Inflation in the US for October was announced at 6.2%, a price that is high for many decades. Concerns in international markets are beginning to mount as inflationary pressures appear to be more pronounced than expected and fears are mounting that the problem will not be as temporary as the central banks expected. It makes sense, then, that the Fed is likely to raise interest rates sooner than expected. These expectations caused a correction in the US stock markets while the dollar strengthened sharply.
In Europe, all the statements and reports converge that the loose monetary policy will continue and that there will be no hike in interest rates soon. Inflation in Germany was announced at 4.5%, a price we have been seeing since the 1990s but that does not seem to be changing anything. Thus, European stock indices continued to strengthen while the euro weakened significantly as the quantitative easing continues.
Bond yields were also on the rise. Indicatively, we mention that the American ten opened at 1.46% and closed the week at 1.57%.
Gold rose sharply, oil corrected for the third week in a row while Bitcoin continues to flirt with the all-time highs.
This week, of course, is dominated by the announcement of inflation in the eurozone next Thursday. In addition, retail sales announcements in the US, the UK, China, and Canada, as well as unemployment and inflation in the UK, are significant.
The US SP500 closed last week with a small correction, at 4,681 points and marginal losses. It was the first time the strong uptrend slowed down, after five uptrend weeks. The announcement of inflation in the US played a decisive role as inflationary pressures may force the US central bank to accelerate the program of reducing quantitative easing and raising interest rates. The trend, of course, has not changed yet, as the index is very close to the all-time highs, but if the perception of the markets for a faster increase in interest rates prevails, we may see more corrections. Below 4,620 points a possible correction is likely to accelerate so we may try short positions this week.
The German DAX40 moved slightly higher last week, closing at 16,085 points, with gains just over 0.30%. The index managed to stay above 16,000 points and continue its uptrend even if the corresponding US stock indices performed corrective moves. This is because in Europe the loose monetary policy and the low interest rates continue in contrast to America where the situation seems to be gradually changing. The trend is strong, the ECB does not seem to be changing its policy any time soon, so possible corrective action can only be made through short-term profit-making. We may try short positions this week.
The British FTSE100 index moved higher last week, closing at 7,333 points and profits a bit above 0.60%. The Bank of England with its policy of low interest rates favors the stock markets and so the index has climbed to high prices for about 21 months. This week contains important announcements for the United Kingdom (inflation, retail sales, and unemployment rate) and so volatility is expected to increase. These announcements will also shape market views on the course of the country’s economy and whether the index will continue to move strongly upwards (as it has been doing since mid-September) or whether it will correct, which is more likely below 7,210 points. Short positions is what we may open this week.
Last week was bullish for gold, closing at $ 1,867 and profits close to 2.60%. Global inflationary pressures favor the rise of gold as many investors use gold as a hedging instrument in their investments. Lately, however, a very strange phenomenon has been appearing, with gold and the US dollar strengthening at the same time. This is a very rare phenomenon and when it occurs it usually does not last long. If gold corrects, the key point is the $ 1,815 price range, which is strong support. If the uptrend that has started since the end of September continues, the target of many buyers is the price range close to $ 1,920 but believing more in the correction, we may try short positions this week.
Last week was corrective for oil with futures of next month closing at $ 80.69, performing losses of about 0.50%. Over the past three weeks, oil has been correcting, and this is mainly due to three reasons: the strong US dollar (let’s not forget that oil is valued in dollars), OPEC’s revised downward review for demand at the end of this year and the rumors that are circulating that Joe Biden may channel oil to the market from US strategic reserves to keep prices lower. These figures have brought oil below the $ 80 mark, further boosting the corrective scenarios. We need to see prices above $ 82.30 to strengthen the uptrend scenario but short positions is our selection for the current week.
EURUSD (Euro vs US Dollar)
EURUSD was strongly bearish last week, opening at 1.1558 and closing at 1.1443. This big drop started on Wednesday after the very high inflation in the USA was announced. The perception in the markets is that the Fed is going to take measures to reduce inflationary pressures and this fact is making the dollar stronger. In Europe, on the other hand, it seems that quantitative easing will continue, a fact that weakens the euro. The announcement of inflation in the eurozone will be very important this week, but technically the pair is in a strong downward movement without an obvious cushion in the current area, while the next support is in the price range of 1.1170. We will open sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
The previous week was bearish for GBPUSD, which opened at 1.3480 and closed at 1.3414. Inflationary pressures in the US reinforce the perception of the Fed taking action and strengthening the dollar. The pound, however, weakened last week due to negative announcements in the UK. More specifically, industrial production and GDP were announced below market expectations. This week is very important for the United Kingdom as inflation, retail sales, and unemployment rate are announced. The pair is in the price range of the strong support of 1.3410 and any bearish break out of these levels can lead to much lower prices. A clear uptrend above 1.3550 is needed for recovery hopes but we’ll keep opening sell positions for one more week.
USDJPY (US Dollar – Japanese Yen)
The USDJPY moved higher last week, opening at 113.35 and closing at 113.91. The strong dollar pushed the pair higher while the Japanese currency continues to be weak mainly due to the continued loose monetary policy by the Bank of Japan. One of the highlights of the past week is the announcement of the producer price index at 8%, a price that has been high for many decades. The USDJPY remains relatively close to the price range of 114.70, which is a high of almost four years. So, we need to be very careful because this resistance is very strong, even if the trend is strongly bullish. There’s still room to open buy positions for one more week.
EURJPY (Euro – Japanese Yen)
Bearish was the last week for the EURJPY (4th in a row) which opened at 131 and closed at 130.35. Both currencies (euro and yen) are weak at the moment due to the quantitative easing that continues in the eurozone and Japan. However, it seems that the euro is weaker, even if there are inflationary pressures in Europe. The pair is a breath away from the milestone price of 130 and this price range is critical to the short-term trend and course of the EURJPY. We may try buy positions this week.
EURGBP (Euro – Great Britain Pound)
Last week was bearish for the EURGBP which opened at 0.8570 and closed at 0.8530. The euro continues to weaken amid the ECB’s loose monetary policy picture, while the sterling picture disappoints investors after the Bank of England did not raise interest rates recently. The pound, however, shows some signs of recovery even though the financial results from the United Kingdom were disappointing. The price range around 0.85 is critical for the pair and we may try buy positions in the current week.
USDCAD (US Dollar – Canadian Dollar)
Last week was bullish for the USDCAD, which opened at 1.2440 and closed at 1.2547. Two factors played a key role in this upward movement: the strong dollar after the announcement of inflation in the US and the new correction in oil prices that weakened the Canadian currency, as oil is the country’s main export product. Canada’s financial calendar was empty last week but this week retail sales and inflation are being announced and so more interest is expected. The resistance at 1.2650 is important for the continuation of the uptrend, while a clear break below 1.25 may rekindle the hopes for a further fall. We’ll try buy positions this week.
USDCHF (US Dollar – Swiss Franc)
The USDCHF had a strong uptrend last week, as the opening price was at 0.9117 and the closing price at 0.9211. This course seemed like an outburst after a downtrend that had started for the pair about two months ago. The unemployment rate in Switzerland remained unchanged at 2.7% while the producer price index climbed to 5.1%. Above 0.9275 the pair may gain momentum for further upward movement while a turn towards 0.91 will probably restore the downtrend. We may try buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
Last week was bearish for AUDUSD which opened at 0.7391 and closed at 0.7331. The US currency strengthened after the announcement of inflation in the US but the Australian dollar weakened significantly after the announcement of the unemployment rate in the country at 5.2% in October, which is pretty much higher compared to 4.6% which was the previous price. The next strong support for AUDUSD is much lower at 0.7170, while the price range of 0.7480 is the resistance for any upward reaction for the pair. We will open sell positions in the current week.
The last week was bullish for Bitcoin, which closed at $ 65,560 and profits that exceeded 3.50%. Global inflationary pressures are strengthening cryptocurrencies and Bitcoin in general, and so gold, the traditional hedge for inflation has now serious competitors. There is widespread optimism among cryptocurrency fans that Bitcoin may soon reach $ 100,000 but that remains an overly optimistic view. The first stop for buyers can only be the all-time highs above $ 69,000. Corrective concerns may arise below $ 62,000 but long positions is what we will open this week.