming week, the dynamics of the pair will again be influenced by macroeconomic statistics from Germany. The IFO Business Climate Index will be published on Monday. At the end of October, the indicator showed a decline, a negative trend is expected and on the results of November, which can put pressure on the euro.
On Thursday, the number of unemployed in Germany will be announced, and on Friday – the consumer price index, the most important inflation indicator of the Eurozone. The data can become support for the euro, as recently usually correspond to the expectations of analysts, stable even with negative values, and therefore do not carry risks for the market.
In our forecast for the coming week, we expect a further decline in the euro/dollar pair's quotations to support levels of 1.1300, 1.1290, 1.1275, 1.1265 and 1.1230.
Forex. Pound/dollar currency pair forecast (GBP/USD)
Last week, the movement of the British currency was characterized by negative dynamics. Starting the trading week with 1.2860, the pound/dollar pair reached 1.2795 at its end. In addition, the pair showed a high level of volatility against the backdrop of the ever-changing news context.
On Thursday, traders reacted positively to the statements of British Prime Minister Theresa May and European Council President Donald Tusk that the conclusion of the Brexit agreement is within reach, and the text of the accompanying political declarations are practically agreed upon. However, despite the looming possibility of reaching an agreement, the market is concerned about its contents, of which little is known.
Comments by former Brexit Minister Dominic Raab played a significant role in Friday's rollback of the pound. He believes that the UK can leave the community on unfavourable terms and that the only acceptable option is an agreement allowing the UK to unilaterally leave the EU without onerous conditions.
The Spanish factor continues to put pressure on the British currency. On Thursday, it was reported that Spain could block the draft agreement on the UK's withdrawal from the EU because it did not resolve the issue of Gibraltar. On Friday, rumours were circulating about reaching agreements on Gibraltar, which, however, were not confirmed, becoming another reason that determined the negative trend for the pound.
A summit of EU leaders will be held on Sunday, with an agreement on britain's exit on the agenda. On 14 November, the British government agreed on its draft, which is to be approved in conjunction with the political declaration on Brexit at the EU summit scheduled for 25 November. Supporters of Theresa May's vote of no confidence in Parliament failed to get the required 48 letters to trigger the vote. However, traders considered this risk highly likely and played it back throughout the trading week. How much it will continue to affect the market in the coming week will be largely determined by the outcome of the summit.
British macroeconomic statistics in the previous week did not support the pound. The publication of the British house price index from Rightmove has had a negative effect, the indicator of -1.7% indicates the difficulties in the British housing sector. Next week, Nationwide's house price index and gross approved mortgages will be published, which may adjust to the downside due to inflated expectations in past reporting periods against the background of weaker evidence.
From the U.S. statistics, the consumer confidence index, which will become known on Tuesday and can positively affect the dollar, as it shows stable growth since June this year. On Wednesday, u.S. GDP data for the third quarter will be released, where economists maintain positive expectations, as well as new home sales data in the U.S. for October. The latter indicator can positively affect the couple, as housing statistics of recent periods in the U.S. is quite weak.
We expect that the pound/dollar pair next week will be characterized by growth to resistance levels of 1.2800, 1.2830, 1.2875, 1.2900 and 1.2950.
Forex. Gold price forecast
Last week was characterized by significant volatility of gold, despit
Trading volumes last week were lowered due to Thursday's Thanksgiving celebration in the U.S. and the abbreviated U.S. trading session Friday.
The momentum for the golden rally earlier in the week was given by the US stock market. Stock indexes showed a sharp decline on Monday due to the negative dynamics of shares of Internet companies and corporations of the technology sector. The reason is that the U.S.-China trade war, which has entered a new phase, has a significant impact on the technological component, because trade flows from China determine the logistics of supply both components and finished products of American corporations.
In connection with the thanksgiving celebrations, at the end of the week the focus shifted to the European stock market, the dynamics of which played in favor of the precious metal. Only on Wednesday did he show growth, breaking a five-day drop. At the end of the week, European indices closed with a decline, although on Friday they remained on positive values.
U.S. foreign debt yields fell for the week, excluding two-year, yields that rose 0.94 basis points. Ten-year bonds, which are a key indicator of the debt market, showed a decline of 2.38 basis points for the week, to the current 3.0390%. Low values on treasuries traditionally reinforce gold quotes.
The long-term trend in gold will be determined by its prey. Last week, Fitch published a study that estimated that by 2022, global gold production will grow to 115 million ounces, up from 104 million ounces in 2018, an increase of 10.6%. Prices according to the agency's forecast will increase by 9.8% to $1,400 per ounce of metal by 2022. Aware of the positive dynamics in the long term, traders will not be afraid to invest in gold assets in the near future.
On Monday, the Weekly Report of the Commodity Futures Trading Commission will be published, from which the number of net speculative positions on gold will be known, on the basis of which it will be possible to analyze market expectations. The build-up of net position signals anticipation of price growth, a reduction in the reverse trend.
In the forecast for the coming week, we assume that gold will maintain an upward momentum and will be able to test resis
Forex. North American Oil Forecast (WTI)
Last week, oil prices were characterized by steady downward trend, falling from the level of 57.33 dollars per barrel on Monday to the level of 50.88 dollars per barrel by the end of Friday trading.
Thus, the quotes ended the sevent
The key driver for the oil market is the three-day December meeting of OPEC and investors' expectations about its results, namely, the decision to reduce oil production. The price dynamics for the coming week will be largely determined by news and rumors about the event. Traders are waiting for Russian President Vladimir Putin to meet with Saudi Prince Mohammed bin Salman at the G20 summit next week. It is believed that its results may affect the decision of OPEC. However, it may not have the expected effect, as the market, fearing a shortage of raw materials, already lays the risks of reducing oil production in the value of quotations.
Despite the fact that oil exports from Iran due to U.S. sanctions decreased by several hundred thousand barrels per day, this did not produce the expected negative effect. Deliveries from Iran are still taking place in higher volumes than expected. In addition, they cover the needs of the largest importers of raw materials – for example, on Friday it became known that China in principle did not stop cooperation with Iran in the energy sector, despite the sanctions.
Also last week, the news to the market was an unspoken agreement between the U.S. and Saudi Arabia to keep commodity prices low. The kingdom produced more than 10.7 million barrels per day in November, a new record for oil production and reduced the potential for higher prices, despite Riyadh's announcementof a decline in exports in early winter.
According to the report of the American Petroleum Institute on commercial reserves of raw materials in the United States, in the week from November 12 to 16, they showed a decline of 1.55 million barrels. However, these statistics were not played out by the market by adjusting oil prices upwards due to the general news background. Oil inventories at the Cushing terminal, which is a barometer of U.S. crude oil supplies, showed an increase of 0.398 million barrels. On Wednesday, data on crude oil reserves in the United States and on oil reserves in Cushing were published according to statistics of the Department of Energy. According to the report, oil reserves increased by 4.85 million barrels in the past week with a forecast of 2.5 million barrels. Inventories at Cushing terminals fell by 0.116 million barrels to 35.35 million barrels.
Next week, oil quotes may be affected by the publication of data on weekly crude oil reserves according to the American Petroleum Institute and data on U.S. crude oil inventories by the Department of Energy, as well as Friday's release of information from the Baker Hughes on the number of operating rigs in the U.S. as an indicator of the activity of the oil industry. Thus, information from the API and the Ministry of Energy is likely to contribute to lower prices due to the expected increase in inventories.
We expect a further decline in oil prices next week to support levels of 50.60, 50.30, 50.00, 49.75 and 49.40 dollars per barrel.
Forex. Cryptocurrency forecast
The rapid downward dynamics of the cryptocurrency market, which began with the sharp collapse of the hard fork Bitcoin Cash, continued last week. Bitcoin started at $5,470 per unit, and by the end of the week was trading at an average of $4,342. Ethereum almost completely duplicated the dynamics of the benchmark currency, falling from 164 to 157 dollars on the first day of trading, and by Friday fell to 122 dollars. The smaller decline was limited to Ripple, which showed an increase from 0.4816 to 0.5014 on the first day of the trading week, but by Friday it had still fallen to 0.4087.
Given the extremely rapid dynamics of the decline of Bitcoin, it is possible to turn the recent support level of 6000 dollars, relevant at the beginning of November, into a level of resistance, the breakdown of which will mean the beginning of a confident uptrend. Prices for virtual currencies show a decline against the background of extremely low volumes of trade. For example, the average volume of trading on Bitcoin as of Friday was 5.1 billion dollars, down by 3.5% per day, which is a rather negative signal for the market, as trading at low values limits the growth potential of cryptocurrencies. It is possible to activate it in the sale of cryptocurrencies by miners in order to cover the cost of their activities, as mining of most virtual currencies at current hashrates is within the limits of self-sufficiency.
An additional factor influencing Ethereum is the complexity experienced by many ICO projects that operate on its basis. It is the only cryptocurrency that has demonstrated its uncharacteristic high volumes of trade – 2 billion dollars per day, with an ordinary pre-crisis daily volume of about 1 billion. The reason is the sale of Ethereum ICO coins when entering fiat money, as well as attempts of private investors to avoid leaving in a more significant disadvantage. Bitcoin has not yet faced such sales due to the high cost.
The news context also does not represent support for the virtual currency market. Last week it became known that the cryptocurrency platform Bakkt, the subject of which will be futures contracts for Bitcoin with physical supply, will not start functioning until January 24, 2019. The fact that the launch of the site, so expected by the cryptocurrency community, is postponed, shows the uncertainty of regulators, so far not at risk of licensing its activities. Uncertainty, as a result, is transmitted to traders closely watching this event.
For the coming week, we consider the scenario of further decline of the cryptocurrency market against the background of negative expectations of private and institutional traders is likely. Bitcoin will move to support levels of 4200, 4050, 3900, 3800 and $3,500. Support levels of $117, 110, 108, $103 and $100 are possible for Ethereum. Ripple will be prone to the least negative dynamics and will attempt to test support levels at 0.3680, 0.3540, 0.3400, 0.3350 and $0.3300.