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The online ECN broker LiteFinance (ex. LiteForex) has been providing its clients access to Tier 1 liquidity in the currency, commodity, and stock market since 2005. All major currency pairs and cross rates, oil, precious metals, stock indexes, blue chips, and the largest set of cryptocurrency pairs can be traded at LiteFinance (ex. LiteForex).
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Dollar plays Mafia. EURUSD forecast 21.12.2020
At a time when liquidity in financial markets is falling on the eve of Christmas and uncertainty is growing, investors' interest in the US currency is returning. Let's talk about it and create a trading plan for EURUSD.
Monthly US dollar fundamental forecast
Uncertainty is an integral part of our life. Financial markets cannot exist without it. This is why investors return to the US dollar from time to time. Fish stuck in the nets of Brexit - let's sell GBPUSD; a new strain of COVID-19 is discovered in Britain and it spreads 70% faster than the previous one - let's buy the greenback; it's hard to tell how Congress will vote on the fiscal stimulus issue - time to return to the dollar. Uncertainty is not the only factor supporting the dollar. It is likely that the markets oversold it.
Although congressional leaders managed to negotiate about $900 billion in fiscal stimulus, the second-largest aid package in US history after the $2.2 trillion one in March, how the Senate and the House of Representatives will vote on December 21 is yet unknown. The stumbling block is the Fed's emergency lending programs. Democrats accuse Republicans of creating obstacles to the fiscal deal, and a potential clash could lead to the project being rejected.
The new strain of COVID-19 discovered in Britain is even greater uncertainty, forcing London to impose additional restrictions, and more than ten European countries to stop letting in tourists from Britain. While epidemiologists say that there is no connection between it and increased mortality rates and that vaccines may still work in the face of a new threat, but what if this is not the case? The entire plan to defeat the pandemic and rapidly restore global GDP in 2021 could go down the drain.
The uncertainty surrounding Brexit hasn't gone away at all. Boris Johnson needs clarification on the new EU fisheries proposal, he believes that the discussed financial aid package is unbalanced and will allow the EU to issue more subsidies than Britain, and Minister for the Cabinet Office Michael Gove argues that London and Brussels will be forced to conclude not one big deal but a few small agreements. The clock is ticking, time is running out, the pound is falling, dragging EURUSD down with it.
Investors are not sure whether the Fed will begin to tighten monetary policy in 2021. Yes, the FOMC forecasts suggest that rates are unlikely to rise before 2024, but there is also an emergency purchase program. Will the rise of inflation expectations, inspired by the current oil price rally, be the reason for the reduction in the scale of QE?
Dallas Fed President Robert Kaplan would prefer to start cutting down on bond purchases if GDP grows rapidly. Long QE creates problems, he says. It distorts financial markets and creates conditions for imbalances that will be difficult to manage.
Monthly EURUSD trading plan
As expected, the EURUSD pair couldn't hold above the 1.224-1.2245 level, while increased uncertainty increases the likelihood of consolidation in the range of 1.196-1.226. That is unless the vote in the US Congress goes off perfectly and the Brexit problems are resolved successfully in the last minute.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-plays-mafia-eurusd-forecast-21122020/?uid=285861726&cid=79634
Dynamics of the USD index
At a time when liquidity in financial markets is falling on the eve of Christmas and uncertainty is growing, investors' interest in the US currency is returning. Let's talk about it and create a trading plan for EURUSD.
Monthly US dollar fundamental forecast
Uncertainty is an integral part of our life. Financial markets cannot exist without it. This is why investors return to the US dollar from time to time. Fish stuck in the nets of Brexit - let's sell GBPUSD; a new strain of COVID-19 is discovered in Britain and it spreads 70% faster than the previous one - let's buy the greenback; it's hard to tell how Congress will vote on the fiscal stimulus issue - time to return to the dollar. Uncertainty is not the only factor supporting the dollar. It is likely that the markets oversold it.
Although congressional leaders managed to negotiate about $900 billion in fiscal stimulus, the second-largest aid package in US history after the $2.2 trillion one in March, how the Senate and the House of Representatives will vote on December 21 is yet unknown. The stumbling block is the Fed's emergency lending programs. Democrats accuse Republicans of creating obstacles to the fiscal deal, and a potential clash could lead to the project being rejected.
The new strain of COVID-19 discovered in Britain is even greater uncertainty, forcing London to impose additional restrictions, and more than ten European countries to stop letting in tourists from Britain. While epidemiologists say that there is no connection between it and increased mortality rates and that vaccines may still work in the face of a new threat, but what if this is not the case? The entire plan to defeat the pandemic and rapidly restore global GDP in 2021 could go down the drain.
The uncertainty surrounding Brexit hasn't gone away at all. Boris Johnson needs clarification on the new EU fisheries proposal, he believes that the discussed financial aid package is unbalanced and will allow the EU to issue more subsidies than Britain, and Minister for the Cabinet Office Michael Gove argues that London and Brussels will be forced to conclude not one big deal but a few small agreements. The clock is ticking, time is running out, the pound is falling, dragging EURUSD down with it.
Investors are not sure whether the Fed will begin to tighten monetary policy in 2021. Yes, the FOMC forecasts suggest that rates are unlikely to rise before 2024, but there is also an emergency purchase program. Will the rise of inflation expectations, inspired by the current oil price rally, be the reason for the reduction in the scale of QE?
Dallas Fed President Robert Kaplan would prefer to start cutting down on bond purchases if GDP grows rapidly. Long QE creates problems, he says. It distorts financial markets and creates conditions for imbalances that will be difficult to manage.
Monthly EURUSD trading plan
As expected, the EURUSD pair couldn't hold above the 1.224-1.2245 level, while increased uncertainty increases the likelihood of consolidation in the range of 1.196-1.226. That is unless the vote in the US Congress goes off perfectly and the Brexit problems are resolved successfully in the last minute.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-plays-mafia-eurusd-forecast-21122020/?uid=285861726&cid=79634
Dynamics of the USD index
LiteFinance
Everyone is kicking off the dollar
When the market is too bullish, the downturns can be very fast.
Investors believe the greenback should drop. Will the USD go down?
Christmas and New Year holidays are soon! Good husbands decorate the Christmas trees, and perfect husbands buy decorations for their wives. There only must be money. Of course, those who followed my recommendations and were buying out the euro at $1.075 since early March have cash. But what about those, carried away by the December euphoria and confidence in the EURUSD rise to 1.25, as large banks promise? They seem to have forgotten that more than one hundred billionaires have become rich on the natural human desire to get rich. Yes, Goldman Sachs claims that the euro will strengthen versus the US dollar in 2021, Morgan Stanley suggests the euro should be 10% up, and Citigroup says the USD should be 20% down. However, none of them has a crystal ball to the future. What if anything goes wrong?
People can pay a high price for being gullible. No matter how many business sharks assure you that the EURUSD will definitely grow, you need to believe in the best but prepare for the worst. At least you will avoid that type of financial stability when there was no money, you don’t have it now and don’t seem to have it in the future.
What are the arguments of dollar sellers? Should the uncertainty ease after the successful vaccines’ tests and Joe Biden’s victory in the 2020 election? But these events have already happened, the news has been traded, and the market uncertainty is always there. What if the vaccines won’t be effective or produce unwanted side effects? Why China and Iran are sure that Biden will be less aggressive than Donald Trump? I don’t think Biden wants China to outperform the USA during his term of power or Iran to make a nuclear bomb.
Should one sell the greenback because the Fed is insane and flooded the markets with cheap liquidity? However, Jerome Powell and his fellow central bankers have been passive for a few months already. The Treasury, led by the outgoing Steven Mnuchin, spares no effort to set the central bank back. First, the Treasury makes the Federal Reserve return the unused funds left over the emergency lending programs. Next, Mnuchin tries to pass through the Congress the Treasury’s decision not to renew several emergency Fed lending programs. So, there could be such a conversation between the US banks soon:
- Federal Reserve, could you lend us some money?
- In general, We can. However, We’d rather teach you the basics of austerity.
Other central banks, including the ECB, are now more aggressive than the Fed, so why should we give up on the dollar? How could anyone believe in the suggested twin deficit, the budget deficit, and the current account deficit? The USD bears were saying the same ahead of the recession. The greenback didn’t crash then; why should it drop now?
I don’t encourage you to enter the EURUSD shorts urgently. I am also a euro bull and believe the euro-dollar could rise to 1.25 next year, but I am not an obsessive buyer of any moving asset….Time will make everything clear. It’s time we wait and see.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/chatty-forex/everyone-is-kicking-off-the-dollar/?uid=285861726&cid=79634
When the market is too bullish, the downturns can be very fast.
Investors believe the greenback should drop. Will the USD go down?
Christmas and New Year holidays are soon! Good husbands decorate the Christmas trees, and perfect husbands buy decorations for their wives. There only must be money. Of course, those who followed my recommendations and were buying out the euro at $1.075 since early March have cash. But what about those, carried away by the December euphoria and confidence in the EURUSD rise to 1.25, as large banks promise? They seem to have forgotten that more than one hundred billionaires have become rich on the natural human desire to get rich. Yes, Goldman Sachs claims that the euro will strengthen versus the US dollar in 2021, Morgan Stanley suggests the euro should be 10% up, and Citigroup says the USD should be 20% down. However, none of them has a crystal ball to the future. What if anything goes wrong?
People can pay a high price for being gullible. No matter how many business sharks assure you that the EURUSD will definitely grow, you need to believe in the best but prepare for the worst. At least you will avoid that type of financial stability when there was no money, you don’t have it now and don’t seem to have it in the future.
What are the arguments of dollar sellers? Should the uncertainty ease after the successful vaccines’ tests and Joe Biden’s victory in the 2020 election? But these events have already happened, the news has been traded, and the market uncertainty is always there. What if the vaccines won’t be effective or produce unwanted side effects? Why China and Iran are sure that Biden will be less aggressive than Donald Trump? I don’t think Biden wants China to outperform the USA during his term of power or Iran to make a nuclear bomb.
Should one sell the greenback because the Fed is insane and flooded the markets with cheap liquidity? However, Jerome Powell and his fellow central bankers have been passive for a few months already. The Treasury, led by the outgoing Steven Mnuchin, spares no effort to set the central bank back. First, the Treasury makes the Federal Reserve return the unused funds left over the emergency lending programs. Next, Mnuchin tries to pass through the Congress the Treasury’s decision not to renew several emergency Fed lending programs. So, there could be such a conversation between the US banks soon:
- Federal Reserve, could you lend us some money?
- In general, We can. However, We’d rather teach you the basics of austerity.
Other central banks, including the ECB, are now more aggressive than the Fed, so why should we give up on the dollar? How could anyone believe in the suggested twin deficit, the budget deficit, and the current account deficit? The USD bears were saying the same ahead of the recession. The greenback didn’t crash then; why should it drop now?
I don’t encourage you to enter the EURUSD shorts urgently. I am also a euro bull and believe the euro-dollar could rise to 1.25 next year, but I am not an obsessive buyer of any moving asset….Time will make everything clear. It’s time we wait and see.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/chatty-forex/everyone-is-kicking-off-the-dollar/?uid=285861726&cid=79634
LiteFinance
Pound both dead and alive at the same time! Forecast Forecast as of 17.12.2020
The UK withdrawal from the EU makes the British economy vulnerable. However, if London and Brussels sign a deal, everything will turn upside down. Where will the pound go? Let us discuss the pound future and make up a GBPUSD trading plan.
Fundamental pound forecast for a year
In early December, Forex traders were discussing the binary scenario. Provided the Brexit deal is signed, the pound will be alive. Otherwise, if the UK withdraws from the EU without a deal, the pound will be dead. However, the sterling is like a Schrödinger's cat; it has to be alive and dead. Following the GBPUSD crash to 1.314, indicated in the previous pound analytics, the pair soared and is about to hit an upside target at 1.367. Where will the British pound go next?
After a dinner meeting of British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen, everyone was prepared for a no-deal Brexit. But the talks continue, and Boris Johnson will recall the UK parliament over Christmas break to legislate for a deal if one is secured. The European Commission President claims that the fisheries problem the only issue they haven’t found a way forward yet. The French president Emmanuel Macron is the only opponent to the deal, while the German Chancellor Angela Merkel says a deal is better than no deal.
The headwind for a pound was quickly replaced by a tailwind. The chance of the interest-rate cut by the BoE has dropped, and the GBPUSD has soared to the highest level over the past 2.5 years. Of course, the major reason is in a weak dollar, weakened by the Fed and Congress. After all, all safe havens are unwanted now.
The uncertainty around Brexit should embarrass the Bank of England, whose condition also resembles Schrödinger's cat. However, the BoE can remain passive, keeping the rate around 0.1% and continuing QE of £895 billion. The BoE Governor Andrew Bailey noted last week, while the central bank still has room to buy more bonds and pump cash into the financial system, that won’t prevent long lines of trucks if borders are hardened.
Although the pound is up, the UK economy remains weak. The GDP is recovering very slowly, following the worst recession over the past 300 years, and the Bank of England expects a double-dip recession in the fourth quarter. The uncertainty around Brexit makes the UK lose its positions in the world exports.
GBPUSD trading plan for a year
What doesn’t kill us makes us stronger. If London and Brussels sign a deal, the UK will improve its position in international trade. In addition to successful vaccination, associated with the increase in PMI, these factors will support the GBPUSD bulls in 2021. The downside driver in the first quarter will be the referendum on Scotland’s independence. However, I see a good chance of the pair’s rise to 1.4, based on the general situation. In the short run, traders could be exiting long and press the pound a little down, which will allow us to buy the sterling at a lower price.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pound-both-dead-and-alive-at-the-same-time-forecast-forecast-as-of-17122020/?uid=285861726&cid=79634
The UK withdrawal from the EU makes the British economy vulnerable. However, if London and Brussels sign a deal, everything will turn upside down. Where will the pound go? Let us discuss the pound future and make up a GBPUSD trading plan.
Fundamental pound forecast for a year
In early December, Forex traders were discussing the binary scenario. Provided the Brexit deal is signed, the pound will be alive. Otherwise, if the UK withdraws from the EU without a deal, the pound will be dead. However, the sterling is like a Schrödinger's cat; it has to be alive and dead. Following the GBPUSD crash to 1.314, indicated in the previous pound analytics, the pair soared and is about to hit an upside target at 1.367. Where will the British pound go next?
After a dinner meeting of British Prime Minister Boris Johnson and European Commission President Ursula von der Leyen, everyone was prepared for a no-deal Brexit. But the talks continue, and Boris Johnson will recall the UK parliament over Christmas break to legislate for a deal if one is secured. The European Commission President claims that the fisheries problem the only issue they haven’t found a way forward yet. The French president Emmanuel Macron is the only opponent to the deal, while the German Chancellor Angela Merkel says a deal is better than no deal.
The headwind for a pound was quickly replaced by a tailwind. The chance of the interest-rate cut by the BoE has dropped, and the GBPUSD has soared to the highest level over the past 2.5 years. Of course, the major reason is in a weak dollar, weakened by the Fed and Congress. After all, all safe havens are unwanted now.
The uncertainty around Brexit should embarrass the Bank of England, whose condition also resembles Schrödinger's cat. However, the BoE can remain passive, keeping the rate around 0.1% and continuing QE of £895 billion. The BoE Governor Andrew Bailey noted last week, while the central bank still has room to buy more bonds and pump cash into the financial system, that won’t prevent long lines of trucks if borders are hardened.
Although the pound is up, the UK economy remains weak. The GDP is recovering very slowly, following the worst recession over the past 300 years, and the Bank of England expects a double-dip recession in the fourth quarter. The uncertainty around Brexit makes the UK lose its positions in the world exports.
GBPUSD trading plan for a year
What doesn’t kill us makes us stronger. If London and Brussels sign a deal, the UK will improve its position in international trade. In addition to successful vaccination, associated with the increase in PMI, these factors will support the GBPUSD bulls in 2021. The downside driver in the first quarter will be the referendum on Scotland’s independence. However, I see a good chance of the pair’s rise to 1.4, based on the general situation. In the short run, traders could be exiting long and press the pound a little down, which will allow us to buy the sterling at a lower price.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pound-both-dead-and-alive-at-the-same-time-forecast-forecast-as-of-17122020/?uid=285861726&cid=79634
LiteFinance
Fed and Butterfly Effect. EURUSD forecast 16.12.2020
The Fed’s passive attitude doesn’t shake the financial market s as a rule. However, investors are so stressed that a single word by Jerome Powell could result in a strong market move. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Weekly US dollar fundamental forecast
When the financial market’s stress has reached its climax, even an unimportant factor could quickly move it up or down. The rising gauge of momentum inspires the US stocks bulls; bears note the extreme values of positive sentiment, including the excessive call option volumes. The Fed’s meeting could become the butterfly flapping its wings, which will start a wave of purchases or sales all over the world. Much, if not everything, depends on the S&P 500 trend now. The EURUSD is also very responsive to US stocks.
According to the US stock indexes, investors monitor the global risk appetite, whose growth has seriously weakened the US dollar recently. However, the US long-term economic outlook is bright, while the first quarter will be rather weak, according to the experts polled by the Wall Street Journal. Analysts expect the US GDP to go down to 1.9% in the January-March period, followed by the growth rate rise to 4% in April-June and July-September.
How can the Fed change investors’ risk appetite? The majority of the economists polled by Bloomberg expect the Fed to offer new guidance for its $120-billion asset purchase program. The QE should continue for several months as currently expected; however, investors want the Federal Reserve to link the terms with the inflation rate and unemployment. If the Fed doesn’t meet the expectations, the S&P 500 will go down.
Nonetheless, the primary driver for the S&P 500 moves, either up or down, is the Fed’s projections for the federal funds rate. The latest GDP forecasts suggest the US growth should contract by 3.7% in 2020 and expand by 4% in 2021. The good news about vaccines gives investors hope that the projections will be revised up. But what will the Federal Reserve do with the borrowing costs? The FOMC median gauge suggests that the interest rate will be at a level of 0%-0.25% through at least the end of 2023. If the FOMC officials hint at an earlier rate hike, it will press the US stock market down and strengthen the US dollar.
Weekly EURUSD trading plan
Nordea Markets expects that the Fed should start normalizing its monetary policy already in the first half of 2022 amid the quick rebound of the US economy and the inflation growth. I don’t think such a scenario is viable now. Jerome Powell and his fellow central bankers are more likely to wait and see, leaving the door for further monetary expansion open and sticking to the dovish tone. If so, the S&P 500 rally will continue, followed by the EURUSD rise towards 1.22 and 1.224. However, under the current conditions, it is risky to buy at highs or sell amid the correction expectations. I would rather open long positions on the corrections.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/fed-and-butterfly-effect-eurusd-forecast-16122020/?uid=285861726&cid=79634
Dynamics of momentum indicator and the demand for call option
The Fed’s passive attitude doesn’t shake the financial market s as a rule. However, investors are so stressed that a single word by Jerome Powell could result in a strong market move. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Weekly US dollar fundamental forecast
When the financial market’s stress has reached its climax, even an unimportant factor could quickly move it up or down. The rising gauge of momentum inspires the US stocks bulls; bears note the extreme values of positive sentiment, including the excessive call option volumes. The Fed’s meeting could become the butterfly flapping its wings, which will start a wave of purchases or sales all over the world. Much, if not everything, depends on the S&P 500 trend now. The EURUSD is also very responsive to US stocks.
According to the US stock indexes, investors monitor the global risk appetite, whose growth has seriously weakened the US dollar recently. However, the US long-term economic outlook is bright, while the first quarter will be rather weak, according to the experts polled by the Wall Street Journal. Analysts expect the US GDP to go down to 1.9% in the January-March period, followed by the growth rate rise to 4% in April-June and July-September.
How can the Fed change investors’ risk appetite? The majority of the economists polled by Bloomberg expect the Fed to offer new guidance for its $120-billion asset purchase program. The QE should continue for several months as currently expected; however, investors want the Federal Reserve to link the terms with the inflation rate and unemployment. If the Fed doesn’t meet the expectations, the S&P 500 will go down.
Nonetheless, the primary driver for the S&P 500 moves, either up or down, is the Fed’s projections for the federal funds rate. The latest GDP forecasts suggest the US growth should contract by 3.7% in 2020 and expand by 4% in 2021. The good news about vaccines gives investors hope that the projections will be revised up. But what will the Federal Reserve do with the borrowing costs? The FOMC median gauge suggests that the interest rate will be at a level of 0%-0.25% through at least the end of 2023. If the FOMC officials hint at an earlier rate hike, it will press the US stock market down and strengthen the US dollar.
Weekly EURUSD trading plan
Nordea Markets expects that the Fed should start normalizing its monetary policy already in the first half of 2022 amid the quick rebound of the US economy and the inflation growth. I don’t think such a scenario is viable now. Jerome Powell and his fellow central bankers are more likely to wait and see, leaving the door for further monetary expansion open and sticking to the dovish tone. If so, the S&P 500 rally will continue, followed by the EURUSD rise towards 1.22 and 1.224. However, under the current conditions, it is risky to buy at highs or sell amid the correction expectations. I would rather open long positions on the corrections.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/fed-and-butterfly-effect-eurusd-forecast-16122020/?uid=285861726&cid=79634
Dynamics of momentum indicator and the demand for call option
LiteFinance
Kiwi is following the yuan up. Forecast as of 15.12.2020
Monthly fundamental forecast for New Zealand dollar
If the Chinese yuan can grow against the dollar up to the highest level since 1993, why not the New Zealand dollar continues the rally versus a basket of world major currencies? The trading idea suggested in the mid-November to buy the NZDUSD with the targets at 0.705 and 0.72. However, some investors may think the uptrend is exhausting. May the New Zealand GDP report for Q3 convince them otherwise?
According to Citigroup, the high demand for the yuan-backed assets will be supporting the yuan during the entire year of 2021. As a result, the USDCNH pair should be down below 6. That was the level last seen 27 years ago. What is good for the renminbi is good for the kiwi. About 30% of New Zealand exports go to China, so the Chinese economy's growth is a positive factor for Wellington. That is why the kiwi and the yuan are positively correlated.
Beijing managed to defeat COVID-19. Furthermore, China’s manufacturing increased by 7%, retail sales – by 5% in November, and the fixed-asset investment went up 2.6% in the first eleven months of the year. Therefore, the OECD forecast suggesting China’s economy's growth by almost 10% in 2021 compared to the fourth quarter of 2019 is likely to come true.
Wellington also managed to deal with the pandemic effectively. Besides, there is a tailwind from China and the commodity market, as well as a lower chance of the interest-rate cut by the Reserve Bank of New Zealand, which lays a strong foundation for the NZDUSD uptrend. Six weeks ago, financial markets were fully confident that the cash rate would drop to -0.25% in 2021. Currently, the chances of such a scenario are estimated at 30%. The sharp rise in property prices could be the reason. The money has never been as cheap as now, and the housing prices soared. That is why New Zealand's prime minister, Jacinda Ardern, asked the RBNZ to take some measures to prevent growing social inequality among the people in New Zealand.
The NZD could follow the AUD trend, which soared after the report on the Australian GDP for Q3. Bloomberg experts suggest the New Zealand economy should expand by 12.9% in the July-September period, following the drop by 12.2% in the April-June period. Better than expected data could give a new momentum to the NZDUSD uptrend. After all, I believe the kiwi price is quite a dependant on the foreign environment. Therefore, a decline in the global risk appetite could result in a short-term correction, while the medium- and long-term NZD outlook remains bullish.
Monthly NZDUSD trading plan
Before Christmas, there will be uncertainty in the financial markets because of Brexit, adopting the fresh fiscal stimulus by the US Congress, and a potential trade war between China and Australia. Therefore, the US stock indexes, as well as the commodities, could be corrected down, pressing the NZDUSD also down. That is good! Traders will have a chance to buy the pair at a lower price and set the targets at 0.72 and 0.73-0.735.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/kiwi-is-following-the-yuan-up-forecast-as-of-15122020/?uid=285861726&cid=79634
Dynamics of NZDUSD and USDCNY
Monthly fundamental forecast for New Zealand dollar
If the Chinese yuan can grow against the dollar up to the highest level since 1993, why not the New Zealand dollar continues the rally versus a basket of world major currencies? The trading idea suggested in the mid-November to buy the NZDUSD with the targets at 0.705 and 0.72. However, some investors may think the uptrend is exhausting. May the New Zealand GDP report for Q3 convince them otherwise?
According to Citigroup, the high demand for the yuan-backed assets will be supporting the yuan during the entire year of 2021. As a result, the USDCNH pair should be down below 6. That was the level last seen 27 years ago. What is good for the renminbi is good for the kiwi. About 30% of New Zealand exports go to China, so the Chinese economy's growth is a positive factor for Wellington. That is why the kiwi and the yuan are positively correlated.
Beijing managed to defeat COVID-19. Furthermore, China’s manufacturing increased by 7%, retail sales – by 5% in November, and the fixed-asset investment went up 2.6% in the first eleven months of the year. Therefore, the OECD forecast suggesting China’s economy's growth by almost 10% in 2021 compared to the fourth quarter of 2019 is likely to come true.
Wellington also managed to deal with the pandemic effectively. Besides, there is a tailwind from China and the commodity market, as well as a lower chance of the interest-rate cut by the Reserve Bank of New Zealand, which lays a strong foundation for the NZDUSD uptrend. Six weeks ago, financial markets were fully confident that the cash rate would drop to -0.25% in 2021. Currently, the chances of such a scenario are estimated at 30%. The sharp rise in property prices could be the reason. The money has never been as cheap as now, and the housing prices soared. That is why New Zealand's prime minister, Jacinda Ardern, asked the RBNZ to take some measures to prevent growing social inequality among the people in New Zealand.
The NZD could follow the AUD trend, which soared after the report on the Australian GDP for Q3. Bloomberg experts suggest the New Zealand economy should expand by 12.9% in the July-September period, following the drop by 12.2% in the April-June period. Better than expected data could give a new momentum to the NZDUSD uptrend. After all, I believe the kiwi price is quite a dependant on the foreign environment. Therefore, a decline in the global risk appetite could result in a short-term correction, while the medium- and long-term NZD outlook remains bullish.
Monthly NZDUSD trading plan
Before Christmas, there will be uncertainty in the financial markets because of Brexit, adopting the fresh fiscal stimulus by the US Congress, and a potential trade war between China and Australia. Therefore, the US stock indexes, as well as the commodities, could be corrected down, pressing the NZDUSD also down. That is good! Traders will have a chance to buy the pair at a lower price and set the targets at 0.72 and 0.73-0.735.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/kiwi-is-following-the-yuan-up-forecast-as-of-15122020/?uid=285861726&cid=79634
Dynamics of NZDUSD and USDCNY
LiteFinance
Four reasons to buy Mexican peso. Forecast as of 14.12.2020
Quarterly peso fundamental forecast
Donald Trump’s attacks on the Fed in 2018-2019 are nothing compared to how other governments interfere with the central banks in other countries. Mexico’s Senate approved Wednesday a bill that will force the central bank to buy dollar bills from banks that can’t place them elsewhere, making it easier for the migrants to exchange the dollar, as they often sell the US dollars at a loss. In fact, a significant chunk of the dollars entering the country comes from drug trafficking, and the adoption of the bill by the House of Representatives will increase the risk of money laundering and terrorist financing, hurt the economy and undermine the international confidence that the Bank of Mexico took years to win. Mexico City can face Washington’s sanctions for money laundering.
Political risks must be the only factor that could prevent the peso from exceptional performance in Forex. Over the past six months, the USDMXN has been down by 11.5%. The gradual recovery of the Mexican economy, which was 12.1% up in the third quarter, the decline in the unemployment rate from 5.5% in June to 4.7% in October, in addition to the favorable foreign environment allow Bloomberg experts suggest the peso could be one of the most promising Forex currencies in 2021.
The world's leading central banks' ultra-easy monetary policy increased the negative-yielding global debt market to $18 trillion. Cheap money, amid investors’ confidence in a soon victory over the pandemic, support carry traders and emerging markets’ currencies. The major problem of developing economies is the slow introduction of coronavirus vaccines. However, Mexico authorizes the Pfizer-BioNTech coronavirus vaccine's emergency use, which should encourage the peso buyers.
About 83% of Mexican exports go to the USA. The experts polled by Wall Street Journal expect the US GDP to go up from 1.9% in the first quarter to 4% in the second and third quarter of 2021, which also encourages the USDMXN bears. Besides, Joe Biden has become the US president and the US-Mexico trade relations.
Besides the international trade also influences the exchange rates. According to Nordea Markets, the growth of international trade will, first of all, support the currencies of Latin America and the emerging markets.
Quarterly USDMXN trading plan
A weaker dollar supports the international financial conditions' improvement and creates a favorable environment for globalization and trade development, which will encourage the USDMXN bears. I believe, provided Mexico’s House of Representatives blocks the bill forcing the central bank to buy the dollars, the pair will continue falling towards 19.4 and 18.6. I recommend one to sell the dollar versus the peso on the USDMXN drawdowns.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/four-reasons-to-buy-mexican-peso-forecast-as-of-14122020/?uid=285861726&cid=79634
Quarterly peso fundamental forecast
Donald Trump’s attacks on the Fed in 2018-2019 are nothing compared to how other governments interfere with the central banks in other countries. Mexico’s Senate approved Wednesday a bill that will force the central bank to buy dollar bills from banks that can’t place them elsewhere, making it easier for the migrants to exchange the dollar, as they often sell the US dollars at a loss. In fact, a significant chunk of the dollars entering the country comes from drug trafficking, and the adoption of the bill by the House of Representatives will increase the risk of money laundering and terrorist financing, hurt the economy and undermine the international confidence that the Bank of Mexico took years to win. Mexico City can face Washington’s sanctions for money laundering.
Political risks must be the only factor that could prevent the peso from exceptional performance in Forex. Over the past six months, the USDMXN has been down by 11.5%. The gradual recovery of the Mexican economy, which was 12.1% up in the third quarter, the decline in the unemployment rate from 5.5% in June to 4.7% in October, in addition to the favorable foreign environment allow Bloomberg experts suggest the peso could be one of the most promising Forex currencies in 2021.
The world's leading central banks' ultra-easy monetary policy increased the negative-yielding global debt market to $18 trillion. Cheap money, amid investors’ confidence in a soon victory over the pandemic, support carry traders and emerging markets’ currencies. The major problem of developing economies is the slow introduction of coronavirus vaccines. However, Mexico authorizes the Pfizer-BioNTech coronavirus vaccine's emergency use, which should encourage the peso buyers.
About 83% of Mexican exports go to the USA. The experts polled by Wall Street Journal expect the US GDP to go up from 1.9% in the first quarter to 4% in the second and third quarter of 2021, which also encourages the USDMXN bears. Besides, Joe Biden has become the US president and the US-Mexico trade relations.
Besides the international trade also influences the exchange rates. According to Nordea Markets, the growth of international trade will, first of all, support the currencies of Latin America and the emerging markets.
Quarterly USDMXN trading plan
A weaker dollar supports the international financial conditions' improvement and creates a favorable environment for globalization and trade development, which will encourage the USDMXN bears. I believe, provided Mexico’s House of Representatives blocks the bill forcing the central bank to buy the dollars, the pair will continue falling towards 19.4 and 18.6. I recommend one to sell the dollar versus the peso on the USDMXN drawdowns.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/four-reasons-to-buy-mexican-peso-forecast-as-of-14122020/?uid=285861726&cid=79634
LiteFinance
Euro got a blank check. Forecast 11.12.2020
Monthly euro fundamental forecast
Compromise is not always the best way to solve a problem. Unlike Mario Draghi, who suppressed the Governing Council’s hawks with his authority, told the market what he considered necessary, and thus manipulated the euro as he wanted, Christine Lagarde prefers to convey to investors the collective position of the ECB. She said the Pandemic Emergency Purchase Programme (PEPP) might not be utilized in full scale, which sounded similar to Jens Weidmann and his supporters' speeches. The hawkish tone of Lagarde’s comments at the press conference following the ECB December meeting sent the EURUSD up to the zone of 2.5-year highs.
Of course, the ECB couldn’t have broken the euro uptrend, but at least it could have tried to press it down a little. In fact, the forecasts are too gloomy, and the actions are expected. The European Central Bank lowered its forecasts for 2021. The expected GDP growth is down from 5% to 3.9%; the expected inflation rate is down from 1.3% to 1.1%. Lagarde expects the euro-area economy to contract 2.2% in the fourth quarter. At the same time, the expansion of the emergency asset purchase program by € 500 billion, as well as the extension of PEPP until the end of March 2022 and LTRO until the end of June 2022, have not surprised investors at all. On the contrary, some of them expected that both programs' terms would be extended by twelve months. Extension by nine months is further evidence of Christine Lagarde's compromise with the hawks.
Considering the December adjustments, the ECB’s monetary stimulus will exceed € 3 trillion this year. The central bank is actually targeting the bond yields of the EU countries; that is, it gives a blank check to the EU governments. They could borrow money, and the ECB will pay the debts.
Germany and other EU countries actively use ECB programs. Through an agreement with Budapest and Warsaw, Berlin found a way to reverse the veto of Hungary and Poland on approving a € 1.8 trillion fiscal stimulus package, including the € 750 billion post-pandemic recovery fund. The approval of programs by the European Union is an important milestone in the development of the united Europe. The risk of the euro area breakup is down to almost zero. Furthermore, a massive fiscal stimulus will support further integration of European countries and transition to a low-carbon economy.
Monthly EURUSD trading plan
The current situation is similar to the market sentiment in the May-August period. At that time, the ECB officials suggested a potential yield control policy and launched the post-pandemic recovery fund. Besides, the recovery of the US stock indexes encouraged the EURUSD bulls to start a rally up. Now, history not only repeats itself but rhymes as well. The EURUSD buyers ignore Boris Johnson's promises to withdraw the UK from the EU with or without a deal. The bulls do not pay any attention to the S&P 500 correction amid the absence of the compromise on the fiscal stimulus in US Congress. The euro is rallying up to the targets at $1.224 and $1.23, and we can enjoy the victory and pick up corrections.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-got-a-blank-check-forecast-11122020/?uid=285861726&cid=79634
Dynamics of ECB quantitative easing programs
Monthly euro fundamental forecast
Compromise is not always the best way to solve a problem. Unlike Mario Draghi, who suppressed the Governing Council’s hawks with his authority, told the market what he considered necessary, and thus manipulated the euro as he wanted, Christine Lagarde prefers to convey to investors the collective position of the ECB. She said the Pandemic Emergency Purchase Programme (PEPP) might not be utilized in full scale, which sounded similar to Jens Weidmann and his supporters' speeches. The hawkish tone of Lagarde’s comments at the press conference following the ECB December meeting sent the EURUSD up to the zone of 2.5-year highs.
Of course, the ECB couldn’t have broken the euro uptrend, but at least it could have tried to press it down a little. In fact, the forecasts are too gloomy, and the actions are expected. The European Central Bank lowered its forecasts for 2021. The expected GDP growth is down from 5% to 3.9%; the expected inflation rate is down from 1.3% to 1.1%. Lagarde expects the euro-area economy to contract 2.2% in the fourth quarter. At the same time, the expansion of the emergency asset purchase program by € 500 billion, as well as the extension of PEPP until the end of March 2022 and LTRO until the end of June 2022, have not surprised investors at all. On the contrary, some of them expected that both programs' terms would be extended by twelve months. Extension by nine months is further evidence of Christine Lagarde's compromise with the hawks.
Considering the December adjustments, the ECB’s monetary stimulus will exceed € 3 trillion this year. The central bank is actually targeting the bond yields of the EU countries; that is, it gives a blank check to the EU governments. They could borrow money, and the ECB will pay the debts.
Germany and other EU countries actively use ECB programs. Through an agreement with Budapest and Warsaw, Berlin found a way to reverse the veto of Hungary and Poland on approving a € 1.8 trillion fiscal stimulus package, including the € 750 billion post-pandemic recovery fund. The approval of programs by the European Union is an important milestone in the development of the united Europe. The risk of the euro area breakup is down to almost zero. Furthermore, a massive fiscal stimulus will support further integration of European countries and transition to a low-carbon economy.
Monthly EURUSD trading plan
The current situation is similar to the market sentiment in the May-August period. At that time, the ECB officials suggested a potential yield control policy and launched the post-pandemic recovery fund. Besides, the recovery of the US stock indexes encouraged the EURUSD bulls to start a rally up. Now, history not only repeats itself but rhymes as well. The EURUSD buyers ignore Boris Johnson's promises to withdraw the UK from the EU with or without a deal. The bulls do not pay any attention to the S&P 500 correction amid the absence of the compromise on the fiscal stimulus in US Congress. The euro is rallying up to the targets at $1.224 and $1.23, and we can enjoy the victory and pick up corrections.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-got-a-blank-check-forecast-11122020/?uid=285861726&cid=79634
Dynamics of ECB quantitative easing programs
LiteFinance
Euro is doomed to success. Forecast as of EURUSD 10.12.2020
The EURUSD could roll down because of the correction of the US stock indexes or a no-deal Brexit but not the European central bank. Let us discuss the Forex prospects and make up a trading plan.
Monthly euro fundamental forecast
The first pandemic wave damaged badly financial markets; the second wave, more destructive, has not affected the markets much. On the contrary, the world stock indexes are growing amid the hopes for vaccines. The associated confidence in the rapid recovery of the global economy in 2021 makes investors search for alternatives to the US assets, supporting the money outflow from the US and weakening the US dollar. The paradox is the EURUSD rally presses down the euro-area exports. The great share of exports in the European GDP doesn’t allow rapid growth of corporate profits, making the euro-area securities less appealing for investors than the US assets. Since the beginning of the year, the S&P 500 has been 15% up, while the EuroStoxx 50 has been 5% down. How could the money be out-flowing from the US?
In fact, European stocks do not always fall when the euro rises. According to Goldman Sachs, the current situation resembles the events of 2012-2014, when assets were on the same road, also because of the expectations for the QE start by the ECB. The company believes that the economic recovery will be a stronger driver for corporations than exports. So, the euro strengthening won’t hit the corporate profits. Goldman Sachs suggests the corporate incomes will grow by 30% in 2021 and by 20% in 2022. The EURUSD should be at 1.25 next year.
A weaker US dollar improves international financial conditions, creating a tailwind for international trade and is more significant for European exports than a strengthening euro. Simultaneously, the ECB's tight control over the euro-area bond market is another important driver for the European stocks’ growth.
If Christine Lagarde and her colleagues at the December 10 meeting expand the emergency asset purchase program by €500 billion, as Bloomberg experts expect, this will be enough to buy 70% of all bonds that the governments of the eurozone countries plan to issue in 2021, according to Pictet Wealth Management. The ECB already owns 43% of all German debt and every second out of five Italian securities. These figures have skyrocketed since the end of 2019, when they were 30% and 25%, respectively. As a result, quarterly yield spreads are the tightest since the previous global financial crisis.
Monthly EURUSD trading plan
The ECB controls the yields just like the Bank of Japan does, although it is not announced. The more monetary stimulus the ECB adds, the better the environment will be created for the European stocks and the euro. Even if the Governing Council reaches the 2% inflation target, which is unlikely, it will also be positive news for the euro. Whatever Christine Lagarde does, the EURUSD will be going up. The bulls could be discouraged by the correction of the US stock indexes or a no-deal Brexit. However, following the ECB meeting, it will be relevant to buy the pair on the price fall. The upside targets will be at 1.224 and 1.235.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-doomed-to-success-forecast-as-of-eurusd-10122020/?uid=285861726&cid=79634
The EURUSD could roll down because of the correction of the US stock indexes or a no-deal Brexit but not the European central bank. Let us discuss the Forex prospects and make up a trading plan.
Monthly euro fundamental forecast
The first pandemic wave damaged badly financial markets; the second wave, more destructive, has not affected the markets much. On the contrary, the world stock indexes are growing amid the hopes for vaccines. The associated confidence in the rapid recovery of the global economy in 2021 makes investors search for alternatives to the US assets, supporting the money outflow from the US and weakening the US dollar. The paradox is the EURUSD rally presses down the euro-area exports. The great share of exports in the European GDP doesn’t allow rapid growth of corporate profits, making the euro-area securities less appealing for investors than the US assets. Since the beginning of the year, the S&P 500 has been 15% up, while the EuroStoxx 50 has been 5% down. How could the money be out-flowing from the US?
In fact, European stocks do not always fall when the euro rises. According to Goldman Sachs, the current situation resembles the events of 2012-2014, when assets were on the same road, also because of the expectations for the QE start by the ECB. The company believes that the economic recovery will be a stronger driver for corporations than exports. So, the euro strengthening won’t hit the corporate profits. Goldman Sachs suggests the corporate incomes will grow by 30% in 2021 and by 20% in 2022. The EURUSD should be at 1.25 next year.
A weaker US dollar improves international financial conditions, creating a tailwind for international trade and is more significant for European exports than a strengthening euro. Simultaneously, the ECB's tight control over the euro-area bond market is another important driver for the European stocks’ growth.
If Christine Lagarde and her colleagues at the December 10 meeting expand the emergency asset purchase program by €500 billion, as Bloomberg experts expect, this will be enough to buy 70% of all bonds that the governments of the eurozone countries plan to issue in 2021, according to Pictet Wealth Management. The ECB already owns 43% of all German debt and every second out of five Italian securities. These figures have skyrocketed since the end of 2019, when they were 30% and 25%, respectively. As a result, quarterly yield spreads are the tightest since the previous global financial crisis.
Monthly EURUSD trading plan
The ECB controls the yields just like the Bank of Japan does, although it is not announced. The more monetary stimulus the ECB adds, the better the environment will be created for the European stocks and the euro. Even if the Governing Council reaches the 2% inflation target, which is unlikely, it will also be positive news for the euro. Whatever Christine Lagarde does, the EURUSD will be going up. The bulls could be discouraged by the correction of the US stock indexes or a no-deal Brexit. However, following the ECB meeting, it will be relevant to buy the pair on the price fall. The upside targets will be at 1.224 and 1.235.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-doomed-to-success-forecast-as-of-eurusd-10122020/?uid=285861726&cid=79634
LiteFinance
ECB can’t handle the dollar. Forecast as of 09.12.2020
Weekly US dollar fundamental forecast
If the ECB can’t set back the dollar bears, it could give the bulls a new advantage on other currencies trading against the euro! After all, the euro area trades not only with the USA but with the entire world, so the exporters should not be concerned with the EURUSD rally. The trade-weighted euro exchange rate is only 0.5% higher than the ECB estimate for 2021. Christine Lagarde could sound dovish and encourage the buyers of the emerging markets’ currencies to go ahead.
The 8% strengthening of the euro against the US dollar is the main reason for the deteriorating financial conditions, which is negative news for the deflationary euro-area economy. The ECB is dissatisfied, but it will hardly succeed in weakening the euro by verbal interventions or the expansion of QE, which has already been taken in the EURUSD quotes. This is due to the weak dollar, which is sensitive to the US stock indices' trends. The US stocks, in turn, responsive to the news from the US Congress.
Hardly had the Senate Majority Leader Mitch McConnell rejected the offer of a $908 billion stimulus package when the S&P 500 dropped. Next, the White House offered a new project for $916 billion, including the issues of financing local authorities important for Democrats and the problem of protecting the rights of enterprises' liability, which is fundamental for Republicans, and McConnell accepted it. The stock index hit a new all-time high in response. McConnell seems to be an essential person for the financial markets.
In 2021, the situation may change radically. There are currently 48 Democrats and 50 Republicans in the Senate. If the two remaining seats are taken by "donkeys," power will pass to Vice President Kamala Harris. If the elephants get even one seat, McConnell will continue to set back Joe Biden's attempts to expand fiscal stimulus. In the first case, new economic aid packages, a reflationary environment, a continuation of the S&P 500 rally, and the greenback drop should follow. In the second scenario, due to the growing uncertainty, the dollar may strengthen.
After all, investors are now focused on the ECB meeting. The risk of the interest rate cut is low, while the probability of the dovish stance is extremely high. I do not think the ECB will raise the issue of debt cancellation, which has been suggested by analysts. They say the national debt will grow by € 1.5 trillion due to the pandemic and, for the first time, exceed the size of GDP. Why doesn't the regulator write off the bonds purchased under QE or replace them with perpetual bonds?
I suppose Christine Lagarde should return to this issue but not on December 10. The ECB should now focus on the euro weakening at least versus the emerging markets’ currencies. The ECB can’t handle the dollar. Moreover, if the EURUSD grows above the resistance at 1.2135, it could continue the rally. I wouldn’t rush to enter new longs, however. I’d rather expect the press-conference following the ECB meeting and buy the pair on the price fall.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/ecb-cant-handle-the-dollar-forecast-as-of-09122020/?uid=285861726&cid=79634
Dynamics of EURUSD and trade-weighted euro
Weekly US dollar fundamental forecast
If the ECB can’t set back the dollar bears, it could give the bulls a new advantage on other currencies trading against the euro! After all, the euro area trades not only with the USA but with the entire world, so the exporters should not be concerned with the EURUSD rally. The trade-weighted euro exchange rate is only 0.5% higher than the ECB estimate for 2021. Christine Lagarde could sound dovish and encourage the buyers of the emerging markets’ currencies to go ahead.
The 8% strengthening of the euro against the US dollar is the main reason for the deteriorating financial conditions, which is negative news for the deflationary euro-area economy. The ECB is dissatisfied, but it will hardly succeed in weakening the euro by verbal interventions or the expansion of QE, which has already been taken in the EURUSD quotes. This is due to the weak dollar, which is sensitive to the US stock indices' trends. The US stocks, in turn, responsive to the news from the US Congress.
Hardly had the Senate Majority Leader Mitch McConnell rejected the offer of a $908 billion stimulus package when the S&P 500 dropped. Next, the White House offered a new project for $916 billion, including the issues of financing local authorities important for Democrats and the problem of protecting the rights of enterprises' liability, which is fundamental for Republicans, and McConnell accepted it. The stock index hit a new all-time high in response. McConnell seems to be an essential person for the financial markets.
In 2021, the situation may change radically. There are currently 48 Democrats and 50 Republicans in the Senate. If the two remaining seats are taken by "donkeys," power will pass to Vice President Kamala Harris. If the elephants get even one seat, McConnell will continue to set back Joe Biden's attempts to expand fiscal stimulus. In the first case, new economic aid packages, a reflationary environment, a continuation of the S&P 500 rally, and the greenback drop should follow. In the second scenario, due to the growing uncertainty, the dollar may strengthen.
After all, investors are now focused on the ECB meeting. The risk of the interest rate cut is low, while the probability of the dovish stance is extremely high. I do not think the ECB will raise the issue of debt cancellation, which has been suggested by analysts. They say the national debt will grow by € 1.5 trillion due to the pandemic and, for the first time, exceed the size of GDP. Why doesn't the regulator write off the bonds purchased under QE or replace them with perpetual bonds?
I suppose Christine Lagarde should return to this issue but not on December 10. The ECB should now focus on the euro weakening at least versus the emerging markets’ currencies. The ECB can’t handle the dollar. Moreover, if the EURUSD grows above the resistance at 1.2135, it could continue the rally. I wouldn’t rush to enter new longs, however. I’d rather expect the press-conference following the ECB meeting and buy the pair on the price fall.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/ecb-cant-handle-the-dollar-forecast-as-of-09122020/?uid=285861726&cid=79634
Dynamics of EURUSD and trade-weighted euro
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
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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
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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
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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