CURRENCY HIGHLIGHTS – March 2018
The EUR/USD pair continues trading higher in range, having extended its weekly advance by a few pips to 1.1361, now consolidating around the 1.1350 price zone. The early advance was directly linked to persistent dollar's weakness ahead of the US Federal Reserve meeting this Wednesday, anticipated to lower economic projections in the dot-plot. The latest retracement and the absence of progress in the shared currency is a result of the usual concerns: EU data came in below the market's expectations, with Construction Output down 1.38% MoM in January against a 0.20% advance expected, while the yearly reading resulted at -0.7%. The German ZEW survey showed that Economic Sentiment improved by more than expected in March, resulting in -3.6 for the country and at -2.5 for the whole Union, this last recovering from -16.6 in February. The US will only release January Factory Orders, seen up by 0.3%.
The broad-based selling pressure surrounding the greenback weighed on the pair during the first half of the month. With the US Dollar Index slumping to its lowest level since the first week of March at 96.29, the pair extended its slide. Although there were no clear catalysts behind the DXY's fall, markets seem to be pricing a dovish FOMC dot plot. “We look for the median dots to decline in each of the next three years, but not all the way to zero for 2019,” TD Securities analysts argued in a recently published report.
However, a sharp rebound witnessed in the Treasury bond yields, which generally shows a strong correlation with the pair, in the last week allowed USD/JPY to retrace its drop and is quoting arround 111 JPY per 1 USD.
Imprisoned by Brexit darkness Sterling is set to chart a check mark. The Brexit uncertainty remains the biggest challenge for UK politics and the biggest drag on Sterling heading into 2019.Sterling is expected to weaken at the beginning of 2019 and rebound sharply after the Brexit uncertainty fades away.
With the UK government still working its way to the UK parliament with the Brexit agreement approval, the Brexit uncertainty is set to prevail the end of 2018 and the beginning of 2019. The 2019 GBP/USD Forecast is highly dependent on the result of the Brexit deal going forward and with no fundamental bias, all options are still on the table leaving different GBP/USD scenarios all applicable.
Sterling could fall past 1.2000 level that historically frames the bottom and serves as a territory of rebound for GBP/USD in case of hard Brexit. The rational solution for all involved parties in the UK parliament, the UK government and in the EU should be to avoid the scenario of no-deal Brexit that would throw the UK economy and Sterling into disarray with the Bank of England saying the bottom for Sterling would be some 25% lower from here, indicating sub parity levels for GBP/USD. Also, no transition Brexit would represent an adverse scenario for Sterling with falling to the lowest level since 1985 of 1.0700. Such scenarios are still considered unlikely. Should such scenarios materialize, it is almost a sure-shot for traders to experience the deal of the lifetime while buying GBP/USD at historical or/and cyclical lows.
The likelihood of the UK finally making some kind of Brexit deal with the European Union, however low it is now, is still the mainstream scenario for the UK and for GBP/USD.
With Brexit uncertainty weighing, the GBP/USD is expected to test the cyclical low of 1.2200 or even 1.2000 level at the beginning of 2019 before rebounding lower. In fact, this is an opposite scenario of 2018 when GBP/USD appreciated to 1.4377 at the beginning of 2018 just to fall to 1.2477 low at the beginning of December, making 2018 low and the lowest level since April 2017.
As mentioned above, 1.2000 is historically a very importance rebound area for GBP/USD that served as a post-Brexit referendum low also in March 2017. With Sterling approaching the 1.2000 level, it will really take a hard Brexit scenario for GBP/USD to overcome this support level as more and more value investors will ponder of entering the market just for the sake of the bargain buy. Sterling traded below 1.2000 level only for three months in from December 1984 till February 1985 on a chart tracking the history back to 1970.
Regardless of how the economic fundamentals are doing in the UK and the US, the Brexit is likely to drag Sterling lower at the beginning of 2019 before the summertime release of Brexit tensions and subsequent rebound higher. We expect the GBP/USD to chart a check mark in 2019.
Gold markets continue to go sideways overall, as we hang about a large come around, psychologically significant number. Beyond that, we have a significant exponential moving average at this area as well.
Gold markets went back and forth during the trading session on Monday, as we continue to see a lot of interest in the $1300 level, an area that of course is psychologically important. Beyond that, we have the 50 day EMA just below that level, so it should offer a significant amount of support as well. Ultimately, the $1275 level underneath is massive support based upon the previous bounce, and of course the 200 day EMA which is just below there. In other words, we believe that there is a lot of support underneath and therefore it’s likely that the market will continue to find buyers on dips.
BITCOIN and ALTCOINS
Bitcoin price predictions 2019: Can Bitcoin see the old good $20,000 days in 2019?
Bitcoin, the first and largest cryptocurrency, has had it rough since it reached its peak at $19,500. After the 2017 December to 2018 January frenzy ended, everyone was expecting BTC to recover. Unfortunately, it didn’t recover and things only got worse. Right now, BTC is hovering around $4,000 and there is no saying when another bear grip will take the price below this level.
As expected, some experts have given their opinion about the current bear market and many of them don’t think it’s going to end soon. While BTC may find stability short-term, it’s going to take a lot of long-term effort for it to get to its all-time high of almost $20,000.
A Bitcoin and technology researcher, Boris Hristov had a lot to say about the current market conditions. According to him, the only way BTC is going to regain its garner legitimacy and composure is if institutional investors enter the market. This is already happening and cryptocurrency markets will be extremely interesting to follow in 2019.
We have talked before about the potential for a sharp break-out and still see this as a strong possibility going into the 2019.