Forex and Cryptocurrency Forecast – Action Forex
EUR/USD: Hawkish Sentiments from the Fed Impact the Dollar
As anticipated, Wednesday, June 12 was pivotal for the forex market. The USD faced strong pressure following the release of inflation data in the U.S. May's figures showed the overall inflation rate decreased to 3.3%, against an expected 3.4%, while the Core Consumer Price Index (Core CPI) came in at 0.2% (m/m), missing the forecast of 0.3%. Consequently, market expectations surged that the Federal Reserve might lower interest rates twice this year, prompting the Dollar Index (DXY) to fall to 104.3 and EUR/USD to spike to a high of 1.0851.
However, the FOMC meeting returned the DXY to its original level, keeping the interest rate unchanged at 5.50%. The updated median forecast from the FOMC revealed only one rate cut expected in 2024, compared to three predicted cuts in March. Currently, CME Group’s FedWatch indicates almost a 70% probability of QE starting at the September FOMC meeting.
Fed Chair Jerome Powell emphasized that further actions would hinge on economic data, asserting that a resilient economy and stable inflation would require maintaining the current rate. He cautioned against excessive expectations, noting a single 25 basis points rate cut would not significantly affect the economy.
Powell’s rhetoric was backed by new inflation forecasts, with the Fed adjusting its 2024 and 2025 estimates upward to 2.6% and 2.3%, respectively. Despite a forecasted GDP growth of 2.1% through 2024-2026, political uncertainties within the Eurozone and rate cuts by the European Central Bank could weaken the euro further.
EUR/USD finished the week at 1.0702. Near-term analyst opinions are mixed: 60% predict a decline, while 20% forecast a rise. Support levels rest in the 1.0670 zone, and resistance ranges from 1.0740 up to 1.1100-1.1140. Upcoming data releases include Eurozone inflation on June 18 and US retail numbers.
GBP/USD: Awaiting the Bank of England's Decision
In autumn 2023, the Bank of England (BoE) maintained a tight monetary policy to stabilize inflation at 2.0%. Despite falling inflation, the BoE's MPC decided on May 8 to keep the interest rate at 5.25%. ONS data showed a notable drop in the Consumer Price Index (CPI) to 2.3%, the lowest since July 2021. British CPI expectations lowered to the lowest in nearly three years.
Business activity data indicated stable UK economic health, though concerns rise from a spike in jobless claims and unemployment reaching 4.4%. The BoE’s upcoming meeting on June 20 is anticipated to keep the interest rate unchanged, with potential QE not likely until September. This creates demand for the pound, though last week's GBP/USD movement fluctuated significantly, ending at 1.2686.
In near-term forecasts, experts are split: 50% anticipate dollar strengthening, 25% foresee a northern trajectory, and 25% remain neutral. Significant support and resistance levels are seen from 1.2575-1.2600 to 1.2865-1.2900.
Upcoming UK economic events include the BoE’s interest rate decision and fresh CPI data on June 19, with retail sales and PMI indicators on June 21.
USD/JPY: BoJ's Promised Changes Create Speculation
The Bank of Japan (BoJ) held its meeting on June 14, maintaining an accommodative monetary policy while planning future bond purchase reductions by July. The yen's recent weakness, following March's rate hike, impacted Asian currencies. Societe Generale predicts bond purchase reductions starting in August and a possible discount rate hike in September.
USD/JPY moved within a wide range but closed the week at 157.37. Expert predictions are evenly split, focusing on resistance in the 157.70 to 160.20 range and support from 156.80-157.05 down to 148.40. No significant economic releases are scheduled for Japan in the upcoming week.
Cryptocurrencies: Bitcoin's Future Hinges on U.S. Policies
The crypto market recently mimicked the dollar's movements, driven by the Fed's responses to U.S. macroeconomic data. BTC/USD inversely correlated with the Dollar Index (DXY), fluctuating with U.S. labor and inflation reports. The recent downturn saw bitcoin drop about 7%, fueled by Fed policies and a halt in bitcoin ETF inflows.
Bitcoin's trading range sits between $66,000 and $72,000. Many in the crypto community, including MN Capital's Michael van de Poppe, foresee potential corrections but not deep declines. Activity around $60,000 suggests strong support, bolstered by geopolitical instability.
Market sentiment remains bullish, with traders like Captain Faibik and Titan of Crypto predicting BTC to surpass $94,000 and possibly reach $100,000 this summer. Binance CEO Richard Teng anticipates bitcoin prices to exceed $80,000 soon, bolstered by the work of spot BTC-ETFs.
US presidential regulation and policies will significantly impact cryptocurrencies. Billionaire Mark Cuban highlights the uncertain grasp of crypto by candidates like Trump and Biden, which underscores the market's regulatory and investment climate.
For detailed market movements and forecasts, follow up on Bloomberg’s cryptocurrency news or Action Forex updates.
