ALL EYES ON FED AND ON BOND YIELDS
Buy USDJPY in the long run, now at 109.28
USDJPY was bullish for a fourth week in a row, confirming our Best Choice which was given about a month ago. Our entry price was 105.25 and already we make more than 400 pips. US bond yields keep on rising, touching the price area of 1.63% and JPY keeps on being weak due to the risk-on mood of many investors. We will keep our current position, targeting 110 which can be achieved this week.
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Weekly Report: Currencies, Indices, Commodities and Cryptos
The bond yields keep on rising as the US 10-year yield has reached 1.64%, at the yearly highs. We need to remind that the bond yields are particularly important for the markets because it is the base (benchmark) that define the desired performance in other investment categories, such as the stock markets. Especially the technology stocks that are sensitive with high expectations, perform bigger pressures which may become harder if the yield of the YS 10-year bond starts approaching 2%. So, we witness a sector rotation from the tech stocks and the high growth stocks to sectors with high internal value such as banks, σε τομείς με υψηλή εσωτερική αξία όπως τράπεζες, infrastructures, commodities etc.
The rise of the yields comes along with the USD strengthening which was in a continuous downtrend during the last months.
Despite the above, last week the stock markets performed profits and USD dropped and we need to render this to the profit taking of the investors that had positions at the greenback. On Thursday, US president Joe Biden, signed the package of economic aid of $1.9 trillion. This package included a direct support of each household of $1,400. The other important event of last week, was the ECB session: Interest Rates remained unchanged at 0%, the quantitative easing remains but ECB will start to increase the bond-buying in order to ensure the financial stability in Eurozone. All these are taking place amongst the COVID-19 pandemic that keeps the major economies (mostly the European ones) locked through extended lockdowns.
The current week is also important regarding scheduled economic announcements, news and events: FOMC on Wednesday for the Interest Rates and the Monetary Policy in USA, Eurogroup, Eurozone Inflation, Interest Rates decision in UK and Japan, Retail Sales in USA, Australia and Canada.
Significantly bullish was the last week for SP500, which closed at 3,941 points, performing profits above 2.6%. We saw an approach of the all-time high price with heavily bullish days while last Friday was bullish too, despite the rise of the bond yields. The current price levels confirm the uptrend of the Index but also create edges for corrections through many investors that may decide to take their profit. Any possible corrections will start rising concerns below 3,900 points and even more below 3,860 points but the uptrend seems strong for the moment, so we will try long positions this week too.
Explosively bullish was DAX30 last week, by closing at 14,559 points with profits that touched 3.7%. The all-time high price fell easily and now only corrections or unpredictable events can cause the drop of the Index. What we notice lately, is a country sector rotation where funds from the overbought Nasdaq and US bonds, move to cheaper options such as the German companies which are expected to recover heavily in the post-COVID-19 economic reality. Long positions is our choice for this week as well.
Another bullish week passed by for FTSE100 as it closed at 6,789 points, performing profits close to 1.6%. The general stocks environment is positive lately, so the Index has managed to approach the price area of 6,900 points which is also a high price for the last year. Under these conditions, such a target seems probable enough. Even if the UK economy has still issues, many companies are relatively cheap, compared to other developed countries and they are attractive enough to the long-term investors. We will insist on long positions for one more week.
Last week we saw a bullish reaction for gold, after 3 heavily bearish weeks as it closed at $1,725 with profits a bit above 1.5%. The temporary USD weakness (gold is denominated in USD) was critical to this but during the current week, the critical event is the FED session since all investors wait the announcements regarding the Interest Rates and the Monetary Policy in USA. Gold price must exceed $1,740 in order to have solid probability for a further recovery but as long as it does not happen, we have an increased probability to see gold approaching the price area of $1,670. Finally, we need to underline that lately, gold has a straight competitor as a safe–haven asset against inflation: cryptocurrencies as an alternative investment option. Our selection for this week is to open short positions.
Corrective was the last week for oil prices, since next month’s futures closed at $65.54, about 1% lower. The approvement of the new support economic package in USA and the vaccinations develop optimism for demand recovery and since the production remains in low levels according to the latest OPEC decisions, there are good expectations for higher oil prices. A strengthening of USD though can press oil prices. Critical price levels above are the resistances of $66.40 and the multi-month high at $67.95 while the supports exist at $64.50 and at $63.10. We’ll try long positions this week.
EURUSD (Euro vs US Dollar)
EURUSD had a bullish reaction last week, by opening at 1.1917 and closing at 1.1952. This rise took place mainly after the middle of the last week as the bond yields start rising again while another important factor was the Lagarde’s speech on Thursday. She stated that ECB will increase the bond-buying scheme in order to support the Eurozone economies. The only important scheduled announcement of the current week in Eurozone is the Inflation in February but in the same day there is the important FED session with the Interest Rates decision, followed by a Press Conference for US Economic and Monetary Policy. If the pair managed to surpass 1.20, it has a certain probability for a further recovery but as it stays below of 1.20 and especially below 1.1950, maybe it will test the 4-mongths low price at 1.1835. We prefer sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
Bullish was the last week for GBPUSD, after two bearish weeks in a row, as it opened at 1.3811 and closed at 1.3917. During last Thursday and Friday, the pair touched the milestone price of 1.40 but almost immediately we saw a violent corrective movement. The results of the UK economy that announced last week were not positive it all since the Industrial Production dropped 4.9% and GDP dropped 2.9%. This week, we’ll pay attention to the Central Banks sessions (FED on Wednesday and Bank of England on Thursday) and if the pair is able to reach or to surpass 1.40, we may see stronger recovery but in the opposite case, the multi-month low price at 1.3777 is threatened. Trusting more the second scenario, we’ll try sell positions this week.
USDJPY (US Dollar – Japanese Yen)
Another bullish week passed by for USDJPY (the 4th in a row), with a weekly open at 108.29 and a weekly close at 109.03. The bond yields kept on rising so USDJPY which is highly correlated with this, moved higher as well. JPY appears weak lately and it seems that the pair is targeting the price area of 110, which can be reached during the current week if of course the conditions remain the same. Critical factor is the US FED session on Wednesday but in any case, we prefer being buyers for one more week.
EURJPY (Euro – Japanese Yen)
EURJPY managed to move higher for the 5th week in a row, by opening at 129.07 and closing at 130.32. The weekly close price above 130, is considered critical and the pair is already moving to the highest prices since the autumn of 2018. Despite some profit taking and the overbought conditions, EURJPY can move even higher so buy positions is what we will open this week too.
EURGBP (Euro – Great Britain Pound)
Another bearish week took place for EURGBP, with a weekly open at 0.8620 and a weekly close at 0.8582, confirming for one more time the heavy downtrend of the last 3 months. The pair’s sellers have a clear target, the price area of 0.85 and most likely they will achieve it under the certain circumstances and by following them, we will open sell positions.
USDCAD (US Dollar – Canadian Dollar)
Last week was heavily bearish for USDCAD since it opened at 1.2657 and closed at 1.2475. The pair touched the 3-year low price, helped by the USD weakness and by the economic results that Canada released last week: Canadian Unemployment Rate dropped to 8.2% in February from 9.4% in January. The trend is bearish during the last year and many analysts predict prices even close to 1.20 but we may see also see bullish short-term reactions. We prefer sell positions for the current week.
USDCHF (US Dollar – Swiss Franc)
Consolidative was the last week for USDCHF, as it opened and closed around the price area of 0.9280 – 0.9290. The volatility was not that low though: the weekly low was at 0.9234 and the weekly high was at 0.9375. The pair had a pause from the heavy uptrend of the last weeks due to the temporary USD correctio. USDCHF may return to its uptrend especially above 0.93 so buy positions is our selection for this week.
AUDUSD (Australian Dollar – US Dollar)
It was a clearly bullish week for AUDUSD, by opening at 0.7692 and closing at 0.7755. The pair took advantage from the USD weakness and recovered after two bearish weeks and in parallel, the higher commodities prices (especially gold) favoured AUD. Early this week, the Retail Sales in China released at the impressive +33.8% on a yearly basis, confirming the come-back of the Chinese economy after the pandemic. Also, Phillip Lowe (RBA) mentioned earlier that the economy support will carry on until the targets in Inflation and Unemployment Rate are achieved. AUD is not taking advantage though of the above news so it may continue lower. In case of a bullish breakout above 0.78, there is a high probability for reaching the price area of 0.80. We’ll open sell positions this week.
Bitcoin kept its bullish direction for one more week, surpassing on Friday the milestone price of $60,000 and it finally closed at $58,990, having performed profits like 15.5%. The performance of Bitcoin and most of the major cryptos is amazing. Indicatively, we underline that the Bitcoin profits during the last 5 months has touched the impressive 450% while more and more investors (retail and institutional) put their eyes on cryptos and generally in blockchain technology. ΝFTs (Non–fungible tokens) is a new and powerful trend that give the investors the opportunity to create and own digital items such as digital art, games, event tickets, domain names etc under the umbrella of blockchain. The digital currencies are here to stay for a long time even if for the moment, the high volatility makes it very risky for most of the investors. If Bitcoin surpasses $60,000 again, it will cause a new optimism wave and it will create high hopes for prices even close to $70,000 very soon. We’ll keep on opening long positions.