EUR/USD: Dollar Breaks Through
● For seven weeks, the EUR/USD pair remained in a sideways trend, lacking strong drivers, confined within the 1.1000-1.1200 range, and on Friday, 4th October, it once again approached the lower boundary of this channel. The main factor influencing this movement was the behaviour of the US Dollar Index (DXY). Calculated by ICE, the DXY rose due to increased demand for safe-haven assets. Concerns over the escalation of the Middle East crisis led to the largest weekly rise in oil prices since 2023, and the US dollar, as a safe-haven currency, became the best-performing G10 currency over a 5-day period. The US currency was also supported by encouraging economic data from the United States. According to the Institute for Supply Management (ISM) report, the country's Services PMI jumped from 51.5 to 54.9 points in September, marking the highest level since February 2023.
● However, the most important event of the week was expected to be the US labour market data, traditionally published on the first Friday of every month. As reported by the Bureau of Labour Statistics (BLS) on 4th October, the number of new jobs in the non-farm sector (NFP) increased by 254K. This figure followed a rise of 159K recorded in August and significantly exceeded market expectations of 140K. The unemployment rate dropped to 4.1% from 4.2% (forecast 4.2%), and instead of the expected decline in annual wage inflation to 3.3%, it actually rose to 4.0% (from 3.9% in the previous month).
● When making decisions on monetary policy, the US Federal Reserve always takes two key indicators into account: the state of the labour market and inflation. The current BLS report showed: 1) the resilience of the economy (since the number of new jobs is increasing and unemployment is falling, the economy is clearly on the rise), and 2) inflation growth. Based on this, market participants concluded that the Fed may not rush with further easing of its policy (QE).
Had the employment data been poor, it would have strengthened market expectations that the FOMC (Federal Open Market Committee) would cut the key interest rate by 50 basis points (bps) at its November meeting. However, now this probability has sharply decreased. Moreover, during his speech at the annual meeting of the National Association for Business Economics (NABE) in Nashville on Monday, 30th October, Fed Chair Jerome Powell noted that the FOMC is "not the kind of committee that rushes to lower rates quickly." "If the economy performs as expected, that would mean two more rate cuts this year, both by a quarter of a point," the head of the US central bank stated.
● Against this backdrop, the US Dollar Index (DXY) surged to 102.69, and the EUR/USD pair, for the first time in many days, broke through the 1.1000 support and found a local bottom at 1.0950. The final note of the week was struck at 1.0974. Expert opinions on the future behaviour of EUR/USD in the near term provided no clear direction. About 20% of analysts supported the strengthening of the dollar and the pair's decline, another 20% predicted its weakening, and the majority (60%) took a neutral stance. In the medium term, the number of votes favouring dollar growth increases to 70%. In technical analysis on D1, all 100% of oscillators are in red, though a quarter of them signal the pair is oversold. Among trend indicators, 65% recommend selling, and 35% suggest buying.
The nearest support for the pair is located in the 1.0950 zone, followed by 1.0890-1.0925, 1.0780-1.0805, 1.0725, 1.0665-1.0680, 1.0600-1.0620, 1.0520-1.0565, and 1.0450-1.0465. Resistance zones are at 1.1000-1.1010, followed by 1.1045, 1.1100, 1.1155, 1.1185-1.1210, 1.1275, 1.1385, 1.1485-1.1505, and 1.1670-1.1690, 1.1875-1.1905.
● In the upcoming week's event calendar, Monday, 7th October stands out with the release of retail sales data from the Eurozone. Wednesday, 9th October is of interest due to the publication of the minutes from the latest FOMC meeting. The second half of the week promises to be more eventful. On Thursday, 10th October, in addition to the usual US unemployment data, we will learn what is happening with consumer inflation (CPI) in the United States. On Friday, Germany's CPI figure will be published first, and by the end of the five-day workweek, we can expect the release of another important inflation indicator – the US Producer Price Index (PPI).
CRYPTOCURRENCIES: The Mystery of Satoshi Nakamoto to be Revealed on 9th October
● Graphic analysis is somewhat reminiscent of the work of artists – each one sees something different when observing the same subject. A month ago, we shared how an analyst under the nickname Rekt Capital predicted a surge in the price of the first cryptocurrency in October, identifying a "bull flag" pattern on the BTC/USD chart. Another analyst, MetaShackle, based their forecast on the "cup and handle" pattern. This prediction was also described in detail by us. Peter Brandt, head of Factor LLC, recently made a forecast based on graphic analysis as well. This well-known analyst and trader suggested that by 2025, the bitcoin-to-gold ratio could increase by more than 400%. He based his highly optimistic forecast on another classic model – the "inverse head and shoulders."
And now, the same Peter Brandt, a Wall Street legend, has spotted not a head, but... blind mice. And not just one or two, but three, which seems to have deeply unsettled him. "A distinct 'three blind mice' pattern can be seen on the bitcoin chart," Brandt wrote. "It points to a further decline in price, so don't expect a bullish rally in October." According to him, the increase in bitcoin trading volumes alongside falling prices indicates that, amidst rising geopolitical tensions, institutional investors prefer to avoid risk and are quickly exiting the market, shifting to gold (and to the dollar, we might add). Brandt noted that in just one day at the beginning of October, over $240 million was withdrawn from US spot BTC-ETFs, the largest outflow in recent months.
It's worth mentioning that the "three blind mice" pattern also implies the presence of a "piece of cheese" these creatures are aiming for. Unfortunately, Brandt didn’t reveal where this cheese might be hidden. However, one could guess it's somewhere below the $60,000 support level. But as long as this level holds, there’s still a chance the mice will regain their sight and retreat, noticing the "bull flag," the "cup and handle," and the "inverse head and shoulders." Once they retreat, the leading cryptocurrency could take off.
● Analyst and Forbes contributor Jesse Colombo, much like Peter Brandt, has concluded that bitcoin has failed to live up to its reputation as a "safe haven" during times of global turmoil. Colombo points out that amidst escalating international tensions and the conflict between Israel and Iran, bitcoin, unlike gold, has once again disappointed investors who sought to use it as a hedge against risks.
"If bitcoin were truly 'digital gold,' it should have risen during periods of geopolitical upheaval, not declined," Colombo stated. "Bitcoin behaves like a speculative, high-risk asset, similar to shares of 'hot' tech companies, rather than as a safe-haven asset. This is evident from how closely bitcoin's price chart tracks the tech-heavy Nasdaq-100 index. Data from the last five years shows a striking correlation coefficient between the two – 0.88 [close to the maximum of 1.00], confirming their strong connection," the Forbes analyst concluded.
● Of course, the negative forecasts of Brandt and Colombo are well-founded. However, as noted by analysts at QCP Capital, the escalation in the Middle East only caused a moderate correction in the cryptocurrency market – bitcoin fell by just 4%, without breaking through the $60,000 level. QCP Capital does not rule out that further conflict escalation could lead to a decline in the price of "digital gold" to $55,000, but the asset is expected to recover from the drop. According to the specialists, BTC is currently supported by two factors: 1) The policy of the People's Bank of China, which aims to stimulate domestic demand amidst a slowdown in the national economy; 2) The initiation of monetary easing (QE) cycles and interest rate cuts by the central banks of major developed countries, primarily the US Federal Reserve.
According to QCP Capital's forecast, bitcoin is sure to demonstrate a bull rally, although its Dominance Index may dip slightly. Historically, October has been associated with a rise in this cryptocurrency’s price. QCP Capital analysts have calculated that over the last nine years, bitcoin has risen in October eight times, with an average increase of 22.9%. If this happens again, it could push the price above $75,000, marking new all-time highs.
● Another interesting observation was made by Markus Thielen, founder of 10x Research. He noted that since the summer, after the release of data on business activity (PMI) in the US manufacturing sector, the crypto market has experienced a pullback of around 10%. "Now, manufacturing activity is declining again," the analyst wrote, "and it may shrink even further due to the dockworkers' strike that began on 30th September in several of the largest ports in the US. This will negatively affect the crypto sector as well." "Forecast indicators have dropped to a level close to recessionary," Thielen predicted. "If the PMI falls below 48.0, it will trigger another bitcoin decline, while a higher figure could fuel a rally." His forecast was accurate. While the market was expecting a reading of 47.5, the September manufacturing PMI actually dropped to 47.2 points. The data was released on Tuesday, 1st October, and that very day the BTC/USD pair showed a red candle on the chart, declining by approximately 6%. Of course, this could be a coincidence. Or it could be a pattern discovered by the founder of 10x Research.
Additionally, according to him, uncertainty in the crypto market is heightened by the potential for another key interest rate hike by the Bank of Japan as part of its ongoing tightening policy (QT).
● And, of course, a major factor generating a lot of speculation around the crypto market is the US presidential election. A survey conducted in the US by Harris Poll, with financial support from Grayscale, showed that over 56% of voters are more likely to vote for a presidential candidate who supports the crypto industry. According to the survey results, nearly 40% of voters now pay attention to a candidate's stance on digital assets (in December 2023, this figure did not exceed 34%). At the same time, nearly 45% of cryptocurrency holders believe that the Democratic Party is more favourable to the industry (with Kamala Harris as the presidential candidate), while 42% pointed to the Republicans (with Donald Trump as the candidate).
A similar poll conducted by crypto exchange Coinbase and Morning Consult showed that the votes of digital asset holders are split evenly: 47% support Kamala Harris, and another 47% back Donald Trump. Despite some discrepancies with the Harris Poll data, the results of both surveys clearly indicate that crypto investors will be an important group that could influence the outcome of the US presidential election on 5th November.
● Expert and founder of Eight and MN Trading, Michael Van De Poppe, believes that by the end of 2024, the price of the leading cryptocurrency will reach a record high of $192,000. He suggests that the BTC market is currently in a "perfect storm" situation. Rising social tensions in many countries, declining trust in traditional financial institutions, and geopolitical conflicts are driving investors towards assets like bitcoin and other cryptocurrencies.
According to the expert, as central banks lower interest rates and increase liquidity to stimulate economic growth, price increases for assets such as physical and digital gold are inevitable in the medium term. The exponentially growing US national debt and further rate cuts by the Federal Reserve will become strong catalysts for cryptocurrency price growth. Van De Poppe believes that in the next cycle, bitcoin's price could reach anywhere between $300,000 and $600,000.
● As for bitcoin's main competitor, Ethereum, in our previous review titled "ETH Is No Longer the King of Altcoins. Long Live the New King?" we provided statistics showing how Solana (SOL) is surpassing the leading altcoin in terms of capital inflow. We won't claim that our publication was the reason, but the co-founder and former CEO of the crypto exchange BitMEX, Arthur Hayes, refuted it in a recent interview, stating that "Ethereum is the unassailable king of altcoins."
"It seems that Ethereum will never stop," he wrote. "The emergence of Layer 2 solutions has reduced transaction costs and accelerated transaction processing on the network. This increases Ethereum's competitiveness and gives it advantages over other networks. [...] Therefore, no other blockchain will be able to surpass it." The ex-CEO of BitMEX praised the Solana network for its user interface and active community. However, according to him, the SOL coin significantly lags behind Ethereum in market capitalization ($67 billion versus $294.5 billion). Furthermore, Hayes believes that for any blockchain to overtake ETH, developers must introduce new and original technology beyond its network.
● According to Ryan Lee, Chief Analyst at Bitget Research, the price of ETH in October could range between $2,200 and $3,400. Among the key factors influencing the asset’s price, Lee highlighted the Federal Reserve's interest rate cuts. He noted that once this rate aligns with Ethereum's staking yield, currently at 3.5% per annum, ETH will once again become an attractive investment tool. Thus, a reduction in interest rates will positively impact the coin's value.
Another bullish factor is the release of EigenLayer (EIGEN) tokens and their subsequent listing on exchanges. This could trigger an influx of additional capital into the ecosystem, helping ETH outpace bitcoin and Solana (SOL) in price growth. As a third growth factor, Ryan Lee pointed to the renewed excitement around meme tokens. According to him, there is currently an increase in meme-based digital assets on the Ethereum network, such as Neiro (NEIRO). High demand for these coins will attract new users and boost the popularity of the ETH network.
● As of the time of writing this review, on the evening of Friday, 4th October, the BTC/USD pair is trading around $62,400, while the ETH/USD pair is at $2,430. The total cryptocurrency market capitalization has declined to $2.17 trillion (down from $2.32 trillion a week ago). The Crypto Fear & Greed Index has dropped from 61 to 41 points, swiftly moving past the Neutral zone and shifting from the Greed zone directly into the Fear zone.
● And finally, an event that promises to become a global sensation. Next week, on 8th-9th October, the American TV channel HBO will air a documentary in which the creators claim to have identified the real Satoshi Nakamoto! "The revelation could send shockwaves through global financial markets and even impact the US presidential elections, given how the Republican candidate and former president Donald Trump has gained the support of bitcoin enthusiasts," the filmmakers stated.
Well, we'll see. Don't forget to turn on your TV and have some calming pills ready – just in case it turns out to be a real information bomb!
NordFX Analytical Group
Disclaimer: These materials are not an investment recommendation or a guide for working on financial markets and are for informational purposes only. Trading on financial markets is risky and can lead to a complete loss of deposited funds
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