25/10/2021
ECB AND RESULTS OF TECHNOLOGY GIANTS IN THE FOCUS OF THE MARKETS
General Comment
The lack of serious news from the world’s top economies has resulted in market movements either based on the emotion of risk-on/off mood or based on other markets such as bond yields. The main stock indices moved upwards mainly based on the positive results of the companies announced during the week. Yields on bonds moved slightly higher, although the US 10-year reached 1.71% in the middle of the week, a price we had to see since last May. Otherwise, central banks continue their loose monetary policy even if the problem of inflation intensifies. The Fed’s Jerome Powell said in a speech on Friday that he was concerned about high inflation.
The US dollar underwent a correction for the second week in a row mainly due to the negative macroeconomic data announced. On the contrary, the euro recovered without any specific announcements but based on the meeting of the European Council, which admittedly had a positive sign.
Enough profits for gold while oil continued for another week its frantic upward trend. Finally, Bitcoin showed a correction towards the end of the week, even though it reached new historical highs in the middle of the week.
This week certainly has more and more important economic announcements and events, such as the ECB meeting on eurozone interest rates and monetary policy and the announcement of US GDP. Important is the announcement of results from the technology giants Apple, Facebook, Amazon, Google, and Microsoft that shape the American indexes and set the tone in the market.
SP500
The US SP500 index closed last week with a rise, at 4,529 points, and gains close to 1.50%. The announced results of the companies continued, creating a positive atmosphere in the stock market even though some were disappointed, such as e.g., IBM. The main news expected this week is the announcement of the US GDP and the orders of durable goods in the USA. The index hit new highs last Friday but then fell after Jerome Powell’s speech. It was the third consecutive positive week for the SP500 that is starting and gaining momentum and it is not excluded that it will present new highs in the current week. Of course, there are chances of correction, but this will start to worry investors more, under the support of 4,480 points. The tone will be given by the announcements of quarterly results and the interviews of the big technology companies as mentioned above. Any bad results and caution for the next quarter in their statements will most likely lead to a possible correction, especially on the Nasdaq100. We prefer long positions for the current week.
DAX30
The German index DAX40 was slightly bearish last week, closing at 15,554 points, with losses close to 0.15%. The economic results announced in Germany had a mixed sign and so the index could not get a clear direction. However, the period we are going through is traditionally very good for the index since it has recorded positive results in recent years. Of course, the buyers’ goal remains to break the all-time highs above 16,000 points, but to do this, the obstacle of significant resistance at 15,770 points must first be overcome. The DAX40 did not fall below 15,370 points last week and if that happens it will be cause for concern for further correction. Long positions is what we intend to open this week.
FTSE100
The British FTSE100 index moved slightly lower last week, closing at 7,203 points and losses just over 0.15%. The index remains very close to the 20-month high of over 7,220 points and seems to have acquired sufficient upward momentum to overcome it. The announcement of inflation in the United Kingdom, just below expectations, can give a breath of fresh air by favoring stock markets. Below 7,150 points the uptrend may be stopped but as long as the index is above 7,000 points the uptrend is maintained so we may try long positions this week.
Gold
Last week was also bullish for gold, closing at $ 1,793.50 and profiting close to 1.50%. The corrective course of the dollar in the last two weeks combined with the high inflation observed in most major economies of the world, favor the upward trend of gold. Of course, there are competitors for gold as well as bond yields but a bullish break out of $ 1,800 will bring gold within shooting distance of the very significant resistance of $ 1,835 which is a high price of the last 4.5 months, and which may pave the way for much higher levels. The chances of a return to the $ 1,700 price range will rise below $ 1,745 but we will try long positions this week.
US Oil
Last week was bullish for oil, with next month’s futures closing at $ 83.95, having gains of 2.50%. The oil rally continues unabated as it was the ninth week in a row bringing black gold to a price area we have been seeing since October 2014. Oil reserves in Cushing, Oklahoma fell 2.3 million barrels to a three-year low. This, of course, boosted oil prices. The target of buyers is the milestone price at $ 85 which is now quite close. One of the issues that could cause corrections in oil prices is the course of the pandemic as many countries, such as Russia and China, have an increasing number of cases and question the recovery of global demand. We insist on long positions for one more week.
EURUSD (Euro vs US Dollar)
The EURUSD was bullish last week, opening at 1.1593 and closing at 1.1643. The PMIs announced in Germany and the Eurozone had a mixed sign while concerns have been raised by the increase in pandemic cases in many European countries. Nevertheless, the EURUSD rose for the second week in a row, mainly due to the weakening dollar, which was weakened as capital went to other markets, such as stocks and bonds. However, the downtrend for the exchange rate has not changed significantly and below 1.1570, there are chances to threaten the 15-month low, below 1.1520. The ECB meeting on interest rates and monetary policy can change the equation but we may try sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
Last week was practically neutral for the GBPUSD, which opened and closed in the price range of 1.3750. The announcement of inflation in the UK at 3.1% against expectations for 3.2% somewhat calmed the concerns about inflationary pressures but gave a sense to the markets that the increase in interest rates and the tighter monetary policy by the Bank of England may be delayed. Retail sales were lower than expected but the PMI was strong and so the pound maintained a neutral profile this week. If the dollar regains its momentum and especially if there are prices below 1.37 then we may see the exchange rate return to a downward trend so we may try sell positions this week.
USDJPY (US Dollar – Japanese Yen)
We saw corrective movements last week for the USDJPY which opened at 114.24 and closed at 113.49. The catalyst for this decline was the announcement of inflation in Japan at 0.2% against expectations of -0.8%. This created the feeling that the tightening of monetary policy by the Bank of Japan may happen sooner than expected. In addition, the Jibun manufacturing PMI was announced at 53 well above what markets expected. Bond yields fluctuated widely during the week but did not close far from opening. If the dollar returns to a strong status, we can see an upward break of 114 or even higher prices and we may open buy positions this week.
EURJPY (Euro – Japanese Yen)
The previous week was bearish for the EURJPY, which opened at 132.43 and closed at 132.15. The Japanese currency strengthened considerably and prevailed over the also strong euro. Catalytic is the ECB meeting on Thursday that may change the balance for the euro, but the exchange rate trend has not changed and so the buyers’ target remains the price range of 134. We will try buy positions in the current week.
EURGBP (Euro – Great Britain Pound)
Last week was bullish for the EURGBP which opened at 0.8420 and closed at 0.8460. The sterling lost some of its strength due to the announcement of inflation in the United Kingdom while the euro gained ground. Given the importance of this week due to the ECB meeting, the chances of the market realizing that the Bank of England may tighten its monetary policy sooner may lead the exchange rate back downwards and thus threaten the 20-month low. below 0.8420. Sell positions is our selection for the current week.
USDCAD (US Dollar – Canadian Dollar)
Last week was consolidative for the USDCAD which opened and closed in the price range of 1.2360 – 1.2365. Oil, Canada’s main export, continued to rise but was not seen as a strengthening of the country’s currency. Inflation was announced at 3.7% slightly above expectations but better than expected were also retail sales and despite the temporary weakness of the US currency, the exchange rate could not move further downward. This shows to some extent that if the dollar strengthens, there could be an uptrend for the USDCAD, especially if there is a breakout of 1.24 so we will open buy positions this week.
USDCHF (US Dollar – Swiss Franc)
Third consecutive week of decline for the USDCHF with opening at 0.9232 and closing at 0.9160. The financial calendar for Switzerland was relatively poor as only imports/exports and the trade balance were announced this week, but it seems that many investors are turning to the safe haven of the Swiss franc. If this situation continues, there are many sellers of the exchange rate that turn to 0.90, while on the contrary, above 0.9275 there are reasonable chances for a return to the upward trend. We prefer buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
For the fourth consecutive week, we saw bullish trends for the AUDUSD which opened at 0.7414 and closed at 0.7464. The strength of the Australian dollar is evident due to rising commodity prices, especially metals, which are the country’s main export commodity. In addition, the Bank of Australia, in a recent announcement of its minutes, repeated its optimism for the economic recovery but reiterated that the interest rates are most likely to increase not before 2024. The upward trend could accelerate above 0.7550 while correction concerns could arise below 0.7370. We may try buy positions this week.
Bitcoin
The week was slightly bearish or Bitcoin, which closed at $ 60,926 with losses that exceeded 1%. Last week, Bitcoin hit a new all-time high of $ 67,167, with the ETF trading on the New York Stock Exchange hovering above $ 1 billion on the first day of trading. In addition, Walmart has announced that it will build hundreds of Bitcoin ATMs in the first phase with a target to make a few thousand in a short time. One of the surprises of the past week was the flash-crash at Binance, after an algorithm error. Bitcoin appeared to be worth close to $ 8,000 in a matter of seconds. Despite the small correction, the Bitcoin trend remains strongly upward, and most investors are optimistic about new records but also about prices at much higher levels (some even refer to prices close to $ 100,000 per year). We will try long positions in the current week.
