30/8/2021
LIQUIDITY SUPPLY REMAINS IN THE US UNTIL…
General Comment
The previous week went smoothly, with low volatility, until Thursday when the Jackson Hole Economic Symposium started, with the markets waiting for any statements from bankers or other market executives. On Thursday, Dallas Fed Chairman Robert Kaplan said that perhaps the tapering (reduction of the $ 120 billion-a-month bond-buying program) should begin in October, and the dollar recovered slightly since losing ground of the week. The big news, however, was expected on Friday, in the speech of Jerome Powell. There was news after the Fed chairman said that tapering would be appropriate to start this year, but he did not show much haste and the weapon of liquidity in the economy always remains on the table. It should be noted here that Powell’s term ends in a few months, there are midterm elections ahead and the turmoil from a sharp drop in liquidity is not in the government’s plans.
This sparked strong stock gains and pushed the dollar into even bigger losses.
On the European side, according to all statements by European officials from the ECB, there is no intention of raising Interest Rates in the foreseeable future or changing Monetary Policy, despite the progress that has been made in the macroeconomic figures of the Eurozone.
Gold and oil had significant gains while Bitcoin moved rather stabilizing after the big rise in recent weeks.
With these data, the announcement of employment in the US next Friday (Non-Farm Payrolls – NFPs) acquires special importance because any positive results will bring tapering even closer since the goal of reducing the Unemployment Rate will be even closer. Other interesting news and announcements this week are the PMIs in Germany / Eurozone / UK and the US, inflation in Germany and the Eurozone, and the Unemployment Rate and Retail Sales in Germany.
SP500
The US SP500 Index closed last week with a strong rise, at 4,507 points and gains that exceeded 1.50%. The week was bullish except Thursday but with Friday’s rally, SP500 managed to surpass the 4,500 points, a target set by many investors and analysts. US Monetary Policy and the prospect of tapering are having a big impact on the Index at this time, and in particular, Jerome Powell’s speech at the Jackson Hole symposium on Friday was the driving force behind the new price record. Under these conditions and based on the general climate of euphoria, we may see even higher prices without, however, excluding corrections due to securing profits. Long positions is our selection for the current week.
DAX30
The German DAX30 moved slightly higher last week, closing at 15,848 points, with gains close to 0.20%. There is a positive climate in general, concerning the response to the pandemic but also due to the high liquidity provided by the ECB and which does not seem to decrease soon but the Index reached 16,000 points (about two weeks ago), underwent corrections, and did not have so far been able to re-establish these levels. If the climate does not change, this may happen very soon so we may try long positions this week.
FTSE100
The British FTSE100 Index was bearish last week, closing at 7,091 points and losses that exceeded 1.10%. The trend remains bullish and with the correction that took place, the Index managed to remain well above the 7,000 points that are a psychological limit for investors. The main target of buyers remains the break above 7,188 points, which will be the highest price since February 2020. The situation in the United Kingdom, about the pandemic, seems to be normalizing and so it is possible to see uptrends soon and under these circumstances, we may try long positions this week.
Gold
Last week gold rose sharply, closing at $ 1,820 with gains of over 2%. The main reason for this rise is the weak dollar (gold is denominated in dollars) and the US Monetary Policy and so on Friday, after Powell’s speech, gold managed to easily exceed $ 1,800 and move even higher. The movement of gold in the last few days will have a characteristic of an uptrend above $ 1,828, but in case of strengthening of the dollar and a bearish breakout of $ 1,800, gold will have a chance to maintain the long-term downtrend that has begun since late May. An important event will be the announcement of employment in the US on Friday (NFPs). We may try long positions this week.
US Oil
Last week was a strong uptrend for oil with the futures of the next month closing at $ 68.69, recording gains that exceeded 11%. It was the biggest weekly rise in a long time since the hurricane, which is expected to hit the southeast coast of the United States this week, forced more than half of the oil production units and many rigs in the Gulf of Mexico to shut down. The focus, of course, is the meeting of OPEC member states, at the ministerial level, next Wednesday with the Kuwaiti oil minister has already stated that the recent production increases may be revised. If this is confirmed, we may see much higher oil prices, well above $ 70. Otherwise, and given that the hurricane in the Gulf of Mexico is temporary, it is possible to see corrections to $ 65. Long positions is our selection for the current week.
EURUSD (Euro vs US Dollar)
The EURUSD was strongly bullish last week, opening at 1.1691 and closing at 1.1795. The week had started higher after the pressure of the dollar, corrected somewhat on Thursday after the statements of Kaplan, and continued upwards on Friday with the speech of Jerome Powell at Jackson Hole where he hinted at tapering in 2021. The Eurozone and Germany had positive economic announcements, mainly in the PMI and GDP and this gave some extra supplies to the euro. It remains to be seen whether this bullish reaction will continue, with the first “obstacle” to the path to 1.20, the resistance of 1.19 or whether the dollar will return recovering, pushing the exchange rate to 1.17 again. Trusting more in the second case, we’re keen to open sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
GBPUSD moved higher last week, opening at 1.3618 and closing at 1.3755. The dollar, with its weakness, pushed the pair higher, moving it far away from the very significant resistance of 1.3570. The relative strengthening of the pound was also helpful in the upward movement as the number of pandemic cases seems to be stabilizing even though the economy in the United Kingdom is fully open. If this picture continues, it is possible that we will see GBPUSD approaching 1.40 again (the last time it was there was at the end of June) but in case of strengthening of the dollar, the pair may turn to 1.36 so we may try sell positions this week.
USDJPY (US Dollar – Japanese Yen)
The USDJPY moved slightly higher last week, opening at 109.68 and closing at 109.83. The dollar was weak but the pair managed to close higher due to the rise in bond yields (the US 10-year closed at 1.31%, having opened at 1.26%). The PMI, which was announced in Japan was below market expectations and did not leave much room for optimism in the yen. On the same page, the inflation in the country was again in negative territory and does not leave much room for tighter Monetary Policy. In any net uptrend of 110, the pair has the potential to move higher so buy positions is our selection in the current week.
EURJPY (Euro – Japanese Yen)
The EURJPY reacted bullishly last week, opening at 128.34 and closing at 129.55. The positive economic results of the Eurozone and Germany and the negative inflation in Japan strengthened the euro and pushed the yen and so the pair is now in a short distance of the milestone price of 130 which is also a psychological limit. A bullish breakout in this price range may put an end to the strong downtrend of the EURJPY over the last three months so buy positions is our selection this week.
EURGBP (Euro – Great Britain Pound)
The EURGBP moved with consolidative trends last week, opening at 0.8578 and closing at 0.8570. It was a pause after two sharply uptrend weeks, mainly due to the strength of the pound that surpassed the relative strength of the euro. If the pound continues like this and given that Interest Rates and Monetary Policy in the Eurozone will probably not change soon, a return of the EURGBP to 0.85 is not ruled out so sell positions is what we will open this week.
USDCAD (US Dollar – Canadian Dollar)
USDCAD moved strongly down last week, opening at 1.2819 and closing at 1.2611. It is not only the US dollar that has appeared weak but also the strengthening of the Canadian currency, due to the explosive rise in oil prices. If oil continues to rise, it is possible to see prices for USDCAD close to 1.25 but otherwise and in a possible combination with a stronger US dollar, the pair may move to 1.28. We prefer buy positions this week.
USDCHF (US Dollar – Swiss Franc)
It was a bearish week for the USDCHF last week, opening at 0.9160 and closing at 0.9110. A key factor in this movement was the dollar, which weakened significantly, while above expectations, the employment in Switzerland was announced, giving another tone to the fall in the pair. If 0.91 breaks out, it is possible to see the price range of 0.90 in the foreground, but above 0.92, the uptrend that has started since June is probably continuing so we prefer buy positions for one more week.
AUDUSD (Australian Dollar – US Dollar)
Last week was strongly bullish for the AUDUSD which opened at 0.7121 and closed at 0.7310, with an increase of almost 200 pips which is a rare event for the pair. Australia continues to have serious issues with the pandemic and Retail Sales fell by 2.7% in July, so there is a chance that this rise was temporary and the pair will go back to 0.71. But if the US dollar weakens further, the 0.7425 price range is the next strong resistance. We think that the first case has a better chance so we may try sell positions this week.
Bitcoin
Bitcoin dropped after five consecutive weeks of strong uptrend movements, closing at $ 48,809 and losses close to 1%. It seems that the recovery above $ 50,000 activated many sellers who, by liquidating Bitcoin, stopped its uptrend. The Kyrgyz government has announced a regulatory framework for cryptocurrencies to be used as a medium of exchange in the country. The well-known Kraken exchange also announced that it will apply for a license in Europe to expand its activities in the European market. All of this is a favorable environment for Bitcoin and cryptocurrencies, but the recent big rise has created a wave of sellers, with subsequent support at $ 46,300 and $ 43,900 and these are the targets that we will try to reach with our sell positions this week.
