The results announced by many American companies last week (Microsoft, Alphabet, etc.) were strong and the stock indices reached new all-time highs. These results further strengthened the positive image that had been formed in the previous days by the banks (Goldman Sachs, Morgan Stanley, etc.) and in combination with the reduction of bond yields, the stock markets strengthened significantly. It is worth noting that while the yield on the US 10-year bond declined, the yield on the 2-year bond rose, creating a convergence between them.
In Europe, the ECB meeting came as no surprise as interest rates and monetary policy in the eurozone remained unchanged. Christine Lagarde tried to reassure the markets by reiterating that the problem of inflation is temporary but when asked what has been discussed in the ECB executives’ ranks lately, she replied “inflation, inflation, inflation” and this showed that there are ultimately greater concerns than these appearing. The next day, inflation in the eurozone was announced at 4.1% for October, confirming these concerns.
With high volatility, the US dollar closed the week profitably. We saw a small correction for gold and oil while Bitcoin moved steadily for the second week in a row.
This week is very important for the financial markets. There are central bank meetings on interest rates and monetary policy in the US, the UK, and Japan. Also, at the end of the week, employment in the US (NFPs) is announced, a very important announcement as it will largely demonstrate the economic recovery after the pandemic. Inflation and possible central bank decisions on tighter monetary policy remain a central issue after the overwhelming liquidity in the markets since the pandemic.
The US SP500 index rose last week, to 4,601 points and profits that exceeded 1.50%. Many technology companies announced their results this week as well, with the sign being considered positive by the markets. The index was at new all-time highs, closing above 4,600 points. There is also a possibility that Joe Biden’s $ 1.7 trillion infrastructure project will be voted on this week, according to his statements. All of this, in anticipation of the Fed’s announcements of US monetary policy on Wednesday and the announcements of the unemployment rate on Friday, factors that could increase volatility and set a new tone in stock markets. The trend is upward but always at such high prices, there can be short-term profit takings that can cause corrections as the SP500 has had four strongly bullish weeks in a row. We prefer short positions this week.
The German index DAX40 moved upwards last week, closing at 15,711 points, with profits just above 1%. As long as the ECB’s quantitative easing program continues, the European stock markets will be favored. The German GDP announced on Friday was below expectations and so the index fluctuated in high volatility but almost immediately regained its uptrend. The goal of the optimistic buyers, of course, remains the bullish break out of 16,000 points and a new record of all times. Nevertheless, there is a clear lag and weakness of the European markets concerning that of the USA, which may continue. We may try short positions this week.
The British FTSE100 index was bullish last week, closing at 7,260 points and profits a bit above 0.40%. The index climbed to a 20-month new high price but did not have the weekly percentage return that the other main indices had, and this can probably be attributed to the rumors that have been circulating lately about interest rate increases by the Bank of England, which if announced will weaken the stock market. The Bank of England meeting this week is therefore becoming particularly crucial. The index trend is strongly upwards while correction concerns will start to appear below 7,160 points. We will open short positions this week.
Last week was corrective for gold, closing at $ 1,784.50 and losses close to 0.50%. The pervasive atmosphere for tackling inflationary pressures through tighter monetary policies by central banks is beginning to affect gold investors. It is worth noting how the main drop for gold occurred on the last day of the week (and the month), where it lost about 1%. $ 1,815, which is a high price of about two months, is certainly a short-term target for buyers, but in case we see prices below $ 1,770, the scenario of further correction may gain more credits. This week is crucial mainly because of the announcements from the United States that we have already mentioned. We will try long positions this week.
Corrective was the last week for oil with next month’s futures closing at $ 83.22, performing losses close to 0.90%. It was the first corrective week after nine consecutive weeks of a strong uptrend. Many analysts believe that oil is already at overbought levels and that corrections are inevitable, but some other analysts believe that the rally can continue. There has been an unexpected rise in US oil inventories by 4.3 million barrels and this has naturally shaken investor confidence in demand. Also of concern is Iran’s announcement that it could restart its nuclear program in late November. On the 4th of the month, there is the meeting of the OPEC members and in combination with the very important announcements in the USA, they can increase the volatility in oil and influence its trend. We may try some low risk long positions this week.
EURUSD (Euro vs US Dollar)
The EURUSD was bearish last week, opening at 1.1640 and closing at 1.1562. The exchange rate has had a slight downtrend since the beginning of the week on Thursday, but after the ECB meeting, we saw an impressive recovery to the area of 1.17, for Friday to come and the strong strengthening of the dollar to bring it back very close to a 15-month low price. Very high volatility is expected this week due to the full economic calendar which includes the announcement of the Fed’s Minutes on US interest rates and monetary policy as well as the announcement of the employment. Any hint of tighter monetary policy could strengthen the dollar and increase the likelihood that the EURUSD will fall below 1.15 so we may try sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
The previous week was bearish for the GBPUSD, which opened at 1.3739 and closed at 1.3692. The strengthening of the dollar resulted in this small downward movement for the exchange rate. This week contains many critical financial announcements as both the Fed and the Bank of England announce their interest rate and monetary policy reports. There have long been rumors that the Bank of England intends to hike interest rates soon to deal with high inflation. If these rumors are confirmed, the exchange rate can move strongly upwards and if it manages to exceed 1.3910 then 1.40 will be a very likely target for buyers. Conversely, if the GBPUSD stays below 1.37, the return scenario to 1.35 gains more points. We may try buy positions in the current week.
USDJPY (US Dollar – Japanese Yen)
The USDJPY moved higher last week, opening at 113.54 and closing at 113.99. Bond yields may have fallen but the strong dollar pushed the exchange rate higher and brought it back within shooting distance of the very significant resistance of 114.70. Japan’s monetary policy is expected to be announced next Tuesday without any surprises. Inflation in the country continues to be very low, allowing for a very loose monetary policy. This fact of course weakens the yen and so it is not ruled out that the USDJPY will continue to rise. Of course, the very strong support at 114.70, which is high for several years, needs a lot of attention. We will try buy positions this week.
EURJPY (Euro – Japanese Yen)
Last week was bearish for the EURJPY (2nd in a row) which opened at 132.13 and closed at 131.80. Both currencies (euro and yen) are quite weak, but the euro seemed weaker, which temporarily recovered on Thursday but weakened more on Friday, taking back all the rise. The exchange rate is at a critical crossroad since below 131.50 the correction may intensify while above 133 the chances of continuing the upward trend that has started for about two months, are enhanced. We will stay out this week.
EURGBP (Euro – Great Britain Pound)
Slightly bearish was the last week for the EURGBP which opened at 0.8461 and closed at 0.8443. The exchange rate is not far from the 20-month low, in the price area of 0.84 and this is mainly due to the strong pound based on market expectations for a hike in interest rates by the Bank of England. On the other hand, the loose monetary policy in the eurozone area continues to weaken the euro. Based on these expectations, the exchange rate has the potential to move below 0.84 but at such many months low, caution is needed because bullish reactions may occur. We may try short positions this week.
USDCAD (US Dollar – Canadian Dollar)
Last week was also consolidative for the USDCAD (the second in a row) which opened and closed in the price range of 1.2365 – 1.2370. Oil, Canada’s main export, was corrective but could not trigger an exchange rate recovery, despite a stronger US dollar. The logical conclusion is of course that if oil recovers its uptrend, the exchange rate may move lower, especially if we see prices below 1.2280. In case of strengthening of the American currency (which is quite possible since there is a meeting of the Fed this week), above 1.2430, the scenario of the upward reaction starts and gains credits so we may try buy positions this week.
USDCHF (US Dollar – Swiss Franc)
The USDCHF downtrend was stopped last week, after the opening and closing in the price range of 0.9145 – 0.9150, which gave a stabilizing trend in the exchange rate. However, the volatility was quite high, and this shows that there is life either to continue the downtrend or to recover based on a possible strengthening of the dollar. In a week when everything is possible due to the Fed meeting and the announcement of the unemployment rate in the US, a bearish break out of 0.91 will probably strengthen the downtrend, but if we see prices above 0.9230, it may be a harbinger of a strong upward reaction. We will open buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
The bullish rally for the AUDUSD continued for the 5th week in a row, as it opened at 0.7464 and closed at 0.7517. The Australian dollar has many reasons to be strong currently. The country’s basic exports, such as rising metals, strengthen the currency. Also, during the week was announced the completion of the quantitative easing program by the Bank of Australia. To all this must be added that the exchange rate managed to close above the milestone price of 0.75. In the vortex of high volatility expected this week, it is possible to see even higher price levels. But if the US currency starts to strengthen, it needs a strong enough bearish movement to reverse the trend. We may try buy positions for one more week.
The week was slightly bullish for Bitcoin, which closed at $ 61,421, performing profits of 0.8%. Bitcoin seems to have been “scared” of the new all-time highs it reached about two weeks ago and so it was the second week that it appeared with consolidative trends. On the other hand, some altcoins were greatly enhanced by absorbing some of the liquidity from cryptocurrency buyers. Technically speaking, it needs a break of $ 63,800 for Bitcoin to gain the momentum needed for new all-time highs. Considering that many cryptocurrency investors see Bitcoin as a counterweight to inflationary pressures, this week, which includes US employment announcements and Fed Minutes, will of course be particularly critical. Concerns about additional correction may arise below $ 59,400. We’d better stay out in this complex and possibly high volatile week.