USD/JPY: Investors at a Crossroads
The USD/JPY was trading in a fairly narrow range throughout the past week, less than 110 pips (114.78-115.86). As already mentioned, investors are now most concerned about two issues: the expected Russian invasion of Ukraine and the increase in the refinancing rate by the US Central Bank. And, apparently, they have not yet decided what to do with such a safe-haven currency as the yen at this stage.
On the one hand, the increase in USD rates should push the pair up, strengthening the position of the US currency.
On the other hand, the escalation of the conflict in Ukraine may remind the markets of economic crises and a spike in inflation. In this case, one can expect a complete loss of risk appetite among investors and an influx of their capital into such a safe haven as the Japanese currency. Actually, this is happening now, although not on a very large scale: it is enough to compare the charts of stock indices and USD/JPY. This relationship is even clearer when compared to the EUR/JPY chart, since, unlike the US, the Eurozone is located in close proximity to the potential war zone.
Analysts' forecasts for the coming week are as follows: 25% of them are in favor of a sideways trend, 50% are in favor of the pair's growth and 25% are in favor of its fall.
Among the oscillators on D1, 30% are neutral gray, 10% are green, 60% are red (with a quarter of them in the oversold zone). Trend indicators have a 50-50 draw. The nearest resistance zone is 115.30, then 115.70. The main goal of the bulls is to renew the high of 116.34 and rise to where the pair has not been seen since January 2017. Support levels are at 115.00, 114.80, 114.15, 113.75, 113.45, 113.20, 112.55 and 112.70.
No significant economic events are expected in Japan next week.
CRYPTOCURRENCIES: Crypto Market Black Friday
BTC/USD is back where it was a month ago. The chart of the last two weeks resembled the chart of mid-January. The front line then lay at the $42,000 level, along which the bulls and bears fought with varying degrees of success. Last time, they ended with the pair falling to $32.945, and, according to a number of analysts, a similar outcome is possible this time as well. It depends not so much on the sales caused by a possible Russian invasion of Ukraine, but on the US Federal Reserve. Tightening monetary policy and rising interest rates could hurt all risky assets, including cryptocurrencies.
Bitcoin has acted as an inflation protector throughout the pandemic. This was one of the main drivers of its growth. But if inflation returns to normal, who needs such a protector?
There is no doubt that the US Central bank will try to curb inflation, which has already reached a 40-year high. But how successful its efforts will be is a question to which different experts give different answers. Bitcoin supporters continue to convince everyone (and themselves in the first place) that we are ahead of an endless rise in prices and serious financial turmoil.
According to Parallax Digital CEO Robert Breedlove, the same thing could happen to the dollar as to the currency of Venezuela. The US currency will hyperinflate by 2035, at which point the price of BTC in dollar terms will become astronomical: 1, 5, or 10 million USD per coin.
The legendary investor, founder of Miller Value Partners, Bill Miller almost half of whose fortune is now made up of cryptocurrency, also stood up to the defense of bitcoin. “It's like an insurance policy. You don't want your house to burn down, and you don't want to get into a terrible accident, but you pay for insurance every year in case it happens,” explained the billionaire.
Tom Lee, co-founder of the analytical firm Fundstrat, called $200,000 a target mark for bitcoin in an interview with CNBC and explained who will facilitate its achievement. And these are not institutional investors at all, but small investors. According to the analyst, the total net worth of US households exceeds $141 trillion. People will look for ways to protect them over the next decade in order not to lose their savings due to inflation, . Therefore, Lee says, the inflow of capital into cryptocurrency can be “huge”.
The high price of this asset is an obstacle to the mass adoption of bitcoin, in his opinion. Therefore, Tom Lee has supported the idea of switching to Satoshi, a millionth of BTC.
Jurrien Timmer, Director of Global Macroeconomics at Fidelity Investments, one of the largest asset management companies, is also optimistic. He is confident that the value of the first cryptocurrency will repeat the growth of Apple's market value. “I compared the network effect of bitcoin to the network effect of Apple computers. As Apple's earnings increase, its share price rises exponentially. I have reason to believe that bitcoin is following the same path. The price of this cryptocurrency will only increase as demand increases.” And according to Trimmer, it will reach $100,000 by 2023.
This expert believes that BTC benefits from its strong difference from all other crypto assets. “Perhaps other digital currencies will look more profitable against the background of bitcoin because of the better scalability, but at the same time they are likely to be less decentralized. For me, bitcoin is like gold, and other cryptocurrencies are more like venture capital.”
Analyst Willy Woo believes that the future of the US dollar in terms of inflation has not yet been determined. Bitcoin's capitalization is currently below $1 trillion, and breaking this mark will give the coin more resilience, and it will grow over the next five years. Further growth to the gold capitalization of almost $11 trillion will be relatively smooth, after which it will slow down. As for the final figure, Willy Woo believes that the capitalization of bitcoin could eventually grow to $40 trillion.
As for the immediate prospects, according to analyst Nicholas Merten, bitcoin is now giving signals of future growth and “its capitalization could reach $4 trillion potentially in October-December 2022.” That is, the asset will show a 220% increase in relation to the previous record high. The previous rally was 392% up and it was 359% up earlier.
“This is a really great signal,” says Merten. “The past resistance level is becoming an upward support. Investors are ready to pay more and more, which indicates the market is ready to return to the formation of another uptrend.”
The fact that BTC/USD was above the 50-day moving average for 10 days really looked like a trend reversal. A breakdown of the 200-day MA at $48,000 could be the next confirmation. Investors were also encouraged by the growth of the Crypto Fear & Greed Index. If at the same BTC price, it was in the zone of Extreme Fear at the level of 20 points a month ago, it reached 52 points on Thursday, February 17.
However, another wave of active sales on Black Friday, February 18 brought another portion of doubts about the bulls' near victory. The Crypto Fear and Greed Index fell into the Fear zone to the 30 mark. The 50-day MA has again turned from support to resistance, and the total crypto market capitalization has not managed to gain a foothold above the psychologically important level of $2.0 trillion, and it is $1.815 trillion at the time of writing.
In conclusion, it remains only to quote the words of Tom Lee from Fundstrat. “If there is no crystal ball, it is very difficult to be accurate in cryptocurrency,” he joked about the forecasts. According to a proverb, there is some truth in every joke. In this case, this proportion clearly exceeds 50%.
NordFX Analytical Group
Notice: These materials should not be deemed a recommendation for investment or guidance for working on financial markets: they are for informative purposes only. Trading on financial markets is risky and can lead to a loss of money deposited.
#eurusd #gbpusd #usdjpy #btcusd #ethusd #ltcusd #xrpusd #forex #forex_example #signals #cryptocurrencies #bitcoin #stock_market
https://nordfx.com/