THE CORRECTION CONTINUED BUT THE NEW AID PACKAGE IS HERE
Buy USDJPY in the long run, now at 106.58
USDJPY was bullish for a second week in a row, confirming our Best Choice which was given two weeks ago. Our entry price was 105.25 and already we make more than 140 pips. US bond yields keep on rising, despite a certain correction by the end of last and given the weakness of JPY due to the risk-on mood of many investors, we keep our current position, targeting 107 and maybe 108 in the next days.
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Weekly Report: Currencies, Indices, Commodities and Cryptos
On Saturday finally, the House of Representatives in USA, passed the new stimulus package of $1.9 trillion as a relief of the economy from the COVID-19 crisis. The president of the House of Representatives mentioned that “Now, the bill moves to the US Senate, where I hope it will receive quick action. We have no time to waste”. We need to see the markets’ reaction on this development. During the last week though Jerome Powell from FED, stated that inflation is still soft and that the employment picture still needs help.
The US bond yields keep on rising (even if by the end of last week performed a correction) and the head of G10 FX Strategy said at CIBC World Markets “the dollar move is a function of what’s happening on the yields side”. USD had important profits, mostly on the end of last week compared to the major currencies. The stock markets continued correctively for a second week in a row, gold moves significantly lower and oil performed important profits. Finally, last week we saw a very strong correction for Bitcoin which moved much lower than the price of $50,000.
The current week has begun with positive futures performance in the most of the major stock markets, as an echo of the agreement in USA, as we saw above and contains a series of important economic announcements and events, such as the speeches of Christine Lagarde and Jerome Powell, PMIs for the biggest economies and of course the jobs markets release in USA on Friday (Non–Farm Payrolls – NFPs).
EURUSD (Euro vs US Dollar)
Bearish was the last week for EURUSD which opened at 1.2113 and closed at 1.2062. We need to underline that the pair until last Friday was in an uptrend but it dropped sharply with the steep drop of US bond yields which strengthened USD. The new aid package of $1.9 trillion in USA may have a perception from the markets as a trigger for extra inflation and may weaken USD but early this week EURUSD is falling even more. If the pair manage to have a bullish reaction by performing a bullish breakout above 1.2170 then it’s possible enough to move higher otherwise there’s a strong probability to decline to the area of 1.20 which is a milestone price and a strong support. Very important speeches and economic announcement this week may cause higher volatility and we’ll try sell positions.
GBPUSD (Great Britain Pound – US Dollar)
It was a corrective week for, after many bullish weeks, since it opened at 1.4011 and closed significantly lower than 1.40, at 1.3920. Obviously, the great progress in UK regarding the vaccinations’ acceleration has already been absorbed to the pair’s price and due to lack of more news, there was no new fuel for GBPUSD to move higher. As a result of this, the strengthening of USD by the end of last week, caused this bearish result for the pair. This week does not contain many announcements for the UK economy too, so GBPUSD is expected to get affected by the vaccinations, the new economic aid package in USA and by the announcements for the US jobs market (NFPs) on Friday. It takes a solid recovery above 1.40 so the smiles return to the buyers faces but below 1.3880, the pair starts having characteristics of a downtrend. By trusting more, the first scenario, our selection for this week is to open buy positions.
USDJPY (US Dollar – Japanese Yen)
Another bullish week passed by for USDJPY, as it opened at 105.40 and closed at 106.54. The US bond yields keep on having a critical role to the pair’s performance but the uptrend carried on at the end of last week even if the US 10-year yield dropped from 1.61%, to 1.40%. Obviously, at this period of time, JPY is weak maybe due to the risk-on mood that most traders have. The buyers have reasons to look higher, at 107 maybe at 108, so we’ll try buy positions.
EURJPY (Euro – Japanese Yen)
It was the third bullish week in a row for EURJPY as it opened at 127.67 and closed at 128.61 while during the week, it touched the price of 130 too. Both EUR and JPY are weak at this period of time so we may see some consolidations. Of course, corrections to the price area of 127.50 are possible as well as prices close to 130 again. We’ll try range strategy this week, keeping in mind that consolidations and sideways movement are possible enough.
EURGBP (Euro – Great Britain Pound)
Bullish was the last week for EURGBP, after for bearish weeks in a row. The pair opened at 0.8643 and closed at 0.8668, with high volatility since the weekly low was at 0.8540 and the weekly high at 0.8730. If GBP return to the last weeks strength the we may see prices close to 0.85, so we’ll try sell positions this week.
USDCAD (US Dollar – Canadian Dollar)
USDCAD had a bullish reaction after many bearish weeks, by opening at 1.2610 and closing at 1.2745. Strong USD hedged at defeated the higher oil prices that always favour CAD since oil is the major and most valuable exportable good of the country. If USD keeps on rising, we may see the pair trying the strong resistance of 1.2880 but in the opposite case and especially below 1.2590, the pair returns to the usual downtrend of the last months. Sell positions is what we’ll open this week.
USDCHF (US Dollar – Swiss Franc)
It was a bullish week for USDCHF which opened at 0.8962, surpassed easily the milestone price of 0.90 and closed at 0.9085. Heavily bullish days were last Tuesday and Friday, along with the drop of US bond yields. Next targets for the buyers are the price areas of 0.9210 and 0.93 and these are the targets that we’ll go after with our buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
The biggest percentage drop on weekly basis of the last months we saw for AUDUSD since the pair opened at 0.7869 and closed at 0.7706. The strength of USD, combined with the decline of many commodities prices (gold mainly), pressed the pair lower. The current week started with negative as the Company Gross Operating Profits feel during the Q4 2020 by 6.6% and the Chinese Caixin Manufacturing PMI released at 50.9, below the expectations. Many market news for Australia this week: Interest Rates, GDP and Retail Sales are the most important. For the time being, AUDUSD has a bullish reaction and above 0.7820 it may have a new uptrend momentum. A possible drop below 0.77 though, may sharpen the bearish trend so we’ll try sell positions this week.
Corrective was the last week for SP500, as it closed at 3,808 points with losses close to 2.30%. The strong USD and the high US bond yields favoured the correction but the new economic aid package that we saw above is able to change the market mood. Early this week, the futures of the Index are profitable and a possible bullish breakout of 3,860 points, may create extra optimism. In case that SP500 is not able to perform a bullish reaction, below 3,800 points, we may see a very sharp correction in the near future. We’ll try long positions though, trusting that most likely the markets will calm down.
It was a bearish week for DAX30 as it closed at 13,796 points, having losses a bit above 1%. The price heights above 14,000 points seems to make the investors dizzy and below 13,635 points the correction may become even stronger. Given that the futures of DAX30 early this week perform a bullish reaction, we may have a new approach of 14,000 points and this is a signal for us to open long positions.
Bearish was the last week for FTSE100 as well. It closed at 6,462 points, performing losses around 1.50%. The 6,300 points is the next strong support for the Index but given the bullish reaction of the futures early this week, we may see a new approach of the 6,600 points and it may be a good signal for the buyers to follow with our long positions this week.
Important losses for gold last week, as it closed at $1,733, about 2.80% lower. The strength of USD, combined with the high US bond yields, pressed gold to price levels that we had not seen since the previous summer. There is an important support at $1,714 and a possible bearish breakout may mean new and strong pressures on gold. Such a sharp drops on gold though may become an opportunity for some investors so we may see bullish reactions to $1,760 or even to $1,800. We’ll try short positions this week.
Oil prices kept on rising last week, since the next month’s futures closed at $61.58, performing profits close to 4.50%. The trend is obviously bullish and if it carries on, it may lead the oil prices to the area of $65 but we should pay attention at two things: the behaviour of USD (we never forget that oil is denominated is USD) and the OPEC meeting on Thursday and the possible decisions regarding the oil production that may occur. We’ll keep our long positions as we think that $65 is a realistic target.
A huge correction took place for Bitcoin last week. The weekly close price was at $45,241 and the loss was more than 21%. Obviously, just because last week did not have a rally of positive news and tweets from many market celebrities and VIPs, many investors decided to liquidate their profits. There is a massive gathering of Bitcoin buyers around $45,000 (430K Bitcoins have been bought close to this price) so this price level may act as a strong support and it is able to boost Bitcoin to the price area of $50,000 again, so we’ll try long positions this week. As we have mentioned again though, Bitcoin cannot have a place amongst the important assets of the big traders and funds as long as it has such a high volatility because nobody wants a lower Sharpe Ratio at his portfolio.