The Fed announced at its recent meeting on November 3rd, that it is beginning to reduce the bond-buying program (tapering) that has been developed and implemented to address the effects of the pandemic on the economy. This was expected by many analysts and by the markets since the economy was also showing signs of recovery, but inflation in the US had risen to alarming levels that had to be addressed. At the same time as the economic recovery was the announcement of employment in the US last Friday (NFPs), where the new jobs announced were above those expected by the markets.
According to Jerome Powell, tapering could start in 2021 and end in mid-2022, but the statement that tapering does not imply an automatic increase in interest rates was also of paramount importance.
In Europe, Christine Lagarde reiterated that there will be no increase in interest rates in the eurozone soon and that this is logically expected to further weaken the euro. We saw the disappointment in investors after the announcement by the Bank of England, which ultimately did not raise interest rates as markets expected.
The result of the above is the significant increase of the main stock indices, some even set new record levels of all time. The dollar strengthened, sterling weakened significantly, gold rose sharply, and a second consecutive week of correction took place for oil. Bitcoin and most cryptocurrencies stabilized for the third week in a row.
The highlight of this week is undoubtedly the announcement of inflation in the US for October. Rising inflation could speed up tapering by the Fed. Other highlights of the week are the Eurogroup and Ecofin meetings in Europe, the announcement of GDP in the UK as well as inflation in Germany and China.
The US SP500 index closed last week with a rise, to 4,685 points and gains above 1.80%. It was the fifth week in a row that was accompanied by new highs of all time. Many stocks had an explosive rise such as Tesla which yielded more than 8%. The low interest rates from most central banks announced last week are a serious reason for the new rise. In addition, the 1.8 trillion fiscal expansion program that is expected to breathe new life into the market also contributes to the feeling of euphoria. The trend is strongly bullish, but corrections are not ruled out either due to short-term profit-takings or due to a change in investors sentiment. We may try short positions this week.
The German index DAX40 moved upwards last week, closing at 16,035 points, with gains of just over 2%. The index managed to exceed 16,000 points and set new historical highs. The announcements and statements of ECB executives continue in a loose monetary policy and low interest rates and therefore the European stock markets are favored. These developments outweighed the negative economic data of Germany last week, bringing the index above 16,000 points. Of course, the sentiment in Europe is not so positive because the fourth wave of the pandemic is sweeping many countries. It is therefore not ruled out that corrections may be made, especially in the case of the permanent loss of 16,000 units so we may try short positions this week.
The British FTSE100 index moved higher last week, closing at 7,312 points and gains above 0.70%. From last Thursday onwards, the index began to strengthen significantly after the surprise decision of the Bank of England to leave interest rates unchanged. The immediate result of this decision was the weakening of the sterling and the strengthening of the stock market. The index is already at a high of 21 months and it is reasonable for buyers to be optimistic about much higher price levels. Technically speaking, correction concerns can arise below 7,200 points and below this level, we may try short positions.
Last week was bullish for gold, closing at $ 1,820 and gaining close to 2%. Gold recorded a decline last Wednesday after the announcement of tapering by the Fed but from Thursday onwards began to strengthen sharply with a peak on Friday and the announcement of employment in the US. The policy of low interest rates is also something that favors gold and together with the inflationary pressures that are observed lately, they create a positive climate. The announcement of inflation in the US this week will be a defining factor for the trend in gold and if there is a steady excess of $ 1,837, the trend that will be created will be strongly bullish. On the contrary, with prices well below $ 1,800 we may see the uptrend slowing. We are keen to try long positions this week.
Corrective was the last week for oil with next month’s futures closing at $ 81.13, performing losses of about 2.50%. The week started sharply declining after the inventories announced in the US were increased and the rumors that circulated in connection with the OPEC meeting were related to a large increase in production. There was also an increase in production in Saudi Arabia, which raised additional concerns about falling prices. However, prices began to recover on Thursday, after US President Joe Biden’s proposal for an additional increase in production was not heeded, with the result that OPEC decided to increase only by 400,000 barrels per day, from December onwards. This event may give a new rise in oil, leaving behind the corrections of the last two weeks. Corrective concerns will return if there is a new turn to $ 80 but we are keen to open long positions this week.
EURUSD (Euro vs US Dollar)
The EURUSD stabilized last week, opening, and closing in the price range of 1.1555 – 1.1565. A new 16-month low of 1.1512 was reached in the middle of the week, but shortly after the announcement of the NFPs in the US, the exchange rate developed strong upwards, with the result that EURUSD closed the week, almost where it had opened. The announcement of the start of tapering on Wednesday gave new life to the dollar, which may continue to strengthen in the future. Retail sales, industrial production, and factory orders in Germany were disappointing. The euro, therefore, has several reasons to be weak, especially after Christine Lagarde’s statements that interest rates are not expected to rise soon. The logical development after these findings is that the exchange rate could be below 1.15 so we may try sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
Last week was sharply bearish for the GBPUSD, which opened at 1.3674 and closed at 1.3489. This downtrend is mainly due to the results of the Bank of England meeting last Thursday. More specifically, the markets expected from this meeting an increase in interest rates from 0.1% to 0.25%. This did not happen, and the pound began to fall until it found support in the price range, just above 1.34 which is a low price of about 11 months. The rest of the financial announcements for the United Kingdom affected the pound until Wednesday but then came in second place. If there is a bearish break out of 1.34, no one knows the fall that can be stopped as there is no close apparent support. We’ll try sell positions this week.
USDJPY (US Dollar – Japanese Yen)
The USDJPY, which opened at 114.05 and closed at 113.38, moved down last week. The de-escalation of bond yields played a big role in this downward movement. In particular, the US 10-year started the week at 1.57% and closed on Friday at 1.45%. Japan, due to very low inflation, can continue the quantitative easing program for quite some time, unlike the Fed, which has already announced how it will start tapering within the year. For three consecutive weeks, the exchange rate is between 113 and 114 and may need additional news and events to escape from this area. We may stay out this week.
EURJPY (Euro – Japanese Yen)
Last week was bearish for the EURJPY (3rd in a row) which opened at 131.82 and closed at 131.15. The drop in bond yields has certainly played a role in the fall as well as the weak euro, as the ECB continues its loose monetary policy without expecting an increase in interest rates in 2022. The first support for the exchange rate is at 130.85 while below these levels there is a landmark price of 130 which is also a psychological limit for many investors. In case of an upward reaction, the price levels close to 133 need to be approximated to establish recovery but we will try sell positions this week.
EURGBP (Euro – Great Britain Pound)
Last week was bearish for the EURGBP which opened at 0.8445 and closed at 0.8569. Of course, the news of the week also referred to the meeting of the Bank of England, which finally left interest rates unchanged at 0.1% without proceeding with the increase expected by the markets. This greatly weakened the pound and gave the exchange rate a boost even though the euro remained weak. If this situation continues, the next target of buyers is the price range above 0.8650 so we will try buy positions in the current week.
USDCAD (US Dollar – Canadian Dollar)
Last week was bullish for the USDCAD, which opened at 1.2379 and closed at 1.2454. The news of the labor market from Canada was encouraging as the new jobs created were above expectations and unemployment fell to 6.7% from 6.9% last month. But the most decisive factor in the fall of the Canadian dollar was the new correction of oil prices, which is the main export commodity of the country. A bullish break out above 1.25 will breathe new life into the exchange rate and in this case, we may see even higher levels. Otherwise, a return to the price range of 1.23 is needed to gain more chances for the continuation of the downward trend that has started since the end of August. Sell positions is what we will open this week.
USDCHF (US Dollar – Swiss Franc)
The USDCHF continued its downtrend last week, as the opening was at 0.9149 and the closing at 0.9121. Inflation in Switzerland was announced above market expectations, and it seems that the country’s currency is going through a period of strengthening. In any case, the determining factor continues to be the US dollar, and depending on its course, the course of the exchange rate will be determined. The USDCHF has been on a downtrend since the end of September and is approaching the benchmark price of 0.90. Significant US inflation announcement on the trend and exchange rate volatility in the coming days and we may try buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
Last week was bearish for the AUDUSD which opened at 0.7508 and closed at 0.7397. This correction came after five consecutive weeks of bulls and is mainly due to the last meeting of the Bank of Australia (RBA) on interest rates and monetary policy. The Bank of Australia denied the expectations of the markets for a tighter monetary policy and according to the statements, the interest rates are not expected to increase before 2023. In addition, the prices of iron, which is a major export product of the country, are under downtrend pressure. A complete reversal of this mini uptrend will be below 0.7170 while if there is a return above 0.7480, there are hopes of a continued rise. We may try sell positions this week.
The week was strongly bullish for Bitcoin, which closed at $ 63,340 and profits that exceeded 3%. Zuckerberg’s recent announcements about Meta and Metaverse have breathed new life into the world of cryptocurrencies, and Bitcoin, which has been hovering around $ 60,000, has gained momentum in recent days. The current week has already started strongly upwards approaching the all-time highs. If this feeling of euphoria continues to prevail in the circles of cryptocurrency investors, it is not excluded that these highs will soon be a thing of the past. The reversal of the trend may be below $ 63,000 but long positions is what we will open this week.