11/1/2021
PARTY GOES ON (FOR THE MOMENT)
General Comment
COVID-19 pandemic, keeps on hitting Europe and USA with a great intensity but this fact does not seem to create serious concerns to the markets. A remarkable new though, is the rise of the 10 years US treasury yield above 1%, which may mean a new start of the inflation reignition in the near future.
Amongst the other facts, surely, we should include the unique phenomenon for USA of the Capitol invasion by Trump’s followers and the violence scenes that we all saw. Earlier during last week, we also saw the election of a Democrat in Georgia which gave to Joe Biden an even more power in the Senate and boosted the markets.
Important new is the loss of 140K job positions in USA in December, even if the expectation was for a positive balance. Despite this fact, the stock markets were significantly profitable maybe because this loss creates expectations for a new stimulus and in the same time, we saw a mild USD recovery.
Gold had serious losses and oil performed a mini rally during last week, after the sudden decision of the Saudi Arabia for reducing the daily production by 1M barrels. Finally, Bitcoin kept on rising, exceeding during the last week even the price of $40,000.
The current week is calmer regarding the scheduled news. We can underline the Inflation and the Retail Sales announcements the USA as well as the bankers’ speeches such as Powell’s from FED and Bailey’s from Bank of England. Of course, the COVID-19 pandemic news and the developments in the political scene in USA will have the most critical roles.
EURUSD (Euro vs US Dollar)
It was a consolidative week for EURUSD as it opened and closed around the price area of 1.2220 – 1.2240. During the week though, the pair touched 1.2350 but the strength of USD that followed, pressed it bearishly. Last Friday’s shock with the loss of 140K job positions in USA in December, could not change the pair’s outlook that much, USD kept on rising since the 10 years US treasury yield had a serious rise as well. The next support levels of EURUSD exist at 1.2130 and 1.2060 and a possible bearish breakout would put the uptrend of the last months into the test but in case of a quick recovery above 1.22, this uptrend will become more solid. Basically, we’ll open sell positions but we’re keen to turn them into buy positions above 1.22.
GBPUSD (Great Britain Pound – US Dollar)
Bearish was the last week for GBPUSD, which opened at 1.3648 and closed at 1.3558. The Brexit deal belongs to the past so the pair from now on will start to get affected by its usual factors. UK has a serious problem regarding COVID-19, as a result of the market opening during the holidays. A very important event of this week is the speech of Bailey (Bank of England) on Monday since the Brexit and the pandemic may lead to decisions regarding the monetary policy in UK which may mean maybe negative Interest Rates. Below 1.3430, the pair solidifies the correction and above 1.3635, the uptrend probability is higher. We’ll open sell positions this week.
USDJPY (US Dollar – Japanese Yen)
A clearly bullish week passed by for USDJPY as it opened at 103.15 and closed at 103.95, in between of a strong USD and an important rise of the 10 years US treasury yield which is currently moving above 1.1%. The next possible main target of the pair’s buyers is the price area of 105 while prices below 102.90 may cause a return of the downtrend which dominates on USDJPY during the last months. We’ll try buy positions on USDJPY this week.
EURJPY (Euro – Japanese Yen)
Last week was bullish for EURJPY, with a weekly open at 126.28, a clear breakout of the difficult resistance at 127 and a weekly close price at 127.04. Early this week though, the pair is moving below 127 again (we need to remind that during last Thursday it had approached 127.50) creating serious doubts for the solidity of the breakout that we mentioned above. As long as EURJPY remains below 127, the probability of a further correction is high but in the opposite case, the first obvious main target is the price area of 127.50. We prefer sell positions this week and we may close them and open buy positions in case of prices above 127.
EURGBP (Euro – Great Britain Pound)
EURGBP had a bullish reaction after two bearish weeks, by opening at 0.8959 and closing at 0.9010. The recovery of 0.90 is considered as important because this is milestone price for the pair. There are rumors for negative Interest Rates from the Bank of England that give pressures on GBP so there is a short-term target for the buyers around 0.91 and in that case, we may see prices close to 0.93. On the contrary, a solid bearish breakout of 0.90 will mean that the scenario for prices close to 0.8860 will return. Our selection for the current week is buy positions.
USDCAD (US Dollar – Canadian Dollar)
Another bearish week passed by for USDCAD which opened at 1.2721 and closed at 1.2686. The oil prices rally strengthened CAD and overridden the temporary USD strength. If USD keeps or recovering, we may see a bullish reaction for the pair and in that case, an obvious target is the price area of 1.28 and maybe later, 1.2955. In the opposite case, the strong support of 1.2630 will be tested with a long-term target for the sellers the price area of 1.25. We’ll open buy positions this week
USDCHF (US Dollar – Swiss Franc)
USDCHF had some consolidations during the last week as it opened and closed around the price area of 0.8830 – 0.8850. A possible further recovery of USD may bring the pair above 0.89, creating expectations for reaching the area of 0.90. If USD returns to its usual downtrend though, the first target for the sellers is the support at 0.8750. Buy positions is our selection for the current week.
AUDUSD (Australian Dollar – US Dollar)
AUDUSD continued its uptrend direction relentlessly by having another bullish week as it opened at 0.77 and closed at 0.7767. It’s important to remark that this rise took place into a bearish environment for gold and during a week where USD was strong. Of course, if USD keeps on recovering the pair will correct to the price area of 0.7640 and maybe lower at 0.7560. In the opposite case, the long–term target of 0.80 still stands, maybe with an intermediate stage at 0.78. Buy positions is what we’ll open this week.
SP500
The first week of the new year was profitable for SP500, as it closed at 3,822 points and profits above 2%. In USA there is an obvious turmoil after the latest invasion in Capitol and concerns for the huge loss of job positions in December. Maybe the markets considers that the COVID-19 economic consequences as the pandemic strikes USA with great strength, may lead to decision for a further support of the US economy through a new stimulus package. The 10 years US treasury yield has a remarkable rise, reaching the price of 1.12% but beyond the expectations, the problems are still there and in combination with a possible profit taking, may cause serious corrections to the price area of 3,730 points. We’ll try some low-risk short positions this week.
DAX30
It was a strongly bullish week for DAX30 which managed to surpass the resistance of 13,790 points by closing at 14,081 points and profits more than 3%. The uptrend is obvious and of course it may drive the Index much higher but a profit taking trend especially into those overbought levels may cause corrections and maybe strong corrections if DAX30 loses 14,000 points. Our basic strategy is to open long positions but below 14,000 points we’ll turn them into short positions.
FTSE100
Last week we saw the biggest rise on a weekly basis of the last months for FTSE100 with a weekly close at 6,858 points and important profits above 7%. It’s obvious that the latest Brexit deal relieved the markets and creates expectations for reaching the area of 7,000 points, so we’ll try long positions this week.
Gold
Strongly corrective was the last week for gold which closed at $1,849 and losses that surpassed 2.7%. The strength of USD and the expectations for smooth transition into the Joe Biden era (even if we saw serious conflicts in Washington last week) which will mean the return to a political stability are factors that press gold prices. Beyond the above, the higher yields that we see in US treasuries also contributes to this and if all the factors continue to exist, then gold prices close to $1,800 are expected. Short positions is what we’ll open this week.
US Oil
US oil performed very important profits (like 8.8%) last week as the next month’s futures of oil closed at $52.68. The dominating event of the week was undoubtably the decision of Saudi Arabia to reduce the production at 1M barrels per day in February & March. The rest of the OPEC countries will retain the production at the same levels by allowing a small rise in the production of Russia and Kazakhstan. The reasonable market reaction though is to absorb quickly that news and to correct to the price area of $50 since the demand remains into lower numbers. We’ll try short positions this week.
Bitcoin
The crazy Bitcoin uptrend carried on for one more week as on last Friday the price surpassed the level of $40,000 and it finally closed at $38,174 with profits more than 15%. Early this week though, we see a big correction that brought Bitcoin close to $32,300, confirming for one more time the huge volatility of Bitcoin and very high risk that carries. The trend still remains bullish and many analysts predict prices like $100,000 (!!!) but if Bitcoin stays below the support of $34,750, we’ll start having serious concerns. The weekend was very bearish and in case of Monday correction we’ll witness one of the biggest corrections in Bitcoin’s history. The king of cryptocurrencies needs to approach the area of $40,000 again in order to convince us that the rally is still alive. We’d better stay out this week.
