2/8/2021

THE FED DOES NOT DO EARLY TAPERING – STOCK MARKETS ARE RISING BUT THE DOLLAR IS REACTING BEARISHLY

General Comment
The Fed meeting (FOMC) came as no surprise as Interest Rates remained unchanged at 0.25% and Monetary Policy also remained unchanged. Markets, however, were expecting some hints of a reduction in the bond-buying program (tapering), but this did not happen because, as Jerome Powell argued, macroeconomic targets, especially the Unemployment Rate, have not yet been met. However, Jerome Powell stressed that there is progress in the economy but still there is a way to go and so the bond purchase by the Fed will remain as it is, at 120 billion dollars per month. In Europe, there is progress in the economic results since the GDP of the Eurozone was announced above expectations and inflation was announced at 2.2% above the 2% limit set and thus based on the hopes for a tighter Monetary Policy from the ECB in the near future, the euro strengthened.
This week is dominated by the announcement of the Unemployment Rate in the US for July, which will show the progress of the US economy, with markets expecting 900 thousand new jobs. Other important announcements include Interest Rates and Monetary Policy in the United Kingdom and Australia, PMIs in Germany, the Eurozone, the United Kingdom, Canada, and the United States, and Retail Sales in Germany.

SP500
Last week was practically neutral for the US SP500 Index, which closed at 4,395 points with marginal losses. The Index started to react upwards from the middle of the week, after the Fed news that it is going to maintain the loose Monetary Policy in the next period, without thoughts for early tapering. Given that the SP500 is very close to the all-time highs, we may see the long-term goal of many investors at 4,500 units to be implemented soon. There is information that the Senate is going to approve $ 550 billion for infrastructure, through a bipartisan agreement between Democrats and Republicans, and this will certainly favor the SP500. The futures of the Index have already opened on the positive ground but many will be stunned at such heights and may sell so corrections are not ruled out. We will open long positions this week.

DAX30
The German DAX30 Index moved lower last week, closing at 15,540 points, with losses close to 0.70%. For several weeks now, the Index has been close to the all-time high of 15,800 points, and the more we do not see significant corrections, the stronger the chance for new highs, especially after the positive results we saw in Germany and the Eurozone recently. The 15,680 points that are ten days high may be the resistance before the new highs. Concerns for corrections are growing below 15,400 points and even further below 15,030 points but long positions is our selection for the current week.

FTSE100
Neutral week for the British FTSE100 Index which closed at 6,959 points, without percentage change but with a high enough volatility from 6,855 points to 7,020 points. Significantly, the Index could not hold above 7,000 points even though the pandemic in the UK seems to be in recession. An announcement of a tighter Monetary Policy by the Bank of England may put further pressure on the Index unless there is a clear excess of 7,000 points which could lead to an area of 7,100 points. Long positions is our selection this week.

Gold
Gold moved higher last week, closing at $ 1,817 and gains above 0.80%. The weakness of the dollar after Powell’s statements about a loose Monetary Policy by the Fed strengthened the gold, which is even more favored due to strong inflationary pressures in the US and other strong economies. Given the announcement of the Unemployment Rate in the US next Friday (NFPs) that may change the balance, gold above $ 1,800 is particularly favored and seems to have entered an uptrend channel for about 40 days. Below $ 1,800, this logic will be challenged and even further below the support at $ 1,788 but we trust the first case more, so we may try long positions this week.

US Oil
Oil continued to rise for a second week in a row, with the next month’s futures closing at $ 73.70, with gains above 2%. It seems that expectations for increased demand after the recovery of the economies from the pandemic crisis have already exceeded the recent decision to increase production by OPEC members and partner countries. However, buyers, given the prevalence of the Delta mutation, may want to see more tangible signs of a further rise in the price of oil and not just speculation about demand. The trend seems to be on the rise but the financial announcements of the week will also play an important role. The main short-term target of buyers remains at $ 75 but below $ 72.40 sellers looking to $ 70 again may be discouraged. We insist on long positions for one more week.

EURUSD (Euro vs US Dollar)
EURUSD had a strong bullish movement last week, opening at 1.1768 and closing at 1.1867. The dollar weakened after the Fed’s announcements on Wednesday but the rest of the US results were not encouraging too (GDP strengthened below market expectations). Europe, on the other hand, has had better results, and combined with higher inflation, the euro has strengthened further. However, the downtrend of the pair has not yet changed and the strong support of 1.17 remains the main target of sellers. A bullish breakout of 1.1975 and possibly 1.20 is needed to establish a reversal of the trend. The announcement of new jobs in the US on Friday (NFPs) may increase volatility and may give new impetus to the EURUSD. We prefer buy positions this week.

GBPUSD (Great Britain Pound – US Dollar)
GBPUSD moved higher last week, opening at 1.3748 and closing at 1.3901. The dollar weakened after the continuation of the loose Monetary Policy by the Fed, but the pound had reasons to strengthen. COVID-19 cases in the UK are declining and there are expectations that the Bank of England, in Thursday’s meeting, may reduce the Asset Purchase Facility. The pair reached 1.40 but did not have the required momentum for such a strong breakout. It is not ruled out that it will try to do so this week so buy positions is our selection for the current week.

USDJPY (US Dollar – Japanese Yen)
Last week was strongly bullish for the USDJPY, opening at 110.46 and closing at 109.67. It is not only the weakness of the dollar that contributed to this but also the bond yields that dropped (the US ten-year fell from 1.28% to 1.22%) as well as the yen strengthened, especially after the results of the Unemployment Rate in Japan, which was announced at 2.9% for June, lower than expected. It is also important that the pair lost the critical value of 110 and below 109, maybe the way will be opened for 107.50. After those thoughts, we may try sell positions this week.

EURJPY (Euro – Japanese Yen)
It was the second week in a row that EURJPY had a slight rise, opening at 130.06 and closing at 130.17. The euro was strong due to the positive economic results of Europe but the yen was also strong due to the encouraging results of Japan. The pair manages to remain above the psychological limit of 130, although bond yields are falling and if it manages to break up 131, it may return to its upward trend. We are keen to open buy positions this week.

EURGBP (Euro – Great Britain Pound)
Another slightly bearish week passed by for the EURGBP, opening at 0.8550 and closing at 0.8533. From mid-May, pair fluctuations are small with movement in the narrow zone 0.85 – 0.8670 since both the euro and the pound are strong. The pound may be stronger as the epidemiological picture in the UK improves, but there are also expectations of a tighter Monetary Policy from the Bank of England. However, we need a clear break of 0.85 to talk about a clear downtrend but we still prefer sell positions for the current week.

USDCAD (US Dollar – Canadian Dollar)
USDCAD continued to decline for the second week in a row, opening at 1.2558 and closing at 1.2470 while also losing the milestone price of 1.25. The weak US dollar combined with rising oil prices (oil is Canada’s main export) is putting downward pressure on the pair. As long as the USDCAD remains below 1.25, the chances of it moving downwards increase, with the next support being in the area of 1.2250. In case of a return above 1.25, buyers will chase prices above 1.26 but by trusting the bearish scenario more, we may open sell positions.

USDCHF (US Dollar – Swiss Franc)
We saw a strong downturn last week for the USDCHF that opened at 0.9191 and closed at 0.9052 but endured above 0.90. The weak dollar is creating a downtrend, but this Monday the Swiss currency will enter the equation with a series of important announcements: inflation, Retail Sales, and the PMI. It is logical for buyers to appear in the area of 0.90 and so we may see upward reactions close to 0.90, although the trend is declining. In case the fall continues, there is a price range of 0.8925 which is a low of about 6 months that may act as a support. We’ll try sell positions this week.

AUDUSD (Australian Dollar – US Dollar)
Last week was bearish for the AUDUSD which opened at 0.7360 and closed at 0.7342. It was the 5th consecutive week of decline despite the US currency being pressured and this fact shows the great weakness of the Australian dollar at this time. Australia is sinking into a lockdown after the great pandemic recovery but also from the side of China there are serious concerns after the announcement of the tightening of the operation of private companies in various sectors of the economy. Below 0.7290 the given downtrend may accelerate, even approaching 0.70 but upward reactions are not ruled out, especially if the pressures on the US currency continue. Sell positions is our selection for the current week.

Bitcoin
A big rise last week for Bitcoin closed at $ 39,839, with gains approaching 12.50%. It was the second strong uptrend week in a row but while there was a strong breakout of $ 40,000, up to $ 42,600, for 2-3 days now, concerns have started to rise again and Bitcoin fell below $ 40,000 again. Rumors (which have not yet been confirmed) that Amazon will accept payments in cryptocurrencies were the main reason for the upward movement, but whether there will be continuity is in doubt. Technically, if Bitcoin holds above $ 37,000, there is a chance of recovery. Of course, above $ 42,600 the rally is expected to continue and accelerate but that presupposes positive news. We may try some low-risk long positions this week.