7/12/2020
MARKETS ARE BULLISH BUT SOME CAUTION IS NEEDED
General Comment
COVID-19 pandemic dominated in the markets for one more week since the lockdowns and the increased numbers of new cases and deaths still stand in many countries. As a counterweight, there are many hopes that this problem will end soon through the efficient vaccines and this fact creates good expectation among the markets. UK has already licensed the vaccine and they’ll start vaccinating this week while Russia has already begun. As per the financial results that announced last week, the most important was the job market in USA in November and while the expectation was for 469,000 new job positions, the result was just 245,000 new positions. USD pressed a lot last week and GBP had profits although there was a big volatility throughout the week, in between positive and negative rumours and statements regarding Brexit. Most of the major stock markets had a profitable week and the most important commodities (gold– oil) had profits as well.
This week is dominated by the Interest Rates announcement and by the monetary policy in Eurozone, the European Council Meeting and of course by any developments regarding COVID-19 since we expect the vaccine licence in USA during the week.
EURUSD (Euro vs US Dollar)
Another bullish week for EURUSD which opened at 1.1960 and closed at 1.2117. The pair managed to surpass 1.20 easily as well as the major resistance at 1.2010, even 1.21 since USD was very weak with many sellers appearing. The conversations for the new package of economic aid in USA have returned so USD has a significant pressure. Also, the expectations for the end of the pandemic have created a risk–on mood to the investors so they turn to most risky assets such as EUR. This week contains the Interest Rates in Eurozone and the European Council Meeting but although there is an obvious uptrend on the pair, USD is oversold (USD Index has lost more than 13% since last March) and it is maybe an opportunity for USD buyers which will mean corrective trends for EURUSD. We’ll try sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
It was the 5th bullish week in a row for GBPUSD, by opening at 1.3325 and closing at 1.3431. The volatility was high again and the pair surpassed 1.35 but it did not manage to close above it. We have entered into the last month before Brexit takes place and still there is no agreement between UK and EU. The President of EU Commission Ursula von der Leyen had a post on Saturday in Twitter that she had a phone call with Boris Johnson, differences remain, no agreement is feasible if there are not resolved and that they will speak again on Monday. The weakness of GBPUSD to remain above 1.35 or even above the resistance of 1.3480, reflects this situation but possible positive news regarding Brexit may boost the pair up to 1.38. The high volatility creates a high-risk environment but we’ll try buy positions for one more week.
USDJPY (US Dollar – Japanese Yen)
It was a mildly bullish week for USDJPY, with a weekly open price at 104.05 and a weekly closing price at 104.18. The 10-year US treasury yield (which is strongly correlated with USDJPY), climbed to 0.95%, supporting USDJPY from the weak USD. Although there are some consolidative trends, the trend of the pair since the last summer is bearish and a possible bearish breakout of 103.70 will bring back the downtrend in a more intense manner. According to this, sell positions is our selection for this week.
EURJPY (Euro – Japanese Yen)
It was the 2nd in a row strongly bullish week for EURJPY which opened at 124.45 and closed at 126.28. The investors, by foreseeing the end of the pandemic through the vaccines, are turned to high risk investment solutions so the pair during the last two weeks has performed a mini rally. The trend and the momentum of EURJPY are definitely bullish and if we see a breakout of 127, more buyers will be attracted but since the resistance of 127 is strong, there is also a probability for correction, down to the price area of 125. We’re keen to open buy positions above 127 but we may open sell positions in the case of bearish signals.
EURGBP (Euro – Great Britain Pound)
Bullish was the last week for EURGBP which opened at 0.8975 and closed at 0.9020. The no agreement status regarding Brexit boosted the pair above 0.90 again. As long as this agreement is still pending, we may see consolidative to bullish trends but in case of positive news, most likely we’ll see a huge drop and an approach to the price area of 0.8860. Sell positions is what we’ll open in the current week, keeping our eye on Brexit news.
USDCAD (US Dollar – Canadian Dollar)
It was a strongly bearish week for USDCAD which had a weekly open at 1.2996 and a weekly close at 1.2784. The great weakness of USD and the higher oil prices pushed the pair to low prices that we had not seen since the beginning of 2018. The strong downtrend is obvious but such oversold conditions may create investment opportunities for traders so we cannot exclude the case to see a recovery, up to 1.29 again. According to this scenario, we’re keen to open buy positions this week.
USDCHF (US Dollar – Swiss Franc)
It was the mostly heavy bearish week for USDCHF since the last summer, which opened at 0.9039 and closed at 0.8918. There’s a heavy downtrend on the pair during the last weeks, there was a bearish breakout of the milestone price of 0.90 but since the oversold conditions may create buying opportunities, we may try buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
Bullish was the last week for AUDUSD as it opened at 0.7383 and closed at 0.7426. The important fact is that we saw a bullish breakout of the important support of 0.7413 due to positive COVID-19 news in Australia in combination with the weak USD. The pair is able to look higher and 0.75 is the most near & realistic target but this sharp drop of USD may cause a recovery, causing also corrections to AUDUSD. We’ll try sell positions this week.
SP500
It was a bullish week for SP500 which managed to perform new all–time highs, closing at 3,670 points with profits like 1.5%. The news regarding the vaccines, create an environment of optimism to the investors that the pandemic nightmare is going to end soon and that there will be a return to normality. The vaccines approvement in USA is possible to be announced during this week while we saw a come-back of the conversations regarding the new stimulus fiscal package in USA, in order to provide support to the economy. SP500 is able to perform new highs but with such a strong uptrend we may see profit taking which may cause corrections. We’ll follow the trend though, by opening long positions this week.
DAX30
Slightly bearish was the last week for DAX30, which closed at 13,287 points, having losses close to 0.5%. The profit taking and the strong resistance at 13,460 points are for the moment important hurdles for the Index to move higher and under these circumstances we may see a more extensive correction, so short positions is what we’ll try this week.
FTSE100
Important profits for FTSE100 last week, with a weekly close price at 6,546 points, about 2.2% higher. The expectancies for a Brexit agreement pushed the Index to surpass the resistance of 6,510 points and it is possible to see (especially in a Brexit agreement case) even higher levels. We’ll try long positions on FTSE100 this week.
Gold
Bullish reaction for gold, we saw last week, after three bearish weeks in a row. Gold closed at $1,842, having profits like 3.3%. The weak USD was a major cause for this as well as the higher economic activity in China. Conversations about a fiscal package in USA through a new QE will favour gold even more and it may boost it to the price area of $1,900 so we may open long positions this week.
US Oil
It was the 5th in a row bullish week for oil, since the next month oil futures closed at $46.06, having performed profits close to 1.2%. The demand is still low but the expectations for the pandemic end through the vaccines, has fulfilled the markets and the investors with positive outlooks. The OPEC members came to an agreement regarding the oil production, based on last April’s decisions and on changes that had been in June and September so oil kept on moving higher. The price may reach the area of $50 is this positive outlook carries on but of course the continuous uptrend causes profit taking and selling trends so we may see corrections too. We’ll open short positions this week but in case of exceeding the price of $46 again, we’ll increase our long size.
Bitcoin
After a short parenthesis of correction, Bitcoin returned to its crazy uptrend by closing last week at $19,380 with profits more than 6.5%. Last week also had a new all–time high price at $19,918, approaching very much to the multi-expected target of $20,000. Of course, a bullish breakout of $20,000 will bring a high enthusiasm to the crypto community. The strong voices that support cryptos keep on increasing and the most recent case is Dan Schulman (CEO of PayPal that recently integrated Bitcoin in the transactions) who stated in CNN that he’s very bullish on the digital currencies. $20,000 is a big temptation and also a very strong resistance but Bitcoin seems to have what it takes to exceed it, so we remain buyers.
