INFLATION IS THE US REMAINED UNCHANGED IN JULY. ALL EYES ON THE FED ON WEDNESDAY (FOMC).
The significant development of the past week, concerning inflation in the US for July, was announced at 5.4%, as it was the previous month. Following this news, the markets anticipated that the loose Monetary Policy by the Fed would continue and so the stock markets had profits and the dollar weakened. It is worth noting that the dollar weakened again on Friday, following the disappointing announcement of the Consumer Sentiment Index by the University of Michigan. However, the announcement of the Fed’s Minutes next Wednesday is of particular importance, with the focus on whether there will be any hint to limit the bond market program (tapering), which will mean a tighter Monetary Policy. The Fed has repeatedly stated that the problem of high inflation is temporary and that it will continue its loose policy until specific macroeconomic targets are met particularly the Unemployment Rate. It is worth noting, of course, that employment recovered dramatically in July, and this triggered scenarios of early action by the Fed.
There has been a silence in Europe for several days now, so the markets believe that what was said at the last ECB meeting on loose Monetary Policy is valid as inflation in the Eurozone remains under control, but growth seems to be accelerating.
In addition to the stock Indices that almost all of them strengthened, gold had a week with strong fluctuations but finally managed to close profitably, oil recorded stayed practically unchanged and finally, Bitcoin seems to be strengthening a lot.
This week, in addition to the Fed Minutes on Wednesday, also contains other important announcements such as Retail Sales in the US, UK, China, and Canada, inflation in the Eurozone, the UK and Canada, GDP in the Eurozone and Japan, and Bank Interest Rates in China.
The US SP500 Index closed last week with a rise, to 4,460 points and gains of about 0.70%. The Index has had a slight uptrend since the beginning of the week but after the announcement of inflation in the US on Wednesday, this rise accelerated and so on Friday we had new all-time highs and an even greater approach of 4,500 points. The issues that could negatively affect SP500 (the week has already started with a correction in futures) are the Delta mutation and the Taliban seizure in Afghanistan. The target of buyers remains at 4,500 units but the two factors we mentioned can cause corrections. In any case, we prefer long positions for the current week.
The German DAX30 Index moved strongly up last week, closing at 15,975 points, having gains close to 1.40%, and setting a record on Friday where we saw prices above 16,000 points. The loose Monetary Policy that continues to dominate Europe favors stock markets as there is a sense that much of the new money, end up in stock markets. The week has started with a correction but if the 16,000 points are exceeded again, buyers are favored so long positions is what we will prefer this week.
The British FTSE100 Index moved strongly up last week, closing at 7,171 points and gains approaching 1.60%. The situation with the Delta mutation seems to be controllable in the United Kingdom with the number of cases stabilizing and some macroeconomic data announced, such as Industrial Production and Manufacturing, show that the British economy has a positive outlook. The Index is exactly on the strong resistance of 7,150 points and any excess will be a high value of about 1.5 years and will pave the way for much higher levels, even up to 7,650 points. Corrections will be a concern if the index is below 7,000 points. Long positions is our selection for this week.
Last week was very strange for gold since the volatility was almost 100% above the average of previous weeks. Last Monday had a strong downtrend and gold reached $ 1,673 but a strong recovery followed and finally the week closed near $ 1,781 and the weekly gains approached 1%. Monday’s big drop was mainly due to the continuation of the positive climate that had been created after the announcement of US Unemployment Rate (NFPs). But since Wednesday, as the dollar began to weaken, gold has had a clear uptrend that has brought it above the $ 1,750 support. To prove an uptrend, the two-month high above $ 1,837 must be broken, but in any case, caution is needed because high volatility also carries a high risk. We may try some low risk long positions this week.
Last week was practically neutral for oil with the futures of next month opening and closing in the price range of $ 67.75 – $ 67.80. There are conflicting views between the IEA (International Energy Agency) which argues that demand will be reduced for the whole of this year due to the Delta mutation and OPEC (Organization of the Petroleum Exporting Countries) which insists on its views on a strong recovery in demand for 2021 and 2022. So, the situation is extremely fluid, and oil will start to gain some momentum either below $ 65 or above $ 70. Of course, we do not forget that oil, like most commodities, is denominated in dollars, so the course of the dollar is a strong factor, and in that sense, the announcement of the Fed’s Minutes on Wednesday may play a key role. We believe that oil may recover this week so we may try long positions.
EURUSD (Euro vs US Dollar)
EURUSD moved higher last week, opening at 1.1755 and closing at 1.1794. The full uptrend movement appeared on Wednesday after the announcement of inflation in the US. Until then, the dollar was strengthening, and the pair tried the strong support at 1.17, which is a low price of about nine months. However, the downtrend, which began in late May, has not changed acter this bullish reaction. Based on the lack of developments from the ECB, the EURUSD is led and carried mainly by the dollar and so the key point of the week is the announcement of the Fed’s Minutes on Wednesday. Any hint of tighter Monetary Policy will launch the dollar and will push the pair down sharply. The Eurozone GDP announcement is the only major news from Europe this week. We may try sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
Practically neutral for GBPUSD was last week, with opening and closing in the range of 1.3865 – 1.3870. The UK GDP for the second quarter of 2021 was announced at 4.8%, as the markets expected and so the sterling was not significantly affected by this. Markets are also expecting tighter Monetary Policy from the Bank of England, so sterling can withstand the pressure of the dollar but does not seem to be able to benefit when the dollar weakens accordingly. Important announcements are expected with interest for the United Kingdom: Unemployment Rate, inflation, and Retail Sales, but the dollar will again play a dominant role. GBPUSD, to gain momentum, must break the price range between 1.3570 and 1.3980 but we are keen to try buy positions this week.
USDJPY (US Dollar – Japanese Yen)
Bearish was the last week for the USDJPY, opening at 110.18 and closing at 109.59. The weak dollar from Wednesday onwards as well as the decline in bond yields (the US 10-year fell to 1.28%) contributed to this picture as well as the yen, which has rather strengthened its status as a safe-haven asset for investment after concerns that have been caused by the Delta mutation. The Fed’s Minutes on Wednesday, as well as how much the pair can recover the milestone price of 110 (because the longer it stays below it, the more likely it is to develop a downtrend) will be the critical factors of the week. Earlier this week, Japan’s GDP was announced, better than expected, and the pair is falling further so sell positions is our selection for the running week.
EURJPY (Euro – Japanese Yen)
The EURJPY moved lower last week, opening at 129.62 and closing at 129.26. The pair is moving away from 130 and this gives more points to the downtrend that has started since the end of May. The euro remains weak due to the loose policy of the ECB, while the yen seems to be strengthening recently. Below 128.60, the downtrend may accelerate even further so we may try sell positions this week.
EURGBP (Euro – Great Britain Pound)
The EURGBP reacted upwards last week, opening at 0.8471 and closing at 0.8503, marginally above the significant value of 0.85. This reaction is not based somewhere and may be of a technical type since the pound remains strong and the euro is weak. A return below 0.85 and especially below 0.8470 will restore the strong downtrend of the pair that has started since the end of last year and the price range of 0.91. Sell positions is our selection for the current week.
USDCAD (US Dollar – Canadian Dollar)
The USDCAD moved slightly lower last week, opening at 1.2545 and closing at 1.2513. Oil price was practically unchanged and so this fall is mainly due to the weakness of the US currency. Given the importance of the announcement of the Fed’s Minutes on Wednesday, Canada also has important announcements such as that of inflation and Retail Sales. If the pair manages to stay above 1.25, its uptrend is probably not in danger but below 1.25, the fall may widen. We may try sell positions below 1.25.
USDCHF (US Dollar – Swiss Franc)
The USDCHF remained almost unchanged last week, opening, and closing around 0.9150, even though by mid-week it was well above 0.92. However, the weakness of the dollar, which prevailed in the pair from Wednesday onwards, pushed it to close where it opened. For the uptrend to continue, the price must be exceeded above 0.9275 and it remains to be seen whether the announcement of Fed Minutes is the necessary fuel for such a thing. Buy positions is our selection for the current week.
AUDUSD (Australian Dollar – US Dollar)
Last week was slightly bullish for the AUDUSD which opened at 0.7350 and closed at 0.7368. The US dollar suffered losses while the Australian currency strengthened despite the country having a serious issue with the Delta mutation and the resumption of lockdowns, and even though the price of iron, which is Australia’s main export, fell sharply. Australia will announce the RBA minutes and the Unemployment Rate while China will announce Interest Rates and Retail Sales and in line with the course of the US dollar, these developments will affect the pair. The trend is still bearish and by trusting it we may open sell positions this week.
Fourth consecutive strongly bullish week for Bitcoin, which closed at $ 47,025, performing gains that exceeded 7%. Chinese mobile phone company Honor has announced that its next smartphone model will support digital yuan, supporting the People’s Bank of China’s goal of developing hardware for digital currencies. Also, the President of Argentina Alberto Fernandez stated that his country will be open to the adoption of cryptocurrencies as an antidote to the high inflation that has plagued the country for several years. Bitcoin is now approaching $ 50,000 and there is widespread optimism among investors that the recent correction will be a thing of the past so long positions is what we select for this week.