25/1/2021
THE STIMULUS PLEDGE KEEPS THE RALLY ALIVE
General Comment
The COVID-19 pandemic and its consequences to the global economies keeps on dominating the financial markets as a catalyst. The vaccinations continue with high rates in the most of the countries but lockdowns remain, so do the high numbers of new cases and deaths. In USA, Joe Biden started his presidency with expectations for a higher stimulus (he suggested a relief package from COVID-19 of $1.9 trillion) and attempts from bringing back the country to its obligations in the environment and health sectors. In Europe, Lagarde’s speech didn’t offer something significantly new: Interest Rates stayed unchanged and the monetary policy in the Eurozone will remain loose but without hurry for an immediate easing.
USD dropped after two rising weeks and EUR had a remarkable bullish week. Most of the stock markets in USA and Europe were profitable, also profitable was the gold while in the oil markets we saw consolidative trends.
This week contains the important announcements in USA regarding the Q4 GDP and the Interest Rates decision, followed by the monetary policy statement and the FOMC press conference. These announcements along with COVID-19 updated will define the outlook of the markets this week.
EURUSD (Euro vs US Dollar)
Bullish was the last week for EURUSD which opened at 1.2084 and closed at 1.2171. The markets expectations for a higher stimulus in USA, caused a drop to USD and the pair returned to its uptrend after two bearish weeks. In Europe, the postpone of the stimulus to the future, makes the currency harder and if this policy goes on, we may see the pair trying the two years high price at 1.2350. A very important role to this week’s trend will have the monetary policy in USA which will be released on Wednesday (the first one under Biden’s presidency) so the possible intentions of the stimulus will become clearer. We will open buy positions this week on EURUSD.
GBPUSD (Great Britain Pound – US Dollar)
Strongly bullish was the last week for GBPUSD, with an open price at 1.3586 and a close price at 1.3680. The USD weakness, favoured the bulls on the pair but the profits could be higher but the serious issues in the UK due to COVID-19 and the derived problems that occur, somehow weaken GBP too. The Unemployment Rate announcement in the UK along with the Q4 GDP and the Interest Rates/Monetary Policy in USA will complete the puzzle of the week. The pair is in an obvious uptrend and a possible solid breakout above 1.3750, will bring back a high probability for reaching 1.40. Our selection for the current week is buy positions.
USDJPY (US Dollar – Japanese Yen)
It was a practically neutral week for USDJPY which opened and closed to the price area of 103.75 – 103.80. It was the second week in a row witch such a behaviour because obviously there is a balance between the two currencies. The 10-years US treasury yield was almost unchanged around 1.10% and the long-term trend of the pair, as it has been developed since June, remains bearish. Below 103.30, we expect a heavier downtrend but there may be some rays of light for the buyers, above 104.40. We’ll keep our sell positions this week on the pair.
EURJPY (Euro – Japanese Yen)
Clearly bullish was the last week for EURJPY as it opened at 125.41 and closed at 126.29. Practically the pair returned to the area of 127 which is the well-known price area of the last two months. EUR seems strong enough and a better approach to the price of 127 or a case of a breakout of it, will give to the pair strong uptrend characteristics. We’ll open buy positions this week.
EURGBP (Euro – Great Britain Pound)
Last week closed with a weak bullish reaction for EURGBP. More specifically, the weekly open was at 0.8876 and the weekly close at 0.8896. The volatility was accordingly low which is a sign of balance between the two currencies. The important thing though is that the pair performed a bearish breakout of the strong resistance at 0.8860 during last Wednesday & Thursday but it was not able to stay below of it and this is a confirmation that the price area of 0.8860 is very critical. A possible solid breakout below 0.8860 opens the road for even lower prices but as long as EURGBP stays above of it, the probability for reaching the area of 0.90 is high. Sell positions is what we’ll open this week.
USDCAD (US Dollar – Canadian Dollar)
It was a week without clear direction for USDCAD (open & close price around 1.2730) but the volatility was not accordingly very low. USD was weak but due to stationary oil prices, CAD was not able to take advantage. The monetary policy in Canada remained unchanged without any surprises. The trend of the pair since the last March is obviously bearish (the price was above 1.46 in March!) and if this behavior carries on, we may see prices close to 1.25 or even lower. We’re keen to try sell positions this week.
USDCHF (US Dollar – Swiss Franc)
Bearish was the last week for USDCHF which opened at 0.8899 and closed at 0.8850, in between of a general weakness of USD. It’s difficult for the pair to stay above 0.89 and as long as this outlook is still on, the multi-year low above 0.8750, is threatened again. We’ll try sell positions again.
AUDUSD (Australian Dollar – US Dollar)
It was a neutral week for AUDUSD since it had a low volatility and moved around 0.7710. The results of Australia were disappointing (especially the Retail Sales) and the concerns about the 2nd wave of COVID-19 in China as well as for a new cycle of the USA – China trade war did not allow AUD to take advantage of the weak USD. The uptrend character of the pair has not changed so far (we should not forget that in March the pair had touched the price of 0.55) so the strong resistance at 0.7820 is in the target of the buyers again. We’ll open buy positions this week too.
SP500
Last week was bullish for SP500, which closed at 3,830 points (profits like 2.25%) by performing a new all-time high price during the week, as it touched the 3,860 points. The statements of Biden about the new stimulus package of $1.9 trillion, for supporting the US economy warmed the stock markets. The investors also awaiting of the FED meeting on Wednesday about the Interest Rates and the Monetary Policy and they expect that the weekly Bonds purchase of $120 billion will not stop. Already the futures of the Index are moving higher and it seems that the rally will continue. We’ll keep on opening long positions.
DAX30
Bullish was the last week for DAX30 which opened at 13,870 points, performing profits close to 0.85%. The bullish reaction of the Index after the big correction that had taken place, keeps the views of the investors alive for the price area of 14,000 points. On the contrary, below 13,720 points, a further correction is possible enough. We’ll try long positions this week.
FTSE100
Mildly bearish was the last week for FTSE100 as it closed at 6,647 points and the losses were close to 0.40%. The UK economy issues are still here as the country is hit by COVID-19 and below 6,500 there is a strong probability for a continuous downtrend. The Index will start recovering again above 6,700 points but, in any case, we’ll stay out this week in order to define things better.
Gold
Gold performed a bullish week after two bearish weeks, by closing at $1,855, having profits close to 1.50%. The weak USD, combined with the expected new stimulus package in USA, give credits to gold which is always favoured in cases of big money supply. If gold can manage to exceed $1,875, then the developed bullish reaction of the last days may continue. On the contrary, prices below $1,815 – $1,820 will give extra chances to the sellers. We’ll keep on being long on gold during this week as well.
US Oil
It was a week of consolidations for oil as the next month’s futures closed at $51.96, about 0.25% lower. There are certain concerns regarding the demand since China starts having issues with COVID-19 again. The recent decisions of OPEC and Saudi Arabia for productions cuts though, provide important supports to the oil prices so it started the current week with profits. Another support factor is the weak USD as the oil is denominated in US dollars. The bulls may take advantage above $53 but there is an important probability for dropping to the area of $50, especially if the 2nd wave of COVID-19 expand in China. We prefer short positions this week.
Bitcoin
It was the 2nd bearish week in a row for Bitcoin since it closed at $32,289, having losses that touched 10%. The volatility keeps on being very high as during two specific days (Thursday – Friday), Bitcoin lost almost 20% of its value! The basic question is if the rally is able to carry on or if the correction will turn into a heavy downtrend, like it happened back in 2018. The SOPR (Spent Output Profit Ratio) Index has dropped to a level that shows that there are limited profits for sellers from now on. This number supports a further bullish trend as well as the analysts’ voices who claim that Bitcoin may reach the price area of $100,000. Technically speaking, above $35,000 there are many smiles to the Bitcoin owners but there are certain concerns below $30,000 and even more below $28,800. We think that Bitcoin will recover so we’ll try long positions this week.
