30/11/2020

MARKETS MAY FACE A HISTORIC PARADIGM SHIFT IN ΤΗΕ AFTER COVID ERA

General Comment

We are entering this week, into the last month of a year that has been marked from the COVID-19 pandemic and the markets seem to have taken for granted the immediate and the final resolving of the problem. With the expected vaccines licensing, the attention will fall on the next day and how the economies will face all the issues that this crisis has produced or spotted. A new economic reality is maybe close at hand.

In other respects, last week had low volatility due to Thanksgiving Day in USA, the Brexit negotiations are entering in a final stage while we had a new trade deal which is very important for the world economies (Asia Pacific Trade Deal), which includes 15 countries (about 30% of the world population) such as China, Japan, South Korea and Australia.

USD had more losses and most of the other currencies took advantage of it. The major stock markets in Europe and USA had a profitable week, gold had serious losses and finally, oil strengthened significantly.

The current week has a lot of scheduled news and events and contains the OPEC meeting, Ecofin session, speeches from Lagarde (ECB) and (FED) and announcements such as the Unemployment Rate in Germany, Eurozone and USA.

EURUSD (Euro vs US Dollar)

Important rise for EURUSD last week since it opened at 1.1846 and closed at 1.1963. The pair has approached very much to the milestone price of 1.20 and the 2.5 years highs at 1.2010. EURUSD is in an uptrend since last spring even if after the summer had a short-term consolidation. The news & updates regarding COVID-19 will move the market again but this week has also many news and events so we expect higher volatility. On the other side, it takes a lot of attention because such a long-term resistance is not easy to break and possible corrections cannot be excluded: Europe has still important issues to resolve and the new government in USA may try to make USD more competitive. We’re still keen to open buy positions on EURUSD this week too.

GBPUSD (Great Britain Pound – US Dollar)

Mild rise for GBPUSD last week with a weekly open at 1.3289 and a weekly close at 1.3314. the fact is that GBP could not take advantage of the weak USD because as we’re entering into the last month before Brexit and the negotiations are not in a progress so far, even if the EU major negotiator Michel Barnier travelled to London for face to face conversations. The pair could approach 1.35 if some positive rumors occur but in the opposite case and if USD gets stronger, we may see even a drop. For the final agreement there are three major issues to be resolved, most likely two of them have already been resolved and the remaining one is about fishing and in case of solving it, we may see a soft Brexit straight away. In this case which is possible enough, we expect GBPUSD to surpass 1.35, travelling to 1.40.

UK does not have important announcements to release this week but USA has a lot such as PMIs and Unemployment Rate but, in any case, we prefer buy positions.

USDJPY (US Dollar – Japanese Yen)

A marginal bullish reaction took place on USDJPY last week, with open price at 103.78 and close price at 104.07. The 10-year US treasury yield which has strong correlation with USDJPY, remained unchanged at 0.82%. Early this week, Japan announced October positive results for Retail Sales and Industrial Production and the JPY strengthening has led the pair below 104 again. USDJPY is in a downtrend since the beginning of the summer and the support of 103.20 is close enough so sell positions is an option for us this week.

EURJPY (Euro – Japanese Yen)

Importantly bullish week for EURJPY which opened at 123.07 and closed at 124.51. It means that we saw a full reversion of the correction that started about 2 months ago, when the second wave of COVID-19 started to expand all over the Europe. There is an obvious uptrend for the pair and a possible bullish breakout of 125, will open the road for the buyers of the pair for targets even close to 127. Trusting this scenario, we’ll try buy positions this week on EURJPY and we may increase our size above 125.

EURGBP (Euro – Great Britain Pound)

Bullish was the last week for EURGBP as it opened at 0.8920 and closed at 0.8981. The stagnation regarding Brexit and the strong EUR caused a bullish reaction on a downtrend that has started from mid-September without achieving though to exceed the milestone price of 0.90. The Brexit negotiations will dominate on the pair this week as well and possible positive news may cause a movement to the important support of 0.8860, without excluding an even bigger drop. Sell positions is our selection this week.

USDCAD (US Dollar – Canadian Dollar)

A bearish week took place for USDCAD, by opening at 1.3084 and closing at 1.2985, having achieved to breakout the important support of 1.30. The higher oil prices, combined with the USD weakness brought this result so the pair is moving now to multi-month lows. There is the OPEC session this week and the decisions will influence the oil prices along with CAD which is strongly correlated. The trend is obviously a downtrend and prices below 1.30, favor a further drop but due to the strong support at 1.2930 – 1.2950 and due to possible decisions from OPEC, we may also face consolidative trends or even bullish reactions. We’d better stay out this week.

USDCHF (US Dollar – Swiss Franc)

Last week closed with lower prices on USDCHF, which opened at 0.9107 and closed at 0.9046. USD was weak again so the pair approached the milestone price of 0.90 again. The bullish reaction that lasted until the end of September has turned to a downtrend so we may see prices close to the next support at 0.8980. This support is a multi-year major support as prices below 0.8980 took place in January of 2015 when the pair had a flash-crash. Sell positions is our option this week but we may take the profit close to 0.8980.

AUDUSD (Australian Dollar – US Dollar)

It was another bullish week for AUDUSD which opened at 0.73 and closed at 0.7384, by taking advantage of the USD weakness and the new Asia Pacific Trade Deal. The pair would have surpassed the important resistance of 0.7410 but there is a tension between Australia and China, since Australia accuses China on the COVID-19 handlings while China replied with tariffs on Australian products, starting with the wine. There is an undoubtable uptrend on AUDUSD but such a tension combined with the false attempts of 0.74 surpassing may cause corrections so we’ll stay out this week, trying to define things better.

SP500

Important rise for SP500 last week, since it closed at 3,636 points with profits that touched 2.5%. The hopes for the end of COVID-19 pandemic through the new vaccines and the return to normality after last US elections, give a tone of optimism to the investors. SP500 is now moving close to its all–time highs which may breakout this week if this positive outlook carries on. Early this week, there is a small correction to 3,614 points but it takes much lower price so we can talk about a trend reversion. We also expect with great interest the resurgence about the new economic aid package in USA for smoothing the consequences of the COVID-19 result on the economy. We’ll keep on opening long positions.

DAX30

Bullish was the last week for DAX30, by closing at 13.353 points, having performed profits like 1.7%. The multi–month high price at 13,460 points is very close, even if the uptrend that has been developed during November is obvious, we may see corrections so we’ll open short positions this week.

FTSE100

With profits around 1% and a weekly closed at 6,406 points, ended the week the UK Index FTSE100. As per the Brexit issue, there is still expectancy for an agreement but since FTSE100 is not able to exceed the resistance of 6,510, we may see significant corrections, especially if it drops below 6,290 points. We’ll try short positions, believing in this case.

Gold

Important losses, like 4.5% for gold prices last week with a weekly close price at $1,784. The surrounding optimism for the pandemic end that comes from the vaccines’ effectiveness, pushes many investors to sell gold as a risk-on mood start to rise in the markets. We noticed though the rare phenomenon of both gold and USD having losses in the same week. The downtrend on gold prices that begun from the beginning of August has been intensified in November and it may cause more losses on gold. We’ll try short positions this week.

US Oil

The rise of the oil prices carried on last week as well and the next month’s futures closed at $45.51, with impressive profits like 7.3%. The hopes for the end of the COVOD-19 pandemic derived from the new vaccines create expectations for higher demand and favour the higher prices but there is also a stagnation since during this week there is the OPEC meeting and some possible decisions will be very critical for oil prices during the next period. A production cut decision may lead oil even to the price area of $50 but in a opposite case we cannot exclude corrections to the support of $43.75. Short positions is our option for this week.

Bitcoin

Corrective week for Bitcoin which closed at $18,192 and losses circa 1.3% περίπου. During last week, the correction was importantly bigger as we saw prices close to $16,200 but in the weekend, we saw a significant recovery. Many investors took their profit and the liquidation of Bitcoins on Thursday was about $2 bn. Also, Coinbase CEO, Brian Armstrong posted on Twitter that the US government may require from the financial institutions to validate the crypto wallet owners and this fact created some concerns amongst the crypto investors. The strong recovery during the weekend creates expectations for approaching $19,500 and a higher probability for reaching $20,000 but in a market with such a high volatility, no fundamentals and strong ups and downs, we cannot exclude surprises. We’ll open long positions in the current week.