2/11/2020

General Comment

Europe is in the centre of COVID-19 pandemic and most of the governments have announced lockdowns. This fact last week, created a risk–off mood by turning the investors to safer investment solutions and we saw a big rise for USD (USD Index jumped more than 1.40%) and pressures to the other currencies such as EUR which due to new QE expectations (maybe next December) has extra reasons to be weak. Stock markets had a slump, so did the oil prices and due to strong USD, bears dominated even on the gold prices.

This week is very important for a series of reasons:

• US presidential elections at 3/11, where a possible Biden election may be a turning point for the markets and a beginning for a new economic model in USA with more taxes and a possible «New Deal». Of course, there will be sections such as Renewable Energy Sources, clean energy companies and metal commodities that will be favored, while banks, oil companies with environmental issues may receive pressures. In the currency markets, on a long-term perspective, we expect to see USD weakness to carry on, independently from the US elections winner and a possible change may press the markets enough.

• FED session for Interest Rates in USA at 5/11
• Unemployment Rate and NFPs announcement in USA at 6/11
• Other economic announcements and events during the week: Interest Rates in UK & Australia, Retail Sales in Eurozone, PMI in many economies, Monetary Policy in Australia and Japan.

EURUSD (Euro vs US Dollar)

Strongly bearish week for EURUSD, with a weekly open price at 1.1854 and a weekly close at 1.1646, very close to a multi-month low at 1.1610. USD took the choice of the investors since things from COVID-19 are not good at all. Also, the statements from Christine Lagarde at the ECB press release had a direction of a new QE in order to tone down the consequences of COVID-19 pandemic in the European economies. The GDP announcements in Eurozone and Germany (better than expected) did not help EUR at all. A possible bearish breakout of 1.1610, opens the road for the price area of 1.1420 and we expect to see a highly volatile week due to the US presidential elections and a series of economic announcements that we mentioned above. We prefer sell positions this week.

GBPUSD (Great Britain Pound – US Dollar)

Bearish was the last week for GBPUSD, which opened at 1.3052 and closed at 1.2948, below the milestone price of 1.30. Strong USD and fears for a new lockdown in UK (it finally announced from Boris Johnson on Sunday), brought this result, overshadowing even the updates of Brexit (negotiations are still on though). Many investors that expected lockdown may encourage since many times the expectation of negative news is worst than the new itself but it takes a solid breakout above 1.30 in order to have such a fact. On the contrary, in a case of breaking out the price of 1.29, the main support of 1.2675 will be visible. In the mid-to-long term run (3-6 months) we believe that the pair will approach the level of 1.35 – 1.38 but for the current week we remain sellers.

USDJPY (US Dollar – Japanese Yen)

It was a practically neutral week for USDJPY, with open & close price around 104.67. The US 10-year treasury yield climbed a bit more to 0.86% without a remarkable effect on the pair though. Both USD and JPY as low risk assets create a balance on the pair with a relatively low volatility as well. Of course, USD has more reasons to get strong (see US elections) and given the difficulties that the pair faces during the last 8 months to drop below 104, we may see a recovery, to the price area of 106 so we’ll open buy positions this week.

EURJPY (Euro – Japanese Yen)

Important drop, the biggest for many weeks, we saw for EURJPY, which opened at 124.07 and closed at 121.91, while all days were clearly bearish. EUR is weak due to the dominating risk-off mood on the markets, JPY is stronger for the same reason, so we may see more bears that can lead the pair to the price area of 120. Sell positions is the choice for us this week.

EURGBP (Euro – Great Britain Pound)

After three consolidative weeks, EURGBP moved bearishly, by opening at 0.9078 and closing at 0.8990, losing (event marginally) the milestone price of 0.90. Both currencies are weak but maybe EUR is weaker so we saw that drop but we need to underline that early this week, the pair has recovered 0.90 again. The trend is definitely a downtrend and since the first multi-month support exists at 0.8865, we may try sell positions.

USDCAD (US Dollar – Canadian Dollar)

Bullish was the last week for USDCAD, which opened at 1.3127 and closed at 1.3319, in between of a very strong USD and a big oil price drop. Early this week, the pair performs more profits, up to 1.3340 and now there is a good probability of reaching the price area of 1.3420, which is a high price since the beginning of August. We need to pay special attention though because there are many important announcements this week for both USA and Canada and of course we’re ahead of the US elections. Buy positions is our selection for the current week.

USDCHF (US Dollar – Swiss Franc)

We saw a strong bullish reaction for USDCHF last week, with open price at 0.9047 and close price at 0.9168. It was the first strong bullish week for the pair since the mid of September since the strong USD dominated in the markets. A possible bullish breakout of 0.92, is maybe a signal for prices like 0.93 so we’ll take our chances by opening buy positions this week.

AUDUSD (Australian Dollar – US Dollar)

Bearish was the last week for AUDUSD (open price at 0.7134 – close price at 0.7027) since the investors turned to safer solutions such as USD. Moreover, the drop of the commodities prices (mainly on gold) did not favor AUD which came close to the important support at 0.70. The price of 0.70 had a bullish breakout in the mid July and since then there was no danger for it but now, a possible bearish breakout may be a signal for the sellers of the pair. There are many announcements and events this week that may change the pictures at any time but for the moment, there is an obvious downtrend. We’ll open sell positions right after a solid bearish breakout of 0.70.

SP500

We had not seen such a weekly drop for SP500 during the last months. The Index closed at 3,278 points, having lost more than 5%. COVID-19 pandemic and the increased new cases, the new package of economic aid in USA which is still pending and the US presidential elections have developed an environment full of uncertainties and concerns. If this situation continues, the multi-month low price at 3,200 points may be threatened but we expect with much interest the results of the US election that is able to turn things upside down. We remain sellers for one more week on SP500.

DAX30

With many European countries entering into a new lockdown, the stock markets cannot be indifferent so DAX30 closed last week at 11,616 points, with important losses more than 8%. Such a weekly percentage drop was the first after the period of last March where the first wave of COVID-19 was conquering the whole Europe. From now on, a bullish reaction may come either from positive news on the pandemic (e.g. vaccine) or from investors that will feel this situation as an opportunity to buy cheaper. We’ll follow the main trend by opening short positions this week.

FTSE100

FTSE100 followed the outlook of the rest main stock Indices, by closing at 5,576 points and losses close to 4.50%. The lockdown that announced lately in UK was expected in any case but the long length expectation of it, created a negative picture. If there will be a bearish breakout of last week’s low at 5,462 points, the negative sentiment may get even worst and in such a case we’re keen to open short positions.

Gold

South direction for gold last week since it closed at $1,878.5, almost 1.30% lower. The uncertainty period due to COVID-19, US elections and the expected new package of economic aid from FED and other central banks, should help gold to climb higher but the very strong USD has prevented this scenario. If USD keeps on strengthening, we may see a threat of the support at $1,850 but in case that the investors buy gold, we need to see a recovery above $1,900, maybe even above $1,920 in order to have a high probability of an uptrend. Next week’s announcements (especially NFPs on Friday) will also be critical factors and we’ll try long positions for the current week.

US Oil

Free falling week for the oil prices as the oil futures closed on Friday at $35.71 with losses like 10%. The important support at $36.10 could not stand and early this week, oil price is already moving much lower at $34.80. The fears for limited demand because of the lockdowns, press the price and maybe there can be a reaction from OPEC regarding the production in order to stop the dropping. The fact is that such low prices create reasons for a production cut decision but still we need to see if, how much and when. Until then, we insist in shorting oil.

Bitcoin

Another strongly bullish week passed by for Bitcoin, closing at $13,762 and having performed profits more than 5.50%. There is a resistance that come in the long past at $13,880, since 6/2019 which seems to prevent Bitcoin from moving higher, even if it on Friday the price surpassed $14,000. The good news carries on: Iran announced that it will allow its national imports to be financed through cryptocurrencies. The current week is a critical crossroad for Bitcoin since we’ll see the result for the US elections and there are important announcements that will reveal the situation in many major economies such as NFPs and the Interest Rates in USA. Technically speaking, the resistance at $13,880 will assess the near future of Bitcoin so we’ll wait to see an uptrend movement and we’ll try long positions.