30/03/2020
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 coronavirus pandemics keeps on dominating at the global economies. Many European countries and USA are in the center of the pandemics but USD appeared very weak last week while the conflict into Eurozone regarding the corona-bonds may bring concerns for EUR as well. The high volatility is expected to carry on this week too with a possible strengthen of safe-haven currencies such as USD and JPY.
EURUSD
We saw a clearly bearish week for EURUSD, which recovered impressively from 1.07 and closed at 1.1137. USD suffered a lot last week since the coronavirus pandemics has been transferred to USA for good. USA is in the first place of coronavirus world cases with 17K-20K new cases every day. At Europe though, there are serious concerns for the future of Eurozone due to the rejection from Germany of the idea of corona-bonds that may relief the South countries such as Italy and Spain who are strictly hit by coronavirus. Italy and Spain have reacted very loudly and these concerns may cause pressures on EUR. In case that the pair drops below 1.1020 there will be a high probability for a downtrend channel again so we’ll favor sell positions this week. We expect to see US announcements on Wednesday that will give an idea of the situation of US economy and of course NFPs on Friday. Also, we expect to see the Consumer Price Index in Eurozone on Tuesday as well as the Germany Unemployment Rate on Wednesday so we can have a good idea of the European economy as well.
GBPUSD
After many decades’ low prices at the area of 1.1450, GBPUSD recovered and closed circa 1.2450 with one of the most bullish weeks of all times. This came mainly from USD weakness rather the GBP strength since the economic results in UK were not positive. Moreover, both USA and UK are sinking into the pandemics crisis because they took delayed actions and decisions. GBP return to the area of 1.20 is not impossible that is why we will open sell positions this week. Of course, we cannot exclude surprises into an environment which is very uncertain and liquid.
USDJPY
A very big drop for USDJPY which opened last Monday at 110.76 and closed on Friday at 107.91, losing about 300 pips. JPY was a safer choice compared to USD and the US 10 years bond yield dropped below 0.7% again. People Bank of China, early this morning cut the rates of the seven days reverse repos from 2.4% to 2.2% and furthermore pumped 50 billion yuan to the Chinese banking system through seven days reverse repos. The pair keeps on dropping though so there’s a high probability for a downtrend. We’ll open sell positions this week, looking to the support of 105.
EURJPY
Clearly bullish week for EURJPY which opened at 118.42 and closed above 120, at 120.17. Early this week though, the pair has opened significantly lower and it’s currently moving close to 119. It seems that is has entered to the well-known channel of the last weeks, between 118 and 120. With all the Eurozone issues, probably it will drop more but we prefer range strategy this week with more points to the sell side.
EURGBP
Bearish movement for EURGBP last week with a close price at 0.8933, below the psychological support of 0.90. Many important problems in Eurozone with a strong conflict between North and South countries so we may see further drop for the pair. Sell is our selection for this week.
USDCAD
Important correction for USDCAD which stopped the bullish rally of the last weeks. Weekly open was at 1.4353 and the weekly close at 1.3970 but early this week, the pair has recovered and it’s moving above 1.40. Bank of Canada cut the rates last Friday from 0.75% to 0.25% but if the weak USD drive the pair below 1.40 again, USDCAD will enter to a bearish trend and we may see lower prices. Also, the oil prices will have a dominating role as well: the more pressures on oil prices the more pressures on CAD. Sell is our weekly selection for this pair.
USDCHF
Huge drop for USDCHF last week since from 0.9853 the pair closed a bit above 0.95, losing about 350 pips. Weak USD had a presence here too but Switzerland is not in a better situation because so far, it’s at Number 9 in the world list of coronavirus cases with 300 deaths, despite the low population. We’ll open sell positions on USDCHF for one more week.
AUDUSD
Important profits for AUDUSD last week since from the price area of 0.58, the pair climbed last Friday up to 0.6162. Australia has a very low number of coronavirus cases and deaths (only 17 deaths) and in combination with the partial quarantine abrogation in China seems to recover faster compared to other countries and mostly European countries and USA which for the moment suffer from the pandemics. We expect to see better performance for the pair this week too, especially if we see encouraging results from the Chinese PMIs announcements mid-week. We’ll keep on opening buy positions.
SP500
Bullish reaction for SP500 last week, with close price at 2,520 points and profits above 11%. Last Friday though was clearly bearish and the problems that the US economy is about to face very soon due to the coronavirus pandemics does not make us optimistic. USA already is in the 1st place in the world list of cases with more than 142,000 cases. A bearish confirmation with a breakout of 2,400 will give a strong message to the sellers and we’re keen to be sellers this week as well.
DAX30
Strong bullish reaction for DAX30, which closed above 9,500 points and managed to perform profits circa 11%. Europe is in the center of coronavirus and in combination with the North – South countries battle in Eurozone, don’t create high hopes for a recovery of the Index. Futures of DAX may have profits about 1% early this Monday morning but we’ll favor sell positions this week.
FTSE100
Bullish reaction for FTSE100 too, which closed above 5,400 points and had profits like 9%. UK though, suffers and will suffer a lot from coronavirus pandemics after the delayed reactions of the government so we’ll open sell positions this week, believing to the downtrend continuation.
Gold
A strongly bullish week for gold which managed to exceed $1,600 by closing to the price area of $1,627 and profits above 8.5%. It seems though that there are certain difficulties in exceeding $1,630 so a pullback and corrections to the regime of $1,600 seems quite possible. On the other hand, a bullish breakout above $1,637 will reflate the buyers. We should not forget that gold is the most important safe-haven asset in the world so it has certain advantages during crisis periods. We don’t also forget that many funds liquidate in such cases in order to support their portfolios to other asset classes. Between those thoughts, we’ll select the short direction for this week.
US Oil
Another bearish week for oil prices, even in a smaller scale compared to the previous weeks. Weekly close was at $21.80 and the weekly loss was more than 7.5%. As long as Saudi Arabia insists to the unilateral decision of production increase, there are higher probabilities to see oil prices lower even if the major drop reason is the demand breakdown to unprecedented levels. In spot market, there were transactions to prices below $10 while the futures market still has prices above $20. $20 is of course a milestone price and a bearish breakout will activate more sellers. Short is our selection for the current week.
Bitcoin
Bitcoin had certain profits early last week but after Wednesday we had a trend reversal so finally the profit was very low, like 1.1% with a weekly closing price at $5,883. In such periods of heavy concerns and fears, Bitcoin should have a better role and greater profits but on the contrary it does not seem to have the power of a solid uptrend and it’s moving between $5,000 and $7,000. On the other hand, the extremely high volatility, prevents the investors from having an appropriate risk management, making Bitcoin practically useless. We think that the sideways movements will carry on so we’ll use a range strategy for this week, giving some extra points to the short direction.
