LiteFinance
- Forex Broker en LiteFinance Global LLC
- San Vicente y las Granadinas
- 933
Desde el año 2005, LiteFinance (ex. LiteForex) es un bróker de ECN online, que ofrece a los clientes la posibilidad de acceder a la más profunda liquidez en divisas, materias primas y mercados de valores. Para operar a través de LiteFinance (ex. LiteForex) están disponibles todos los principales pares de divisas, tasas cruzadas, petróleo, metales preciosos, índices bursátiles, acciones corporativas y el conjunto más grande de pares de criptomonedas entre los brókeres.
LiteFinance
Euro needs an operation. Forecast as of 08.12.2020
Weekly euro fundamental forecast
A puzzle: which economy is turning down and the financial markets are rising? At first, it seems to be the USA, where the employment rate has been shrinking for the seventh consecutive months. It means the US GDP growth is slowing down, and the stock indexes are hitting all-time highs. However, the right answer is the euro area. The euro-area economy is about to face a double-dip recession, and the euro is rallying up. The financial conditions in the euro area are much more controversial than in the USA. In addition to the economic problems in the euro area, there is the Brexit issue and the unwillingness of Hungary and Poland to support the idea of the Rescue Fund. Furthermore, the ECB doesn’t want the euro to strengthen.
According to a Bloomberg study, economic activity continues to slow. This is especially acute in Germany, Italy, and Spain, where the rise in the number of COVID-19 cases and the newly imposed restrictions are pressing down the economy. It is natural that, under such conditions, the ECB is eager to help it with additional monetary stimulus.
Under normal conditions, the monetary easing expectations, including an expansion of the emergency asset purchase program by €500 billion and its extension by 6-12 months, would most likely weaken the euro. However, investors are now more confident that the ECB can close bond spreads than to bring the euro area out of deflation, not to mention the ability to drive the CPI to its 2% target. Based on interest rate swaps, inflation expectations indicate that consumer prices will rise by an average of 1.25% over the next five years.
It is a paradox, but Christine Lagarde’s statement made 9 months ago that the central bank should not interfere with the bond spreads convinced investors that this is what the ECB is doing now. The ECB cannot say directly that it targets yields following the example of the Bank of Japan, but the euro-area bond market rates signal that the central bank controls the yields.
Foreign investors are willing to buy the Portuguese or Greek bonds, as the ECB supports these papers. The capital inflow into the European markets is a powerful growth driver for the EURUSD.
How could the ECB officials surprise investors? By the QE extension not by six but by twelve months? Bloomberg has already revealed this possibility. By verbal interventions? They don’t have a long-term effect. Another matter is a sharp rate-cut. The euro-area economy has experienced a shock that occurs once in a hundred years, so that it could be a reason for the rate cut.
Weekly EURUSD trading plan
I think the ECB won’t break the EURUSD uptrend even if it expands the emergency asset purchase program, extends the QE through the middle of 2022, or resorts to verbal interventions. If the pair drops below 1.208, there will be just a local correction encouraging investors to buy. Only radical measures of the central bank can turn the euro trend down.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-needs-an-operation-forecast-as-of-08122020/?uid=285861726&cid=79634
Dynamics of PMIs of major advanced economies
Weekly euro fundamental forecast
A puzzle: which economy is turning down and the financial markets are rising? At first, it seems to be the USA, where the employment rate has been shrinking for the seventh consecutive months. It means the US GDP growth is slowing down, and the stock indexes are hitting all-time highs. However, the right answer is the euro area. The euro-area economy is about to face a double-dip recession, and the euro is rallying up. The financial conditions in the euro area are much more controversial than in the USA. In addition to the economic problems in the euro area, there is the Brexit issue and the unwillingness of Hungary and Poland to support the idea of the Rescue Fund. Furthermore, the ECB doesn’t want the euro to strengthen.
According to a Bloomberg study, economic activity continues to slow. This is especially acute in Germany, Italy, and Spain, where the rise in the number of COVID-19 cases and the newly imposed restrictions are pressing down the economy. It is natural that, under such conditions, the ECB is eager to help it with additional monetary stimulus.
Under normal conditions, the monetary easing expectations, including an expansion of the emergency asset purchase program by €500 billion and its extension by 6-12 months, would most likely weaken the euro. However, investors are now more confident that the ECB can close bond spreads than to bring the euro area out of deflation, not to mention the ability to drive the CPI to its 2% target. Based on interest rate swaps, inflation expectations indicate that consumer prices will rise by an average of 1.25% over the next five years.
It is a paradox, but Christine Lagarde’s statement made 9 months ago that the central bank should not interfere with the bond spreads convinced investors that this is what the ECB is doing now. The ECB cannot say directly that it targets yields following the example of the Bank of Japan, but the euro-area bond market rates signal that the central bank controls the yields.
Foreign investors are willing to buy the Portuguese or Greek bonds, as the ECB supports these papers. The capital inflow into the European markets is a powerful growth driver for the EURUSD.
How could the ECB officials surprise investors? By the QE extension not by six but by twelve months? Bloomberg has already revealed this possibility. By verbal interventions? They don’t have a long-term effect. Another matter is a sharp rate-cut. The euro-area economy has experienced a shock that occurs once in a hundred years, so that it could be a reason for the rate cut.
Weekly EURUSD trading plan
I think the ECB won’t break the EURUSD uptrend even if it expands the emergency asset purchase program, extends the QE through the middle of 2022, or resorts to verbal interventions. If the pair drops below 1.208, there will be just a local correction encouraging investors to buy. Only radical measures of the central bank can turn the euro trend down.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-needs-an-operation-forecast-as-of-08122020/?uid=285861726&cid=79634
Dynamics of PMIs of major advanced economies
LiteFinance
Euro leaves the yen behind. Forecast as of 07.12.2020
The growth of the global risk appetite pressed down the US dollar and all safe-havens, including the yen. The euro buyers remember old advantages, and the euro is ahead of the main rivals. How will the ECB react? Let us discuss this question and make up the EURJPY trading plan.
Weekly yen fundamental analysis
It is pleasant when the forecasts for three months come true after two or three weeks. The EURJPY pair has reached the target at 126.4, which I indicated in late November, amid the increase in global risk appetite and aggressive sell-offs of safe-havens and funding currencies. High demand for emerging markets’ assets encourages carry traders. However, the euro is growing faster than the EM currencies, which looks surprising at first. The risks of a double-dip recession are high; the ECB expresses discontent with the regional currency strengthening, it will try to set the uptrend back.
Both in technical and fundamental analysis, there are patterns widely used by traders. A decline in the coronavirus cases in Europe, hopes for rapid economic recovery after the lockdown, and the change in the EU stance, which previously focused on fiscal consolidation, and is now ready to spend the money, became the main drivers of the EURUSD and EURJPY rallies in June-August. The current situation is similar, and investors are afraid of missing out.
If in the spring the idea of the € 750 billion Rescue Fund and the related issue of EU common bonds was shocking and made it possible to talk about a worthy alternative to Treasuries, now at the EU summit on December 10-11, the issue of the viability of this project will be decided. Hungary and Poland are opposed, but Brussels has a plan B. If Budapest and Warsaw do not want to participate in the program, they can do without them. According to the President of the European Commission, Ursula von der Leyen, it is the money that the EU borrows from future generations and wants to use not only for recovery but also for building a strong economy. More digital, more green, more livable.
Europe is turning into a spender because of the pandemic, which is confirmed by the words of Angela Merkel that Germany was able to invest large sums in 2020 and will be able to do so in 2021, as it has successfully managed funds in recent years. The Chancellor noted the country's lowest debt in the G7. The fiscal stimulus is a powerful driver of economic growth, the divergence in which played into the hands of the EURJPY bulls in July-August and will do so in the first half of 2021. Another thing is that the euro is really growing too fast, and not only against the US dollar but also against other currencies, which the ECB may not like.
Weekly EURJPY trading plan
I believe Christine Lagarde and other ECB governors could slow down the EURJPY uptrend, but the ECB can’t turn it down. It is still relevant to buy the euro against the yen on the price fall and hold the trades up to the target at 128.5 indicated earlier. Yen is weak now due to the general weakness of safe-haven assets due to the increased demand for carry trades and capital repatriation by Japanese investors. The Nikkei 225 seems less likely to drop than the S&P 500, since two whales in the Japanese stock market, BoJ, and GPIF, appeared due to ETFs' purchases by the Bank of Japan.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-leaves-the-yen-behind-forecast-as-of-07122020/?uid=285861726&cid=79634
Dynamics of COVID-19 cases in Europe and USA
The growth of the global risk appetite pressed down the US dollar and all safe-havens, including the yen. The euro buyers remember old advantages, and the euro is ahead of the main rivals. How will the ECB react? Let us discuss this question and make up the EURJPY trading plan.
Weekly yen fundamental analysis
It is pleasant when the forecasts for three months come true after two or three weeks. The EURJPY pair has reached the target at 126.4, which I indicated in late November, amid the increase in global risk appetite and aggressive sell-offs of safe-havens and funding currencies. High demand for emerging markets’ assets encourages carry traders. However, the euro is growing faster than the EM currencies, which looks surprising at first. The risks of a double-dip recession are high; the ECB expresses discontent with the regional currency strengthening, it will try to set the uptrend back.
Both in technical and fundamental analysis, there are patterns widely used by traders. A decline in the coronavirus cases in Europe, hopes for rapid economic recovery after the lockdown, and the change in the EU stance, which previously focused on fiscal consolidation, and is now ready to spend the money, became the main drivers of the EURUSD and EURJPY rallies in June-August. The current situation is similar, and investors are afraid of missing out.
If in the spring the idea of the € 750 billion Rescue Fund and the related issue of EU common bonds was shocking and made it possible to talk about a worthy alternative to Treasuries, now at the EU summit on December 10-11, the issue of the viability of this project will be decided. Hungary and Poland are opposed, but Brussels has a plan B. If Budapest and Warsaw do not want to participate in the program, they can do without them. According to the President of the European Commission, Ursula von der Leyen, it is the money that the EU borrows from future generations and wants to use not only for recovery but also for building a strong economy. More digital, more green, more livable.
Europe is turning into a spender because of the pandemic, which is confirmed by the words of Angela Merkel that Germany was able to invest large sums in 2020 and will be able to do so in 2021, as it has successfully managed funds in recent years. The Chancellor noted the country's lowest debt in the G7. The fiscal stimulus is a powerful driver of economic growth, the divergence in which played into the hands of the EURJPY bulls in July-August and will do so in the first half of 2021. Another thing is that the euro is really growing too fast, and not only against the US dollar but also against other currencies, which the ECB may not like.
Weekly EURJPY trading plan
I believe Christine Lagarde and other ECB governors could slow down the EURJPY uptrend, but the ECB can’t turn it down. It is still relevant to buy the euro against the yen on the price fall and hold the trades up to the target at 128.5 indicated earlier. Yen is weak now due to the general weakness of safe-haven assets due to the increased demand for carry trades and capital repatriation by Japanese investors. The Nikkei 225 seems less likely to drop than the S&P 500, since two whales in the Japanese stock market, BoJ, and GPIF, appeared due to ETFs' purchases by the Bank of Japan.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-leaves-the-yen-behind-forecast-as-of-07122020/?uid=285861726&cid=79634
Dynamics of COVID-19 cases in Europe and USA
LiteFinance
Euro will stand a trial. Forecast as of 04.12.2020
Weekly euro fundamental forecast
Investors believe in the EURUSD bullish outlook in the long term. In the short term, however, the euro bulls should stand a trial. The higher the euro is rising, the more investors start considering the negative factors. The euro buyers are ready to exit longs at any moment, which could trigger a drawdown. There should be a reason to sell the euro, and the reason could emerge.
In November, the major bearish drivers weakening the US dollar were easing political uncertainty and increasing the global risk appetite. In early December, the greenback fell out of favor due to the return of talk about a reflationary environment. On the one hand, investors are convinced of the global economic recovery amid the positive news about COVID-19 vaccines and look for investments outside the US. ON the other hand, the US securities become less appealing. Joe Biden welcomed the $ 908 billion compromise fiscal stimulus proposal and said any deal would now be the first step ahead of new legislation when he takes office. The new US president is confident that the economy will need more help.
The Treasury yield is not growing amid the concerns of the Fed’s potential ‘operation twist,’ and the inflation expectations are surging up to the highest levels over the past twelve or eighteen months. The US bond market real rates are falling, making the US assets less appealing and supporting the capital outflow from the US to other countries. In 2021, the money must be flowing to Europe. However, according to the euro-area PMI change, the region sets back the global economy.
Even without a double-dip recession in the euro area, the euro has enough problems. According to the forecast of 33 analysts polled by Bloomberg, the ECB is to expand the emergency asset purchase program by €500 billion at the meeting on December 10. The ECB is also expected to extend the QE term from the middle to the end of 2021 and increase the LTRO volume. The EU and the UK are failing to agree on the Brexit terms, and the tough position of France suggests the Brexit deal may not be signed this year. The EU governments cannot agree on the recovery fund of €750 billion because of Poland and Hungary. The EU even considers plan B, which would exclude these countries from the program.
Weekly EURUSD trading plan
Therefore, the euro has got enough weak points, and the investors will see the euro flaws once the rally of the US stock indexes suspends. The first alarming signal has already appeared. Pfizer's announcement of supply chain problems causing vaccine production to be cut from 100 million to 50 million doses in 2020 intimidated investors and sent down the US stock indexes on December 3. The S&P 500 and the EURUSD may also drop if the US jobs report is poor. If the euro rolls down below the supports at $1.2125 and $1.208 may be the reason to exit long trades.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-will-stand-a-trial-forecast-as-of-04122020/?uid=285861726&cid=79634
Dynamics of PMIs
Weekly euro fundamental forecast
Investors believe in the EURUSD bullish outlook in the long term. In the short term, however, the euro bulls should stand a trial. The higher the euro is rising, the more investors start considering the negative factors. The euro buyers are ready to exit longs at any moment, which could trigger a drawdown. There should be a reason to sell the euro, and the reason could emerge.
In November, the major bearish drivers weakening the US dollar were easing political uncertainty and increasing the global risk appetite. In early December, the greenback fell out of favor due to the return of talk about a reflationary environment. On the one hand, investors are convinced of the global economic recovery amid the positive news about COVID-19 vaccines and look for investments outside the US. ON the other hand, the US securities become less appealing. Joe Biden welcomed the $ 908 billion compromise fiscal stimulus proposal and said any deal would now be the first step ahead of new legislation when he takes office. The new US president is confident that the economy will need more help.
The Treasury yield is not growing amid the concerns of the Fed’s potential ‘operation twist,’ and the inflation expectations are surging up to the highest levels over the past twelve or eighteen months. The US bond market real rates are falling, making the US assets less appealing and supporting the capital outflow from the US to other countries. In 2021, the money must be flowing to Europe. However, according to the euro-area PMI change, the region sets back the global economy.
Even without a double-dip recession in the euro area, the euro has enough problems. According to the forecast of 33 analysts polled by Bloomberg, the ECB is to expand the emergency asset purchase program by €500 billion at the meeting on December 10. The ECB is also expected to extend the QE term from the middle to the end of 2021 and increase the LTRO volume. The EU and the UK are failing to agree on the Brexit terms, and the tough position of France suggests the Brexit deal may not be signed this year. The EU governments cannot agree on the recovery fund of €750 billion because of Poland and Hungary. The EU even considers plan B, which would exclude these countries from the program.
Weekly EURUSD trading plan
Therefore, the euro has got enough weak points, and the investors will see the euro flaws once the rally of the US stock indexes suspends. The first alarming signal has already appeared. Pfizer's announcement of supply chain problems causing vaccine production to be cut from 100 million to 50 million doses in 2020 intimidated investors and sent down the US stock indexes on December 3. The S&P 500 and the EURUSD may also drop if the US jobs report is poor. If the euro rolls down below the supports at $1.2125 and $1.208 may be the reason to exit long trades.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-will-stand-a-trial-forecast-as-of-04122020/?uid=285861726&cid=79634
Dynamics of PMIs
LiteFinance
Euro takes a jump. Forecast as of 02.12.2020
Monthly euro fundamental forecast
COVID-19 has become a disaster, but the development of vaccines inspires hope for the better. The pandemic's economic fallout has turned out to be not so horrible as it was expected just six months ago. Furthermore, an adequate man has become the US president. Yes, there are still be economic consequences of the pandemic, but the global economy can well get over the crisis in a better state than many have worried about. Investors have quite a number of reasons to be optimistic, and they are hurrying up to buy. The S&P 500 in 2020 breaks records for the 27th time, the Nasdaq Composite – for 46th time. The EURUSD, closely related to the US stock indexes, has broken out level 1.2 at the second attempt, hitting the highest level since May 2018.
The uncertainty resulted from the pandemic is so strong that the OECD presented two forecasts in the summer. Neither of the forecasts was preferable. The first one suggested a single shock from COVID-19; the second implied double damage. In November, the global economic data turned out to be stronger than both forecasts, which has supported the increase in the global risk appetite.
According to the OECD gauge, many world economies won’t recover to the pre-crisis levels in 2021. The introduction of the vaccines doesn’t mean that everything will be fine in a month. Nonetheless, the economic situation is improving, and it will be improving further. The forecast for global GDP for next year was reduced from 5% to 4.2%, for the US growth - from 4% to 3.2%, for the European - from 5.1% to 3.6%. The OECD expects the US economy to recover by the end of 2021. The euro-area outlook is worse. Only Germany is said to be able to get closer to the pre-crisis level. Germany’s GDP is expected to be just 1.7% lower than in the fourth quarter.
I don’t think such projections are the reason to sell the EURUSD. First, the lower are the forecasts, the easier it will be to surpass them, as it was in the euro-area in 2017. Second, the OECD is quite optimistic about China’s economic growth, which strongly impacts the euro area. The Chinese GDP could expand by 10% in 2020-2021. And finally, as we have already discussed, the explosive growth of industry and foreign demand supports the export-led countries and regions. JP Morgan's Global Manufacturing PMI is currently one of the best in a decade, and the IHS Markit Composite PMI is growing for the seventh straight month.
The OECD projections fuel the fuss around purchasing the US stocks. Besides, the EU's chief medicines regulator says Pfizer’s partner, BioNTech, and US drugmaker Moderna have applied for their vaccine approval. Furthermore, the US Congress has resumed talks on the new fiscal stimulus. The new proposal of the bipartisan group is $ 908 billion. Remember, earlier, the Democrats insisted on an amount of $ 2.4 trillion; the Republicans were ready to provide only $ 650 billion to the economy.
Monthly EURUSD trading plan
Thus, my forecast suggesting the EURUSD trading range to move from 1.16-1.2 to 1.18-1.22 comes true. The price has consolidated above 1.2 and is rising to the upper border of the trading channel. I recommend buying the euro on the drawdowns.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-takes-a-jump-forecast-as-of-02122020/?uid=285861726&cid=79634
OECD forecasts
Monthly euro fundamental forecast
COVID-19 has become a disaster, but the development of vaccines inspires hope for the better. The pandemic's economic fallout has turned out to be not so horrible as it was expected just six months ago. Furthermore, an adequate man has become the US president. Yes, there are still be economic consequences of the pandemic, but the global economy can well get over the crisis in a better state than many have worried about. Investors have quite a number of reasons to be optimistic, and they are hurrying up to buy. The S&P 500 in 2020 breaks records for the 27th time, the Nasdaq Composite – for 46th time. The EURUSD, closely related to the US stock indexes, has broken out level 1.2 at the second attempt, hitting the highest level since May 2018.
The uncertainty resulted from the pandemic is so strong that the OECD presented two forecasts in the summer. Neither of the forecasts was preferable. The first one suggested a single shock from COVID-19; the second implied double damage. In November, the global economic data turned out to be stronger than both forecasts, which has supported the increase in the global risk appetite.
According to the OECD gauge, many world economies won’t recover to the pre-crisis levels in 2021. The introduction of the vaccines doesn’t mean that everything will be fine in a month. Nonetheless, the economic situation is improving, and it will be improving further. The forecast for global GDP for next year was reduced from 5% to 4.2%, for the US growth - from 4% to 3.2%, for the European - from 5.1% to 3.6%. The OECD expects the US economy to recover by the end of 2021. The euro-area outlook is worse. Only Germany is said to be able to get closer to the pre-crisis level. Germany’s GDP is expected to be just 1.7% lower than in the fourth quarter.
I don’t think such projections are the reason to sell the EURUSD. First, the lower are the forecasts, the easier it will be to surpass them, as it was in the euro-area in 2017. Second, the OECD is quite optimistic about China’s economic growth, which strongly impacts the euro area. The Chinese GDP could expand by 10% in 2020-2021. And finally, as we have already discussed, the explosive growth of industry and foreign demand supports the export-led countries and regions. JP Morgan's Global Manufacturing PMI is currently one of the best in a decade, and the IHS Markit Composite PMI is growing for the seventh straight month.
The OECD projections fuel the fuss around purchasing the US stocks. Besides, the EU's chief medicines regulator says Pfizer’s partner, BioNTech, and US drugmaker Moderna have applied for their vaccine approval. Furthermore, the US Congress has resumed talks on the new fiscal stimulus. The new proposal of the bipartisan group is $ 908 billion. Remember, earlier, the Democrats insisted on an amount of $ 2.4 trillion; the Republicans were ready to provide only $ 650 billion to the economy.
Monthly EURUSD trading plan
Thus, my forecast suggesting the EURUSD trading range to move from 1.16-1.2 to 1.18-1.22 comes true. The price has consolidated above 1.2 and is rising to the upper border of the trading channel. I recommend buying the euro on the drawdowns.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-takes-a-jump-forecast-as-of-02122020/?uid=285861726&cid=79634
OECD forecasts
LiteFinance
Dollar lost its shine: for how long? Forecast as of 01.12.2020
Weekly US dollar fundamental forecast
In November, the USD was 2.6% down, increasing the loss since the beginning of the year to 5% and hitting the lowest level since April 2018. The US dollar in November featured the worst drop since July amid mass sell-offs of the safe-havens. The major reasons are the increase in the global risk appetite and the easing of the political uncertainty in the USA. The greenback has lost its shine because of the euphoria in the US stock market, spurred by positive news about vaccines. The Dow Jones in November performed the best growth since January 1987 (+12%), the S&P 500 performed the best since April (+11%), Nasdaq Composite was 12% up. However, no euphoria could last forever.
The universal vaccination is a matter of time, the global economy is recovering, the cheap money is ample. Therefore, the stock indexes are rising. Following a tough year, positive prospects become clearer. However, when investing, it is important not only to predict the future, but also to assess what has already been priced in. If investors have considered all the positive, they expect everything to be fine. If it turns out to be so, the market won’t have any room to grow. In the case of US stock indices, everyone expects that everything will not be just good, everything will be fantastic!
According to the American Association of Individual Investors, there were 43% of bears and 26% of bulls in the market in early October. In late November, the balance of power has dramatically shifted. 47% of investors believe the stocks will further rise, only 27% of them are bearish. Investors Intelligence polls show that two-thirds of investors share an optimistic view on the US stock market, which is the highest number since January 2018. At that time, the euphoria was soon replaced by the disappointment resulting in mass sell-offs.
Currently, much of the positive news has already been priced, and the market ignores the negative. There are several negative factors, such as deterioration in the US domestic data and the difficult epidemiological situation. Furthermore, Jerome Powell warns that the next few months will be tough, and the government hasn’t agreed on the new fiscal stimulus package. The S&P 500 can well go down in the correction, followed by the EURUSD, which is closely correlated with the stock index. However, I don’t think the correction to be deep. History proves that even at a time when optimism in the US stock market was high, its decline most often led to consolidation, rather than a sharp drop.
The EURUSD bulls haven’t broken out level 1.2 amid a few negative drivers. The US stock indexes dropped on the last day of November. Germany’s inflation rate was down from -0.5% to -0.7% Y-o-Y, which is the worst performance for more than a decade. This fact increases the risk of the ECB’s monetary stimulus expansion.
Euro has rebounded from the strong level of the second time. However, the rally is now more likely to continues than in early September. It makes sense to buy out the corrections down to $1.1905 and $1.1845. It will be relevant to add up to the long positions when the price tests the high of November.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-lost-its-shine-for-how-long-forecast-as-of-01122020/?uid=285861726&cid=79634
Dynamics of major currencies in November
Weekly US dollar fundamental forecast
In November, the USD was 2.6% down, increasing the loss since the beginning of the year to 5% and hitting the lowest level since April 2018. The US dollar in November featured the worst drop since July amid mass sell-offs of the safe-havens. The major reasons are the increase in the global risk appetite and the easing of the political uncertainty in the USA. The greenback has lost its shine because of the euphoria in the US stock market, spurred by positive news about vaccines. The Dow Jones in November performed the best growth since January 1987 (+12%), the S&P 500 performed the best since April (+11%), Nasdaq Composite was 12% up. However, no euphoria could last forever.
The universal vaccination is a matter of time, the global economy is recovering, the cheap money is ample. Therefore, the stock indexes are rising. Following a tough year, positive prospects become clearer. However, when investing, it is important not only to predict the future, but also to assess what has already been priced in. If investors have considered all the positive, they expect everything to be fine. If it turns out to be so, the market won’t have any room to grow. In the case of US stock indices, everyone expects that everything will not be just good, everything will be fantastic!
According to the American Association of Individual Investors, there were 43% of bears and 26% of bulls in the market in early October. In late November, the balance of power has dramatically shifted. 47% of investors believe the stocks will further rise, only 27% of them are bearish. Investors Intelligence polls show that two-thirds of investors share an optimistic view on the US stock market, which is the highest number since January 2018. At that time, the euphoria was soon replaced by the disappointment resulting in mass sell-offs.
Currently, much of the positive news has already been priced, and the market ignores the negative. There are several negative factors, such as deterioration in the US domestic data and the difficult epidemiological situation. Furthermore, Jerome Powell warns that the next few months will be tough, and the government hasn’t agreed on the new fiscal stimulus package. The S&P 500 can well go down in the correction, followed by the EURUSD, which is closely correlated with the stock index. However, I don’t think the correction to be deep. History proves that even at a time when optimism in the US stock market was high, its decline most often led to consolidation, rather than a sharp drop.
The EURUSD bulls haven’t broken out level 1.2 amid a few negative drivers. The US stock indexes dropped on the last day of November. Germany’s inflation rate was down from -0.5% to -0.7% Y-o-Y, which is the worst performance for more than a decade. This fact increases the risk of the ECB’s monetary stimulus expansion.
Euro has rebounded from the strong level of the second time. However, the rally is now more likely to continues than in early September. It makes sense to buy out the corrections down to $1.1905 and $1.1845. It will be relevant to add up to the long positions when the price tests the high of November.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-lost-its-shine-for-how-long-forecast-as-of-01122020/?uid=285861726&cid=79634
Dynamics of major currencies in November
LiteFinance
Forex in December: Who will go to Europe at Christmas? Forecast for EURUSD, EURJPY, NZDJPY, USDCHF and USDSEK
In previous years, crowds of tourists came to Europe to celebrate Christmas. Everything is different in 2020. How will it affect the trends of EURUSD, EURJPY, and other currency pairs? Let us discuss the Forex outlook and make a trading plan.
Monthly euro fundamental forecast
It isn't easy to build a profitable trading strategy based on seasonal regularities if the entire year is special, different from the previous ones. Recession rarely occurs, once in a decade or even more rarely. That is why patterns, based on the statistics of the asset trends during a particular period of time, often fail. Could we bet on the euro purchases if, for example, the EURUSD rally in January often resulted in the increase of tourism in Europe at Christmas? Who will go to Europe amid the pandemic? Nonetheless, amid such a controversial environment, statistical analysis with the fundamental component continues to yield profits. In November, the profits generated by the purchases of the NZDJPY (+5.2%), AUDJPY (+4.4%), and EURJPY (+2.1%) have compensated for the loss from other trade operations.
The New Zealand dollar is generally the best-performing currency in December; it closed in the green zone twice more often than in the red one. The European currencies were also quite strong. Since 1975, the Swedish krona has strengthened in 29 cases out of 45, the euro and the Swiss franc grew in 28 cases. Among the outsiders are the Japanese yen, the US dollar, and the Canadian dollar.
The Kiwi may have grown more often, but in percentage terms, CHF, EUR, and SEK's success looked more impressive. On average, the Swiss franc added 1.44% in December, the euro - 1.15%, and the Swedish krona - about 1%. In terms of average growth, only the Loonie was losing to the greenback, and in terms of the median, the Japanese yen was behind the USD.
In the best years, the New Zealand dollar grew on average by 2.3%, the Swissy- by 3.4%, the euro- by 2.8%, the Swedish krona – by 2.4%. Although the Canadian dollar often closed in the red, the loss was quite small. The CAD declined on average by 1.2%, the yen – by 2.7%.
Monthly trading plan for EURUSD, EURJPY, NZDJPY, USDCHF, and USDSEK
Therefore, based on statistics, the global risk appetite should continue increasing in December, which I personally would associate with the beginning of the vaccination. It looks reasonable to buy the NZDJPY, which corresponds to my concept of the Kiwi strength and the yen weakness. The NZD could go down a little in December because New Zealand trade partners, such as the EU, UK, and the USA, are weak. However, it is relevant to buy on the price fall.
As for the European currencies, it will be relevant to trade trends recovery. The euro-area is likely to face a double-dip recession. Therefore, weak domestic data, ECB monetary easing, and Christine Lagarde’s dovish tone will press down the EURUSD and EURJPY, which will allow entering longs at good prices. The same strategy is relevant for the short positions on the USDCHF and USDSEK. The dispute among the Riksbank members, which has extended the QE by 200 billion SEK at the November meeting, could support the SEK growth over the next few weeks. The central bank’s officials differently interpret the volume of the monetary stimulus.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/forex-in-december-who-will-go-to-europe-at-christmas-forecast-for-eurusd-eurjpy-nzdjpy-usdchf-and-usdsek/?uid=285861726&cid=79634
Rise-and-fall periods
In previous years, crowds of tourists came to Europe to celebrate Christmas. Everything is different in 2020. How will it affect the trends of EURUSD, EURJPY, and other currency pairs? Let us discuss the Forex outlook and make a trading plan.
Monthly euro fundamental forecast
It isn't easy to build a profitable trading strategy based on seasonal regularities if the entire year is special, different from the previous ones. Recession rarely occurs, once in a decade or even more rarely. That is why patterns, based on the statistics of the asset trends during a particular period of time, often fail. Could we bet on the euro purchases if, for example, the EURUSD rally in January often resulted in the increase of tourism in Europe at Christmas? Who will go to Europe amid the pandemic? Nonetheless, amid such a controversial environment, statistical analysis with the fundamental component continues to yield profits. In November, the profits generated by the purchases of the NZDJPY (+5.2%), AUDJPY (+4.4%), and EURJPY (+2.1%) have compensated for the loss from other trade operations.
The New Zealand dollar is generally the best-performing currency in December; it closed in the green zone twice more often than in the red one. The European currencies were also quite strong. Since 1975, the Swedish krona has strengthened in 29 cases out of 45, the euro and the Swiss franc grew in 28 cases. Among the outsiders are the Japanese yen, the US dollar, and the Canadian dollar.
The Kiwi may have grown more often, but in percentage terms, CHF, EUR, and SEK's success looked more impressive. On average, the Swiss franc added 1.44% in December, the euro - 1.15%, and the Swedish krona - about 1%. In terms of average growth, only the Loonie was losing to the greenback, and in terms of the median, the Japanese yen was behind the USD.
In the best years, the New Zealand dollar grew on average by 2.3%, the Swissy- by 3.4%, the euro- by 2.8%, the Swedish krona – by 2.4%. Although the Canadian dollar often closed in the red, the loss was quite small. The CAD declined on average by 1.2%, the yen – by 2.7%.
Monthly trading plan for EURUSD, EURJPY, NZDJPY, USDCHF, and USDSEK
Therefore, based on statistics, the global risk appetite should continue increasing in December, which I personally would associate with the beginning of the vaccination. It looks reasonable to buy the NZDJPY, which corresponds to my concept of the Kiwi strength and the yen weakness. The NZD could go down a little in December because New Zealand trade partners, such as the EU, UK, and the USA, are weak. However, it is relevant to buy on the price fall.
As for the European currencies, it will be relevant to trade trends recovery. The euro-area is likely to face a double-dip recession. Therefore, weak domestic data, ECB monetary easing, and Christine Lagarde’s dovish tone will press down the EURUSD and EURJPY, which will allow entering longs at good prices. The same strategy is relevant for the short positions on the USDCHF and USDSEK. The dispute among the Riksbank members, which has extended the QE by 200 billion SEK at the November meeting, could support the SEK growth over the next few weeks. The central bank’s officials differently interpret the volume of the monetary stimulus.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/forex-in-december-who-will-go-to-europe-at-christmas-forecast-for-eurusd-eurjpy-nzdjpy-usdchf-and-usdsek/?uid=285861726&cid=79634
Rise-and-fall periods
LiteFinance
Dollar should build a hedge. Forecast as of 27.11.2020
The greenback could further weaken if foreign investors hedge against currency risks of the investments into the US securities. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Quarterly US dollar fundamental forecast
On Thanksgiving day, when the US securities markets do not work, it is time to take a break and think about the future trading plan. The fundamental analysis theory reads that the exchange rate of a currency is determined by investment and trading capital flows, influenced by interest rates, economic growth, inflation, and other factors. With this regard, the growing USD shorts look natural. Investors look for more promising assets. The growing appeal of the assets outside the United States will facilitate the flow of capital from North America to other continents and weaken the greenback.
The process is already going on. The USD has been more than 10% down from the March highs and reached its two-year low amid the Fed’s aggressive monetary expansion and easing political tensions in the USA. Furthermore, investors believe in the improvement of the US-China trade relations under Joe Biden; they also hope the vaccines will support the global economic recovery. The dollar should continue weakening in 2021 amid the capital outflows from the USA and hedging against currency risks.
Goldman Sachs predicts that the greenback will weaken by 6% over the next 12 months, as the US stocks are fundamentally overvalued, the bond market rates do not rise with inflation, and the global economic recovery will encourage investors to search for better investment options outside the United States. Citi emphasizes that foreign investors have accumulated a huge stock of the US Treasuries. At the same time, bearish outlooks for the dollar and lower hedging costs will push them to hedge against currency risks by selling the USD. As a result, the USD index will fall by 20% in 2021, which is the most aggressive bearish forecast for the greenback.
I agree with the idea that the countries most suffered from the COVID-19 pandemic will start recovering fast due to vaccines, and their currencies will be strengthening. Nonetheless, I have a few questions. First, does it make sense to bet on the emerging markets’ assets, which will be the last to receive vaccines? Second, what if the vaccines won’t help? Unlike Pfizer and Moderna, AstraZeneca is not willing to register its vaccine now, suggesting the further tests are necessary.
I would not like to think about negative scenarios. Moreover, people deserve to forget 2020 quickly. They have made tremendous sacrifices and hopefully rethought the need to appreciate what they have. I believe, at the initial stage of vaccine introduction, we could consider buying European and Japanese stocks, which in November looked better than their US counterparts.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/short-term-forecast-for-btcusd-xrpusd-and-ethusd-27112020/?uid=285861726&cid=79634
The share of currency risks hedging when buying Treasuries by foreign investors
The greenback could further weaken if foreign investors hedge against currency risks of the investments into the US securities. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Quarterly US dollar fundamental forecast
On Thanksgiving day, when the US securities markets do not work, it is time to take a break and think about the future trading plan. The fundamental analysis theory reads that the exchange rate of a currency is determined by investment and trading capital flows, influenced by interest rates, economic growth, inflation, and other factors. With this regard, the growing USD shorts look natural. Investors look for more promising assets. The growing appeal of the assets outside the United States will facilitate the flow of capital from North America to other continents and weaken the greenback.
The process is already going on. The USD has been more than 10% down from the March highs and reached its two-year low amid the Fed’s aggressive monetary expansion and easing political tensions in the USA. Furthermore, investors believe in the improvement of the US-China trade relations under Joe Biden; they also hope the vaccines will support the global economic recovery. The dollar should continue weakening in 2021 amid the capital outflows from the USA and hedging against currency risks.
Goldman Sachs predicts that the greenback will weaken by 6% over the next 12 months, as the US stocks are fundamentally overvalued, the bond market rates do not rise with inflation, and the global economic recovery will encourage investors to search for better investment options outside the United States. Citi emphasizes that foreign investors have accumulated a huge stock of the US Treasuries. At the same time, bearish outlooks for the dollar and lower hedging costs will push them to hedge against currency risks by selling the USD. As a result, the USD index will fall by 20% in 2021, which is the most aggressive bearish forecast for the greenback.
I agree with the idea that the countries most suffered from the COVID-19 pandemic will start recovering fast due to vaccines, and their currencies will be strengthening. Nonetheless, I have a few questions. First, does it make sense to bet on the emerging markets’ assets, which will be the last to receive vaccines? Second, what if the vaccines won’t help? Unlike Pfizer and Moderna, AstraZeneca is not willing to register its vaccine now, suggesting the further tests are necessary.
I would not like to think about negative scenarios. Moreover, people deserve to forget 2020 quickly. They have made tremendous sacrifices and hopefully rethought the need to appreciate what they have. I believe, at the initial stage of vaccine introduction, we could consider buying European and Japanese stocks, which in November looked better than their US counterparts.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/short-term-forecast-for-btcusd-xrpusd-and-ethusd-27112020/?uid=285861726&cid=79634
The share of currency risks hedging when buying Treasuries by foreign investors
LiteFinance
Gold faces bad times. Forecast as of 26.11.2020
Monthly gold fundamental forecast
Any trading asset gores up and down, the market is moving in cycles. The market cycle often depends on the economic cycle. The history proves that the best time to buy stocks is the recovery period following the economic downturn. This is the bad time for gold. Investors believe in the prosperous future, the risk appetite is increasing. Traders look for the assets other than gold to invest their money. Investors sell gold and buy other trading instruments, doesn’t matter if they are stocks, cryptocurrencies or commodities.
In 2020, gold has faced two worst daily sell-offs since 2013. The last gold crash resulted from the positive news about vaccines developed Pfizer and BioNTech. Markets believe in the victory over the pandemic; the stocks and Treasury yields surged, and the XAUUSD has dropped. However, the Treasury yields have dropped since then, and the US dollar is weak, which should be good news for gold. But this time, the market is different. Investors continue exiting ETFs, whose gold holding have contracted by more than 2% from the October highs. The holdings of the SPDR Gold Shares fund has declined to the lowest level since July.
Traders do not want to sell off bonds amid the concerns about the Fed’s ‘operation twist’, which is to be launched in December. The greenback is falling amid the lower political uncertainty and higher demand for the risk assets. Why isn’t the gold price growing? Contrary to the historical pattern, the Treasury yield, the USD index and the gold price are following the same way.
There are several factors pressing down gold. Investors are willing to buy stocks, commodities and the bitcoin. Furthermore, investors fear that the gold trend will repeat the situation of 2011-2013. At that time, after the drop from the record highs, there were enough bull in the gold market predicting the uptrend recovery amid the central banks’ ultra-easy monetary policy and the US dollar weakness. The same situation is now. Goldman Sash believes that gold will hit a fresh all-time high in 2021 and will reach $2300 per ounce. ANZ sees the gold price at $2100 over the next twelve months. Commerzbank expects that Janet Yellen's appointment as Treasury Secretary will further ease monetary policy by the Fed, which is good news for XAUUSD bulls.
Monthly gold trading plan
Gold bulls bet on the reflation environment. In 2011-2013, this plan didn’t work out. n this regard, Macquarie's forecast of a fall in prices to $ 1550 an ounce in 2021, as the crisis has subsided, and expectations of the Fed monetary easing have lowered, looks much more reasonable. I don’t think the XAUUSD fall will be as sharp. However, over the three-year investment horizon, gold price can well hit the level of 1550 or so. It makes sense to hold down the shorts entered at the levels of $1965 and also at $1900, $1875 and $1865. It is also relevant to enter new shorts on the drawdowns to $1825 and $1845. The medium-term targets are at $1775 and $1725.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/gold-faces-bad-times-forecast-as-of-26112020/?uid=285861726&cid=79634
Dynamics of SPDR Gold Shares holdings
Monthly gold fundamental forecast
Any trading asset gores up and down, the market is moving in cycles. The market cycle often depends on the economic cycle. The history proves that the best time to buy stocks is the recovery period following the economic downturn. This is the bad time for gold. Investors believe in the prosperous future, the risk appetite is increasing. Traders look for the assets other than gold to invest their money. Investors sell gold and buy other trading instruments, doesn’t matter if they are stocks, cryptocurrencies or commodities.
In 2020, gold has faced two worst daily sell-offs since 2013. The last gold crash resulted from the positive news about vaccines developed Pfizer and BioNTech. Markets believe in the victory over the pandemic; the stocks and Treasury yields surged, and the XAUUSD has dropped. However, the Treasury yields have dropped since then, and the US dollar is weak, which should be good news for gold. But this time, the market is different. Investors continue exiting ETFs, whose gold holding have contracted by more than 2% from the October highs. The holdings of the SPDR Gold Shares fund has declined to the lowest level since July.
Traders do not want to sell off bonds amid the concerns about the Fed’s ‘operation twist’, which is to be launched in December. The greenback is falling amid the lower political uncertainty and higher demand for the risk assets. Why isn’t the gold price growing? Contrary to the historical pattern, the Treasury yield, the USD index and the gold price are following the same way.
There are several factors pressing down gold. Investors are willing to buy stocks, commodities and the bitcoin. Furthermore, investors fear that the gold trend will repeat the situation of 2011-2013. At that time, after the drop from the record highs, there were enough bull in the gold market predicting the uptrend recovery amid the central banks’ ultra-easy monetary policy and the US dollar weakness. The same situation is now. Goldman Sash believes that gold will hit a fresh all-time high in 2021 and will reach $2300 per ounce. ANZ sees the gold price at $2100 over the next twelve months. Commerzbank expects that Janet Yellen's appointment as Treasury Secretary will further ease monetary policy by the Fed, which is good news for XAUUSD bulls.
Monthly gold trading plan
Gold bulls bet on the reflation environment. In 2011-2013, this plan didn’t work out. n this regard, Macquarie's forecast of a fall in prices to $ 1550 an ounce in 2021, as the crisis has subsided, and expectations of the Fed monetary easing have lowered, looks much more reasonable. I don’t think the XAUUSD fall will be as sharp. However, over the three-year investment horizon, gold price can well hit the level of 1550 or so. It makes sense to hold down the shorts entered at the levels of $1965 and also at $1900, $1875 and $1865. It is also relevant to enter new shorts on the drawdowns to $1825 and $1845. The medium-term targets are at $1775 and $1725.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/gold-faces-bad-times-forecast-as-of-26112020/?uid=285861726&cid=79634
Dynamics of SPDR Gold Shares holdings
LiteFinance
Dollar steps in the old path. Forecast as of 25.11.2020
In previous years, US presidents didn’t interfere in the foreign exchange market as often as Donald Trump did. Joe Biden is coming to power, and the Forex trends are to return to the former patterns. How will this affect EURUSD? Let us discuss the Forex outlook and make up a trading plan.
Monthly EURUSD fundamental forecast
Slogans and real actions are often two completely opposite things. US presidents from Bill Clinton to Barack Obama expressed their commitment to a strong dollar policy. However, because of this policy's transparency, the greenback often fell during their terms of office. Donald Trump, on the contrary, talked about the advantages of a weak currency. Trump accused other countries of currency manipulations, called on the Fed to cut interest rates and resume the QE. Nonetheless, the USD was growing because of the certainty created by Trump’s administration. That is why I believe there are important bearish drivers for the greenback's weakening in the future. Joe Biden comes back to the old slogan ‘String dollar reflects the strength of the US economy.’ Biden nominates Janet Yellen for Treasury Secretary.
The market should forget the shocks resulting from the President's unexpected commentaries, which the US administration would try to smooth over the next day. During Trump’s term of office, forex analysts used to say that what was good for Trump was good for the dollar. As a safe-haven, greenback often benefited from the uncertainty, fueled by Trump’s unpredictable and eccentric tweets. Forex is coming back to old patterns. Besides, the hopes for the global economic recovery press down the safe-haven assets.
Investors discuss the controversial rally of the US stock indexes by 60% up from March’s low amid the US economy’s weakness. However, no matter how terrible they are, recessions rarely happen and end rather quickly, so everyone is rushing to buy stocks. For decades, investors have been guided by three principles: spare no money, buy and hold, and finally buy on the price fall. Such simple investment strategies have been and continue to be profitable! The Dow Jones has hit level 30000 for the first time. The S&P 500, according to the median gauge of 40 experts polled by Reuters, should be 9% up from the current levels by the end of 2021.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-steps-in-the-old-path-forecast-as-of-25112020/?uid=285861726&cid=79634
Dynamics of Dow Jones and US GDP
In previous years, US presidents didn’t interfere in the foreign exchange market as often as Donald Trump did. Joe Biden is coming to power, and the Forex trends are to return to the former patterns. How will this affect EURUSD? Let us discuss the Forex outlook and make up a trading plan.
Monthly EURUSD fundamental forecast
Slogans and real actions are often two completely opposite things. US presidents from Bill Clinton to Barack Obama expressed their commitment to a strong dollar policy. However, because of this policy's transparency, the greenback often fell during their terms of office. Donald Trump, on the contrary, talked about the advantages of a weak currency. Trump accused other countries of currency manipulations, called on the Fed to cut interest rates and resume the QE. Nonetheless, the USD was growing because of the certainty created by Trump’s administration. That is why I believe there are important bearish drivers for the greenback's weakening in the future. Joe Biden comes back to the old slogan ‘String dollar reflects the strength of the US economy.’ Biden nominates Janet Yellen for Treasury Secretary.
The market should forget the shocks resulting from the President's unexpected commentaries, which the US administration would try to smooth over the next day. During Trump’s term of office, forex analysts used to say that what was good for Trump was good for the dollar. As a safe-haven, greenback often benefited from the uncertainty, fueled by Trump’s unpredictable and eccentric tweets. Forex is coming back to old patterns. Besides, the hopes for the global economic recovery press down the safe-haven assets.
Investors discuss the controversial rally of the US stock indexes by 60% up from March’s low amid the US economy’s weakness. However, no matter how terrible they are, recessions rarely happen and end rather quickly, so everyone is rushing to buy stocks. For decades, investors have been guided by three principles: spare no money, buy and hold, and finally buy on the price fall. Such simple investment strategies have been and continue to be profitable! The Dow Jones has hit level 30000 for the first time. The S&P 500, according to the median gauge of 40 experts polled by Reuters, should be 9% up from the current levels by the end of 2021.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-steps-in-the-old-path-forecast-as-of-25112020/?uid=285861726&cid=79634
Dynamics of Dow Jones and US GDP
LiteFinance
Yen loses the firm ground. Forecast as of 24.11.2020
Fundamental yen forecast for six months
Donald Trump is leaving the White House, and the age of safe havens is also about to end. The eccentric and unpredictable 45th US president created an environment of uncertainty in the financial markets, which supported the safe-haven assets. Amid the trade wars and the pandemic over the last three years, the Japanese yen has grown 6.4% versus the US dollar, the Swiss franc – by 6.9%. On the opposite side in the list of 30 most traded Forex currencies are the Turkish lira (-99%), the Brazilian real (-68%), and the Russian ruble (-30%). Everything can radically change in 2021.
One of the key drivers for the USDJPY is the capital flows from Japan into the USA and vice versa. Over the six months up to September, overseas stocks' net sales by Japanese investors totaled ¥3.91 trillion; net purchases of local government debt are of ¥11.8 trillion. Both values are the highest since 2013. During the same period, the dollar was down by 4.5% versus the yen. Furthermore, when the Japanese investors were actively selling the foreign stocks (- ¥ 4.85 trillion on a net basis), the USDJPY was almost 4% down.
Although the US stock indexes were rising, Japan's epidemiological situation was better than in the USA, and there was uncertainty around the US presidential election. As a result, insurance companies, pension funds, and other investors preferred to sell the US stocks and repatriate capitals to Japan, pressing the USDJPY down. In 2021, the Japanese investors should display a higher risk appetite amid Biden’s victory (he will be more predictable than Trump), vaccines, and global GDP recovery. The capital flows should again outflow from Japan, making the yen a Forex outsider.
I do not think there is much use in selling the yen versus the US dollar. First, the greenback is also a safe haven, and the USD outlook is also bearish for 2021. Second, the US economy can well recover sooner than Japan’s growth. The US PMI has shown the best growth since March 2015, while Japan’s PMI remains weak.
Trading plan for EURJPY, GBPJPY, and AUDJPY for six months
It makes sense to sell the yen versus the euro, the pound, and the Australian dollar. A Brexit deal will support the euro and the sterling. If the pandemic is stopped, the EUR and the GBP could repeat the rallies that occurred in the May-August period. China and commodities will support the Aussie. Under such conditions, it seems promising to buy the EURJPY, GBPJPY, and AUDJPY with the targets of 126.4 and 128.5, 142.5 and 144.7, 79.5 and 82.4 in three and six months, respectively.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/yen-loses-the-firm-ground-forecast-as-of-24112020/?uid=285861726&cid=79634
Dynamics of Japanese PMI
Fundamental yen forecast for six months
Donald Trump is leaving the White House, and the age of safe havens is also about to end. The eccentric and unpredictable 45th US president created an environment of uncertainty in the financial markets, which supported the safe-haven assets. Amid the trade wars and the pandemic over the last three years, the Japanese yen has grown 6.4% versus the US dollar, the Swiss franc – by 6.9%. On the opposite side in the list of 30 most traded Forex currencies are the Turkish lira (-99%), the Brazilian real (-68%), and the Russian ruble (-30%). Everything can radically change in 2021.
One of the key drivers for the USDJPY is the capital flows from Japan into the USA and vice versa. Over the six months up to September, overseas stocks' net sales by Japanese investors totaled ¥3.91 trillion; net purchases of local government debt are of ¥11.8 trillion. Both values are the highest since 2013. During the same period, the dollar was down by 4.5% versus the yen. Furthermore, when the Japanese investors were actively selling the foreign stocks (- ¥ 4.85 trillion on a net basis), the USDJPY was almost 4% down.
Although the US stock indexes were rising, Japan's epidemiological situation was better than in the USA, and there was uncertainty around the US presidential election. As a result, insurance companies, pension funds, and other investors preferred to sell the US stocks and repatriate capitals to Japan, pressing the USDJPY down. In 2021, the Japanese investors should display a higher risk appetite amid Biden’s victory (he will be more predictable than Trump), vaccines, and global GDP recovery. The capital flows should again outflow from Japan, making the yen a Forex outsider.
I do not think there is much use in selling the yen versus the US dollar. First, the greenback is also a safe haven, and the USD outlook is also bearish for 2021. Second, the US economy can well recover sooner than Japan’s growth. The US PMI has shown the best growth since March 2015, while Japan’s PMI remains weak.
Trading plan for EURJPY, GBPJPY, and AUDJPY for six months
It makes sense to sell the yen versus the euro, the pound, and the Australian dollar. A Brexit deal will support the euro and the sterling. If the pandemic is stopped, the EUR and the GBP could repeat the rallies that occurred in the May-August period. China and commodities will support the Aussie. Under such conditions, it seems promising to buy the EURJPY, GBPJPY, and AUDJPY with the targets of 126.4 and 128.5, 142.5 and 144.7, 79.5 and 82.4 in three and six months, respectively.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/yen-loses-the-firm-ground-forecast-as-of-24112020/?uid=285861726&cid=79634
Dynamics of Japanese PMI
LiteFinance
Euro ignores negative. Forecast as of 23.11.2020
Monthly euro fundamental forecast
The correction of the US stock indexes and the concerns about a double-dip recession in the euro area do not stop the EURUSD bulls. The idea of the price growth to 1.2 already in 2020 looks more real than it did in early November. Furthermore, the USA is willing to introduce COVID-19 vaccines in less than three weeks. The vaccination is a key to the victory over the pandemic, global economic recovery, and the improvement of the global risk appetite.
New lockdowns amid the second pandemic wave in the euro area should have sent the EURUSD down. Bloomberg experts expect the euro-area PMI to go down below the critical level of 50 for the first time since June. If so, the pressure on the ECB will increase, making the central bank expand the monetary stimulus at the December meeting. However, this fact has already been priced in the major currency pair rates. Also, there are talks about the Fed’s monetary policy easing.
The news that the Treasury asks the Fed to return the $ 415 billion in unused funds that Congress gave the central bank for emergency lending programs is clearly political. Donald Trump, leaving the White House, hinders the reforms of the new US president. Trump tries to push Biden against the Senate and the House of Representatives after the change of leadership of the Treasury Department and the resumption of the idea of supporting the economy with cheap and affordable loans. Simultaneously, the absence of a ‘blue wave’ reduces the chance of a fresh massive fiscal stimulus. Under such conditions, most of the responsibility is on the Fed. Further deterioration of the US economy can force the Fed to resort to the ‘operation twist’ and the QE expansion.
Fed’s monetary easing is a bearish factor for the US dollar. Also, speculators have recently reduced dollar shorts, which could trigger a new wave of sell-offs. Some sellers are stepping back, but new dollar bears should come, so the euro will continue rising.
The number of new coronavirus cases decreases in the euro-area, investors expect the UK-EU trade deal shortly, which supports the EURUSD bulls. Twenty-four hours is plenty of time, and the negotiators can well strike a deal at the last moment. The Brexit deal is likely to send the GBPUSD up to 1.34-1.35, allowing the euro to get closer to $1.2.
Monthly EURUSD trading plan
I have many times noted that the euro-dollar tends to consolidate in the range of 1.16-1.2. However, the upper border of the range could move higher. This is because the US dollar bearish factors are now included in the exchange rates. The euro can well move into the trading channel of $1.18-$1.22 in December. Therefore, it is still relevant to buy the euro on the breakout of the resistance zone of $1.188-$1.189.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-ignores-negative-forecast-as-of-23112020/?uid=285861726&cid=79634
Dynamics of USD and speculative positions on US dollar
Monthly euro fundamental forecast
The correction of the US stock indexes and the concerns about a double-dip recession in the euro area do not stop the EURUSD bulls. The idea of the price growth to 1.2 already in 2020 looks more real than it did in early November. Furthermore, the USA is willing to introduce COVID-19 vaccines in less than three weeks. The vaccination is a key to the victory over the pandemic, global economic recovery, and the improvement of the global risk appetite.
New lockdowns amid the second pandemic wave in the euro area should have sent the EURUSD down. Bloomberg experts expect the euro-area PMI to go down below the critical level of 50 for the first time since June. If so, the pressure on the ECB will increase, making the central bank expand the monetary stimulus at the December meeting. However, this fact has already been priced in the major currency pair rates. Also, there are talks about the Fed’s monetary policy easing.
The news that the Treasury asks the Fed to return the $ 415 billion in unused funds that Congress gave the central bank for emergency lending programs is clearly political. Donald Trump, leaving the White House, hinders the reforms of the new US president. Trump tries to push Biden against the Senate and the House of Representatives after the change of leadership of the Treasury Department and the resumption of the idea of supporting the economy with cheap and affordable loans. Simultaneously, the absence of a ‘blue wave’ reduces the chance of a fresh massive fiscal stimulus. Under such conditions, most of the responsibility is on the Fed. Further deterioration of the US economy can force the Fed to resort to the ‘operation twist’ and the QE expansion.
Fed’s monetary easing is a bearish factor for the US dollar. Also, speculators have recently reduced dollar shorts, which could trigger a new wave of sell-offs. Some sellers are stepping back, but new dollar bears should come, so the euro will continue rising.
The number of new coronavirus cases decreases in the euro-area, investors expect the UK-EU trade deal shortly, which supports the EURUSD bulls. Twenty-four hours is plenty of time, and the negotiators can well strike a deal at the last moment. The Brexit deal is likely to send the GBPUSD up to 1.34-1.35, allowing the euro to get closer to $1.2.
Monthly EURUSD trading plan
I have many times noted that the euro-dollar tends to consolidate in the range of 1.16-1.2. However, the upper border of the range could move higher. This is because the US dollar bearish factors are now included in the exchange rates. The euro can well move into the trading channel of $1.18-$1.22 in December. Therefore, it is still relevant to buy the euro on the breakout of the resistance zone of $1.188-$1.189.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-ignores-negative-forecast-as-of-23112020/?uid=285861726&cid=79634
Dynamics of USD and speculative positions on US dollar
LiteFinance
Central banks went too far. Review as of 20.11.2020
Fed Chair: a scapegoat for Trump, a man of his dreams for Biden
Can money solve any problems? The central banks can answer the question the best. When you've got a hammer, any trouble becomes a nail. Regulators' control over money is a crude tool, and it can be useless in some cases. Never before have disproportions been as evident as now, when stock markets are growing rapidly amid ultra-soft monetary policies even if the pandemic has killed millions of people.
The IMF admits that financial markets are far from reality, and a further rally will result in future perturbation and destabilization when the bubble has burst out. Saying monetary policy is just all right, the Fed officials admit that they went too far, though. If the economy may face a double recession, it's better to do something to avoid it. At the same time, if everything is "all right" and the federal funds rate and QE are optimal, the previous steps have been too aggressive. Finally, it's Donald Trump, who wins. The man always learns from the mistakes of those who have followed his advice. He asked the Fed to cut borrowing costs and revive QE a while ago. Now, face the music.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/chatty-forex/central-banks-went-too-far-review-as-of-20112020/?uid=285861726&cid=79634
Fed Chair: a scapegoat for Trump, a man of his dreams for Biden
Can money solve any problems? The central banks can answer the question the best. When you've got a hammer, any trouble becomes a nail. Regulators' control over money is a crude tool, and it can be useless in some cases. Never before have disproportions been as evident as now, when stock markets are growing rapidly amid ultra-soft monetary policies even if the pandemic has killed millions of people.
The IMF admits that financial markets are far from reality, and a further rally will result in future perturbation and destabilization when the bubble has burst out. Saying monetary policy is just all right, the Fed officials admit that they went too far, though. If the economy may face a double recession, it's better to do something to avoid it. At the same time, if everything is "all right" and the federal funds rate and QE are optimal, the previous steps have been too aggressive. Finally, it's Donald Trump, who wins. The man always learns from the mistakes of those who have followed his advice. He asked the Fed to cut borrowing costs and revive QE a while ago. Now, face the music.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/chatty-forex/central-banks-went-too-far-review-as-of-20112020/?uid=285861726&cid=79634
LiteFinance
Euro chose the path. Forecast as of 19.11.2020
The correction of the US stock indexes is dangerous for the EURUSD bulls. However, the recovery of the global economy promises euro buyers good profits. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Monthly euro fundamental forecast
What is your trading style? Will you sell an asset in the short-term, being ready to take the profit at any time if you see a correction in the uptrend? Or will you buy and hold the longs expecting the drawdown to end? If you answer this question, you will know how to trade the EURUSD. Effective vaccines will support global economic growth in 2021. However, the markets should remain unstable in the short-term. There is a strong demand for safe-haven assets, including the US dollar. But investors should sell them sooner or later.
Although vaccinations will take time, and the logistical challenges are enormous, the global economy will be stronger in a year or two than it is now. The US stock market could be overvalued now, reacting to the positive news about vaccines developed by Pfizer and Moderna. Nevertheless, the long-term outlook for the US stock indices is optimistic. The EURUSD long-term prospects are also positive. Coronavirus vaccines are not the only growth driver for the euro.
Donald Trump’s protectionism, political uncertainty in the USA, and an 11% drop of the USD from the March high resulted in the fact that the single European currency for the first time over many years has outperformed the greenback in the international settlements. Yes, the US dollar is the primary funding currency, it is the major currency in the conversion transactions and FX reserves of the world’s central banks, but this won’t hinder the EURUSD rally. It is enough that the central banks diversify the FX reserves in favor of the euro.
The victory over the coronavirus pandemic is not the only factor that can accelerate economic expansion. According to the WTO research, in 2020, the G20 countries have introduced 133 trade measures related to COVID-19. 84 of them were aimed at facilitating trade, 49 - to restrict it. The entire world expects the USA and China to lower the import tariffs. Based on Xi Jinping's statement, Beijing is willing to do it.
Therefore, the euro's long-term outlook is clearly bullish. However, the EURUSD bears can well develop a short-term correction down. The main reason for this is the S&P 500 drawdown. BofA Merrill Lynch notes that the share of cash in global investors' portfolios has approached the critical 4% mark, which usually serves as a signal for selling US stocks.
Monthly EURUSD trading plan
Therefore, position traders should enter the EURUSD long-term longs on the corrections down to 1.18, 1.176, 1.172, and 1.167. Speculators could sell the euro in the short-term with narrow targets.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-chose-the-path-forecast-as-of-19112020/?uid=285861726&cid=79634
Dynamics of the US dollar’s and the euro’s shares in the global payments
The correction of the US stock indexes is dangerous for the EURUSD bulls. However, the recovery of the global economy promises euro buyers good profits. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Monthly euro fundamental forecast
What is your trading style? Will you sell an asset in the short-term, being ready to take the profit at any time if you see a correction in the uptrend? Or will you buy and hold the longs expecting the drawdown to end? If you answer this question, you will know how to trade the EURUSD. Effective vaccines will support global economic growth in 2021. However, the markets should remain unstable in the short-term. There is a strong demand for safe-haven assets, including the US dollar. But investors should sell them sooner or later.
Although vaccinations will take time, and the logistical challenges are enormous, the global economy will be stronger in a year or two than it is now. The US stock market could be overvalued now, reacting to the positive news about vaccines developed by Pfizer and Moderna. Nevertheless, the long-term outlook for the US stock indices is optimistic. The EURUSD long-term prospects are also positive. Coronavirus vaccines are not the only growth driver for the euro.
Donald Trump’s protectionism, political uncertainty in the USA, and an 11% drop of the USD from the March high resulted in the fact that the single European currency for the first time over many years has outperformed the greenback in the international settlements. Yes, the US dollar is the primary funding currency, it is the major currency in the conversion transactions and FX reserves of the world’s central banks, but this won’t hinder the EURUSD rally. It is enough that the central banks diversify the FX reserves in favor of the euro.
The victory over the coronavirus pandemic is not the only factor that can accelerate economic expansion. According to the WTO research, in 2020, the G20 countries have introduced 133 trade measures related to COVID-19. 84 of them were aimed at facilitating trade, 49 - to restrict it. The entire world expects the USA and China to lower the import tariffs. Based on Xi Jinping's statement, Beijing is willing to do it.
Therefore, the euro's long-term outlook is clearly bullish. However, the EURUSD bears can well develop a short-term correction down. The main reason for this is the S&P 500 drawdown. BofA Merrill Lynch notes that the share of cash in global investors' portfolios has approached the critical 4% mark, which usually serves as a signal for selling US stocks.
Monthly EURUSD trading plan
Therefore, position traders should enter the EURUSD long-term longs on the corrections down to 1.18, 1.176, 1.172, and 1.167. Speculators could sell the euro in the short-term with narrow targets.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-chose-the-path-forecast-as-of-19112020/?uid=285861726&cid=79634
Dynamics of the US dollar’s and the euro’s shares in the global payments
LiteFinance
Dollar doesn’t like Tesla. Forecast as of 17.11.2020
Weekly US dollar fundamental forecast
We should never forget 2020. However, financial markets seem to have forgotten it. Despite Wall Street experts' forecasts, suggesting the market turmoil following the US presidential election, the S&P 500 hits fresh highs. The US stocks are again rising amid the news about the COVID-19 vaccine. This time, Moderna offers a vaccine that demonstrated 95% efficiency. This vaccine performs better than the products developed by Pfizer and BioNTech. However, the stock index featured a weaker growth, which suggests the momentum exhaust and the EURUSD rally is limited.
The higher rises the S&P 500, the more experts talk about a correction. The epidemiological situation in the USA is deteriorating. The number of hospitalizations has reached a record high of 73,000. Over the last week, 1129 people died on average, which is the highest rate since August. Besides, 53 Reuters experts out of 57 believe that the coronavirus is the US economy's major problem, rather than the uncertainty about the ultimate voting results.
I suppose these two matters are related. Joe Biden says even more people will die from COVID-19 unless he and the new US administration soon take up their duties. Donald Trump continues a series of controversial tweets. Trump tweets Biden ‘won because the election was rigged’ and then he writes ‘We will win.’
So, the USA's epidemiological situation is tough; Trump refuses to concede and rejects the voting result. These are the arguments for a soon S&P 500 correction down. Another bearish factor is the uncertainty around the new fiscal stimulus package. Old financial aid programs expire on January 1. According to Deutsche Bank, the end of the programs will reduce consumer incomes by $150 billion in the first quarter of 2021, pressing the GDP down by 1%.
On the other hand, the US stock buyers have some arguments for the rally continuation. The Fed provides huge volumes of cheap liquidity, investors hope for a soon recovery of the US economy amid the introduction of COVID-19 vaccines. Furthermore, Tesla stock is to join the S&P 500 index in December. Since the beginning of 2020, the S&P 500 has been 12% up, which is quite an impressive performance considering the pandemic. However, the Nasdaq 100 has been 38% up due to the Tesla company. The S&P 500 should catch up.
Weekly EURUSD trading plan
I deliberately focus on the US stock market in my euro-dollar analytics. The US stock indexes determine the global risk appetite, which is the key driver for all dollar pairs, including the EURUSD. If the euro breaks out the resistance at $1.1865-$1.188, it should continue the rally towards $1.1955-$1.1965. If the EURUSD bounces down from the resistance, the correction should continue down to 1.18 and 1.1765.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-doesnt-like-tesla-forecast-as-of-17112020/?uid=285861726&cid=79634
S&P 500 reaction to the news about vaccines
Weekly US dollar fundamental forecast
We should never forget 2020. However, financial markets seem to have forgotten it. Despite Wall Street experts' forecasts, suggesting the market turmoil following the US presidential election, the S&P 500 hits fresh highs. The US stocks are again rising amid the news about the COVID-19 vaccine. This time, Moderna offers a vaccine that demonstrated 95% efficiency. This vaccine performs better than the products developed by Pfizer and BioNTech. However, the stock index featured a weaker growth, which suggests the momentum exhaust and the EURUSD rally is limited.
The higher rises the S&P 500, the more experts talk about a correction. The epidemiological situation in the USA is deteriorating. The number of hospitalizations has reached a record high of 73,000. Over the last week, 1129 people died on average, which is the highest rate since August. Besides, 53 Reuters experts out of 57 believe that the coronavirus is the US economy's major problem, rather than the uncertainty about the ultimate voting results.
I suppose these two matters are related. Joe Biden says even more people will die from COVID-19 unless he and the new US administration soon take up their duties. Donald Trump continues a series of controversial tweets. Trump tweets Biden ‘won because the election was rigged’ and then he writes ‘We will win.’
So, the USA's epidemiological situation is tough; Trump refuses to concede and rejects the voting result. These are the arguments for a soon S&P 500 correction down. Another bearish factor is the uncertainty around the new fiscal stimulus package. Old financial aid programs expire on January 1. According to Deutsche Bank, the end of the programs will reduce consumer incomes by $150 billion in the first quarter of 2021, pressing the GDP down by 1%.
On the other hand, the US stock buyers have some arguments for the rally continuation. The Fed provides huge volumes of cheap liquidity, investors hope for a soon recovery of the US economy amid the introduction of COVID-19 vaccines. Furthermore, Tesla stock is to join the S&P 500 index in December. Since the beginning of 2020, the S&P 500 has been 12% up, which is quite an impressive performance considering the pandemic. However, the Nasdaq 100 has been 38% up due to the Tesla company. The S&P 500 should catch up.
Weekly EURUSD trading plan
I deliberately focus on the US stock market in my euro-dollar analytics. The US stock indexes determine the global risk appetite, which is the key driver for all dollar pairs, including the EURUSD. If the euro breaks out the resistance at $1.1865-$1.188, it should continue the rally towards $1.1955-$1.1965. If the EURUSD bounces down from the resistance, the correction should continue down to 1.18 and 1.1765.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-doesnt-like-tesla-forecast-as-of-17112020/?uid=285861726&cid=79634
S&P 500 reaction to the news about vaccines
LiteFinance
Euro believes in vaccine. Forecast as of 16.11.2020
Weekly euro fundamental forecast
People drive the markets. The unexpected moves of asset prices often result from people’s puzzling decisions. The entire world is inspired by the positive results of the COVID-19 vaccines, and the S&P 500 hits fresh highs. Why has Pfizer CEO Albert Burla sold shares of $ 5.6 million in the pharmaceutical company? Does he want to sell at good prices when everybody is buying? Or does he not believe in the vaccine? If so, the disappointment could soon replace the market euphoria.
The hopes for a soon economic rebound are pushing up the stock indexes and the EURUSD. The Bloomberg data suggest a sharper downturn of the euro-area PMI than that of the US in the first weeks of November. Furthermore, the number of new coronavirus cases in Europe is higher than in the USA. Despite all the negative factors, the euro is growing.
Investors believe in the economic recovery. The progress in the vaccine development and the hopes for a V-shaped recovery of the US GDP allow Morgan Stanley to recommend investors to continue buying stocks and corporate bonds and selling Treasuries and the US dollar. According to the company’s forecast, the USD index will drop by 4% by the end of 2021. JP Morgan and Goldman Sachs are also optimistic. They suggest that the US presidential election results and the gradual improvement of the epidemiological situation will support the growth of the stock.
The trust in the vaccines implies that the global PMI will continue increasing despite the second pandemic wave. The correlation between the PMI and the Treasury yields means a big growth potential of the US bond market. The lesson learned from the current recession suggests that it’s better to ignore the growing debt and continue selling money rather than saving it up. Extensions of the issue volumes will encourage investors to withdraw the money from the secondary market and spend it in the initial market. In addition to the hopes for the global GDP recovery, this fact will send the yields up.
Italy is willing to issue bonds in US dollars at a rate of 165 basis points higher than their euro-area peers. Why should a country pay more when it can borrow cheaper in its own currency, not to mention cheap loans from the European Stability Mechanism? Italy needs money. If there is demand, why not sell the securities at a higher price?
The higher risk appetite and growing bond yields are a positive factor for the EURUSD.
Weekly EURUSD trading plan
Therefore, if Pfizer’s vaccine really saves the world from the pandemic, the global economic recovery promises good profits for the euro buyers. However, one should be cautious when holding the EURUSD longs entered at level 1.18. If the S&P 500 goes down, the traders will start selling the euro.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-believes-in-vaccine-forecast-as-of-16112020/?uid=285861726&cid=79634
Dynamics of EURUSD and the change in the COVID-19 cases
Weekly euro fundamental forecast
People drive the markets. The unexpected moves of asset prices often result from people’s puzzling decisions. The entire world is inspired by the positive results of the COVID-19 vaccines, and the S&P 500 hits fresh highs. Why has Pfizer CEO Albert Burla sold shares of $ 5.6 million in the pharmaceutical company? Does he want to sell at good prices when everybody is buying? Or does he not believe in the vaccine? If so, the disappointment could soon replace the market euphoria.
The hopes for a soon economic rebound are pushing up the stock indexes and the EURUSD. The Bloomberg data suggest a sharper downturn of the euro-area PMI than that of the US in the first weeks of November. Furthermore, the number of new coronavirus cases in Europe is higher than in the USA. Despite all the negative factors, the euro is growing.
Investors believe in the economic recovery. The progress in the vaccine development and the hopes for a V-shaped recovery of the US GDP allow Morgan Stanley to recommend investors to continue buying stocks and corporate bonds and selling Treasuries and the US dollar. According to the company’s forecast, the USD index will drop by 4% by the end of 2021. JP Morgan and Goldman Sachs are also optimistic. They suggest that the US presidential election results and the gradual improvement of the epidemiological situation will support the growth of the stock.
The trust in the vaccines implies that the global PMI will continue increasing despite the second pandemic wave. The correlation between the PMI and the Treasury yields means a big growth potential of the US bond market. The lesson learned from the current recession suggests that it’s better to ignore the growing debt and continue selling money rather than saving it up. Extensions of the issue volumes will encourage investors to withdraw the money from the secondary market and spend it in the initial market. In addition to the hopes for the global GDP recovery, this fact will send the yields up.
Italy is willing to issue bonds in US dollars at a rate of 165 basis points higher than their euro-area peers. Why should a country pay more when it can borrow cheaper in its own currency, not to mention cheap loans from the European Stability Mechanism? Italy needs money. If there is demand, why not sell the securities at a higher price?
The higher risk appetite and growing bond yields are a positive factor for the EURUSD.
Weekly EURUSD trading plan
Therefore, if Pfizer’s vaccine really saves the world from the pandemic, the global economic recovery promises good profits for the euro buyers. However, one should be cautious when holding the EURUSD longs entered at level 1.18. If the S&P 500 goes down, the traders will start selling the euro.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-believes-in-vaccine-forecast-as-of-16112020/?uid=285861726&cid=79634
Dynamics of EURUSD and the change in the COVID-19 cases
LiteFinance
Dollar looks for benefits. Forecast as of 13.11.2020
Investors wonder if it is relevant to sell the greenback as a safe haven or to buy because the US economy performs better than the euro-area. Therefore, the EURUSD tends to consolidate. Let us discuss this and make up a trading plan.
Weekly US dollar fundamental forecast
The market is like an ocean; the calm follows the storm. But calm sometimes is anxious; investors can’t define the further trend direction. Investors start exiting longs on the US stocks amid the record number of hospitalizations in the USA. Besides, the number of new COVID-19 cases is above 100,000 per day during nine consecutive days, and some US governors impose new restrictions. Another strict lockdown will hardly occur, but local isolation will result in job losses and an economic downturn. The EURUSD bulls will lose the major benefit if the S&P 500 fails to continue the rally.
The euro is supported by easing the market uncertainty and the hope for the global GDP recovery amid the vaccination. The US dollar could benefit from the divergence in economic expansion and monetary policies. According to 90% of 65 Wall Street Journal experts, the financial markets' uncertainty will ease as the US voting results are announced, and there is positive news about the vaccines. 80% of specialists expect the market to stabilize soon. According to Christine Lagarde, the ECB sees far less uncertainty than before amid Joe Biden's victory, progress on Brexit, and successful vaccine tests. The more clarity there is in the market, the less reason to buy safe-haven assets, including the US dollar.
On the other hand, the greenback should benefit from US economic performance. According to Wall Street Journal experts, the euro-area economy is likely to face a double recession while the US economy will show better results than earlier expected. The US GDP should contract by 2.7%, compared to the previously expected drop of 3.6%. The unemployment rate will drop to 6.7%, not to 7.8%. The risk of another downturn within twelve months has been significantly down.
The forecasts of experts look optimistic, but the pandemic does not end. Jerome Powell warns that the next few months will be tough for the United States and that it is too early to assess the impact of vaccine news on the economy's development. New restrictions can discourage those who think the glass is half full.
If the greenback loses the advantage of growth divergence, it may benefit from underestimating uncertainty. There are more than enough reasons for uncertainty growth. It is not known whether Washington's attitude towards Beijing will soften under Biden. It is unknown if Democrats and Republicans will find common ground over the fiscal stimulus. 58% of Wall Street Journal experts expect the stimulus of $1 trillion -$2 trillion, 29% expect less than $1 trillion, 13% predict a stimulus package of $2.1 trillion -$3 trillion.
WeeklyEURUSD trading plan
Therefore, some benefits of the US dollar have exhausted, some still work. That is why the EURUSD trend is not clear. If the pair breaks out the resistance at 1.1845, the bulls should go ahead. On the other hand, if the price goes below the support at 1.176, the bears can take control.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-looks-for-benefits-forecast-as-of-13112020/?uid=285861726&cid=79634
Dynamics of risk of US economic recession
Investors wonder if it is relevant to sell the greenback as a safe haven or to buy because the US economy performs better than the euro-area. Therefore, the EURUSD tends to consolidate. Let us discuss this and make up a trading plan.
Weekly US dollar fundamental forecast
The market is like an ocean; the calm follows the storm. But calm sometimes is anxious; investors can’t define the further trend direction. Investors start exiting longs on the US stocks amid the record number of hospitalizations in the USA. Besides, the number of new COVID-19 cases is above 100,000 per day during nine consecutive days, and some US governors impose new restrictions. Another strict lockdown will hardly occur, but local isolation will result in job losses and an economic downturn. The EURUSD bulls will lose the major benefit if the S&P 500 fails to continue the rally.
The euro is supported by easing the market uncertainty and the hope for the global GDP recovery amid the vaccination. The US dollar could benefit from the divergence in economic expansion and monetary policies. According to 90% of 65 Wall Street Journal experts, the financial markets' uncertainty will ease as the US voting results are announced, and there is positive news about the vaccines. 80% of specialists expect the market to stabilize soon. According to Christine Lagarde, the ECB sees far less uncertainty than before amid Joe Biden's victory, progress on Brexit, and successful vaccine tests. The more clarity there is in the market, the less reason to buy safe-haven assets, including the US dollar.
On the other hand, the greenback should benefit from US economic performance. According to Wall Street Journal experts, the euro-area economy is likely to face a double recession while the US economy will show better results than earlier expected. The US GDP should contract by 2.7%, compared to the previously expected drop of 3.6%. The unemployment rate will drop to 6.7%, not to 7.8%. The risk of another downturn within twelve months has been significantly down.
The forecasts of experts look optimistic, but the pandemic does not end. Jerome Powell warns that the next few months will be tough for the United States and that it is too early to assess the impact of vaccine news on the economy's development. New restrictions can discourage those who think the glass is half full.
If the greenback loses the advantage of growth divergence, it may benefit from underestimating uncertainty. There are more than enough reasons for uncertainty growth. It is not known whether Washington's attitude towards Beijing will soften under Biden. It is unknown if Democrats and Republicans will find common ground over the fiscal stimulus. 58% of Wall Street Journal experts expect the stimulus of $1 trillion -$2 trillion, 29% expect less than $1 trillion, 13% predict a stimulus package of $2.1 trillion -$3 trillion.
WeeklyEURUSD trading plan
Therefore, some benefits of the US dollar have exhausted, some still work. That is why the EURUSD trend is not clear. If the pair breaks out the resistance at 1.1845, the bulls should go ahead. On the other hand, if the price goes below the support at 1.176, the bears can take control.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-looks-for-benefits-forecast-as-of-13112020/?uid=285861726&cid=79634
Dynamics of risk of US economic recession
LiteFinance
Euro and ‘fun isolation’. Forecast as of 12.11.2020
Monthly euro fundamental forecast
I have often mentioned that the fourth quarter should be similar to the second, although the disaster should be less dramatic. This is evident from economic data, which suggests the current restrictions hit the euro-area economy. However, the damage is far less than it was during the previous lockdown. People continue going to work, manufacturing operates, and the government restricts entertainment and retail trading. The so-called ‘fun isolation’ suggests that vaccines' introduction will allow the euro-area economy to recover soon. This fact lets me hope that the EURUSD correction won’t be deep.
Of course, the ECB would like the euro to cost as little as possible, which will support exports and accelerate inflation. In her recent speech, Christine Lagarde highlighted the effectiveness of the Pandemic Emergence Purchase Program (PEPP) and anti-crisis long-term refinancing operation (LTRO). This was a clear signal that both of them will be expanded in December. On the other hand, the ECB president did not say anything about interest-rate changes. It is quite possible that by increasing the scale of QE, the ECB will cause the same reaction in EURUSD as the Bank of England did by its similar actions. Remember, the pound rose in response to the BoE monetary easing in November.
But still, the primary growth driver for the EURUSD is not the liquidity trap suggesting lower efficiency of the stimulating measures as their volumes increase and inadequate response of the regional currency. That is the rally of the US stock indexes, which supports the euro. Yes, the S&P 500 growth on November 9 unexpectedly supported the dollar. But this situation resulted from the realization of the investment idea of Biden’s victory in the US presidential election. The correlation between the US stock market and the EURUSD should soon restore, which could encourage the euro bulls to go ahead.
The record stimuli as the response to the recession have poured a huge amount of money into the financial system. Ahead of the elections, investors preferred to hold cash because of uncertainty. Now, that money goes back into the market. Amid positive news about vaccines, the S&P 500 rallies thanks to traditional industries, including industry and banking. As soon as there are talks about a long vaccine introduction process, the stock market is still rising. This time thanks to the tech stocks.
Monthly EURUSD trading plan
The current situation looks like that of the second quarter when the US and the euro-area economies slid down into recession, and the S&P 500 was growing. Investors expected the recession to end soon, and the GDP recovery to be V-shaped. The same is now. It will take a long time to introduce the COVID-19 vaccine after it has been approved. However, the stock indexes are rallying up, suggesting purchases of the EURUSD if the price closes above 1.18 and 1.1845. Otherwise, the US stock market correction will send the euro down to $1.172 and $1.167.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-and-fun-isolation-forecast-as-of-12112020/?uid=285861726&cid=79634
Dynamics and structure of ECB assets
Monthly euro fundamental forecast
I have often mentioned that the fourth quarter should be similar to the second, although the disaster should be less dramatic. This is evident from economic data, which suggests the current restrictions hit the euro-area economy. However, the damage is far less than it was during the previous lockdown. People continue going to work, manufacturing operates, and the government restricts entertainment and retail trading. The so-called ‘fun isolation’ suggests that vaccines' introduction will allow the euro-area economy to recover soon. This fact lets me hope that the EURUSD correction won’t be deep.
Of course, the ECB would like the euro to cost as little as possible, which will support exports and accelerate inflation. In her recent speech, Christine Lagarde highlighted the effectiveness of the Pandemic Emergence Purchase Program (PEPP) and anti-crisis long-term refinancing operation (LTRO). This was a clear signal that both of them will be expanded in December. On the other hand, the ECB president did not say anything about interest-rate changes. It is quite possible that by increasing the scale of QE, the ECB will cause the same reaction in EURUSD as the Bank of England did by its similar actions. Remember, the pound rose in response to the BoE monetary easing in November.
But still, the primary growth driver for the EURUSD is not the liquidity trap suggesting lower efficiency of the stimulating measures as their volumes increase and inadequate response of the regional currency. That is the rally of the US stock indexes, which supports the euro. Yes, the S&P 500 growth on November 9 unexpectedly supported the dollar. But this situation resulted from the realization of the investment idea of Biden’s victory in the US presidential election. The correlation between the US stock market and the EURUSD should soon restore, which could encourage the euro bulls to go ahead.
The record stimuli as the response to the recession have poured a huge amount of money into the financial system. Ahead of the elections, investors preferred to hold cash because of uncertainty. Now, that money goes back into the market. Amid positive news about vaccines, the S&P 500 rallies thanks to traditional industries, including industry and banking. As soon as there are talks about a long vaccine introduction process, the stock market is still rising. This time thanks to the tech stocks.
Monthly EURUSD trading plan
The current situation looks like that of the second quarter when the US and the euro-area economies slid down into recession, and the S&P 500 was growing. Investors expected the recession to end soon, and the GDP recovery to be V-shaped. The same is now. It will take a long time to introduce the COVID-19 vaccine after it has been approved. However, the stock indexes are rallying up, suggesting purchases of the EURUSD if the price closes above 1.18 and 1.1845. Otherwise, the US stock market correction will send the euro down to $1.172 and $1.167.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-and-fun-isolation-forecast-as-of-12112020/?uid=285861726&cid=79634
Dynamics and structure of ECB assets
LiteFinance
Dollar smiles again. Forecast as of 11.11.2020
Monthly US dollar fundamental forecast
It is impossible to predict market trends. The market is unpredictable; it can always surprise us. The EURUSD bulls are surprised because the pair doesn’t grow. There should be several reasons for the euro growth. Joe Biden has won the US presidential election; there is positive news about the COVID-19 vaccines. Investors should have started selling the dollar. However, the greenback remains strong, encouraging traders to buy the USD.
Jefferies notes that the USD closed in the red zone six months out of the last seven, having been down by 11%. The dollar’s surge on November 9 proves that most of the negative had been priced in the quotes, and the greenback will hardly start falling now. The central bank in Europe and Asia, which compete with the Fed, are willing to provide an extra monetary stimulus, which is a bearish factor for their local currencies. Jefferies sees the EURUSD falling to 1.14 as the dollar smile theory is popular again. It suggests the USD should strengthen at the final, third stage of the economic cycle because the US GDP outperforms the global peers.
Even though the next two quarters, according to the President of the Federal Reserve Bank of Dallas Robert Kaplan, will be tough for the US, it should demonstrate robust growth in 2021. Unlike Europe, the USA does not impose a lockdown, and the restrictions introduced in the euro-area countries are costly. For example, each month of helping businesses and workers in Italy affected by COVID-19 will cost Rome €10 billion. If the restrictions last through March, it will cost €40 billion - €50 billion, or 3% of GDP. Furthermore, the PMIs and other indicators are falling, which is confirmed by a decrease in the ZEW Indicator of Economic Sentiment for Germany to the lowest level since April.
The epidemiological situation in the euro area deteriorates. The ECB estimates that one in seven workers in Spain is associated with a business at risk of collapse, which compares with 8% of employees in Germany and France, and 10% - in Italy. The divergence in economic growth is in favor of the USA, which presses down the EURUSD.
And what about Biden’s victory and coronavirus vaccines? I believe the first driver has already worked out, which is evident from the euro drop on November 9. There is still much uncertainty around vaccines. Nobody can say how quickly they will be introduced and how long the immunity will last. The market needs time. The US stock indexes could be overvalued and will be unstable in the next few weeks. Besides, the positive news about COVID-19 vaccines will give Republicans a reason to delay or adopt a smaller fiscal stimulus than previously anticipated.
MonthlyEURUSD trading plan
The euro should be strong in the long-term outlook, but it should weaken in the short term. Under such conditions, one could buy the EURUSD at the breakout of the resistance at 1.192. It will be relevant to sell the euro-dollar if the price breaks out the support at 1.179.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-smiles-again-forecast-as-of-11112020/?uid=285861726&cid=79634
Dynamics of German economic sentiment index
Monthly US dollar fundamental forecast
It is impossible to predict market trends. The market is unpredictable; it can always surprise us. The EURUSD bulls are surprised because the pair doesn’t grow. There should be several reasons for the euro growth. Joe Biden has won the US presidential election; there is positive news about the COVID-19 vaccines. Investors should have started selling the dollar. However, the greenback remains strong, encouraging traders to buy the USD.
Jefferies notes that the USD closed in the red zone six months out of the last seven, having been down by 11%. The dollar’s surge on November 9 proves that most of the negative had been priced in the quotes, and the greenback will hardly start falling now. The central bank in Europe and Asia, which compete with the Fed, are willing to provide an extra monetary stimulus, which is a bearish factor for their local currencies. Jefferies sees the EURUSD falling to 1.14 as the dollar smile theory is popular again. It suggests the USD should strengthen at the final, third stage of the economic cycle because the US GDP outperforms the global peers.
Even though the next two quarters, according to the President of the Federal Reserve Bank of Dallas Robert Kaplan, will be tough for the US, it should demonstrate robust growth in 2021. Unlike Europe, the USA does not impose a lockdown, and the restrictions introduced in the euro-area countries are costly. For example, each month of helping businesses and workers in Italy affected by COVID-19 will cost Rome €10 billion. If the restrictions last through March, it will cost €40 billion - €50 billion, or 3% of GDP. Furthermore, the PMIs and other indicators are falling, which is confirmed by a decrease in the ZEW Indicator of Economic Sentiment for Germany to the lowest level since April.
The epidemiological situation in the euro area deteriorates. The ECB estimates that one in seven workers in Spain is associated with a business at risk of collapse, which compares with 8% of employees in Germany and France, and 10% - in Italy. The divergence in economic growth is in favor of the USA, which presses down the EURUSD.
And what about Biden’s victory and coronavirus vaccines? I believe the first driver has already worked out, which is evident from the euro drop on November 9. There is still much uncertainty around vaccines. Nobody can say how quickly they will be introduced and how long the immunity will last. The market needs time. The US stock indexes could be overvalued and will be unstable in the next few weeks. Besides, the positive news about COVID-19 vaccines will give Republicans a reason to delay or adopt a smaller fiscal stimulus than previously anticipated.
MonthlyEURUSD trading plan
The euro should be strong in the long-term outlook, but it should weaken in the short term. Under such conditions, one could buy the EURUSD at the breakout of the resistance at 1.192. It will be relevant to sell the euro-dollar if the price breaks out the support at 1.179.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-smiles-again-forecast-as-of-11112020/?uid=285861726&cid=79634
Dynamics of German economic sentiment index
LiteFinance
Gold pays the debts back. 10.11.2020
Monthly gold fundamental forecast
Gold is rolling down, and my forecast comes true. Just a few days ago, I recommended selling gold on the rebound from the resistance at $1965. Gold has been more than 5% down, and one could have made quite a lot of money on this strategy. Most of the positive factors have already been priced in the XAUUSD. The good news about COVID-19 vaccines has crashed the gold prices.
Gold trades could face the same situation as it was in 2011. 9 years ago, the global economy was recovering after the recession; massive fiscal and monetary stimuli weakened the world’s major currencies and fueled up inflation expectations, which was a bullish factor for the XAUUSD. However, consumer prices grew very slowly, and the gold uptrend broke down. In 2020, the hopes for the expansion of financial aid to at least $2 trillion encouraged the gold bulls to go ahead. Nonetheless, the divided congress and the information about vaccines set the gold buyers back.
The gold uptrend seemed to base on a strong foundation. The monetary stimuli now are the biggest ever, which boosts the central banks’ balance sheets, weakening the global currencies and increasing the volume of negative-yielding bonds up to a record high of $17.05 trillion.
Nonetheless, the situation cannot be stable by its nature, and it is going to change.
First, grate money supplies provided by central banks turned out into a liquidity trap. Additional monetary stimuli won’t be as effective as they used to be. It is evident from the reaction of the Australian dollar and the British pound to the monetary easing performed by the RBA and the BoE. These currencies strengthened, though they should have weakened under normal conditions. Regulators are more likely to change the structure of the QE rather than the volumes. The balance sheets should not increase as fast as before.
Second, Joe Biden’s victory along with the divided Congress lowers the chances of a massive fiscal stimulus. The gold bulls’ hopes for the reflationary policy, which could have been performed along with the presence of the ‘blue wave’, haven’t met the reality. That is why the speculators are exiting the gold longs.
Finally, if the information about the effectiveness of the OCVID-19 vaccine is true, the global economic recovery will drive the global bond market rates up and encourage investors to sell off the XAUUSD. Gold uptrend might recover only if the dollar is weak, but that will hardly happen soon. The dollar should weaken against the euro only provided the EU cancels the restrictions.
Monthly gold trading plan
I recommend holding down the shorts entered at level $1965. It will be relevant to add up to the sell positions if the price fails to break out the resistance at $1900 and $1915 or tests the supports at $1875 and $1860.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/gold-pays-the-debts-back-10112020/?uid=285861726&cid=79634
Dynamics of central banks’ balance sheets
Monthly gold fundamental forecast
Gold is rolling down, and my forecast comes true. Just a few days ago, I recommended selling gold on the rebound from the resistance at $1965. Gold has been more than 5% down, and one could have made quite a lot of money on this strategy. Most of the positive factors have already been priced in the XAUUSD. The good news about COVID-19 vaccines has crashed the gold prices.
Gold trades could face the same situation as it was in 2011. 9 years ago, the global economy was recovering after the recession; massive fiscal and monetary stimuli weakened the world’s major currencies and fueled up inflation expectations, which was a bullish factor for the XAUUSD. However, consumer prices grew very slowly, and the gold uptrend broke down. In 2020, the hopes for the expansion of financial aid to at least $2 trillion encouraged the gold bulls to go ahead. Nonetheless, the divided congress and the information about vaccines set the gold buyers back.
The gold uptrend seemed to base on a strong foundation. The monetary stimuli now are the biggest ever, which boosts the central banks’ balance sheets, weakening the global currencies and increasing the volume of negative-yielding bonds up to a record high of $17.05 trillion.
Nonetheless, the situation cannot be stable by its nature, and it is going to change.
First, grate money supplies provided by central banks turned out into a liquidity trap. Additional monetary stimuli won’t be as effective as they used to be. It is evident from the reaction of the Australian dollar and the British pound to the monetary easing performed by the RBA and the BoE. These currencies strengthened, though they should have weakened under normal conditions. Regulators are more likely to change the structure of the QE rather than the volumes. The balance sheets should not increase as fast as before.
Second, Joe Biden’s victory along with the divided Congress lowers the chances of a massive fiscal stimulus. The gold bulls’ hopes for the reflationary policy, which could have been performed along with the presence of the ‘blue wave’, haven’t met the reality. That is why the speculators are exiting the gold longs.
Finally, if the information about the effectiveness of the OCVID-19 vaccine is true, the global economic recovery will drive the global bond market rates up and encourage investors to sell off the XAUUSD. Gold uptrend might recover only if the dollar is weak, but that will hardly happen soon. The dollar should weaken against the euro only provided the EU cancels the restrictions.
Monthly gold trading plan
I recommend holding down the shorts entered at level $1965. It will be relevant to add up to the sell positions if the price fails to break out the resistance at $1900 and $1915 or tests the supports at $1875 and $1860.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/gold-pays-the-debts-back-10112020/?uid=285861726&cid=79634
Dynamics of central banks’ balance sheets
LiteFinance
Dollar is set back by euphoria. Forecast as of 09.11.2020
Weekly US dollar fundamental analysis
Euphoria rules the market. Investors forgot about both COVID-19, the US fiscal stimulus's unsettled issue, and Donald Trump rejecting the voting results. Traders are satisfied with the less uncertainty around Joe Biden’s policy, hoping for lower volatility. Analysts suggest that the divided Congress won’t allow Biden to carry out radical reforms in tightening taxation and regulation of technology companies. As a result, the S&P 500 grew by 7.3% in the first week of November, and the USD dropped to the lowest level since early September.
How long will the euphoria last? History proves that starting from 2000, if the S&P 500 was growing on election day, it continued growing in November and December. The first years of presidential terms were also favorable for the US stock indexes. The S&P 500 grew by 18.6% on average. However, the stock indexes’ trends during the time of the divided Congress, which prevented the White House from carrying out radical reforms, were controversial. During 45 years, starting from 1928, when one party controlled the US government, the stock market rose at an average rate of 7.46% annually, up from 7.26% in 46 years when the power was divided.
In my opinion, the markets are going too fast. Investors want to join the stock market’s uptrend, forgetting about the negative. However, are some negative factors that should have their effect. First, political uncertainty continues. Donald Trump is challenging the election results. Because of the second round of voting in Georgia, we will know the partisan makeup of the U.S. Senate only on January 5. It creates obstacles to the agreement on the new fiscal stimulus. Until a fresh stimulus is provided, the US economy will be slowing down, which presses down both the global GDP and the risk appetite.
Second, the coronavirus vaccines haven’t yet been developed, and the COVID-19 pandemic continues in the USA and in the euro area. The numbers of new coronavirus cases, hospitalizations, and deaths are hitting all-time highs, so investors’ optimism is surprising. The epidemiological situation in Europe is deteriorating. France, Germany, and other countries are locked down. This fact suggests that the divergence in the economic growth and monetary policy is in favor of the EURUSD bears.
Finally, the U.S. dollar may not be falling amid the growth of the S&P 500. The negative correlation between stocks and the USD is the strongest at the time of uncertainty, also because of the US presidential election. Once uncertainty eases, the negative correlation should stop working.
Weekly EURUSD trading plan
Euphoria rules the market, but it can’t last for long. If the EURUSD bulls fail to hold the price above 1.188, the pair should roll down to 1.183 and 1.1785. Otherwise, if the resistance is held up, the euro could continue the rally up to $1.195-$1.196 and even $1.2. Next, large traders should take some profits and exit the longs.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-set-back-by-euphoria-forecast-as-of-09112020/?uid=285861726&cid=79634
Reaction of S&P 500 to the political situation in USA
Weekly US dollar fundamental analysis
Euphoria rules the market. Investors forgot about both COVID-19, the US fiscal stimulus's unsettled issue, and Donald Trump rejecting the voting results. Traders are satisfied with the less uncertainty around Joe Biden’s policy, hoping for lower volatility. Analysts suggest that the divided Congress won’t allow Biden to carry out radical reforms in tightening taxation and regulation of technology companies. As a result, the S&P 500 grew by 7.3% in the first week of November, and the USD dropped to the lowest level since early September.
How long will the euphoria last? History proves that starting from 2000, if the S&P 500 was growing on election day, it continued growing in November and December. The first years of presidential terms were also favorable for the US stock indexes. The S&P 500 grew by 18.6% on average. However, the stock indexes’ trends during the time of the divided Congress, which prevented the White House from carrying out radical reforms, were controversial. During 45 years, starting from 1928, when one party controlled the US government, the stock market rose at an average rate of 7.46% annually, up from 7.26% in 46 years when the power was divided.
In my opinion, the markets are going too fast. Investors want to join the stock market’s uptrend, forgetting about the negative. However, are some negative factors that should have their effect. First, political uncertainty continues. Donald Trump is challenging the election results. Because of the second round of voting in Georgia, we will know the partisan makeup of the U.S. Senate only on January 5. It creates obstacles to the agreement on the new fiscal stimulus. Until a fresh stimulus is provided, the US economy will be slowing down, which presses down both the global GDP and the risk appetite.
Second, the coronavirus vaccines haven’t yet been developed, and the COVID-19 pandemic continues in the USA and in the euro area. The numbers of new coronavirus cases, hospitalizations, and deaths are hitting all-time highs, so investors’ optimism is surprising. The epidemiological situation in Europe is deteriorating. France, Germany, and other countries are locked down. This fact suggests that the divergence in the economic growth and monetary policy is in favor of the EURUSD bears.
Finally, the U.S. dollar may not be falling amid the growth of the S&P 500. The negative correlation between stocks and the USD is the strongest at the time of uncertainty, also because of the US presidential election. Once uncertainty eases, the negative correlation should stop working.
Weekly EURUSD trading plan
Euphoria rules the market, but it can’t last for long. If the EURUSD bulls fail to hold the price above 1.188, the pair should roll down to 1.183 and 1.1785. Otherwise, if the resistance is held up, the euro could continue the rally up to $1.195-$1.196 and even $1.2. Next, large traders should take some profits and exit the longs.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-set-back-by-euphoria-forecast-as-of-09112020/?uid=285861726&cid=79634
Reaction of S&P 500 to the political situation in USA