8/2/2021
EXPECTATIONS FROM THE NEW ECONOMIC AID PACKAGE IN USA
Best Choice for the next weeks to months
Currencies
Sell EURUSD in the long run, now at 1.2025
EURUSD dropped last week below 1.20 and even if it recovered above this level on Friday, it seems that it has developed a downtrend momentum. The new US presidency is not a very warm supporter of the weak USD (as Janet Yellen stated a few weeks ago) and most likely the pair will drop again below 1.20 while many analysts predict more sharp bears, to 1.18 or even to the long-term support at 1.16. Europe’s issues regarding COVID-19 with the vaccinations delays and the lockdowns, contributes to this view as well.
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Weekly Report: Currencies, Indices, Commodities and Cryptos
General Comment
The new US government, planted high hopes last week that the new economic aid package will be enough (suggestion for $1.9 trillion) so the US economy can be supported while Janet Yellen (new US secretary of treasury) stated that by the end of the current year there will be employment fulfillment. This fact triggered a euphoria to the financial markets with an important strengthening of USD which stopped partially on Friday, even if the results from the job market in USA were not discouraging at all. More specifically, the Unemployment Rate dropped in January from 6.3% from 6.7% in December while there were 49K new job positions. We also need to underline that the US 10-year treasury yield keeps rising, touching 1.20%.
As per COVID-19, things are still difficult as there are increased numbers in new cases & deaths and the new mutations create concerns while there are still issues, mostly in Europe mostly with vaccination delays. The stock markets though had remarkable profits. Good profits for oil as well but gold had serious losses. Finally, Bitcoin managed to surpass $40,000 again, at the end of last week.
The current week is quiet regarding the scheduled economic announcements. The most important are the Consumer Price Index in USA, China and Germany, the Eurozone Industrial Production, the UK GDP and the US Michigan Consumer Sentiment Index. The New Year starts in China on Friday (Year of the Ox).
EURUSD (Euro vs US Dollar)
Bearish was the last week for EURUSD which opened at 1.2130 and closed 1.2049 while during the week we saw prices, much lower than 1.20. The expectation and the good mood between Democrats and Republicans as per the new economic aid package in USA, boosted the markets and strengthened USD. On Friday, the pair had a bullish recovery as on Thursday it had touched the price area of 1.1950. In a quiet week (regarding schedules news & announcements) that just started, the risk on/off mood will be critical and the barometers for this will be any updates in the new economic aid package and any news about COVID-19 and vaccinations. A new bearish breakout of 1.20 will increase the probability of a downtrend while it takes a bullish turn above 1.2190 so EURUSD is able to return to its uptrend, developed at the last ten months. Sell positions is what we’ll open this week.
GBPUSD (Great Britain Pound – US Dollar)
Another bullish week passed by for GBPUSD, with a weekly open price at 1.3702 and a weekly close price at 1.3733. It was the 12th bullish week out of the last 14 weeks and this is a clear confirmation that GBP is strong in the post-Brexit era, even if USD was strong during the last week too. In UK the vaccinations take place quickly and the target is to vaccinate all the vulnerable groups of citizens within the current month. Another critical factor was the Monetary Policy release from the Bank of England as it seems that the scenario of negative rates does not have a high probability. The yearly high price at 1.3759 is the immediate target of the buyers while there are many voices who predict that GBPUSD is able to reach 1.40 soon and why not, the 2018 highs at 1.44. We’ll try buy positions this week.
USDJPY (US Dollar – Japanese Yen)
USDJPY carried on the bullish trend for the 2nd week in a row since it opened at 104.77 and closed at 105.36, exceeding and staying above the psychological level of 105. The strong USD, combined with the higher US treasury yields reverse the downtrend that had started in last June and a change takes place in the new year. The economic announcements from Japan lately are not judged as positive so in a possible USD strength continuation, we may see the pair trying the resistances at 105.70 and 106.10, so buy positions is our selection for the current week.
EURJPY (Euro – Japanese Yen)
It was a practically neutral week for EURJPY as the weekly open at 127.09 and the weekly close at 126.96 proved for one more time that there’s a balance spot for the pair the last period, around 127. Above 127, there is the strong resistance (2 years high price) at 127.50 while below there is the short-term support at 125.10. We may see an oscillation around 127 this week so we’ll stay out until a clear trend is indicated.
EURGBP (Euro – Great Britain Pound)
Bearish was the last week for EURGBP which opened at 0.8846 and closed at 0.8771. There’s an emerging downtrend which started from the end of the last year and seems to continue as the next targets are 0.8670 and 0.85. GBP is stronger than EUR lately because EUR seems weaker against all the other major currencies. For one more week, we are sellers on EURGBP.
USDCAD (US Dollar – Canadian Dollar)
Last week was neutral–to–bearish for USDCAD with an according low volatility. The pair opened at 1.2786 and closed at 1.2761 since both USD and CAD were strong: USD because of the expectations of the new economic aid package and CAD due to higher oil prices. Since the beginning of December, the pair is in an oscillation around 1.2750 but there’s a high probability of continuing the downtrend that has started since the last March, if and when USDCAD starts having a higher volatility. Under this consideration, we prefer sell positions this week.
USDCHF (US Dollar – Swiss Franc)
Important rise for USDCHF during the last week as the pair opened at 0.8897 and closed at 0.8989. The strong USD boosted the pair higher and we need to remark that USDCHF surpassed the price of 0.90 for the first time since the last November. Of course, we should not underestimate the fact that it could stay above 0.90 but based on the latest attitude of USD, it may happen soon so buy positions is what we’ll open this week.
AUDUSD (Australian Dollar – US Dollar)
Bullish recovery for AUDUSD last week, after a mini downtrend that took place during the last month. The pair opened at 0.7623 and closed at 0.7677 as AUD proved to be stronger than USD during the last week. Interest Rates stayed unchanged in Australia at 0.1% and the Chinese Caixin PMI was better than expected. If AUDUSD is able to exceed 0.77, we may see it at 0.7765 very soon. On the contrary, below 0.7560 the scenario of a downtrend (that has been developed from the beginning of the new year) is valid again. We trust the first case more, so buy positions is our selection.
SP500
Important rise and a new record is what we saw for SP500 last week, since it closed at 3,884 points, performing profits more than 5%. The optimism that has been developed due to the high amount of the economic aid package in USA was a catalyst to this profitability. The increasing number of vaccinations in USA also contributes to the general positive mood while the SP500 companies results that released last week, were promising too. The new price records create expectations to the investors for more profits but the profit taking in such cases is a strong factor for corrections. In any case, we won’t be contrarians to the main trend so long positions is our selection.
DAX30
Heavily bullish week passed by for DAX30 as the Index closed at 14,069 points with profits approaching 5%. The recovery of DAX30 above 14,000 points is surely a very positive fact and early this week it has conquered the record of 14,120 points too, providing higher hopes and expectations for an uptrend continuation. We prefer long positions this week too.
FTSE100
Bullish was the last week for FTSE100, after three bearish weeks in a row. The Index closed at 6,453 points, performing profits that touched 2%. In a possible scenario of surpassing the resistance of 6,630 points, the uptrend scenario earns many credits as it is helped by the development of the vaccinations in the UK and the post-Brexit era. We’ll try long positions.
Gold
Important losses for gold last week as it closed at $1,814.50, losing about 2% of its value. The USD in which gold is denominated got stronger and this fact was a serious factor for gold’s drop while the vaccinations that continue without serious issues, contribute to the risk-on mood of the investors. On Friday, the gold price performed a bullish reaction from the low price of $1,784 but it was not capable to reverse the negative outlook. A possible bearish breakout below this level is able to trigger a heavy downtrend while it takes bullish breakout above $1,880 for a valid uptrend scenario. The first case has better chances, so we’ll open short positions this week.
US Oil
After three consolidating weeks, oil exploded and closed the week at $57.06 (next month’s futures price), performing important profits like 9.50%. The vaccinations that carry on, provide expectations for the pandemic end soon and this fact will increase the oil demand. The OPEC+ countries, continue the policy of production cuts, boosting the oil prices higher and in parallel, the lower inventories levels in USA show the economy strengthening in many sectors (such as the manufacturing sector) followed by a higher consumption rate. Last week opens higher hopes to the buyers for reaching the area of $60 but possible corrections to the area of $52, if the mood changes, cannot be excluded. We’ll stay out this week, as the risk is huge for any choice.
Bitcoin
Important rise is what we what we saw last week for Bitcoin, as it closed at $38,858 with profits that exceeded 17%. During the week, Bitcoin climbed above $40,000 again and the smiles to the cryptos investors returned because recently they had seen it even close to $28,800. The volatility is very high and this is an explanation for prices below $40,000 again but the developed trend is bullish and most likely it is a matter of time to see Bitcoin above $40,000 again, even above the all-time high price at $42,000. We’ll try long positions this week.
