11/10/2021

DISAPPOINTING RESULTS FROM THE NFPs (US JOBS MARKET)

General Comment
Last week’s very important announcement about the US jobs market (Non-Farm Payrolls – NFPs) disappointed the markets. More specifically, the expectations were for 500K new jobs in September, while according to the announcement, only 194K new jobs were created. The sentiment in the markets from this development was that the macroeconomic targets after the pandemic are still slow to be achieved and therefore the Fed’s quantitative easing program, which involves a monthly bond purchase of $ 120 billion, is more likely to continue for a long time. These estimates led to a drop in the dollar, which until then had strengthened but not to the extent that it upset the balance and the trend. There is a general sense of concern stemming from inflationary pressures and large increases in energy prices that may be slowing down the global recovery, and this creates a sense of risk-off mood for most investors.
In Europe, more or less the same pattern continues: Christine Lagarde reiterated that there is no rush for a tighter Monetary Policy in the Eurozone and the economic results of the European continent were not as expected, as we will see below.
The week closed with a slight recovery in most major stock Indices, stabilizing trends prevailed in gold while the rally of rising oil prices continued unabated. Finally, Bitcoin and most cryptocurrencies rose sharply.
The big event of the current week is undoubtedly the announcement of inflation in the US on Wednesday, with any increased inflationary pressures creating expectations for a tighter US Monetary Policy. The Fed Minutes (FOMC) are announced on the same day, which is also expected with great interest. In the shadow of these developments are other announcements such as inflation in Germany and China, the Unemployment Rate in the United Kingdom, the European Council meeting, and the Retail Sales in the US and China. Monday is a public holiday in the USA (Columbus Day).

SP500
The US SP500 Index closed last week with a rise, to 4,348 points and profits of about 0.70%. Monday started sharply declining, followed by three uptrend days and on Friday there was a correction. Since the beginning of September, the climate has not been good in the stock markets, with concerns over the post-pandemic recovery, the Evergrande issue and Sino-US relations, and some delays in Joe Biden’s fiscal expansion plan of $ 4 trillion. A break out below 4,260 points is needed for the situation to take the form of a strong correction and if this happens there will be concerns in the markets. On the contrary, above 4,470 points, optimism will probably return. We prefer short positions this week.

DAX30
The German DAX40 Index was slightly bearish in the previous week, closing at 15,188 points and having losses close to 0.20%. The Index volatility, though, was high and in the middle of the week, we saw prices well below 15,000 points. However, it seems that there are strong levels of support in this price range. Any break out below 15,000 points will favor the corrective scenario while over 15,400 points will create conditions that favor the upward reaction. Our selection for the current week is short positions.

FTSE100
The British FTSE100 Index moved higher last week, closing at 7,071 points and gains approaching 0.70%. The energy crisis has shaken the UK economy which is also plagued by a shortage of basic goods and some Brexit and European Union fisheries disputes. However, the army intervention has partially normalized the situation and the Index is kept stable above 7,000 units. Any loss of these levels creates conditions for intense correction, but above 7,130 units, buyers dream of prices above 7,200 units, which is a high of about 20 months. We prefer short positions this week too.

Gold
Consolidative trends prevailed in gold last week, closing at $ 1,757 with marginal losses of 0.20%. Combined with declining volatility, investors are shown to have a wait-and-see attitude concerning US Monetary Policy and inflation. The announcement of the US jobs market on Friday had a slight effect on things, as the impact on the dollar was small. September inflation and the Fed Minutes on Wednesday will be the most decisive factors that will affect gold shortly, but its trend so far remains declining. We may open short positions this week.

US Oil
The rally in oil continues with undiminished intensity with the futures of the next month closing at $ 79.54. The OPEC meeting last Monday, which did not hide further than the planned increase in production, gave new air and prices soared to the levels we have seen since 2014. Very high natural gas prices also favor the rise because already many industries that used natural gas, turn to oil to avoid high production costs. Earlier this week, there was a net excess of $ 80, and looking for resistance in the past, we find $ 87.20. We will try long positions this week.

EURUSD (Euro vs US Dollar)
EURUSD dropped for the fifth week in a row, opening at 1.1597 and closing at 1.1574. The drop would have been significantly higher (week low at 1.1529) if there had not been a bullish reaction on Friday due to the weakness of the dollar after the announcement of the NFPs. The dollar continued to be strong, based on market expectations for a sooner-than-expected change in the loose Monetary Policy in the US, and the euro continued to its known weakness since apart from the given loose Monetary Policy by the ECB, the other scheduled announcements were rather negative. Retail Sales in the Eurozone and the Trade Balance in Germany were lower than expected. If the EURUSD downtrend continues, the next support is at 1.15 and 1.1420 while it needs a recovery above the levels of 1.1650 to have reasonable hopes of an upward reaction. We prefer to sell positions this week.

GBPUSD (Great Britain Pound – US Dollar)
GBPUSD moved higher last week, opening at 1.3552 and closing at 1.3614. The pair has been on the rise despite the strong dollar and this is because there are reasonable rumors that the UK will hike Interest Rates soon enough, perhaps within the year. If this development is verified, it can reverse the big downtrend that has started since the end of May and the price range of 1.42. The first visible resistance, in this case, is 1.3750 so buy positions are our selection for the current week.

USDJPY (US Dollar – Japanese Yen)
The USDJPY was strongly bullish last week, opening at 110.91 and closing at 112.22. The strong dollar helped in this strong movement as well as the explosive rise in bond yields (the US 10-year bond yield climbed from 1.46% to 1.61%). In addition, Japan’s loose Monetary Policy with low inflation weakens the yen. The pair overcame critical resistances as well as the psychological limit of 112 and it is logical for buyers to expect even higher levels. We may try to buy positions this week too.

EURJPY (Euro – Japanese Yen)
The EURJPY had a bullish reaction last week, opening at 128.58 and closing at 129.89. The euro and the yen are both weak at the moment due to the loose Monetary Policy by their central banks but Japan with very low inflation (announced at 0.3% for September) has further room for quantitative easing. However, the pair remained below 130 and so new “fuel” will be needed for a further rise but in any case, we will try to buy positions this week.

EURGBP (Euro – Great Britain Pound)
The EURGBP moved lower last week, opening at 0.8547 and closing at 0.8498. Rumors of Interest Rates hike by the Bank of England strengthened the pound and pushed the pair to close below 0.85 but not below the critical support of 0.8450. The trend is bearish but this support at a low of 1.5 years can cause bullish reactions at these levels. We will open sell positions this week.

USDCAD (US Dollar – Canadian Dollar)
USDCAD was strongly bearish last week, opening at 1.2642 and closing at 1.2470. The US dollar may have been strong, but the Canadian currency certainly prevailed due to the explosive rise in the price of oil, which is Canada’s main export commodity. If the rally in oil continues, the support of 1.2420 will probably be threatened, but if there is a pause, then the reversal of the downtrend will begin to exist above 1.26. We insist in sell positions for one more week.

USDCHF (US Dollar – Swiss Franc)
Slightly declining was the USDCHF last week, opening at 0.9298 and closing at 0.9272. The Unemployment Rate in Switzerland remains at 2.8% while the country’s Foreign Exchange Reserves remain particularly high, reaching $ 1 trillion. These results strengthened the Swiss franc against the dollar and now Wednesday’s announcements from the US can cause strong fluctuations. We will try to buy positions this week.

AUDUSD (Australian Dollar – US Dollar)
Last week was bullish for the AUDUSD which opened at 0.7258 and closed at 0.7308. Australia expects strong growth by the end of 2021 as announced by the Bank of Australia and this has revived the morale of investors of the country’s dollar. The uptrend reaction of the pair was seen two weeks before as there was a stabilization after the downtrend. If this reaction continues, the next target of buyers is the price range of 0.7480, which is a high of about three months so buy positions are what we will open this week.

Bitcoin
It was the second strongly bullish consecutive week for Bitcoin, which closed at $ 54,715, and gains that exceeded 13%. The government of El Salvador has launched new ATMs for Bitcoin while JP Morgan has announced to its customers that it will use Bitcoin as a counterweight to high inflation. Add to that the information from Bloomberg that the SEC may approve an ETF for Bitcoin, soon enough. With these developments, cryptocurrency fans are quite optimistic that $ 60,000 is a very realistic target for Bitcoin, without hiding their hope for the all-time high of close to $ 65,000. Long positions are our selection for the current week.