5/10/2020
IMPORTANT DISCLAIMER
The information of this report is of a general nature only. It is not a personal financial advice. It does not take into account your objectives, financial situation and personal needs.
a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.
General Comment
COVID-19 finally touched the heart of the political scene since President Trump and his wife are now infected. This fact changes the outlook of the US elections and it makes perfect sense for the markets eyes to point in this. On the other hand, there is still no agreement between Democratic and Republican parties regarding the approval of the new economic aid package, so this issue is still pending. Lagarde’s statements were rather calming as per the Eurozone inflation while the negotiations on Brexit still carry on. USD appeared weak and although the Unemployment Rate in USA dropped to 7.9%, the new job positions were below expectations. US stock Indices recovered, so did the European ones, gold also recovered and oil had serious losses.
In the current week, markets expect to see the progress of Trump’s health and as per the scheduled news & announcements, the week is dominated by PMIs announcements, Powell (FED) and Lagarde (ECB) speeches and of course FOMC minutes on Wednesday that have to do with the future monetary policy in USA.
EURUSD (Euro vs US Dollar)
Bullish was the last week for EURUSD after its big drop, opening at 1.1622 and closing at 1.1716. USD appeared weak again even if the European economies are pressed for new measures of the governments in order to stop the second wave of COVID-19. As long as the pair remains above 1.15, the long–term uptrend has not affected and above 1.1750 there is a certain case for approaching 1.19 again. The health of President Trump will affect things a lot as well as some important announcements throughout the week such as FOMC minutes, central banks speeches, PMIs and the German Trade Balance. We insist on buy positions for one more week.
GBPUSD (Great Britain Pound – US Dollar)
It was a bullish week for GBPUSD, with a weekly open at 1.2755 and weekly close at 1.2928. The pair is trying to reach out 1.30 again as the negotiations regarding Brexit continue but the agreement is not close so far. On the other hand, the COVID-19 pandemic expands all over the Island and government takes new restriction measures as the certain fears of a second lockdown is suspended. The price area of 1.30 seems like a realistic short–term target but we cannot exclude a retracement to 1.28 again. There is also a probability for a sideways movement into the channel between 1.28 and 1.30. We prefer buy positions, up to 1.30 but then we may try some sell positions.
USDJPY (US Dollar – Japanese Yen)
Marginal losses for USDJPY last week since the pair opened at 105.50 and closed at 105.34. The US 10 years treasury yield climbed to 0.71% but the health issues of Donald Trump leave no room for risk-on mood to the investors. There are several weeks that the pair moves around 105 and in order to have a certain direction there must be either a bullish breakout above 105.80 or bearish breakout below 104.90. We will try both buy/sell positions this week, above/below the aforementioned levels.
EURJPY (Euro – Japanese Yen)
Bullish was the week for EURJPY which started at 122.67 and managed to close at 123.41. There was a confirmation that 122.50 is a strong support and even if the current week has opened with a bullish momentum, it takes a solid breakout above 124.50 in order to have a reversal of the downtrend that has started by the end of last August, from the price area of 127. We remain sellers but we may open buy positions above 124.50.
EURGBP (Euro – Great Britain Pound)
It was the 3rd in a row bearish week for EURGBP, which closed at 0.9055 and approached very much the milestone price of 0.90. The pair slowly is eating the big rise that took place in the beginning of last month, from 0.89, to 0.93. The price area of 0.90 will have a critical role but in order to have a solid uptrend, we need to see prices above 0.9150. Consolidations around 0.90 is also a case so we’d better stay out this week.
USDCAD (US Dollar – Canadian Dollar)
Bearish direction is what we saw for USDCAD last week as the pair opened at 1.3383 and closed at 1.3310. We need to underline that this drop took place as long as the oil price had an important drop as well and given than the Canadian economy & currency are directly correlated to the oil prices, the weakness of the pair should be addressed to the weak USD. The outlook of the pair is mixed because there is a certain uptrend since the end of August that brought USDCAD up to 1.3420 but on the other hand we should not ignore the corrective movements of the last days. We trust the correction continuation scenario so sell positions is our option for this week.
USDCHF (US Dollar – Swiss Franc)
Clearly bearish image for USDCHF last week since the pair opened at 0.9280 and closed at 0.9205. The weak USD pressed the pair and early this week it is already moving below 0.92. Below 0.9160, το USDCHF returns to its downtrend and as the next support is at 0.9050, we will open new sell positions this week.
AUDUSD (Australian Dollar – US Dollar)
The Australian Dollar recovered last week, covering a big part of the losses that took place the week before. AUDUSD opened last week at 0.7029 and closed at 0.7162. The current week has 3 days off in China (National Days) but on Tuesday there is the Interest Rates announcement by RBA so the volatility will have a mixed outlook. The weakness of USD dominates the markets and the next important resistance exists at 0.7210. Above this level, the pair is looking positively the price area of 0.7350, so buy positions seems like a good case this week.
SP500
We saw a bullish reaction after four in a row bearish weeks for SP500 which closed at 3,345 points performing profits that approached 2%. The stock markets still await the approval of the new economic aid package but the exact amount is still under negotiations between the US parties. There is also positive news regarding the health of President Trump but the fact that he was infected will be critical for the US elections. The polls so far show that Biden, is ahead Trump in a clear manner. Technically speaking, it takes a bullish breakout of 3,387 points in order to have a return to an uptrend but a possible drop below 3,300 points may retrieve the scenarios of a bigger correction. We believe that a recovery is more possible, so long positions is our selection.
DAX30
We saw a weak recovery for DAX30 last week. The weekly close was at 12,691 points, performing profits like 1%. The Index attempted during the week to approach 13,000 points but there were many sellers’ waves. We don’t exclude the case to see a lack of direction and oscillation in a tight range, so range strategy is the best option for us for the current week.
FTSE100
Marginally bullish was the least week for FTSE100, which closed at 5,875 points and profits close to 0.5%. FTSE100 keeps on moving very close to multi–months low and every attempt of recovery seems (for the moment) very weak. Above 6,000 points, the optimism will return but below 5,740 points the sense of a downtrend is heavy. If we see difficulties of breaking out the milestone of 6,000 points, we may try short positions.
Gold
We saw a bullish reaction for gold prices last week, since the commodity closed slightly above $1,900 with profits more than 2%. The exact amount of the new economic aid package in USA, will be a critical factor in the next period as well as the developments around COVID-19 that may lead the investors to risk-off solutions like gold. A crutch to gold prices recovery was also the weak USD (gold is denominated in US dollars) so we may witness a temporary balance situation around $1,900. Higher probability for higher prices, so long positions is our option for the current week.
US Oil
Important drop took place last week for oil prices, as the futures closed below $37 with losses more than 7.5%. COVID-19 hit President Trump and his wife, the new economic aid package is still pending while OPEC announced that the production in September, had a rise of 160K barrels per day. On Tuesday, the Short-Term Energy Outlook is released and it will give a sense in the whole energy market. Technically speaking, last week the oil price approached a lot the multi-months low at $36.10 but possible good news regarding Trump’s health may cause a rally. The situation globally though, does not leave many hopes for an oil price recovery, so we will wait for temporary bullish reaction in order to open short positions.
Bitcoin
Bearish week for Bitcoin, since it closed at $10,670 with losses like 1%. There was an important new that has to do with the famous exchange BitMEX because the regulatory authorities in USA accused them that they provide an unregulated platform for transactions (see more at https://www.cftc.gov/PressRoom/PressReleases/8270-20). Bitcoin after this fact, lost 4% of its value while there were withdrawals of several million dollars from this exchange. On the other hand, though, we didn’t see a breakdown, on the contrary, Bitcoin was very stable above $10,500 so the uptrend has not been affected so far. We’re keen to try some long positions this week, trusting that Bitcoin will remain resistant.
