Inflation in the eurozone was announced at 4.05% and this is the highest price we have seen since July 2008 and the second-highest in the history of the Union. However, Christine Lagarde reiterated that the quantitative easing program will continue unabated and that there is no thought of raising interest rates in 2022. These statements have resulted in the strengthening of European stock markets as well as the weakening of the euro. It is worth noting that the European continent is affected by the fourth wave of the pandemic and that in many countries a partial or total lockdown is already in place. This is an issue that has caused particular concerns and is turning a portion of investors into safe-haven assets.
On the other side of the Atlantic, markets continue to move in the reality of high inflation and the Fed’s plan to reduce its bond-buying program (tapering). The US financial calendar did not have any major announcements, except for retail sales, which rose above expectations, showing how the US economy is on a positive growth trajectory. Stock markets strengthened as the dollar rose sharply amid expectations of tighter monetary policy.
Gold corrected, oil continued to correct, while Bitcoin also suffered losses.
The highlight of this week is the announcement of the Fed minutes (FOMC), which will set the tone for US monetary policy and interest rates in the near future. Also, important announcements are US GDP & durable goods orders, PMIs in US, eurozone, Germany, UK, and Australia as well as interest rates in China. Thursday is a public holiday in the US (Thanksgiving Day).
The US SP500 index closed slightly higher last week, at 4,697 points with profits a bit above 0.30%. In the last two weeks, the strong rise of the index has stopped without, however, correcting significantly, showing a certain resilience. The technology industry is leading the way and does not allow the index to be affected by the negative climate that has formed due to the fourth wave of the pandemic. Joe Biden’s fiscal expansion program also keeps the positive climate alive in many sectors of the US economy. Below 4,620 points, concerns for a broader correction will intensify even if at the moment the trend is bullish and the index is very close to the all-time highs. We may try short positions this week.
The German index DAX40 was bullish last week, closing at 16,137 points, with profits over 0.30%. The index had a clear uptrend until Thursday but since then and especially on Friday showed strong corrective trends. Quantitative easing continues in Europe but market psychology is beginning to suffer from the fourth wave of the pandemic that has led many countries to some form of lockdown. A mini-rally has started since the beginning of October for DAX40, which seems to have stopped for the time being, and to continue, the all-time highs close to 16,300 units need to be re-approached. If we see the index below 16,000 points, the scenario of further correction will have a better chance but long positions is what we will open this week.
The British FTSE100 index dropped last week, closing at 7,204 points with losses of more than 1.70%. It is remarkable how the index behaved worse than most major stock indices worldwide. High inflation in the UK calls into question loose monetary policy but there have been some shares of the British dashboard that have underperformed. AstraZeneca has collapsed due to Pfizer’s recent success with the pandemic pill and some other stocks have not had the expected results. The correction may continue or even accelerate below 7,150 points while there is hope for recovery above 7,300 points. Short positions is what we will open in the current week.
Last week was corrective for gold, closing at $ 1,847 and losing more than 1%. Gold has had an explosive rise since the end of September and a correction like this was more or less expected. High inflation continues and favors gold as well as the climate of concern over the attack of the fourth wave of the pandemic. The strong US dollar is a deterrent for more profits because let’s not forget that gold is valued in dollars. Of paramount importance for the course of gold shortly is the announcement of the Fed’s minutes on Wednesday. Buyers are targeting $ 1,880, which is the highest price of the last week and about 5.5 months high. Below $ 1,815 there is a greater chance of a reversal of the trend. We may try long positions this week.
Last week was strongly bearish for oil with the futures of the next month closing at $ 75.64, performing losses that approached 5%. There are two main reasons for this downtrend movement. First, demand concerns due to the fourth wave of the pandemic currently affecting mainly Europe. The second reason is the strengthening of the dollar, in which the price of oil is valued. The current price range near $ 75 is critical because buyers may see these levels as an opportunity. Especially over $ 77 this interest can be rekindled even more. But if there are consolidated prices below $ 75, the oil may have entered a downtrend channel. Trusting more the first case, we are keen to open long positions this week.
EURUSD (Euro vs US Dollar)
EURUSD was strongly bearish last week, opening at 1.1445 and closing at 1.1280. The US dollar remains strong after the recent announcements by the Fed for a tighter monetary policy in the US. The euro, on the other hand, is mired in a whirlwind of the ECB’s loose monetary policy and low interest rates that are not expected to rise any time soon. Except for inflation in the euro area, the rest of the economic calendar in Europe did not have any particular surprises and the result is that the exchange rate is based on the expectations of the markets from the central banks. The EURUSD has weakened significantly in recent times and is very close to the critical support of 1.1170 so we may try sell positions this week.
GBPUSD (Great Britain Pound – US Dollar)
The previous week was slightly bullish for the GBPUSD, which opened at 1.3411 and closed at 1.3443. The pound was the only major currency to strengthen against the dollar. The high inflation announced in the United Kingdom (4.2% in October) raised market expectations for a tighter monetary policy by the Bank of England. In addition, the UK financial announcements were positive: the unemployment rate fell to 4.3%, while retail sales were higher than expected. The pair has been on a downtrend since the end of last May and this trend may continue, especially if we see prices below 1.3350. On the contrary, hopes for a continuation of the upward reaction may be seen above 1.36. Sell positions is our selection this week.
USDJPY (US Dollar – Japanese Yen)
The USDJPY, which opened at 113.92 and closed at 114.02, moved slightly higher last week. The strong dollar pushed the pair up to the price range of 115 but somewhere there was intense pressure from sellers since it is a price zone that is a high of about 4.5 years. In addition, bond yields showed a slight decline and in particular, the US 10-year opened at 1.57% and closed at 1.55%. The pandemic is also creating momentum for safe havens such as the Japanese yen. The trend remains upward and the strong resistance just below 115 is difficult to overcome but there’s still room for buy positions this week.
EURJPY (Euro – Japanese Yen)
The EURJPY, which opened at 130.41 and closed at 128.63, fell sharply last week. Earlier this week, Japan’s GDP was announced, which fell well below expectations, but it seems that the euro is going through a period of great weakness. The yen attracts the preferences of a portion of investors due to the negative investment sentiment caused by the fourth wave of the pandemic. The exchange rate broke out the milestone price of 130 and is very close to the significant support of 127.90, which if broken will be a low price of about 9 months. We may try sell positions in the current week.
EURGBP (Euro – Great Britain Pound)
Last week was bearish for the EURGBP which opened at 0.8522 and closed at 0.8389. The euro is in free fall due to the continued loose monetary policy of the ECB. The pound, on the other hand, strengthened due to high inflation and the positive economic announcements of the week in the United Kingdom. There was a bearish break out of the critical support of 0.84 and so the EURGBP is at a low price of about 21 months but it has more room for bears so we may try sell positions this week.
USDCAD (US Dollar – Canadian Dollar)
Last week was bullish for the USDCAD, which opened at 1.2541 and closed at 1.2633. The continuing correction in oil prices causes the weakening of the Canadian currency as the country’s economy is heavily dependent on oil. Inflation in Canada was announced at 4.7%, which is the highest price in the last 30 years. The strong US currency is also pushing the exchange rate higher, creating optimism among buyers about how it can soon reach and exceed the levels of 1.28. Signs of a reversal of the trend will begin to appear below 1.25 but we will continue with buy positions for one more week.
USDCHF (US Dollar – Swiss Franc)
The USDCHF had a strong uptrend last week, as the opening was at 0.9201 and the closing at 0.9288. Statements from the Bank of Switzerland show that the relatively high inflation of the country is not a cause for concern at the moment and that the quantitative easing will continue as the goal is for the Swiss franc to weaken further. These developments combined with the strong dollar create positive expectations among some investors that the pair could reach the strong resistance of 0.9370. A move of the USDCHF to 0.91 could stop the strong uptrend that has been created for two weeks but we will try buy positions for one more week.
AUDUSD (Australian Dollar – US Dollar)
Last week was bearish for AUDUSD which opened at 0.7323 and closed at 0.7228. The announcement of Bank of Australia minutes and Philip Lowe’s speech were interpreted by the markets as a continuation of loose monetary policy and low interest rates. Also, the negative climate created by the 4th wave of the pandemic creates a risk aversion in the investment community and a move away from high-risk options such as the Australian currency. Sellers are starting to look at the price range of 0.71 while hopes of an upward reaction will begin to rise above 0.7370. We may try sell positions this week too.
Last week was bearish for Bitcoin, which closed at $ 58,660, performing losses that exceeded 10.50%. The US Securities and Exchange Commission has expressed concerns about the issuance of new Bitcoin-based ETFs. The first ETF a few weeks ago had a very high capitalization in a short period and, logically, the markets expected some continuation in this. In addition, many options that expired last Friday pushed the price even lower. The most critical support in a possible correction is close to $ 53,000 while recovery breaths could be over $ 61,000. We’ll try long positions this week.