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WEEKLY REPORT: INDICES, COMMODITIES, CURRENCIES, AND CRYPTOS
THE BELL OF THE HIGHER INTEREST RATES IS RINGING IN EUROPE AS WELL
Weekly Report: Indices, Commodities, Currencies, and Cryptos
Last week was very full of news, financial announcements, and events. The ECB meeting on interest rates and monetary policy in the eurozone probably surprised markets and investors. Christine Lagarde said that inflation at 5.1% is a big danger for the eurozone and hides great risks. Following these statements, an increase in interest rates in the eurozone area in 2022 cannot be ruled out, something that was not in the program based on the statements of European officials, a short time ago.
In the United States, the intention is for a tight monetary policy and an increase in interest rates, with the probability that this will happen in March, amounting to 85.7%. The Fed has announced other interest rate hikes in the year to catch up with very high inflation. With inflation hovering above 7%, interest rates at 0.25%, and bond yields also at low levels (US 10-year closed at 1.92% last week), it is certain that there is a problem and that actions need to be taken. An important development was the positive news from the labor market in the USA since in January 467K new jobs were created against expectations for only 150K.
The American stock markets rose slightly while having high volatility, the British stock markets also rose while the European ones fell. The dollar appeared extremely weak as low interest rates and low bond yields in front of the huge population make the US currency disadvantageous. The euro, on the other hand, strengthened after the ECB meeting and the higher probability of hiking the interest rates in the eurozone. Gold strengthened, oil continued its frantic rally while Bitcoin and most cryptocurrencies performed a significant recovery.
This week does not have many important announcements but the announcement of inflation in the US next Thursday is enough to worry investors and create high volatility in the market. Market expectations speak for the unrealistic price (it seemed so a few months ago) of 7.3%.
The US SP500 index closed last week, at 4,483 points, with profits approaching 1.50%. Monday and Tuesday were strongly bullish days but from Wednesday onwards corrective trends prevailed, but not enough to change the sign of the week. The results of many companies, mainly technological ones dominated the forefront of the stock market. Meta Platforms, the parent company of Facebook, announced disappointing financial results and for the first time in its history, a decrease in users in North America. Its share plummeted, with losses of about 26%, dragging with it the main stock indices. On the other hand, Amazon had strong profitability, partly restoring a more positive market climate. A key point for this week is the announcement of inflation in the US, with the Fed having already stated that any worsening of inflation will mean more aggressive actions. The correction could be accelerated below 4,440 points so we may try short positions this week.
The German DAX40 index moved lower last week, closing at 15,162 points, with losses of 1.65%. Europe is experiencing multiple problems such as the threatening conflict in Ukraine, the energy crisis, inflationary pressures, and of course the pandemic that still plagues many European countries. In Germany, inflation remains high, the unemployment rate fell to 5.1% and factory orders rose satisfactorily. A key issue is tighter monetary policy and a possible rise in interest rates in the eurozone because that would likely hit stock markets. Crucial to further correction is the loss of 15,000 points and even more, the critical support at 14,800 points. We could try short positions this week.
The British FTSE100 index moved higher last week, closing at 7,472 points and profits over 0.40%. The British stock market has recently outperformed other major global stock indices and withstood last week’s hike in interest rates by the Bank of England. The PMIs in the UK were positive and the Bank’s expectations for higher inflation shortly may push some investors into the stock market to avoid a certain loss of real income. The target of many buyers of the index remains the price area of 7,576 points, which is a high price of about two years. We may try long positions this week.
Last week was bullish for gold, closing at $ 1,808 and performing profits reaching 1%. Many other investment solutions with low-risk profiles, such as bond yields, are significantly lower than inflation. The same is true of bank interest rates, even if certain increases are heralded by the Fed or other central banks. Gold benefits from the above because it has the potential to offer more profits, with a greater risk of course. A possible strengthening factor for gold will also be a possible continued weakening of the dollar. The narrow channel between $ 1,750 and $ 1,850 that gold has been moving for about 3.5 months still seems to be holding up but we’re keen to open long positions for one more week.
Last week was strongly bullish for oil with next month’s futures closing at $ 91.92, with profits exceeding 5.30%. It was the seventh consecutive bullish week for oil, from the price area close to $ 70, and total gains in these seven weeks over 30%. The last time that we saw such oil prices was the summer of 2014. The crisis in Ukraine and fears of a war conflict maintain a climate of fear and anxiety and the result is that oil prices have skyrocketed. To this was added a storm in Texas that threatened production at the largest shale unit in the United States. Inflation, the weak dollar, and the general energy crisis are also factors that raise prices, although OPEC at its recent meeting decided to increase daily production by 400K barrels. If this climate continues, we will likely see oil even at $ 100, but if rumors of a de-escalation prevail in Ukraine, then we will probably see a large de-escalation of prices. We may try some low-risk short positions this week, trusting that the crisis in Ukraine may subside.
EURUSD (Euro vs US Dollar)
We saw a big rise last week for the EURUSD which opened at 1.1142 and closed at 1.1451. It was the biggest weekly rise in recent months, with the dollar very weak and the euro strengthening significantly after the mini-surprise from the ECB meeting. High inflation in the eurozone seems to be pushing the European Central Bank to tighten monetary policy further and possibly hike interest rates in 2022, something that was not on the program and was ruled out through statements, a while ago. The positive news from the American labor market somewhat stopped the frantic rise of the pair but did not substantially change the picture. The announcement of US inflation on Thursday will be crucial for the EURUSD. A bullish breakout of 1.15 is likely to create new upward momentum for the pair but if the dollar starts to strengthen from market expectations for more actions from the Fed, then we can see a return to the downtrend channel in which the pair has in the last 9 months. We may try short positions this week.
GBPUSD (Great Britain Pound – US Dollar)
Last week was bullish for GBPUSD, as it opened at 1.3393 and closed at 1.3528. The dollar was weak but the sterling also strengthened after the recent rise in interest rates by the Bank of England. The increase in sterling, however, was relatively small because the interest rate event was expected and had probably already been consumed and digested by the markets. The positive image also from the US labor market limited the further strengthening of the pair. There is an informal competition between central banks on monetary policy and interest rates with a direct impact on the pair. Buyers are expecting a breakout of 1.3750, considering that this will put GBPUSD on an uptrend channel while the corresponding price range for sellers is close to 1.3360. By having a bigger trust in the first case, we may open buy positions this week.
USDJPY (US Dollar – Japanese Yen)
The USDJPY, which opened and closed in the price range of 115.20 – 115.25, had consolidative trends last week. The dollar was weak but this was offset by a rise in bond yields that most of the times favor the USDJPY. Industrial production and retail sales in Japan were below expectations, in contrast to the unemployment rate in the country in December, which fell to 2.7%, from 2.8% the previous month. Given the importance of the announcement of inflation in the US on Thursday, in case of the dollar’s recovery, the resistance of 116.35 may be threatened, which is a high price of about 5 years. For this reason, we could try buy positions this week.
EURJPY (Euro – Japanese Yen)
The previous week was strongly bullish for the EURJPY, which opened at 128.44 and closed at 131.92. The significant strengthening of the euro after the ECB’s interest rate and monetary policy stance in the eurozone area resulted in the “conquer” of the landmark price of 130. The resistance also broke at 131.60 and in combination with the continuing loose monetary policy from the Bank of Japan, we may see a new rise to the price range of 133.50 so buy positions is our selection for the current week.
EURGBP (Euro – Great Britain Pound)
Last week was bullish for the EURGBP which opened at 0.8314 and closed at 0.8463. The Bank of England raised interest rates by 0.25% but on the one hand due to expectations for a bigger increase and on the other hand, the big momentum gained by the euro due to the mini surprise from the recent meeting of the European Central Bank for monetary policy and interest rates, contributed to one the biggest weekly pair hikes lately. Above 0.85, the uptrend will further increase its chances but a possible return below 0.84 and especially below 0.8360 may restore the downtrend of recent months. We may try sell positions this week.
USDCAD (US Dollar – Canadian Dollar)
Last week was steadying for the USDCAD, which opened and closed around 1.2760. The Bank of Canada’s postponement of interest rate hikes and negative macroeconomic results did not allow the Canadian dollar to recover even if the US currency was weak, even if oil prices had a new upward rally. Canadian GDP rose 0.6%, new building permits fell 1.9% but more important was the rise in the unemployment rate to 6.5% in January from 6% in December. Since under these conditions the pair could not acquire a downtrend, it is logical that there is optimism among buyers for approaching the price range of 1.30 so buy positions is our selection for the current week.
USDCHF (US Dollar – Swiss Franc)
The USDCHF was bearish last week, as the opening price was at 0.9309 and the closing price at 0.9256. The weak US dollar was the main reason for the fall, even though Switzerland’s economic performance was not positive. The consumer climate fell dramatically and retail sales fell 0.4% in December, well below the previous month, which had risen 5.3%. The Swiss currency with a low-risk profile may be favored if the crisis in Ukraine leads to a conflict, but if things normalize and combined with a possible recovery of the dollar, the pair may rise to 0.94 so we may try buy positions this week.
AUDUSD (Australian Dollar – US Dollar)
Last week was bullish for the AUDUSD which opened at 0.6991 and closed at 0.7073. The rise was higher due to the weakness of the US currency but was restrained after the meeting of the Bank of Australia, which kept interest rates unchanged at 0.1% and did not give clear signs of tighter monetary policy. In addition, retail sales in Australia fell 4.4% in December, shaking the positive climate that has formed recently. China did not have much to contribute to the pair due to the New Year celebrations. The Bank of Australia’s policy, if combined with a possible strengthening of the US currency, could lead the AUDUSD to 0.70 again so sell positions is our selection for the current week.
Last week was bullish for Bitcoin, closing at $ 42,420 and performing profits close to 11.80%. The upward reaction that preceded seems to be continuing as some investors choose cryptocurrencies in response to high inflationary pressures worldwide. In addition, Russia, which had previously announced the ban on cryptocurrencies, seems to be retreating under pressure as the Russians hold a fairly respectable percentage of Bitcoins worldwide. Many media outlets are reporting that the IMF is pushing El Salvador to reverse its decision to introduce Bitcoin as an acceptable currency in the country, with the government not backing down for now. Above $ 44,500, the uptrend will probably earn more points, but many analysts say that there is a possibility of correction. We could some low-risk try short positions this week.