14/12/2020

USA STARTS VACCINATIONS AHEAD OF  FOMC – BULLISH MARKETS REACTION

 

General Comment

Finally, the new vaccine approved in USA as well (UK did the same a few days ago) so it is expected that the vaccinations will start immediately. By the end of this, it is expected that the vaccine will be licenced in EU too so there are certain hopes for the end of the pandemic even in most of the countries the lockdown is still on with extremely high numbers of new cases. As per the new fiscal stimulus in USA and the Brexit issue, we didnt see important updates while there was a new package of 500 bn euros from ECB as an extension of the Pandemic Emergency Purchase Program (PEPP) and a program extension to the March of 2022.

USD had a very weak bullish reaction and GBP had a sharp bearish movement due to Brexit uncertainty. The major stock markets performed some mild corrections, gold has consolidations and oil kept or rising.

In the current week, besides any news from COVID-19, we need to put our eyes on the Interest Rates decisions in USA, Japan, UK and Switzerland as well as on the Unemployment Rate in UK and Australia and the PMIs in almost all major economies.

 

EURUSD (Euro vs US Dollar)

Slightly bearish was the last week for EURUSD since it opened at 1.2130 and closed at 1.2112. USD had a very weak recovery after the last period’s big drop but EUR could not take advantage of the new support package from ECB because COVID-19 devastates Europe and most of the countries, one by one, start applying a new lockdown after opening for a few days, under the Health System pressure. The pair though has a solid uptrend and a bullish breakout of 1.2177 (2.5 years high price), may be a signal for new buyers. On the contrary, in case of a bearish slope, especially below 1.2060 we may see sellers take over. We trust the first case more and we’ll open buy positions this week.

 

GBPUSD (Great Britain Pound – US Dollar)

The bullish weeks sequence of GBPUSD had a stop last week as the pair opened at 1.3410 and closed at 1.3222. The probability of a Brexit deal has been decreased since another week passed by without serious progress and the deadline is now just a few days ahead. Both sides’ statements show disappointment and exhaustion so the very next period will be very interesting. The current week contains important scheduled announcements for UK, such as the Unemployment Rate and the Interest Rates decision but Brexit will be a catalyst again. Early this week, there is a price jump above 1.33, along with some visible hopes for a deal. Technically speaking, a drop below 1.3130 will be a sign for a correction continuation but prices above 1.3480 will rather mean that a Brexit deal is close and more bulls are yet to come. We will wait for one or the other scenario and we’ll act accordingly.

 

USDJPY (US DollarJapanese Yen)

Another consolidative week passed by for USDJPY which came along with low volatility. More specifically, the pair opened at 104.13 and closed at 104, while there was a similar behaviour to the 10-year US treasury yield which dropped to 0.90%. Japan is going to announce this week the Interest Rates and a possible recovery of USD, as long as the pair remains above 104, develops hopes for more bulls. The most possible scenario though is the bearish one, especially if there’s a breakout below 103.60 so sell positions is what we’ll open this week.

 

EURJPY (EuroJapanese Yen)

The strong uptrend of EURJPY stopped last week since the pair opened at 126.29 and closed at 125.97. There was also a low volatility on the pair and as it seems, at least for the moment, the price area of 127 is a difficult and hard resistance. Prices below 125.70 would intensify the bearish trend so we’ll try sell positions this week.

 

EURGBP (Euro – Great Britain Pound)

Importantly bullish week passed by for EURGBP, as the pair opened at 0.9037 and closed at 0.9155. It was the biggest weekly rise since the beginning of September which was the result of the bad GBP outlook due to Brexit deal difficulties. All scenarios are on the table and the future of the pair is extremely uncertain so we’d better stay out this week.

 

USDCAD (US Dollar – Canadian Dollar)

USDCAD kept on dropping for one more week, even if it took place in a smoother manner. The weekly open price was at 1.2775 and the close price at 1.2762 as the pair is moving to price areas which are 2.5 years lows. The oil prices keep on rising, favouring CAD and if we see prices below 1.27 then prices even close to 1.25 will not impress us. There is always the case of the USD recovery though, which is in oversold condition but it takes a reaction above 1.2840 as a first dose of reaction. Sell positions is our selection for the current week.

 

USDCHF (US DollarSwiss Franc)

It was another bearish week for USDCHF which opened at 0.8911 and closed at 0.8895. USD had some signs of stabilization but it takes a recovery above 0.8950 in order to have evidence for a further bullish reaction. On the contrary, as long as USDCHF stays below 0.89, most likely the downtrend that has started many months ago, will carry on especially in the case of price below 0.8850. Sell positions is what we’ll try this week.

 

AUDUSD (Australian Dollar – US Dollar)

It was the 4th bullish week in a row for AUDUSD with more intensified rise since the pair opened at 0.7430 and closed at 0.7533, at high prices that we had not seen since the summer of 2018. The weakness of USD that carries on, the bullish breakout of 0.75 and the higher commodities prices (iron mostly) favoured this uptrend. This week contains important news for Australia (RBA Meeting Minutes and Unemployment Rate) so we may see more bulls up to 0.76. The pair is really high and overbought so there may be a probability of correction but we’ll try buy positions for one more week since the trend seems strong.

 

SP500

Mildly corrective was the last week for SP500, which closed at 3,652 points, having lost around 1%. Still there is no agreement in the Congress for the new fiscal stimulus package while there are just a few more weeks before this issue ends. The news & updates around this package is the most important factor that moves the stock markets in USA at this stage but there will be many eyes on Interest Rates decision on Wednesday as well. As long as there is no decision from Congress there will be a higher probability for profit taking this week and corrective movements may occur as a result (especially below 3,627 points) but in case of positive news, SP500 is able to try the all-time highs of 3,715 points. Long positions is our option for this week.

 

DAX30

It was the 2nd corrective week in a row for DAX30, which closed at 13,128 points, with a drop like 1.2%. As per COVID-19, things are getting worst in Germany and this fact causes corrective tendencies which may get stronger below 13,000 points. The uptrend outlook of the Index has not changed so far though, but trusting more corrections to come, we may try short positions this week.

 

FTSE100

Corrective was the last week for FTSE100 too. The Index closed at 6,506 points, about 0.5% lower. The lack of progress at Brexit deal compensated the beginning of vaccinations in UK so early this week, the futures of the Index are moving lower, below the psychological level of 6,500 points. Below 6,450 points, the correction may turn into a downtrend but in any time a possible Brexit deal may bring the Index to its bullish orbit again. Things are blur and uncertain so we’ll stay out this week.

 

Gold

Consolidative was the last week for gold, which closed at $1,843. The vaccines licensing was a positive fact but the concerns and the lack of news regarding the new package of economic aid in USA brought such a balance. There a mild downtrend since last August (when gold had surpassed $2,000) in the gold prices and a new package announcement may cause a very good recovery. Prices below $1,825, increase the probability of a further drop so we’ll try short positions in the current week.

 

US Oil

It was the 6th in a row bullish week for oil as the next month’s futures price closed at $46.65, performing profits like 1.3%. The positive latest news from the vaccines and the calming announcements of OPEC, favour the higher oil prices but these levels have created overbought conditions. The positive outlook continuation may lead oil to prices even close to $50 but some investors that will decide to liquidate their profits (40% since the beginning of November) may press the oil prices lower. We’ll try long positions, since the futures of oil are already above $47.

 

Bitcoin

Bitcoin had a very strong corrective movement since last Friday but later, during the weekend it recovered and it finally closed at $19,162, with a limited loss a bit above 1%. During last week, we saw prices close to $17,500, which proves the extremely high volatility. Some information mention that the Bitcoin miners caused this temporary drop with massive selling movements but the immediate reaction and recovery above $19,000 shows that the most important crypto asset has still many breaths and that its road to $20,000 has not been affected so far. The very high volatility though creates many concerns to the investors as it is very harrowing and it makes very difficult for Bitcoin to participate in a portfolio with other assets. Currently, Bitcoin is still above $19,000 so we’ll open long positions for one more week.

 

 

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