23/03/2020

 

IMPORTANT DISCLAIMER

The information of this report is of a general nature only. It is not a personal financial advice. It does not take into account your objectives, financial situation and personal needs.

a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.

 

General Comment

The volatility of the markets keeps being in extremely high levels in between the coronavirus pandemics that affects the whole world. USD appeared last week very strong since the investors favour the safety and not the risk exposure. FED though, during last week, announced swap lines with many Central Banks (ECB, BoE, BoJ etc) even with emerging markets such as Brazil or other European countries such as Denmark and Sweden. It will take a lot of attention regarding USD because another one mini Plaza accord for a relative stop of dollar’s raise may be on its way.

 

EURUSD

Strongly bearish week for EURUSD which opened at the price region of 1.11 and closed at 1.07, reaching 3 years lowest price. Coronavirus pandemics have caused a huge risk–averse to the investors so USD is considered to be safer and very strong even if FED has performed a series of fiscal attempts and the Interest Rates have the price of 0.25% (we need to remind that until last summer, Interest Rates had a price of 2.25%). Coronavirus does not seem to stop its expansion regarding the cases and the deaths so we expect a further bearish movement, that is why we’ll open sell positions this week, targeting the price area of 1.05. A big factor for the pair’s behaviour will have the March PMI announcements during the week in USA, Eurozone and Germany because the size of the damage may be revealed in each territory as per Industry, Services and Manufacturing sectors.

 

GBPUSD

Second in a row free–fall week for GBPUSD which opened at 1.2243 and closed on Friday at 1.1624. During the week, the lowest price was close to 1.14 and this price region for the pair is the lowest since the mid 80s. England is hit by the coronavirus pandemics strongly because the government took delayed action and FCA asked from the FTSE companies to delay the announcement for the results for at least 2 weeks. Also, Bank of England lowered the Interest Rates from 0.75%, to 0.1% which is all time low record! Under these circumstances and by knowing the strength of USD, it’s difficult to spot a GBP recovery. On the other hand, the pair is in extremely oversold condition and it gives an extra motivation to the buyers. It’s very possible to see consolidation movements this week so a range strategy with some small low-risk opportunistic buy positions will be our option.

 

USDJPY

A strong recovery for USDJPY which climbed up to 111.50 and it finally closed on Friday at 110.74, a very impressive come back if we consider that about 2 weeks ago the price had touched the area of 101! USD is considered to be very strong this period of time so there are plenty of buyers that are not affected even from the price of the 10 years US treasure yield which dropped from 1.18% last Wednesday to 0.85%. Early this morning, it is moving even lower to 0.82% so the pair is moving to the region of 110 but most likely it will recover again and we expect to test the price of 112. We will open buy positions with above target but first we will wait for the second vote in Senate for the approvement of $1 trillion in order to battle the coronavirus pandemics consequences.

 

EURJPY

Sideways to slightly bearish movement last week for EURJPY. The average price of the pair the last days is close to 118.50 and it seems that it cannot easily escape below 116.50 or above 120. If we exclude some possible negative reactions after the European and German ΡΜΙ that may push EUR, we don’t expect important change in the pairs behavior so we’ll favor the range strategy for the current week and maybe some opportunistic low-risk sell positions.

 

EURGBP

Bullish was the previous week for EURGBP with a weekly open at 0.9027 and a weekly close at 0.9181 but we need to underline that on Thursday the pair touched the price of 0.95 and after that, a strong downtrend took place. We may see an expansion of this correction so we’ll open sell positions this week.

 

USDCAD

Strongly bullish was last week for USDCAD which started from the region of 1.39 and managed to close at 1.4328 while on Thursday it performed a weekly high at 1.4668. The strong USD in comparison with the weak CAD due to very low oil prices are the major causes for this rally. Canada’s economy has a lot and important problems due to the coronavirus pandemics. Only last week there were about 500,000 applications to the Unemployment Insurance because of the massive layoffs while in the same week last year this number was 27,000. The USDCAD uptrend since the beginning of the year is more than obvious but it may face overbought issues so we cannot exclude corrective movements. We’ll try range strategy this week with our most preference to the long direction.

 

USDCHF

Second in a row heavily bullish week for USDCHF which closed at 0.9853 by continuing the mini rally from the price area of 0.92, two weeks ago. Switzerland is one of the big victims of the pandemics since it’s at No 9 at the total cases list, having till early Monday morning 7,474 cased and 98 deaths. It’s possible to have Central Banks interventions so we need to pay special attention to the pair. We’ll try only some small low-risk sell positions.

 

AUDUSD

The drop of AUDUSD carried on with an unabated manner last week since the pair closed at 0.58 and during the week, we saw prices even close to 0.55. Such price regions are the lowest prices in the last 18 years. The Australian government announced new measures of economic support but there are some well based reasons for the pair’s recovery. The price is too low and it may be an opportunity for the buyers while in the same time, China seems to have finished with the coronavirus pandemics, having just a few new cases in the last days. Moreover, Australia has a very low Index “total cases per 1M of population” at 64 while Italy has 978 and Spain 615. We’ll try buy positions this week but it’s really difficult to spot the target levels due to the very high volatility.

 

SP500

Drop for SP500 for one more week with total losses like 14.5%. Early this Monday, the futures of the Index are moving bearishly with losses close to 4%. It’s hard to see a quick recovery because the fears and the concerns lead to massive liquidations so we’ll take short positions, looking at 2,000 points.

 

DAX30

Important drop for DAX30 with weekly loss more than 10%. Early this Monday, the futures of the Index are moving bearishly with losses close to 3.6% but the fact is that during the last days of the previous week, the Index had consolidative attitude. Of course, the main trend is a downtrend but the last days behavior gives some hopes for recovery. We’ll try some low-risk long positions though but we’ll not be exposed to high risk because the panic may cause strong bearish movements again this week.

 

FTSE100

Another bearish week for FTSE100 which closed last Friday with total losses around 14.5%. Current week’s futures point also down with current performance at -1.75% but this Index also showed some sideways consolidative reaction which is either a technical reaction for the downtrend continuation or a light of hope to the market breakdown. We’ll prefer to stay out this week.

 

Gold

Bearish was the last week for gold which ended the week very close to $1,500 and weekly losses about 2%. During the week, gold touched also the price of $1,450 but last Friday was a heavily bullish day. Gold is the most safe–haven asset but the crisis that we witness has crashed a lot of global truths. Investors seem to prefer cash and mostly USD so we may see gold trying $1,450 again. Long-term though, gold has a good probability of recovery because sooner or later the investors that looking for safe solutions will turn to gold. Gold has a very big advantage compared to the currencies: it cannot be inflationary since its production and quantities are finite.

 

US Oil

Huge drop for oil price last week. The black gold closed with losses around 28.5% and during last week we saw prices even close to $20.5. During this period, there is no obvious reason for oil price recover unless there is a truce to the recent trade war between Saudi Arabia and Russia. Prices are moving into the range between $20 – $25 at the moment and only a bearish breakout of $20.50 may trigger a new downtrend rally with target $19.44 which is the lowest price for the last 18.5 years. It’s possible to see USA pushing OPEC, Russia and Saudi Arabia because a collapse of the oil companies in USA will have a big effect in the US financial system which have very high loans in the sector.

 

Bitcoin

Recovery week for Bitcoin which opened at $5,353 and closed at $5,813 with total profit above $8.5%. The big issue though is the high volatility since the weekly low was at $4,425 and the weekly high at $7,139 with a weekly price range at $2,714. With such a high volatility there cannot be even the most basic Risk Management from the investors so in the current stage are favoured only the opportunists & speculators. Bitcoin does not show serious signs of recovery so we’ll open sell positions targeting the price area of $5,000 at the first stage.