Forex analysis review

EUR/USD. Weekly preview: Fed meeting, US GDP and European inflation
BITCOIN - technical analysis of the current situation
Janet Yellen warned the US government about the threat of a technical default
Jerome Powell may resign as early as January 2022

EUR/USD. Weekly preview: Fed meeting, US GDP and European inflation

Posted: 25 Jul 2021 07:37 AM PDT

So, the euro-dollar pair ended last week at 1.1770 - that is, at the lower limit of the range of 1.1750-1.1830, within which it was traded throughout the entire five-day trading period. EUR/USD bears literally tried to gain a foothold below the target of 1.1750 every day, but in vain: the southern impulse faded, and the price returned back to the range. Traders lack determination, although bearish sentiment for the pair clearly prevails.

The European Central Bank did not support the euro – moreover, the ECB members essentially gave the "green light" to further weakening of the single currency. The new strategy of the Central Bank allows for a temporary excess of the target inflation rate, allowing the regulator to ignore such an inflationary surge. This fact further removed the moment of a possible increase in the interest rate. According to most experts, the ECB will raise the rate no earlier than 2024 (the year 2025 also appears in the reports of currency strategists). As for the prospects for QE, there were no "hawkish" hints here either. Christine Lagarde said that "certain decisions" regarding the prospects for monetary policy will be made at the September meeting, when new macroeconomic forecasts will be published. At the same time, according to insider information from Reuters, in September the European Central Bank will not discuss the fate of the RERR, since at that time there will still be uncertainty about the development of the pandemic. According to sources, the ECB is likely to discuss this issue in October or November. Given the fact that another wave of coronavirus cases is expected during this period, no one will dare to curtail PEPP, only to resume this program again in a few weeks against the background of an increasing epidemiological crisis. All this suggests that the ECB will maintain the current parameters of monetary policy in the foreseeable future, while possible changes will only be in the direction of its further easing.

In other words, the European Central Bank has said its word – now it's the turn of the US Federal Reserve. The next meeting of the Federal Reserve, which will be held on July 27-28, will be the central event of the upcoming week for traders of the EUR/USD pair. Against the background of this event, all other fundamental factors fade, although the economic calendar is full of important releases. Let's focus on the main ones.

So, on Monday, it is traditionally half-empty: only the German IFO indices are of interest. Positive dynamics is expected here – in particular, the indicator of business environment conditions in Germany may again update a long-term record, reaching the level of 102.3 points. This fact may provide minor support for the euro. During the American session, data on home sales in the US on the primary market will be published. Positive dynamics is also expected here after a two-month decline. This release is interesting in the context of recent statements by some representatives of the Fed. In particular, the head of the St. Louis Federal Reserve, James Bullard, said last week that "it's time to curtail incentives", in light of the increased risks of overheating of the US real estate market.

The main release of Tuesday is an indicator of American consumer confidence. After reaching a one-and-a-half-year high (127.3 points), a slight decline is predicted in July – up to 124 points. But if this release is released in the "green zone", the dollar will receive significant support, especially in light of inflation expectations.

On Wednesday, we will learn the results of the July Fed meeting. It should be noted here that despite the dovish comments of Jerome Powell, rumors are persistently being circulated in the market that the American regulator will announce the curtailment of QE at one of the next meetings. Also, among experts, you can often find the idea that the first round of rate increases will take place next year, and not in 2023. And if I would not rush to conclusions about the rate, then the prospects for curtailing QE in the foreseeable future look more realistic. The latest inflation releases reflect the rise in prices of various categories of goods and services, including the amount of rent for housing. This means that the US economy could hypothetically be close to overheating if the Federal Reserve does not take retaliatory measures. At least, this position is voiced by some currency strategists – in particular, the conglomerate Goldman Sachs, who in early July announced that, according to their estimates, the Federal Reserve will announce the curtailment of QE, if not in November, then in December, that is, at the final meeting this year. If at the July meeting Powell at least does not rule out such a scenario, the US currency will receive strong support, and the uncorrelation of the positions of the Fed and the ECB will be more pronounced, putting additional pressure on EUR/USD.

On Thursday, all the attention of traders will be focused on the publication of data on the growth of the US economy in the second quarter. This is the most important release, which can also provoke increased volatility among dollar pairs. Let me remind you that in the first quarter, US GDP grew by 6.4%, exceeding the forecast values. The positive dynamics should also remain in the second quarter – the key indicator should reach 8.6%. If this indicator even minimally exceeds a sufficiently strong forecast level, the dollar will again be in high demand.

But on Friday, the main news for the pair will come from Europe – we will learn data on the growth of inflation in the eurozone in July. In the previous month, the general consumer price index slowed its growth, reaching 1.9% (after the May increase to 2%). The core index, which was at the level of 0.9% (after the previous growth to 1%), also disappointed investors. According to preliminary forecasts, in July, the indicators should "bounce back": the general CPI will return to the two – percent mark, the core CPI-to the one-percent mark. In the event that the indicators come out at the forecast level, this fact will not impress investors. But any, even a minimal "step back" will significantly increase the pressure on the single currency.

Thus, the coming week promises to be volatile. If we talk about trade decisions, then short positions are a priority here – at least until the announcement of the results of the July Fed meeting. The previous expectations will support the dollar, at least according to the trading principle "buy on rumors, sell on facts". It is most expedient to go into sales at the peak of the northern impulses, and to be more precise, when the corrective price pullbacks are "fading". The main goal of the southern movement is still the support level of 1.1750 (the lower line of the Bollinger Bands indicator on the daily chart).

The material has been provided by InstaForex Company - www.instaforex.com

BITCOIN - technical analysis of the current situation

Posted: 25 Jul 2021 07:37 AM PDT

BITCOIN

Another test of the existing lows of the current monthly correction for the bears was not crowned with success. It was not possible to overcome the area and continue the decline. As a result, the third extremum (29184.48) was formed, previously 29701.91 (05/19/21) and 29151.97 (06/22/21) were designated here. The support zone formed by these three anchor points now serves as the most significant border for short players. The passage of these supports and the subsequent breakdown of the weekly cloud, as well as the elimination of the monthly Ichimoku gold cross (the final line of 27176.82) will allow the downward trend players to consider new far-reaching plans. Another failure of the bears provided the opponent with the opportunity to quickly climb to the area of important resistances of the existing section - 33534 - 34355 - 35164. When consolidating above, the daily dead cross will be eliminated, bitcoin will enter the daily cloud and take over the weekly short-term trend. All this will also lead to the consideration of new large-scale prospects only for the players for the increase. The primary task in this direction will be to form a full-fledged rebound from the met supports of the monthly cross of Ichimoku (34355 Kijun + 38958 Tenkan + 41532 Fibo Kijun).

On lower timeframes, the advantage is now completely on the side of the bulls, who are actively implementing the upward trend. The resistance of the classic Pivot levels can now serve as upward guidance within the day. With the development of downward corrections, one can focus on the support of the classic Pivot levels. The area of the most important supports, responsible for the distribution of support forces, can now be designated at the place where the support for the weekly long-term trend (32237) and the daily Ichimoku cross (32704 - 31954) merge. Testing and consolidating below will affect the current distribution of forces and will require a new assessment of the situation.

***

In the technical analysis of the situation, the following are used:

higher timeframes - Ichimoku Kinko Hyo (9.26.52) + Fibo Kijun levels

H1 - Pivot Points (classic) + Moving Average 120 (weekly long-term trend)

The material has been provided by InstaForex Company - www.instaforex.com

Janet Yellen warned the US government about the threat of a technical default

Posted: 24 Jul 2021 07:34 PM PDT

US Treasury Secretary Janet Yellen sent an official letter to the relevant legislative body, in which she said that the country might face a technical default. Recall that a few weeks ago, Yellen already spoke about the threat of a technical default. Now, this issue is coming to the first position in the rating of the most priority tasks of the American government. Yellen informed the country's leadership that a default could cause irreparable damage to the state. It would seriously affect the pace of economic recovery after the crisis caused by the coronavirus pandemic. A default could happen as early as August if the government debt ceiling is not raised by July 31. If nothing is done in this matter, the state debt limit will be exhausted on August 1. Thus, if the national debt is not increased, the American government will not be able to pay debts and interest on government bonds, which will seriously undermine confidence in the authorities and spoil the international reputation of the United States. The US Treasury Secretary also noted that even "one threat of default" is already harming the economy. Yellen also notified the government that, starting in August, her department is suspending the sale of securities.

In 1917, a law was passed in the United States that restricts government spending and the amount of debt. Thus, to increase the size of the national debt, Congress and the Senate must approve this decision. Since 1917, Congressmen have increased the borrowing limit 74 times. It is also worth noting that the total US public debt during the pandemic increased to $ 30 trillion, which is more than 100% of the country's GDP. However, most experts still tend to believe that the issue will be resolved positively. One of the US political forces is not profitable to default, no matter how banal it may sound. And in any case, the States are used to "living on credit." If the national debt limit has already been raised 74 times, nothing prevents it from being raised 75 times. Thus, the probability of a "surprise" is minimal.

The material has been provided by InstaForex Company - www.instaforex.com

Jerome Powell may resign as early as January 2022

Posted: 24 Jul 2021 07:34 PM PDT

US stock markets continue to grow. Moreover, it is very difficult to say what are the reasons for its growth at this time. Whether for the most banal reason – there is more money in the US economy, so this excess money settles on the stock market. Whether for deeper fundamental reasons, such as the rapid recovery of the American economy. One way or another, the NASDAQ and S&P 500 indices on Friday did not just close with an increase. They updated their absolute highs. By the way, the macroeconomic statistics were very weak this week. On Friday, more or less significant business activity indices were published, which were not unequivocally in favor of the dollar or the American economy. It turned out that business activity in the manufacturing sector increased from 62.1 to 63.1 points in July, but at the same time, it decreased from 64.6 to 59.8 points in the service sector.

In addition, American journalists began to wonder who will take the place of Jerome Powell after his term of office ends? Recall that in January next year, Powell may leave his post if the Joe Biden administration does not decide to extend his contract for a second term. At this time, there is little chance that Powell will remain at the helm of the Fed. It is noted that there is no direct conflict between Biden and Powell, but Biden is a Democrat, and Powell is a Republican. Thus, Biden will probably want to see "his person" at the head of the central bank.

Moreover, one way or another, the president wants to have at least some influence on the Fed's monetary policy. After all, the Fed is not directly subject to the president under American laws. It is independent. Therefore, at least some influence on its activities can be exerted if the president appoints the person. Of course, this does not guarantee the result. One has only to remember how Donald Trump clashed with Powell, although they are both from the same party, and it was Trump who nominated Powell for this post in 2017. Also, American economists have already suggested who can replace Powell at the head of the Fed. It can be Lael Brainard, who has been on the Fed's monetary committee since 2014 and is famous for the softest position among all committee members. Experts note that if Brainard becomes the head of the Fed, the organization can take the most "dovish" position of all possible for a long time.

The material has been provided by InstaForex Company - www.instaforex.com

Forex analysis review

Forex analysis review

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