6/9/2021

DISAPPOINTING RESULTS FROM THE US JOBS MARKET

General Comment
The most important news of the past week was the announcement of Friday for employment in August in the USA (NFPs). The result was disappointing, just 235K positions against expectations for 750K, in a critical turn of the American economy to escape the effects of the pandemic. Employment is the number one goal set by the Fed’s Jerome Powell to change US Monetary Policy, which has been loose since the beginning of the pandemic, to $ 120 billion a month in a bond-buying program. Following Friday’s disappointing result, that target is being phased out and the tapering of the bond-buying program is postponed to the future. The immediate consequences of this situation were the fall of the dollar and the rise of stock Indices as there is a widespread feeling that much of the new money ends up in shares.

Gold continued to rise, oil had rather stabilizing trends while Bitcoin continued the uptrend rally that has been going on for several weeks.

Europe is taking over this week, with the ECB meeting on Interest Rates and Monetary Policy in the Eurozone dominating, but no changes or surprises are expected. It should be noted that inflation in the Eurozone for August was announced at 3% and this is a different parameter that may hide future developments. Otherwise, the week does not contain significant announcements and only the GDP of the Eurozone and the United Kingdom and inflation in Germany and China stand out. Holiday on Monday for USA and Canada (Labor Day) but there is Ecofin in Europe.

SP500

The rally continued last week for the US SP500 Index, which closed at 4,533 points and gains of about 0.60%. The unexpected disappointing results from the US jobs market, favored the scenario of the continuation of the loose Monetary Policy by the Fed, arguing that the provision of liquidity will be directed to some extent to the stock markets. After new all-time highs and a lack of significant financial announcements for the US this week, only short-term earnings gains can cause corrections, as the Index trend is strongly upward. We prefer long positions for one more week.

DAX30

The German DAX30 Index moved correctively last week, closing at 15,758 points, having losses of more than 0.50%. High inflation in the Eurozone, which raises suspicions that the ECB will stop providing liquidity sooner, as well as the short positions that occurred after reaching 16,000 units, brought this result. In addition, Retail Sales and PMIs were reported in Germany below expectations and we may see the correction expand to support at 15,600 points, so short positions is our selection for the current week.

FTSE100

The British FTSE100 Index moved slightly higher last week, closing at 7,138 points and marginal gains above 0.10%. The pandemic seems to be stabilizing in the UK and with the economy fully open, there is optimism for a better course. A significant obstacle to the further uptrend of the Index is the resistance above 7,190 points, which is a high price of about 1.5 years. A break of these levels indicates a strong uptrend for the FTSE100 so long positions is what we’ll try this week.

Gold

Last week was bullish for gold with a closing price at $ 1,830 and gains over 0.50%. The week was consolidative but on Friday after the announcement of employment in the US, the dollar weakened and favored the rise of gold. Given that the only significant development that could affect gold this week is the ECB meeting, gold will continue to largely depend on the course of the dollar and possibly the course of the pandemic. Close to $ 1,840 there is a strong resistance, which if overcome is probably paving the way for higher levels. On the contrary, below $ 1,800, it is possible to see further corrective trends. We may try short positions this week.

US Oil

Last week was practically neutral for oil with the futures of the next month opening and closing in the price range of $ 69.10 – $ 69.30 and a marginal increase of 0.60%. At the OPEC meeting last Wednesday, it was decided to continue the production increase by 400 thousand barrels per day, which was recently approved, despite the rumors that had circulated to the contrary. As Hurricane Ida hits the east coast of the United States, with many oil rigs and drilling rigs shut down, the oil will likely return to normal, depending on the dollar. The long-term uptrend is maintained even the obvious first target of buyers is $ 70 and this is what we’ll go after with our long positions this week.

EURUSD (Euro vs US Dollar)
EURUSD moved strongly up for the second week in a row, opening at 1.1792 and closing at 1.1878. The pair has been on an uptrend almost all week, mainly due to the weakness of the dollar as tapering continues to emerge as a prospect following Powell’s recent statements and the disappointing results of the US jobs market. There was a bullish breakout of 1.19 and an immediate return below these levels but if this is repeated, the scenario of 1.20 will become quite possible. The focus of this week is the ECB meeting on Interest Rates and Monetary Policy in the Eurozone. We may try buy positions this week.

GBPUSD (Great Britain Pound – US Dollar)

GBPUSD moved higher last week, opening at 1.3756 and closing at 1.3858. The weak dollar was again in the spotlight and pushed the pair up in a week with little news and announcements for the UK (only the PMI indicators were significant with practically neutral results). The pandemic and the Delta mutation seem to be under control in a country that for months has had its economy fully open to any activity. A bullish breakout of 1.39 could pave the way for the important resistance of 1.40 so buy positions is what we’ll open this week.

USDJPY (US Dollar – Japanese Yen)

The USDJPY moved slightly lower last week, opening at 109.85 and closing at 109.69. Bond yields moved marginally upwards (the US 10-year closed at 1.32%, having opened at 1.30%) and this somehow canceled the weakness of the dollar and did not allow the pair to fall further. The yen was favored due to the Unemployment Rate reported in Japan at 2.8%, better than expected but also due to the nature of the yen as a safer investment choice amid concerns about the pandemic. As long as the USDJPY remains below 110, it is more likely to fall further with the 109.10 price range being the next support so sell positions is our selection for the current week.

EURJPY (Euro – Japanese Yen)
The EURJPY continued to rise last week, opening at 129.55 and closing at 130.29, surpassing and closing above 130. The high inflation announced in the Eurozone raises hopes for an early tightening of Monetary Policy in the Eurozone, favoring the euro. Above 130.75, it is possible to see upward trend data for the pair and we prefer buy positions this week.

EURGBP (Euro – Great Britain Pound)

The EURGBP moved with consolidative trends last week, opening at 0.8564 and closing at 0.8570. It was the second week in a row with this behavior, demonstrating a “tie” between the euro and sterling that has been both strong lately. Given that the long-term trend that has started since the beginning of the year is bearish, we may see an approach of 0.85 again so sell positions is our selection for the current week.

USDCAD (US Dollar – Canadian Dollar)

USDCAD moved lower last week, opening at 1.2611 and closing at 1.2526. The oil that always affects the Canadian currency was practically neutral and so the downward movement should be attributed mainly to the fall of the US currency. Canada’s announcements were far from encouraging, with the country’s GDP for Q2 2021 moving in negative territory against growth expectations. If the US dollar continues to be weak, there is a chance that we will see the pair moving even lower but some caution is needed as the 1.25 price range is strong support. We’d better stay out this week.

USDCHF (US Dollar – Swiss Franc)
USDCHF moved higher last week, opening at 0.9109 and closing at 0.9138. It was the only major pair that moved in favor of the dollar after the extremely disappointing announcements about the Swiss economy. Indicatively, we mention that the GDP of the 2nd quarter of 2021 was announced at 1.8% while the markets were expecting more than 2% but also the inflation of August passed in positive territory. Any temporary issues in Switzerland, however, do not have the power to affect the USDCHF as the dollar has, and any continuation of its weakness could push the pair to 0.90 so sell positions is our choice for this week.

AUDUSD (Australian Dollar – US Dollar)

It was the second strong in a row bullish week for the AUDUSD which opened at 0.7304 and closed at 0.7450. The Australian economy is plagued by local lockdowns imposed to combat the Delta mutation but the country’s GDP was announced for the second quarter of 2021, above expectations, at 0.7%. The Trade Balance was also strongly in surplus and so the Australian currency strengthened, pulling the pair higher, with the help of course the weak US dollar. After that, it makes sense for AUDUSD buyers to think that 0.75 is a realistic target and this is our selection for this week too: buy positions.

Bitcoin

Bitcoin recovered to a strong uptrend, closing at $ 51,809 and gains exceeding 6%. The $ 50,000 breakout has filled cryptocurrency investors with optimism, but JP Morgan warned that the current rise is more of a “cryptomania” for investors than a healthy and structured rise. The statements of John Paulson of Paulson & Co., who said that cryptocurrencies have no physical value, were also negative for the sector. Investors, however, do not seem to be discouraged and they are already dreaming of even higher levels since technically, on the way to $ 60,000, there is no strong resistance. Long positions is our selection for the current week.