Daily Market Analysis from ForexMart

Crypto analysts doubt Bitcoin's bright future

Last week, the leading digital asset declined to $32,900 for the first time since the summer of 2021. However, by the end of last week, BTC increased by 7.3% reaching $37,700.

The recent growth of the US stock market triggered the rebound of Bitcoin. This growth has interrupted the negative dynamics for the first time after three weeks of steady decline. In addition, this once again emphasized the increased correlation of exchange and virtual assets lately.

The leading altcoins followed the growth of the flagship digital asset. Thus, during the week Ethereum jumped by 7%, and Binance Coin increased by 4.6%. At the same time, the total capitalization of the crypto market rose by 1.7% to $1.79 trillion.

At the time of writing, Bitcoin is hovering at $37,000 and its capitalization stands at $706 billion, according to CoinGecko, the world's largest independent cryptocurrency data aggregator.

Despite a temporary stabilization, the situation in the crypto market remains extremely unstable, with BTC risking a third consecutive month of decline. Thus, in January, the first cryptocurrency has already lost about 20%, and the collapse from the November highs exceeded 45%.

The unpredictable trading of the crypto market makes experts give mixed forecasts. The former head of the cryptocurrency exchange BitMEX Arthur Hayes said that in the near future, Bitcoin may collapse to $20,000 once the support of $28,000-$30,000 is broken through.

This level is important for market participants, as it prevented the collapse of BTC in the summer of last year when the value of the coin fell to $28,000. The reason for Bitcoin's large-scale collapse was the largest hash rate drop in the history of crypto-assets amid the mass relocation of miners from China.

By the way, crypto-enthusiasts began to feel more pessimistic about the endless growth of bitcoin. Thus, analysts at JPMorgan, one of the world's largest banks, reduced the fair valuation of BTC to $38,000 from $150,000.

According to JPMorgan, the main reason for such a negative outlook on the future of the main cryptocurrency is high volatility, which limits the use of digital assets by institutional investors.

Experts stressed that the recent sharp pullback by 50% in bitcoin from its November all-time high was a signal to cancel the addition of BTC to the investment portfolios of many institutions, funds, and organizations.

Earlier experts of the bank were betting on the convergence of Bitcoin volatility with gold volatility and the equation of their shares in portfolios of investors. According to the bank's scenario for 2022, the volatility ratio of the main cryptocurrency to gold may reduce by two times.

However, in their latest report, analysts at JPMorgan lowered the price of Bitcoin to 1/4 of $150,000, that is, to $38,000. In addition, the bank's experts did not rule out a further drop in the value of the main cryptocurrency in the absence of market buy signals.

Trading plan for starters of EUR/USD and GBP/USD on February 1, 2022

February 1 economic calendar:

Europe will release its labor market data today, where the unemployment rate may decline from 7.2% to 7.1%. This is a positive factor that can support the euro locally.

The final data on business activity in the manufacturing sector in Europe, the UK, and the US for January is unlikely to put pressure on the market.

JOLTS data on open vacancies in the US will be published during the American trading session. The total number of which may rise from 10,562 thousand to 11,075 thousand. If the data is confirmed, the US dollar may receive support.

Time targeting

The index of business activity in the European manufacturing sector - 9:00 Universal time

The index of business activity in the UK manufacturing sector - 9:30 Universal time

EU unemployment rate - 10:00 Universal time

The index of business activity in the US manufacturing sector - 14:45 Universal time

The number of open vacancies in the US labor market (JOLTS) - 15:00 Universal time

Trading plan for EUR/USD on Feb 1:

According to the correction structure, the price movement is still relevant in the market, but its scale indicates the possibility of early completion. So while working on the euro's growth, it is worth preparing to reduce the volume of long positions, which will lead to the resumption of the downward trend. The area of 1.1270/1.1300 is considered as a variable resistance level.analytics61f8de57430a4.jpg

Trading plan for GBP/USD on Feb 1:

The pullback stage is still relevant in the market. As a result, traders do not rule out the pound's slight strengthening towards 1.3500. At this moment, a gradual reduction in the volume of long positions is possible, which will eventually lead to the end of the pullback stage and the continuation of the downward cycle.

Trading plan for starters of EUR/USD and GBP/USD on February 2, 2022

February 2 economic calendar:

Europe will release its inflation data today, which may slow down from 5.0% to 4.5%. Given the ECB's vague position, the decline in inflation is in no way a bad factor, but in this case, tomorrow's meeting may remain unchanged since the European regulator sees a decline in consumer prices.

ADP's employment report in the US will be published during the US trading session, which may increase by 207 thousand. On the one hand, the figure is not small, but compared to the previous month, where there was an increase of 807 thousand, speculators may be afraid. This will negatively affect the US dollar.

Time targeting:

EU inflation - 10:00 Universal time

US ADP report - 13:15 Universal time

Trading plan for EUR/USD on Feb 2:

The correction is still relevant in the market, despite the resistance area. Therefore, the quote may continue to move within 1.1270 /1.1320, locally leaving the resistance zone.

The signal for the prolongation of the upward cycle will be received if the price holds above the level of 1.1330 in a four-hour period.

The signal about the completion of the correction will be considered by traders if the price holds below the level of 1.1230 in a four-hour period.

Trading plan for GBP/USD on Feb 2:

The corrective course remains in the market, where traders do not exclude a subsequent increase in the value of the pound if the price holds above the level of 1.3530. In this case, it will likely move in the direction of 1.3600.

Traders will consider an alternative scenario of market development in case the price returns below the level of 1.3480. This step may indicate the primary signal to the end of the correction.

Trading plan for starters of EUR/USD and GBP/USD on February 3, 2022

February 3 economic calendar:

Today is the busiest day of the week, as two meetings of the Central Banks are expected at once.

The Bank of England intends to accelerate the pace of tightening monetary policy by raising the refinancing rate from 0.25% to 0.50%. This step will definitely affect the exchange rate of the British currency in terms of its further strengthening. It is worth considering that the pound has already grown by 200 points, after the news appeared on January 28 that the regulator intends to raise the rate once again. Thus, there is an assumption that the market has already considered the decision of the Bank of England in the quotation.

Following the meeting, the European Central Bank (ECB) is highly likely to leave everything as it is. Therefore, market participants will pay attention to subsequent comments, where we expect to hear specifics from the regulator in terms of further actions. In simple words, the ECB intends to adhere to an ultra-soft approach or follow the path of its colleagues and start tightening monetary policy. The first option of development will lead to a weakening of the euro, but the announcement of an early tightening of monetary policy will provide an opportunity to strengthen the euro noticeably.

Time targeting

Bank of England results - 12:00 Universal time

ECB results - 12:45 Universal time

ECB press conference - 13:30 Universal time

Trading plan for EUR/USD on Feb 3:

In this situation, traders are considering a temporary price fluctuation within the resistance area of 1.1270/1.1320, but everything can change if new speculative surges amid informational noise.

Trading recommendations remain the same, where acceleration is considered after the breakdown of one of the control values.

The signal for the prolongation of the upward cycle will be received if the price holds above the level of 1.1330 in an H4 period.

The signal about the end of the correction will be considered by traders if the price holds below the level of 1.1260 in an H4 period.

Trading plan for GBP/USD on Feb 3:

In this case, there is overheating of long positions, where the level of 1.3600 can act as resistance. This will lead to a gradual recovery of downward interest. It is worth considering that traders might ignore the overbought status due to upcoming events. In this case, holding the price above the level of 1.3600 will lead to a subsequent growth.

Pound aims to reach new highs

The pound gathered strength for the next breakthrough, which occurred after the results of the Bank of England's meeting on the rate was announced. Its nearest goals are to consolidate in the reached positions and conquer the next highs.

On Thursday, the Bank of England discussed the current monetary policy. The key issue was to raise the interest rate. The markets expect five rate hikes from the regulator this year, the cumulative increase of which will be 125 bps. Following the announcement of the results of the meeting, the pound noticeably declined against the US dollar. On Thursday evening, it was trading at the level of 1.3577 and then made a short-term breakthrough to 1.3628. However, it lacked the strength to hold on to the gained positions. On Friday morning, the GBP/USD pair was near the round level of 1.3600, trying not to further fall.

Experts consider the Bank of England one of the most "hawkish" among the world's regulators. The actions of the monetary authority confirm this definition. It can be recalled that the British regulator is expected to increase the interest rate from 0.25% per annum to 0.5% while maintaining the volume of asset repurchases for 895 billion pounds. Along with this, the Bank of England revised the forecast of the country's economic growth downward to 3.75% from the previous 5% calculated in November 2021. The Central Bank of England considers a reduction in aggregate demand as the reason for the slow growth rates of the national economy. At the same time, the regulator raised the forecast for UK inflation for this year to 5.75% from the previous 3.5%.

The current situation had a vague effect on the pound's dynamics. On the one hand, the rate increase gave impulse to it, helping it to increase, but on the other hand, it keeps it in a state of uncertainty. This condition prevents the pound from reversing and it has to be content with short-term growth.

In relation to the Euro currency, the British currency also showed growth. Analysts noted that it surged to a 2-year high against the euro amid the interest rate hike by the Bank of England. The regulator expectedly raised the key rate to 0.5%, and this is not the limit. According to Jane Foley, Head of Foreign Exchange at Rabobank, the Bank of England will raise rates again in May 2022.

"Against the backdrop of falling household incomes due to rising energy and food prices, market expectations for a rate hike by the Bank of England are exaggerated. However, another rate hike is expected in May," J. Foley believes.

The British regulator has increased the interest rate to curb rampant price pressure. According to the estimates of the Central Bank of England, the inflation rate in the country will soon exceed 7%. The off-the-scale indicators not only concern inflation. According to BoE's representatives, consumer price growth in April 2022 will reach its peak values over the past 30 years and will amount to 7.25%. Based on the preliminary forecasts, the UK inflation will remain above 5% in a year. However, the ministry believes that inflation will be below 2% in three years and will amount to 1.6%. At the same time, the British regulator believes that investors have put too many rate increases in prices this year.

Because of this, the pound remains at risk but does not give up. It is slightly imbalanced against the US dollar due to a decline in global risk appetite and a drop in the stock market, but it strives to overcome price barriers, despite inflationary pressure and several negative economic factors.

European stock markets closed lower on Friday

The ECB did not change the main parameters of monetary policy. The regulator left the base interest rate on loans at zero, the rate on deposits - at minus 0.5%. The rate on margin loans was kept at 0.25%.

Meanwhile, in a post-meeting press conference, ECB President Christine Lagarde warned that consumer price growth, which reached historic highs in January and December, could remain elevated for a longer period than previously expected. At the same time, she expressed the hope that inflation will begin to gradually slow down during 2022.

When asked if Lagarde was ready to repeat what she said two months ago about the low probability of a rate hike in 2022, the head of the ECB replied that she does not make promises without certain conditions, and that much will depend on the March revision of the central bank's macroeconomic forecasts.

In turn, the Bank of England raised its key rate for the second time in a row, from 0.25% to 0.5%, against the backdrop of record inflation in the UK in 30 years.

The volume of orders of industrial enterprises in Germany in December increased by 2.8% compared to the previous month, the country's Ministry of Economics reported. Analysts on average had expected a rise of 0.5%.

Retail sales in the euro area in December 2021 decreased by 3% compared to the previous month, data from the European Union Statistical Office (Eurostat) showed. Analysts polled by Bloomberg had expected a decline of 0.9% on average. In annual terms, retail sales increased by 2% instead of the expected growth of 5%.

Retail sales fell the most in Ireland (-3.2%), Spain and Finland (-3%). The most significant growth in retail sales was recorded in Slovenia (+44.1%), Lithuania (+16.2%) and Estonia (+12.6%).

Traders continue to follow the reporting season and analyze the results of European and American companies.

The composite index of the largest enterprises in the Stoxx Europe 600 region by the close of trading fell by 1.38% and amounted to 462.15 points. At the end of the week, the indicator lost 0.73%.

The British FTSE 100 fell on Friday by 0.17%, the French CAC 40 index - by 0.77%, the German DAX - by 1.75%. The Spanish IBEX 35 and the Italian FTSE MIB lost 1.15% and 1.79% respectively.

The French pharmaceutical company Sanofi SA increased its net profit in the fourth quarter of 2021, but the rise in revenue was worse than market forecasts. The company's shares fell 1.1%.

Italian bank Intesa Sanpaolo SpA turned profitable in the fourth quarter of 2021 and plans to return €22 billion to shareholders by 2025 as part of a new business plan. Bank papers, meanwhile, fell 2.2%.

Enel SpA shares lost 2.1%. The Italian energy company boosted revenue in 2021 on the back of better business segment performance, but profit growth slowed.

Capitalization of the Swedish biopharmaceutical AddLife AB collapsed by 26.3%. The company said its CEO Christina Wilgard plans to retire this year.

The value of Swedish door lock maker Assa Abloy AB jumped 7% after the release of the report. The company posted a net profit of SEK 3.04 billion ($334.2 million) in the fourth quarter, which was higher than the market forecast. Assa Abloy also increased its dividend.

Shares in British tech Oxford Nanopore Technologies PLC rose 1% after analysts at Berenberg released a positive report on the company's outlook following the Festival of Genomics 2022 event.

Cryptocurrency theft funded North Korea's nuclear and missile program

United Nations report says that cryptocurrency theft remained an important source of income for North Korea's nuclear and ballistic missile programs last year.

Cryptocurrency theft was carried out through cyberattacks on cryptocurrency exchanges around the world. North Korean hackers stole millions of dollars worth of cryptocurrency.

In general, the report notes that more than $50 million worth of digital assets has been stolen between 2020 and mid-2021.

Moreover, according to the UN report, cyber-attacks represent the main source of income for Pyongyang's nuclear and missile program. The findings were submitted to the UN Security Council committee on sanctions against North Korea.

The UN report describes an analysis of how North Korea's cyberattacks could have raised $400 million worth of cryptocurrency last year. These attacks primarily targeted investment firms and centralized exchanges. Last year was the most fruitful for cybercriminals. According to calculations and analysis of UN data, criminals launched at least seven attacks on cryptocurrency platforms.

The UN Security Council banned North Korea from launching ballistic missiles and conducting nuclear tests.

In addition, it has tightened sanctions against North Korea since 2006 in order to limit funding for Pyongyang's nuclear and missile programs.

The report noted that North Korea's missile tests have increased over the past year. According to a US statement last week, North Korea carried out nine ballistic missile launches in January despite sanctions.

And one of the last launches of a medium-range ballistic missile took place a week ago. The most popular test site was Alsom Island, located 11 miles off the northeast coast of North Korea. Since 2019, Pyongyang has launched more than 25 missile strikes on it.

According to 2019 UN data, North Korea managed to secure about $2 billion for its nuclear and missile program despite existing sanctions pointing to state-sponsored hacking groups.

European stock market up on strong earnings

Strong quarterly reports on corporate earnings of European companies supported the stock market on Wednesday, but concerns about the aggressive steps of major central banks are limiting growth. Thus, the pan-European STOXX 600 index rose by 1.0%. The UK FTSE 100 advanced by 0.45% to 7,600.4, the French CAC 40 was up by 1.06% to 7,103.08, and the German DAX rose by 0.88% to 15,376.34.

Investors expect the European companies to show strong financial performance. This week, such companies as Metro AG, Societe Generale, and Total Energies will issue their corporate reports.

Shares of some European companies have already posted gains. For example, the securities of the French asset manager Amundi added 2.5%. This rise was facilitated by reports about a significant increase in the company's quarterly profits.

Equinor, the largest oil company in Northern Europe, published strong results for the previous year. Its shares were up by 3.7%.

Shares of Danish jewellery maker Pandora also rose by 5.1% today. The expected growth of sales in 2022 was certainly a driving factor. In addition, Pandora's results came in line with the preliminary forecast released in January.

Shares of the Dutch payment system Adyen were the top gainers in Europe: their price surged unexpectedly by as much as 11.0%.

The worst performers of the day were the stocks of the Swedish online casino developer Evolution Gaming, which lost 6.8%, and the shares of the Norwegian financial corporation Storebrand, which fell by 5.8%. Shares of the Dutch insurance company Aegon NV also slipped into negative territory with a drop of 4.86%.

In general, on February 9, global stock markets were quite optimistic. In addition to strong corporate reports, the macroeconomic data from Germany was also of key importance. Thus, the volume of the country's exports in December in monthly terms rose by 0.9% and imports - by 4.7%.

Investors hope that the geopolitical conflict in Eastern Europe will soon be resolved, especially after French President Emmanuel Macron has visited Moscow and Kyiv. European and American officials are convinced that the only way to handle the conflict on the border with Ukraine is to implement the Minsk agreements.

European stock indices continue to grow steadily due to multiple positive factors

During the trading session on Thursday, European stock exchange indicators are permanently increasing against the background of strong financial statements of major corporations.

So, at the time of writing, the British FTSE 100 indicator increased by 0.03% to 7646.1 points, the French CAC 40 also gained 0.03%, reaching a level of 7133.12 points, and the German DAX jumped 0.2% to 15514.1 points.

The main impetus for the growth of European stock markets was the optimism of investors regarding the published corporate reports of Siemens, ArcelorMittal, and Societe General. The value of the securities of these giants rose on Thursday by 6.07%, 0.72%, and 4.8%, respectively.

The focus of attention of market participants this week is data on the inflation rate in the United States. According to preliminary forecasts of analysts, in January, this indicator will rise to the highest since February 1982 - by 7.3%. Recall that in December 2021, the inflation rate in the United States reached 7%.

Following the results of the trading session on Wednesday, European stock indices reported a spectacular rise against the background of a decline in the yields of government bonds of the eurozone states.

Thus, the key Stoxx Europe 600 indicator closed at 473.33 points, gaining 1.72% over the day. France's main stock index, the CAC 40, added 1.46%, stopping at 7130.88 points, the German DAX gained 1.57% and rose to 15482.01 points, and the British increased by 1.01% to 7643.42 points.

The yield of 10-year German government bonds lost about 5 basis points yesterday, dropping to 0.22%. The declining yield of bonds stimulates the attractiveness of securities for investors as a reliable investment tool.

The most popular stocks among traders on the eve were the securities of technical corporations. As a result, the quotes of the Dutch manufacturer of microelectronic products ASML Holding jumped by 4%, ASM International - by 4.7%, AMS-Osram - by 5.8%.

Another important growth factor for European stock markets was the corporate reporting of the region's leading enterprises. Thus, the shares of the Danish jewelry manufacturer Pandora increased in price by 8% against the background of the company's management statement about the expected sales growth in 2022.

The quotes of the Norwegian oil and gas corporation Equinor ASA jumped 1.4% after the company reported a return to profit in the fourth quarter. In addition, Equinor ASA representatives announced an increase in dividend payments and an increase in the securities repurchase program.

Shares of the Danish transport and logistics company A.P. Moller-Maersk AS on Wednesday closed with an increase of 7.2% on the background of a report on record revenue and net profit in the fourth quarter of last year.

The quotes of the British pharmaceutical company GlaxoSmithKline sank by 1.4%, despite the growth in net profit and revenue in the fourth quarter of 2021.

Securities of the leading Dutch bank ABN Amro Bank NV fell by 9.1%. In the fourth quarter of last year, the net profit of ABN Amro Bank NV increased 10 times, however, the size of the new program for repurchasing its securities did not meet market forecasts.

Shares of the German manufacturer Siemens Energy AG gained 1%. The company's stock quotes showed growth, despite reporting a net loss in the last quarter against profit for the same period in 2020.

The securities of the Dutch manufacturer of paints and varnishes Akzo Nobel NV soared by 5% on the back of better than experts predicted quarterly reports of the company.

Experts say that the current optimism in the stock markets of Europe and the world is explained by the absence of meetings of the largest central banks and positive financial reports of manufacturing giants.

Forecast for USD/JPY on February 11, 2022

The dollar's effort to settle above the MACD indicator line on the daily chart of the USD/JPY pair was not in vain - yesterday the price jumped by 86 points, closing the day with a rise of 52 points. Now the way for the dollar to the line of the price channel of the monthly chart in the area of 117.17 is open.

On the four-hour chart, visually stable growth continues in the price channel. The Marlin Oscillator is in no hurry to grow, which allows the price to reach the lower border of the price channel either by a small correction, or by a sideways movement - by consolidation. Next, we are waiting for a new wave of growth.

Forecast for EUR/USD on February 11, 2022

On Thursday, with the release of data on inflation in the US, the euro traded in a range of 120 points, marking the target level of 1.1496 with an upper shadow. To be precise, yesterday's peak was 1.1495, but one point can be neglected as a fluctuation effect. Inflation (CPI) in the US increased from 7.0% y/y to 7.5% y/y in January, and this is the highest rate since 1982. Market participants are now waiting for the March rate increase immediately by 0.50%. We are now waiting for the euro to go into a correction in the area of the MACD indicator line on the daily chart, to the target level of 1.1300 (August 2018 low). At this level, the question will be decided - will the price turn from it into further growth, towards the target 1.1700/22, or will it consolidate below it and continue to decline to 1.1060.

On the four-hour chart, the price went under the balance indicator line, visually getting ready to attack the MACD line (1.1355), overcoming which will make it possible to get ready to take 1.1300. The signal line of the Marlin Oscillator turned down from the zero line (arrow), which is an additional confirmation of the price's intention to develop a downward movement.