3/5/2021

 

AFTER THE FED, THE LABOR MARKET IN THE USA

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Weekly Report: Indices, Commodities, Currencies and Cryptos

 

General Comment

The pause and correction in the main stock markets continued last week. The FED meeting last Wednesday somewhat disappointed expectations as many analysts and investors awaited the announcement of a gradual de-escalation of the Fed’s bond-buying program, but Jerome Powell was clear: monetary policy will not change unless further substantive progress in the US economy.

The US economy “ran” by 6.4% in the first quarter of 2021 while in the same period the Eurozone shrank by 0.6%, a sign that the recovery from the pandemic in the US is ahead of Europe. These announcements on Friday, combined with the rise in bond yields (the 10-year US bond in the same day from 1.61% to 1.68%) caused a correction in the stock market and gave a boost to the dollar that finally closed the week profitably. Gold corrected slightly; oil had significant gains while we also had a return to the rise for Bitcoin.

This week is dominated by announcements for the US labor market on Friday (Non-Farm Payrolls – NFPs) which will further demonstrate the state of the US economy in the recovery from the pandemic. Other important announcements of the week are Factory Orders and PMIs in the US, the announcement of Interest Rates and Monetary Policy in the UK, Retail Sales and PMIs in the Eurozone, and the announcement of Monetary Policy in Japan and Australia.

 

SP500

The US SP500 index closed last week with slight gains, closing at 4,179 points, with an increase of about 0.35%. Last Friday, it took back many of the Index gains, with bond yields rising despite the FED meeting on Wednesday having a ton of continued loose monetary policy in the US. The results of the companies that were announced were very satisfactory: 87.1% showed profits beyond expectations which exceeded 76% of the previous quarter and is much higher than the average of about 65%. The results of the other companies will be announced this week. The Index does not seem to have lost its uptrend momentum, although there are fears that the new tax policy in the US will cause concerns and possible corrections. We will keep on opening long positions this week too.

 

DAX30

It was the second consecutive week of correction for the German Index DAX30 which closed at 15,131 points, showing losses close to 1%. In Europe, the delay of the economic recovery from the pandemic compared to the USA is beginning to become apparent and this is also reflected in the stock markets. Below 15,090 points and well below 15,000 points, concerns about further correction are likely to intensify but for now, the dynamics of the Index have not been greatly affected so we will try long positions for one more week.

 

FTSE100

Last week, the British FTSE100 Index rose to 6,924 points, gaining just over 0.5%. The course of vaccinations and the opening of the market after the lockdown in the United Kingdom create optimism for a bullish breakout of 7,000 points, which is a year high, and a target for a return to pre-pandemic levels. Long positions is what we prefer.

 

Gold

Slightly bearish was the last week for gold, which closed at $ 1,768, with losses of almost 0.5%. The continuation of the loose monetary policy by the FED on Wednesday gave some uptrend momentum but the gold was affected in the following days by the new rise in bond yields and the strong dollar. Early this week there is an uptrend near $ 1,775 but a return below $ 1,754 (last week’s low) may put gold in a continuation of the downtrend that started last August. Based on this, we prefer short positions this week.

 

US Oil

Last week was bullish for oil, with next month futures closing at $ 63.45, with profits above 2.3%. The week was strongly bullish but on Friday there was a correction of 2% after many investors secured their profits amid concerns about the Indian economy which is severely affected by the pandemic. Japan also saw a significant drop in oil imports. Expectations of a recovery in demand after the pandemic have created a positive climate in recent weeks, pushing oil prices above $ 65 last week but the ensuing sharp correction shows that things are still fragile. Above $ 65.50 there will be reasonable expectations for new highs above $ 68 while below $ 62.20 lurk sellers targeting $ 60. We will try short positions this week.

 

EURUSD (Euro vs US Dollar)

We saw a strong correction week for the EURUSD, after three consecutive weeks of an uptrend. The pair opened at 1.2094 and closed at 1.2018 with almost all the fall due to the strong dollar on Friday and the weakening of the euro on the same day, with the announcements of the 1st quarter GDP in the USA and Eurozone respectively showing the difference in the recovery of two economies. By Friday, the loose US monetary policy as announced by the FED had brought the EURUSD to the level of 1.2150 but if the big correction that followed below 1.20 continues, it will return to the table the scenarios of the continuation of the big downtrend of the pair, started at the beginning of the year. This trend showed signs of reversal in April that can continue above 1.2150, aiming for the year highs at 1.2350 but we prefer sell positions this week.

 

GBPUSD (Great Britain Pound – US Dollar)

Last week was bearish for the GBPUSD which opened at 1.3872 and closed at 1.3809. The whole week was bullish but on Friday the pair dropped sharply from the price area of 1.3940 which had managed to climb, due to the strength of the US currency. This week contains important announcements for the British economy, as the announcement of Interest Rates and Monetary Policy is expected on Thursday. If the strengthening of the dollar proves to be temporary, soon the exchange rate will approach 1.40 again but a consolidation below 1.38 will give hope to the sellers of GBPUSD to approach the support at 1.3665. Sell positions is our selection for the current week.

 

USDJPY (US DollarJapanese Yen)

Explosive rise for the USDJPY last week, opening at 107.90 and closing at 109.34. The pair seems to be recovering after three sharply declining weeks and this is not only due to the strengthening of the dollar on Friday but is mainly due to the rise in bond yields throughout the week. This was helped by the announcement of the Bank of Japan, with Haruhiko Kuroda stating that the pandemic relief program will continue after its originally proposed end in September. If the USDJPY exceeds 110, we will have a full return to the uptrend while this will have limited chances below 108. Buy positions is our selections this week.

 

EURJPY (EuroJapanese Yen)

The EURJPY closed strongly bullish last week, opening at 130.47 and closing at 131.43, easily overcoming the resistance of 131 and confirming the uptrend that has started since November. Buyers cannot hide their mood for optimism: a 6-year high above 137.50, but of course, there is still a long way to go and corrections below 131 and even below 130 are not ruled out. We will try buy positions this week.

 

EURGBP (Euro – Great Britain Pound)

Slightly bearish was the last week for the EURGBP, which opened at 0.8712 and closed at 0.8696. There was a slight correction from the strong uptrend of the last month with sterling strengthening due to the better epidemiological picture of the United Kingdom compared to Europe. Above 0.8720 the rise is probably more likely while below 0.8670, the correction begins and becomes more noticeable but trusting that Europe has still many issues with COVID-19 compared to the UK, we prefer sell positions this week.

 

USDCAD (US Dollar – Canadian Dollar)

A strong downtrend prevailed last week in the USDCAD, which opened at 1.2474 and closed at 1.2283. We have seen such prices since the beginning of 2018 as the Bank of Canada became the first Central Bank to reduce the bond-buying program, thus making its Monetary Policy tighter after the pandemic. The rise in oil prices also helped the downtrend of the pair. If things do not change, especially in US Monetary Policy, the pair is moving towards 1.20 so we will try sell positions.

 

USDCHF (US DollarSwiss Franc)

The USDCHF decline paused last week, with the pair closing where it had just opened, at 0.9130. Technically, this formation favors further recovery if the USDCHF manages to exceed 0.9180 but if this does not happen, the way to 0.90 is open, especially in the case of a bearish breakout below 0.9080. We will wait to see prices above 0.9180 and then we will try buy positions.

 

AUDUSD (Australian Dollar – US Dollar)

Last week was bearish for the AUDUSD which opened at 0.7740 and closed at 0.7709. The US currency strengthened but the Australian dollar withstood the pressure due to rising prices for metals and especially copper. This week contains announcements about Australia’s Interest Rates and Monetary Policy, and we may see increased volatility. Prices​​ below 0.7690 favor further correction and any reversal above 0.78 (technically the resistance is at 0.7815), will give hope of an uptrend in the pair. Buy positions is our selection this week.

 

Bitcoin

Bitcoin reacted upwards last week, closing at $ 56,655, with profits of over 15%. The Chicago Mercantile Exchange (CME) announced that mini futures contracts for Bitcoin will be available this week, something that could spur interest in cryptocurrencies by small investors with small portfolios. On the other hand, concerns have been raised as the US Securities and Exchange Commission is delaying the issuance of the Bitcoin Exchange Trading Fund (ETF), raising reasonable questions. If Bitcoin manages to exceed $ 60,000, it will still spread optimism among cryptocurrency followers, and by trusting this case, we are keen to open long positions this week.

 

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