21/12/2020

LOOKING FOR A CORRECTION OPPORTUNITY?

 

General Comment

Most likely, markets will persist the uptrend, especially as long as the governments and the central banks increase the liquidity to the global system and USD is getting weaker. When everybody buys and nobody sells though, there comes the time that an “unimportant event” will trigger a correction which will look like an “expected one” afterwards.

What may be such an event? The slower recovery at the post-COVID era, the new economic policy from president Biden or the high inflation?

Nobody knows!

In other respects, the vaccination in UK and USA continues with a high rate and it will start in Europe very soon as well. There is a certain progress regarding the new economic aid package in USA, even if the amount is much lower than the expectations but this fact is also a catalyst for the financial markets. Also, the current week is very critical for a Brexit deal and the negotiation since the differences still remain.

USD weakened more and the USD Index dropped below 90 for the first time after the April of 2018. Most of the stock markets moved higher while profitable were gold and oil too.

This week does not have strong scheduled announcements and we expect low volatility by the end of the week due to Christmas holidays. Most important ones are the GDP announcements in USA and UK so most critical events will be the pandemic, the new stimulus package in USA and a possible Brexit deal. Early this week, some media announced that finally there is an agreement for the aid package, up to $900 bn and $600 bn will move to individuals and small companies. Nancy Pelosi earlier posted in Twitter that “Congressional Democrats have reached an agreement with Republicans and the White House on an emergency coronavirus relief and omnibus package that delivers urgently needed funds to save the lives and livelihoods of the American people.”

 

EURUSD (Euro vs US Dollar)

Strongly bullish was the lasty week for EURUSD which opened at 1.2135 and closed at 1.2255. USD kept on weakening so the pair surpassed 2.5 years highs. News around COVID-19 as well as the new aid package in USA dominate to the trend and volatility of EURUSD even if due to Christmas holidays, the volatility is expected to be lower. Technically speaking, the pair is in overbought levels so we cannot exclude corrections to 1.2150 but a possible breakout of 1.2272 is able to give more bulls. Early this week, EURUSD dropped below 1.22 due to the agreement for the aid package in USA which makes USD stronger. The main trend has not changed so we’ll wait for recovery movements in order to open buy positions. In case of prices below 1.2125 we may try sell positions.

 

GBPUSD (Great Britain Pound – US Dollar)

It was a bullish week for GBPUSD which opened at 1.3348 and closed at 1.3528. The vaccinations in UK have already started but the numbers of new cases are still very high so the government announced new restrictions in London and other areas. As per the Brexit issue, the differences still remain regarding fisheries but there is a positive mood that there could be an agreement by the end of this week. This week though was opened strongly bearish and the pair is moving below 1.33 in between no deal at Brexit and COVID-19 concerns. For GBPUSD, in order to return to its uptrend, we need to see prices above 1.3540 again and below 1.3135 the sellers will become stronger. Trusting the Brexit deal scenario, we’ll wait for a recovery and we’ll try buy positions this week.

 

USDJPY (US DollarJapanese Yen)

Last week was bearish for USDJPY by opening at 103.97 and closing at 103.28 while there was a divergence between the pair and the 10-year US treasury yield which climbed to 0.93%. Many media have announced the agreement for the new US stimulus package as we saw above but the point is that Japan has also announced a new similar package of 106 trillion yen for the years 2021 – 2022, as Reuters just announced. There is already a bullish reaction to the area of 103.40 which does not seem very strong so far. On the contrary, if we see a bearish breakout of 103, the pair has a good probability for a strong downtrend, so we’ll try sell positions below 103 this week.

 

EURJPY (EuroJapanese Yen)

EURJPY moved higher last week, opening at 126.16 and closing at 126.60. During the week, the pair touched but could not exceed the price of 127, confirming for one more time how strong is the resistance at this specific price area. Currently, EURJPY performs bearish trends to 126, which may become stronger below 125.70 so we may take our chances with sell positions this week.

 

EURGBP (Euro – Great Britain Pound)

It was a consolidative week for EURGBP, with a weekly open price at 0.9084 and a weekly close price at 0.9057. The volatility though remained high since the highs and the lows of the week were at 0.9149 and 0.8981 respectively. The Brexit deal (or no deal) still dominates the pair as early this week it is moving much higher from 0.91. It’s possible enough to see a Brexit deal this week so in every bearish chance we’ll try sell positions.

 

USDCAD (US Dollar – Canadian Dollar)

Bullish was the last week for USDCAD, after four bearish weeks in a row. The open price was at 1.2748 and the close one at 1.2785 with a relatively lower volatility. The agreement for the new aid package in USA strengthens USD so the pair is currently moving close to 1.29. A big drop also is taking place to oil prices and if this behaviour carries on, we may see the pair to approach 1.30 again, so buy positions is our selection for the current week.

 

USDCHF (US DollarSwiss Franc)

USDCHF had bearish movements for the 5th week in a row, opening at 0.8880 and closing at 0.8830. The strong USD this week affects the pair which is already close to 0.8880 but the downtrend reversal, requires prices above 0.8915. We’ll try sell positions but above 0.8915 we’ll become buyers.

 

AUDUSD (Australian Dollar – US Dollar)

AUDUSD kept on rising for the 5th week in a row by opening at 0.7549 and closing at 0.7622. The bulls are still here and the price reached the area of highs that we saw last time at the summer of 2018. Earlier this week, China left the Interest Rates unchanged at 3.85% but the pair is moving lower because of a stronger USD. The uptrend reversal will start to become solid below 0.75 and as long as this does not happen, the probability of bulls is higher. This Tuesday contains important announcements in Australia and USA but afterwards we expect lower volatility due to Christmas holidays. We remain buyers but we’ll become sellers below 0.75.

 

SP500

New highsnew records for SP500 last week. The Index closed at 3,717 points, about 1.8% higher. Early this week, there is a correction to the price area of 3,690 points since the markets expected much higher amount than the $900 bn that announced earlier. Below 3,675 points, the correction may become stronger while prices above 3,720 will give extra fuel to the buyers. A correction makes sense after such a strong uptrend so we may try short positions this week.

 

DAX30

Strongly bullish was the last week for DAX30 with a close price at 13,628 points and a performance like 3.8%. The Index approached the strong resistance at 13,790 points and it already into a correction, below 13,300 points. Below 13,150 points, the correction may become stronger but a come-back above 13,500 will create expectations for further bulls. We’ll try long positions as long as we see recovery signs and more intensively above 13,450 points, otherwise we’ll stay out.

 

FTSE100

In divergence with the other major Indices, FTSE100 had a bearish week and closed at 6,476 points with losses close to 0.6%. The issues from the pandemic and the hard Brexit scenario carry on and below 6,240 points there’s a strong case for the uptrend reversal. We’ll try short positions this week.

 

Gold

Gold had another bullish week, closing at $1,887 and performing profits close to 2.4%. The new package of economic aid in USA and the expectations for a Brexit deal have brought gold already above $1,900. There’s a strong resistance at $1,965 which may open the road for the area of $2,000. The aid stimulus package, the Brexit updates and the news regarding COVID-19 will affect the gold price during the next period of time. We’re keen to remain buyers for one more week.

 

US Oil

It was the 7th bullish week in a row for oil and next month’s futures prices closed at $49.21 and profits like 5.5%. In the current week, we witness strong corrective movements, below $47 since USD (the currency which oil is denominated) is getting stronger. Oil may intensify its corrective profile, maybe below $46 but above $48 and especially above $48.80 will show us that it is resilient enough to approach $50 again. The oil demand has not recovered so far and the price is mostly supported on the OPEC members deal for lower production, which is an agreement that may not last for a long time. In such a case, it is very possible to see a very strong correction, especially if the return to the post-COVID era, delay more than expected. We will try short positions this week, trusting that the correction has more room to extend.

 

Bitcoin

Explosively bullish was the last week for Bitcoin which performed one of the most profitable weeks in its history. More specifically, last week it closed at $23,471 and the weekly profits touched 22.5%! The investors that selected to buy Bitcoin in the beginning of last March, have seen a performance that surpasses 600%! The fundamental reasons behind this rise have to do with the very low Interest Rates and with the inflation in the currencies due to many QEs that still take place. Also, the reliability that cryptocurrencies have taken after big companies and economy important individuals have been expressed in a positive manner. Of course, such a big rise is very possible to trigger corrections because of profit taking so the investors should be ready for such a case. We’ll try some low-risk short positions this week.

 

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