Forex. Euro/dollar forecast (EUR/USD)
The quotations of the euro/dollar pair rose last week, and on Friday the price reached a local weekly high at 1.1722. However, by the end of the day session the pair had lost more than a hundred points and finished the trading week at 1.1621.
On Thursday, another meeting of the European Central Bank took place. The interest rate remained unchanged, as were plans to reduce the quantitative easing programme. Until the end of September, the ECB will continue buying 30 billion euros worth of securities, and from October to December the volumes will decrease to 15 billion. By the end of this year, the regulator plans to complete with monetary stimulus. As for the interest rate, the ECB plans to keep it at the current level, at least until the end of summer 2019, and maybe longer, if inflation in the medium term does not reach the specified level of 2%. Recall that at the moment the consumer price index is growing by just 2% in annual terms, but the basic inflation is significantly lower and is only 1%.
At a press conference, ecb chief Mario Draghi said that the potential strength of the Eurozone economy supports confidence that inflation will reach the target values. At the same time, Draghi noted the growing risks associated with trade wars, instability of emerging economies and growing volatility of currency markets. According to Draghi, substantial monetary stimulus is still needed to restore inflation.
Forecasts of economic growth in the Eurozone do not imply a return to 2017 and imply a fairly modest growth, not exceeding 2.0% in annual terms. At the same time, analysts estimate that the U.S. economy will grow by about 3.0% in 2019. The U.S. labor market remains as strong as possible, consumer spending and manufacturing orders are also growing. This dynamic will continue until early 2020, after which a decline is expected. The Fed will continue to raise interest rates every quarter until the end of summer 2019. More radical forecasts imply even stronger growth in the U.S. economy. For example, according to the Atlanta Fed model, real GDP growth in the third quarter of this year could reach 4.4% due to the growth of consumer spending. The latest data of retail sales and industrial production in the United States were quite strong.
In the short term, the greatest impact on the euro/dollar pair quotes will be the expectations of an interest rate increase by the Federal Reserve at the meetings in September and December. The euro/dollar pair is still trading in the broad corridor of 1.1560 to 1.1800, and we expect another attempt to break through the lower boundary of the range in the near future.
In our forecast for the coming week, we expect a slight increase in the euro/dollar pair's quotations to resistance levels of 1.1640 and 1.1660, after which we expect a reversal and decline to support 1.1620, 1.1600 and 1.1560.
Forex. Pound/dollar currency pair forecast (GBP/USD)
The British currency strengthened last week against the US. The pound/dollar pair overcame the key level of 1.3000 and managed to gain a foothold above it, finishing the trading week at 1.3053.
Last week there was another meeting of the Bank of England and, similarly European, it did not bring great surprises. Members of the monetary committee voted unanimously to keep the interest rate and volume of purchases of securities at the current level. The Bank of England, like the ECB, noted the increased risks to the global economy associated with protectionist policies in the US and the high level of uncertainty for financial markets. Forecasts for the growth of the British economy remain unchanged at fairly low levels.
Bank of England Governor Mark Carney once again noted the high probability of a hard Brexit and said that the UK's exit from the EU without an agreement could have the same consequences as the financial crisis of 2008.
Contrary to Carney's pessimism, there were several reports of possible progress in the negotiations last week, which provided substantial support to the British currency and allowed the pound/dollar pair to overcome the resistance level of 1.3000. Bloomberg reported on Thursday that the EU and the UK have reached a preliminary agreement on the issue related to the status of the Irish border, which for now remains the main problem in the negotiations. On Friday, the quotations of the pair reached the local maximum since the beginning of August this year at 1.3143, after which they fell sharply to the level of 1.3053.
Current forecasts suggest that an agreement between the UK and the EU could be concluded by the end of November. Thus, the next two months will be accompanied by increased volatility in markets associated with the British pound. Any information about the expected progress in the negotiations will be accompanied by a growth of the currency, so a return to the multi-month low at 1.2662 is extremely unlikely in the near future.
The UK economy remains low but stable. The refined data of industrial production and manufacturing in the manufacturing sector again showed a decline. The average wage, which increased by 2.9%, which could lead to stronger consumer activity and GDP growth faster than current forecasts, was more positive.
In the coming week, the British currency is expected to be highly dependent on Brexit-related news. Most likely, the pound/dollar pair will be able to stay above the level of 1.3000 due to the abundance of positive information about progress in the negotiations. We expect a slight increase in the quotations of the pair to the resistance levels of 1.3070, 1.3090, 1.3125 and 1.3160.
Forex. Gold price forecast
Gold prices strengthened for most of the last week and reached a local high of 1213 dollars per troy ounce, but by the end of trading the price fell to 1193 dollars.
In general, the dynamics of the gold price was quite predictable last week. As we expected, after recovering from the annual minimum quotes for some time will consolidate at the key level of 1200 dollars per troy ounce.
The gold market did not react to the trade conflict between the United States and China in any way. However, the further development of the conflict and the possible entry into force of additional duties on Chinese goods worth $200 billion will undoubtedly affect the price. In addition, economists have long predicted a strong correction of the U.S. stock market, which, meanwhile, continues to beat highs. In this case, the U.S. currency will also fall, so gold will become a protective asset for the investment portfolio. However, given the plans for further tightening of interest rates of the Fed in the coming year, a sharp decline in the dollar may not come soon.
The main driver of gold growth last week was the continuation of uncertainty in developing countries. Some experts suggest that these are the first signs of the coming global crisis. Against this background, the demand for gold will be maintained at a high level.
According to data published by the World Gold Council, interest in the asset remains with the Central Banks of different countries. After a long hiatus, Venezuela again began to buy gold against the backdrop of the ongoing severe economic crisis in the country. In August, venezuela's incumbent President Maduro announced the start of a program to sell gold certificates to the public to save savings from inflation. This is not Maduro's first attempt, having previously pegged the rate of the falling currency to the national cryptocurrency. In addition to Venezuela, Russia, India, Kazakhstan, Turkey and Mongolia became major buyers of gold for their reserves. The total increase in gold was 26.7 tons compared to the previous period.
Despite the negative forecasts for the U.S. economy in the medium term, the current situation remains quite good. Charles Evans, president of the Federal Reserve Bank of Chicago, said Friday that he expects two more interest rate hikes before the end of this year. Evans noted strong U.S. economic growth, low unemployment and steady inflation. In his opinion, GDP growth in 2019 will be 3%, which exceeds the growth of other developed economies. Expectations of a rate hike by the Federal Reserve will significantly limit the growth of gold quotations.
In our forecast for gold for the coming week we expect a further decline in quotations to support levels of 1190, 1188 and 1185 dollars per troy ounce, after which we expect a reversal and price increase to the levels of 1192, 1195 and 1200 dollars.
Forex. North American Oil Forecast (WTI)
WTI crude oil prices rose slightly in the last trading week and reached the resistance level of $69.00 per barrel.
Towards mid-week, the price of oil reached its local peak at $71.25 per barrel, after which it entered a phase of decline. The growth of quotations was provided by lingering fears of a sharp decline in Iranian oil exports.
OPEC in August increased oil production by 278,000 barrels per day compared to July, while overcompliance with the terms of the deal amounted to 110%, a decrease of 5% compared to the previous month. Oil production has grown the most in Libya, Iraq and Nigeria. The leader was Libya, where production was recovering from a military conflict that left some of the exporting capacity in the hands of non-governmental organizations. As a result, Libya increased daily production to 926,000 barrels. Although Libya is not part of the OPEC agreement to reduce production, the country's government has said that production will not exceed one million barrels by the end of 2018.
Iran, Venezuela and Algeria accounted for the largest drop in oil production. Iran is cutting production because some countries are halting Iranian oil exports now, without waiting until November, when U.S. sanctions are formally imposed. In Venezuela, a large-scale economic crisis continues, leading to a reduction in production.
According to the September report, OPEC raised its forecast for U.S. oil production for 2018 and 2019 by 30,000 barrels per day to 10.56 and 11.51 million barrels per day, respectively. In particular, OPEC raised its forecast for shale oil production in 2018 by 70,000 barrels per day to 5.98 million barrels per day. The constant increase in U.S. shale oil production remains the main factor that limits the rise in oil prices.
Another factor that currently limits the growth of oil prices remains the trade conflict between the United States and China. The worst-case scenario, in which the U.S. imposes promised sanctions on imports of Chinese goods worth $200 billion, and the Chinese government will retaliate on the same scale, suggests a global slowdown in global growth economy that will lead to lower energy demand. The significantly reduced growth of emerging markets also raises concerns about the decline in global oil demand.
In our forecast for the coming week we expect further growth of WTI oil quotations to resistance levels of 69.20, 69.40, 69.75, 70.00 and 70.30 dollars per barrel.
Forex. Cryptocurrency forecast
The cryptocurrency market recovered slightly last week. Bitcoin quotes rose to the level of 6500 dollars, and the price of ethereum reached 220 dollars.
For the first time in the last few weeks, the main assets were not without a failure of quotations, and the recovery was not enough even to reach the highs of the last week. As usual recently, the Altcoins have sagged more significantly than bitcoin, and the rate of recovery of the main currency has been faster. As a result, the bitcoin dominance index set another annual high of 56.3%. Bitcoin quotes continue to trade in the corridor of 6000 – 7500 dollars, and for a larger recovery the price should gain a foothold above the upper limit of the range.
Last week, Jaxx Liberty multi-currency wallet for Android and Chrome was released. Jaxx Liberty users will be able to access the Portfolio module, which allows them to track the dynamics of the cryptocurrencies selected by the user over a certain period of time, the news module and data on price movements and market capitalization Cryptocurrency. The wallet also supports more than 70 cryptocurrencies and tokens. Separately, the developers note that Jaxx Liberty does not require registration and does not store personal data of users, while private keys are stored on the client's side and never leave the device.
The main network of the Tezos project is due to be launched on Monday, September 17. The launch of a viable version of the software was made at the end of June, but all this time the network was in beta mode. There has been only one outage on the network since it was launched. Thus, in mid-July for an hour did not make correct validation of blocks. The problem was solved, and since then the blockchain system has been running smoothly. Tezos became the largest ICO for its time, in July 2017 it raised 232 million dollars. It was also the largest ICO in history before Filecoin appeared. Tezos currently has a capitalization of about $882 million.
In October of this year, the hard fork is expected to be the second most popular cryptocurrency. The upcoming change to the ethereum, which has been dubbed Constantinople, will include five different proposals to improve the project. Its main goal is to improve the efficiency of the network and restructure the commission system. In addition, the update of Constantinople aims to make the blockchain ethereum more scalable. Constantinople is also intended to change the economy of the entire blockchain, as it will reduce the reward for the block within the fork Community Ethereum perceived the adoption of this proposal positively, although it will make mining less profitable.
In our forecast for the coming week, we expect a further recovery of the price of bitcoin to resistance levels of 6550, 6600, 6700, 6800 and 7000 dollars, as well as the growth of ethereum to the levels of 225, 235, 240, 250 and 260 dollars.