18/1/2021
WILL THE CORRECTION CONTINUE?
General Comment
The pandemic COVID-19 is expanding to USA and Europe without any signs of relief, despite the vaccinations that have already started for a few weeks. The delays that have been applied at the distribution of the vaccines have caused some turbulences to the markets which react nervously. In USA, it seems that the tension is over as the political stability takes over and the new US president Joe Biden starts his presidency this week with his statements to be expected from the markets.
The US 10 years treasury yield that have been performed lately a mini rally by touching 1.19%, dropped during the last days as the current price is around 1.09% while Jerome Powell from FED, stated that there are no serious thoughts for the moment for rising the Interest Rates. With all the above, USD performed its biggest percentage profits since the last October and accordingly, we saw some correction to the stock Indices in USA and Europe. A mildly bearish week was for gold and oil but we need to underline the huge volatility that the most of the cryptocurrencies have during the last week although the profits are remarkable.
The current weeks begins with a public holiday in USA (Martin Luther King Birthday) but during the rest of the days there are important announcements and events such as the Eurogroup, the Interest Rates in Eurozone, China, Canada and Japan and the PMIs in USA/UK/Germany/Eurozone.
EURUSD (Euro vs US Dollar)
Important drop for EURUSD last week as the pair opened at 1.2216 and closed at 1.2075. The US macros that released brought disappointment to the investors but the most critical factor was the risk–averse mood (due to COVID-19) that pushed them to safer solutions such as USD. For the pair, it starts to become visible the milestone price of 1.20 and a possible breakout below of it will carry EURUSD to a downtrend. On the contrary, prices above 1.2230 would probably mean the return to the uptrend that dominates on the pair since the beginning of November. Beyond COVID-19, the Biden’s expected statements and the Eurogroup, there are other economic announcements and events that could increase the volatility such as the Sentiment Index in Eurozone and Germany and of course the Interest Rates decision in Eurozone, followed by the Monetary Policy Statement and the Press Conference. We prefer buy positions this week, trusting that USD weakness may carry on.
GBPUSD (Great Britain Pound – US Dollar)
Last week was slightly bullish for GBPUSD as it opened at 1.3560 and closed at 1.3585. The new era for UK outside of EY has already begun but nowadays the major issue has to do with COVID-19, with new record highs in cases and deaths and new restrictions from the government. The price area of 1.37 is a very strong resistance for the pair but we cannot exclude a re-approaching of it, for a possible road to 1.40, that many analysts predict. In case of a bearish breakout of 1.3450 though, there are certain probabilities for an even bigger correction. Buy positions is what we’ll open this week.
USDJPY (US Dollar – Japanese Yen)
It was a week of low volatility and high uncertainty for USDJPY which opened and closed around 103.85 – 103.90. The 10 years US treasury yield dropped from the last high of 1.19%, to 1.09%, not allowing the staying of the pair above 104 by balancing the strength of USD. Starting at the last summer, the pair declines with some periods off that we see sideways movements and since there are no clear signals for a recovery, we’ll try sell positions in this week too.
EURJPY (Euro – Japanese Yen)
It was a heavily bearish week for EURJPY as it opened at 126.84 and closed at 125.43. The risk-averse mood favors the safe-haven assets such as JPY and a possible bearish breakout of 125, is able to set the pair away from its uptrend dynamics that has developed during the last months. It takes a solid behavior above 125.70 in order to have a good probability for chasing the area of 127 again and in this case, we’ll try buy positions.
EURGBP (Euro – Great Britain Pound)
A clearly bearish week passed by for EURGBP since it opened at 0.9012 and closed at 0.8885. The pair could not breakout the strong support of 0.8860 (even temporarily) and we saw a weak reversal of the downtrend. If finally, this support collapses the we may see prices even close to 0.85 since GBP in the long-term seems strong. We prefer sell positions this week.
USDCAD (US Dollar – Canadian Dollar)
Mildly bullish week for USDCAD as it opened at 1.27 and closed at 1.2737. USD became stronger and the dropping oil prices weakened CAD. The pair has a bullish reaction during the current week too, approaching the area of 1.28 and prices above 1.2835 and even more, above 1.2955 set a stronger bullish reaction. On the bearish side, the price of 1.2630 is a strong support and in case of a breakout, opens the road for prices like 1.25. We’ll try buy positions that we may increase above 1.2835.
USDCHF (US Dollar – Swiss Franc)
It was the 2nd week in a row with a bullish reaction for USDCHF which opened at 0.8854 and closed at 0.8913. The pair seems to escape from the multi–year lows of 0.8758 by starting building levels for the milestone price of 0.90. We’ll open buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
It was a corrective week for AUDUSD after a bullish rally of many weeks with an open price at 0.7753 and a close price at 0.7703. USD appeared stronger, on the contrary with AUD which pressed in between of the lower commodities prices. Early this week, we saw the release of the Chinese GDP which climbed like 6.5% YoY, surpassing even the pre COVID-19 era. If we see solid prices below 0.7650, there will be a higher probability of a further correction but since the uptrend has not been changed yet, the resistance of 0.7820 seems like a challenge for the buyers and we’re keen to follow it by opening buy positions for one more week.
SP500
A clearly corrective week passed by for SP500, which closed at 3,746 points, having losses like 2%. There are certain doubts and concerns for the upcoming statements of the new US president Joe Biden and if he’s able to make it to the Senate as well as the Janet Yellen’s statements (which probably will be the new Secretary of Treasury in USA) as she noted that the weak USD is not a main target. A correction like this is more or less expected for the Index, especially in our case because recently has reached new highs but as it seems the uptrend has not been distorted so far. Below 3,650 points there will be more concerns but above 3,800 points the smiley faces will return. We’ll try long positions, trusting that the bulls are still here.
DAX30
Bearish was the last week for DAX30 which closed at 13,750 points and losses close to 2.3%. The Index was not able to solidify prices above the multi–month resistance of 13,790 points and as long as it stays below of it, a bigger correction is “ante portas”. Above 13,790 points there is room for reaching even at 14,000 points but we’ll open long positions only above 13,790 points. Otherwise, we’ll try short positions.
FTSE100
It was a bearish week for FTSE100 which closed at 6,675 points, performing losses like 2.7%. Was it just a technical correction to the big rise that took place? Was it a deliberated policy of the investors? The support of 6,630 points is very critical for the further decline of the Index and the area of 6,765 points is maybe the key for a return to its uptrend. Long positions is our selection this week.
Gold
The drop of gold prices carried on for a 2nd week in a row since last Friday’s close price was at $1,828 and the losses surpassed 1%. The strong USD was surely a critical factor for this, overbeating even the risk-averse mood that most of the investors had due to the worsening COVID-19 issues which is a fact that favors gold. The area of $1,770 is a main target for the sellers since it is a multi–month support while in order for the buyers to smile, it takes a recovery above $1,865. We’ll try long positions this week, as we think that a weaker USD may support gold.
US Oil
Mild corrections is what we saw last week for oil prices as the next month’s futures closed at $52.09, with losses a bit above 1%. Oil is denominated in USD, the US currency got stronger and the strengthening/weakness of it will be a critical factor for the behaviour of oil in the next period. The recent decisions of OPEC and Saudi Arabia for production cuts seem to be already absorbed by the markets and given the low demand that it’s going to dominate (as the restrictions caused by COVID-19 will stay), we may see oil prices dropping to $50. We prefer short positions this week.
Bitcoin
It was a week of very high volatility for Bitcoin and a week of a strong correction. The weekly close price was at $35,819 and the losses exceeded 6%. During the week though, we saw prices that touched $30,000 which means a volatility above 20%! The main trend is still bullish since based on the recent data, the number of the big investors (the ones who own 1,000+ Bitcoins) has been increased, which is a sign of trust to the crypto markets. Also, the expected new package of economic aid, announced by Joe Biden recently will cause inflation to the traditional currency and it will help Bitcoin. On the other hand, all this huge volatility creates serious risk management issues and the recent statements of Lagarde that cryptos are highly speculative and it may take regulations, concern amounts of uncertainty for the future. The trend remains bullish but since this volatility makes things unpredictable, we’d better stay out for one more week
