7/6/2021
FED DECISION TIME?
General Comment
As of Friday, market sentiment was optimistic after the US ADP Employment Change had high expectations for new job positions. The PMI in the US was also encouraging. But the results of Friday (NFPs) disappointed: 559K new jobs in May, compared to expectations for 650K. This development reduces the chances of early change and tighter Monetary Policy by the Fed because it turns out that the targets have not yet been met. On the other hand, the problem of high Inflation needs to be addressed, so the Fed meeting on June 16 is gaining great interest and how it will approach these issues. The consequence of this development was also the significant drop in bond yields. Europe did not have positive results last week either. Retail Sales in the Eurozone are still in deep red and Inflation is on the rise (but not as high as in the US).
Following the announcement of the NFPs, the stock market in the US strengthened and closed positively for the week, as did the markets in Europe. The stronger dollar (especially on Thursday) lost its uptrend, gold corrected while oil prices rose sharply. Finally, Bitcoin looks stuck after the recent major correction, without being able to recover but without falling further.
The end of this week is eagerly awaited. On Thursday there is the announcement of Interest Rates and Monetary Policy in the Eurozone by the ECB, which, however, is not in a hurry to tighten its Monetary Policy since Inflation is still at controllable levels. On the same day, there is the very critical announcement of Inflation in the US for May, while on Friday and Saturday there’s the G7 meeting, on the need to reform the global tax system and introduce perhaps a common corporate tax rate of 15%.
SP500
The US SP500 Index closed last week, at 4,227 points and gains close to 0.60%. The rise came mainly after the announcement of the US labor market. The results, which were lower than expected, gave the Fed a better chance of surviving the loose Monetary Policy, which favors the stock market because part of the extra money ends up there. The Fed, however, had said it would begin easing pandemic support packages, but the NFPs cast doubt on those statements. The Index is now a breath away from the all-time high of 4,238 points and of course, the announcement of Inflation in the US, and the next actions by the Fed are eagerly awaited. With this data, everything is open: from the new highs in case of continuation of the loose Monetary Policy to the big correction, in the opposite case. We’ll try long positions this week, trusting more the first case.
DAX30
The German DAX30 Index strengthened for another week, closing at 15,695 and gaining about 1.25%, breaking a new price record. Except for Monday, all other days were bullish, with Inflation in the Eurozone announcing at 2%, leaving room for the ECB to continue its loose Monetary Policy. The uptrend is quite strong but of course, possible profit-taking cannot rule out corrections (already the opening of this week is corrective). Without known upward resistance (since we are at the all-time high), the supports at 15,340 points and 15,000 points are worth it but we may try long positions for one more week.
FTSE100
Last week was bullish for the British FTSE100 index, which closed at 7,075 points and gains approaching 1%. The Index seems to be consolidating above 7,000 points, aiming at the highs of the year, above 7,142 points. There are concerns about a return to normalcy in the UK as there has been an increase in cases in recent days, mainly due to the Indian mutation, but the government and the markets do not seem to be particularly worried. Only the loss of 7,000 points can reverse the positive climate and raise concerns of greater correction but long positions is our selection for one more week.
Gold
Last week, the strong bullish rally for gold, which closed at $ 1,894, stopped with losses of about 0.70%. The decline intensified on Thursday, when the dollar rose sharply and moderated on Friday, in the fall of the dollar after the NFPs. It was the first bearish week for gold after four consecutive weeks of a strong uptrend, losing the psychological threshold of $ 1,900. The end of this week will be very important for the course of gold with the announcement of Inflation in the US and the ECB meeting on Interest Rates and Monetary Policy in the Eurozone. Below last week’s low of $ 1,855, the upward trend of recent weeks will be questioned and we’ll try short positions this week.
US Oil
Last week closed with significant gains for oil, with the futures of the following month closing at $ 69.37, having gains that exceeded 4%. It was the second week in a row that oil was approaching the psychological level of $ 70, which we have seen since October 2018. At the OPEC meeting last Tuesday, it was agreed to comply with the agreed supply restrictions. However, expectations for demand, especially in the US and China, is positive and this pushes oil prices up. Concerns may arise from the course of vaccinations, mutations, and a possible 4th wave of the pandemic. Maybe around $ 70 which is a very strong resistance anyway, there will be stabilizing or even corrective trends so we may try long positions up to $70 and maybe short positions after that.
EURUSD (Euro vs US Dollar)
Last week was bearish for the EURUSD which opened at 1.22 and closed at 1.2166. The dollar was very strong until Thursday (the USD Index reached 90.61 – a high of almost 2 months) but after the negative announcement about the US labor market, it fell considerably. The Fed’s reasonable expectations for an easing of Monetary Policy were called into question and the USD Index fell to the price area of 90. However, the pair closed lower because the Eurozone announcements did not excite investors either. This week is extremely interesting due to the ECB meeting, the US Inflation announcement, and the G7, and therefore the situation is very fluid. The support of 1.21 is important, while upwards, the resistance at 1.2270 but we’re keen to try sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
Slightly bearish was the last week for the GBPUSD which opened at 1.4180 and closed at 1.4157. The PMI results in the UK were encouraging but offset by concerns about increased pandemic cases and so the pound was practically neutral. The exchange rate, therefore, moved mainly against the dollar, which strengthened to the NFPs and then fell. The British GDP is announced on Friday, but the Inflation in the USA, which will be announced on Thursday, will increase the volatility and will greatly influence the GBPUSD trend. The resistance remains strong at 1.4250 while the first support is at 1.4080. Sell positions is what we’ll open this week.
USDJPY (US Dollar – Japanese Yen)
The previous week was bearish for the USDJPY, opening at 109.80 and closing at 109.33. Friday was a catalytic day for the pair that lost all its weekly gains after the announcement of the NFPs and the big drop in bond yields. Japan had positive announcements, mainly in its Industrial Production and the Manufacturing PMI, so the yen stopped its downtrend, but it is clear that the dollar dominates the pair. If the USDJPY manages to recover the 110 it has a high chance of developing an upward trend that is why we prefer buy positions this week.
EURJPY (Euro – Japanese Yen)
Bearish was the last week for the EURJPY, opening at 133.98 and closing at 133.25. The pair braked from the rally mainly due to the positive results of Japan and the mediocre results in Europe. The uptrend has not yet been affected (below the support of 132.50 the trend will be revised) while the target of buyers remains last week’s high, above 134.10 so we insist in buy positions for one more week.
EURGBP (Euro – Great Britain Pound)
Third in a row stabilization week for the EURGBP that opened and closed in the price area, just below 0.86. This demonstrates the balance between sterling and the euro. The ECB meeting in the Eurozone is expected on Thursday with particular interest and a downward break of 0.8565 could lead the pair to 0.85. Values consistently above 0.86, give more chances in the upward scenario. By trusting more of the first case, we’ll choose to open sell positions this week.
USDCAD (US Dollar – Canadian Dollar)
Stabilizing and slightly upward trends for the second week in a row for the USDCAD that opened at 1.2066 and closed at 1.2082. The 1.20 has proved to be a very strong obstacle for the continuation of the downtrend since during these two weeks the oil strengthened significantly but without a corresponding response from the Canadian currency. The Unemployment Rate in Canada remained unchanged at 8.2% but the country’s GDP grew well below expectations. Interest Rates in Canada will be announced on Wednesday, but the US dollar will again play a dominant role, with the announcement of Inflation and the expected changes in the Monetary Policy by the Fed. With a possible strengthening of the USD, the target of some buyers is the price range of 1.2130 which is the first strong resistance so buy positions is what we’ll open this week.
USDCHF (US Dollar – Swiss Franc)
The week was practically neutral for the USDCHF, which opened and closed near 0.8990, but with increased volatility. The two faces of the dollar (boost to the NFPs and then fall) are responsible for this picture, while the negative announcement about the Swiss GDP also played a role. The price – milestone of 0.90 acquires more interest since above or below this limit, the trend of the pair (up or down respectively) is largely evidenced. We’ll open buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
AUDUSD reacted bullishly last week, after three consecutive bearish weeks, opening at 0.7710 and closing at 0.7742. The Australian currency was virtually unchanged as the Bank of Australia (RBA) announced that it would keep Interest Rates low until 2024 but on the other hand, the country’s GDP and Trade Balance strengthened significantly. Below 0.7645 the bearish scenario is strengthened while above 0.78, the scenario is encouraged to approach 0.80. We may try sell positions.
Bitcoin
Last week was consolidative for Bitcoin, which closed at $ 35,809, up 0.3%. The week started with positive expectations and approaching $ 40,000 but a new tweet from Elon Musk with a broken heart and the name of Bitcoin caused another drop. On the positive side of the week is the resumption of cryptocurrency ads by Google, which had stopped in 2018. The company announced: “As of August 3, advertisers offering cryptocurrency exchanges and wallets targeting the United States can advertise these products and services when they meet the following requirements and have been certified by Google “. The slower the expected recovery for Bitcoin, the more worries there are that the big correction of recent weeks may continue. Below $ 33,400, these concerns are further exacerbated so short positions is our choice for the current week.
