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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 will spoil the party. Forecast for 27.01.2021
The FOMC's first meeting in 2021 is an important event for financial markets. However, the Fed’s meeting will hardly change investors’ sentiment. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Fundamental US dollar forecast for today
Jerome Powell is trying to convince the financial markets that the Fed will not take away the punch bowl just when the party gets going. However, different vaccination paces and the growth-gap between the US and euro-area economies suggest that the EURUSD bulls should not expect the euro rally to be as fast as it was in November-December. The IMF expects the US and China’s economies to exceed the forecasts made for 2022 before the pandemic by 1.5% by the end of next year. Some European economies will only be able to recover to pre-crisis levels in 2023.
In 1955, William McChesney Martin, then chairman of the US Federal Reserve, noted that the central bank’s attempt to raise interest rates too early to slow down inflation looks like taking away the punch bowl just when the party gets going. Jerome Powell does not want to repeat the mistakes of the former Fed’s chairs. For example, Ben Bernanke crashed financial markets in 2013, saying that it was the right time to start tapering the bond purchases. In early January, several FOMC officials talked about pulling back on the asset purchase program, which supported the US dollar. Powell aims now to dissuade investors from this idea.
However, 37% of Bloomberg experts believe that the Fed should start winding down the QE as early as 2021. Such expectations are one of the key drivers of the greenback strengthening.
Furthermore, the US dollar has more benefits. They are a potential escalation of the US-China trade battle, divergence in the paces of vaccination and economic recovery in the US and the euro area. Although the upward revising of the forecasts for the global GDP in 2020 from -4.4% to -3.5% and in 2021 from +5.2% to 5.5% by the IMF is good news for the EURUSD bulls, it is necessary to understand what will drive the global economy. The leaders should be the USA and China, while the euro-area economies should be lagging behind.
I do not believe the above factors are the ultimate benefits for the greenback. The US dollar should benefit from the US-China battle escalation, but the greenback could weaken if the global GDP rebounds because of its safe-haven status. Such a scenario is more likely to work out in the medium term. In the short run, the EURUSD trend depends on the vaccination speed.
With this regard, the situation suggests the euro should be corrected down. Pfizer said it is ready to ship 200 million doses to the US by the end of May, two months earlier than initially estimated. On the contrary, the vaccine's provision to the European Union is being delayed due to problems with the manufacturer's plant in Belgium. AstraZeneca said it would ship substantially fewer doses to Europe than it had promised.
EURUSD trading plan for today
I believe Jerome Powell’s dovish stance could push the EURUSD up above the bottom of figure 22. However, investors should soon realize that there won’t be such a rally as it was in November-December and start selling the euro. It will be relevant to enter short-term sell trades if the price fails to test the resistances at 1.221 and 1.2245.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-will-spoil-the-party-forecast-for-27012021/?uid=285861726&cid=79634
Forecasts for the time of US QE slowing
The FOMC's first meeting in 2021 is an important event for financial markets. However, the Fed’s meeting will hardly change investors’ sentiment. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Fundamental US dollar forecast for today
Jerome Powell is trying to convince the financial markets that the Fed will not take away the punch bowl just when the party gets going. However, different vaccination paces and the growth-gap between the US and euro-area economies suggest that the EURUSD bulls should not expect the euro rally to be as fast as it was in November-December. The IMF expects the US and China’s economies to exceed the forecasts made for 2022 before the pandemic by 1.5% by the end of next year. Some European economies will only be able to recover to pre-crisis levels in 2023.
In 1955, William McChesney Martin, then chairman of the US Federal Reserve, noted that the central bank’s attempt to raise interest rates too early to slow down inflation looks like taking away the punch bowl just when the party gets going. Jerome Powell does not want to repeat the mistakes of the former Fed’s chairs. For example, Ben Bernanke crashed financial markets in 2013, saying that it was the right time to start tapering the bond purchases. In early January, several FOMC officials talked about pulling back on the asset purchase program, which supported the US dollar. Powell aims now to dissuade investors from this idea.
However, 37% of Bloomberg experts believe that the Fed should start winding down the QE as early as 2021. Such expectations are one of the key drivers of the greenback strengthening.
Furthermore, the US dollar has more benefits. They are a potential escalation of the US-China trade battle, divergence in the paces of vaccination and economic recovery in the US and the euro area. Although the upward revising of the forecasts for the global GDP in 2020 from -4.4% to -3.5% and in 2021 from +5.2% to 5.5% by the IMF is good news for the EURUSD bulls, it is necessary to understand what will drive the global economy. The leaders should be the USA and China, while the euro-area economies should be lagging behind.
I do not believe the above factors are the ultimate benefits for the greenback. The US dollar should benefit from the US-China battle escalation, but the greenback could weaken if the global GDP rebounds because of its safe-haven status. Such a scenario is more likely to work out in the medium term. In the short run, the EURUSD trend depends on the vaccination speed.
With this regard, the situation suggests the euro should be corrected down. Pfizer said it is ready to ship 200 million doses to the US by the end of May, two months earlier than initially estimated. On the contrary, the vaccine's provision to the European Union is being delayed due to problems with the manufacturer's plant in Belgium. AstraZeneca said it would ship substantially fewer doses to Europe than it had promised.
EURUSD trading plan for today
I believe Jerome Powell’s dovish stance could push the EURUSD up above the bottom of figure 22. However, investors should soon realize that there won’t be such a rally as it was in November-December and start selling the euro. It will be relevant to enter short-term sell trades if the price fails to test the resistances at 1.221 and 1.2245.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-will-spoil-the-party-forecast-for-27012021/?uid=285861726&cid=79634
Forecasts for the time of US QE slowing
LiteFinance
Pound: The vaccine changes rules of game. Forecast as of 26.01.2021
Investors prefer to buy those countries' currencies that are actively fighting COVID-19, including with the help of vaccines. Let's discuss how the vaccination campaign's speed will affect the EURGBP and GBPUSD prices and make up a trading plan.
Monthly pound fundamental forecast
Traders love divergences. In technical analysis, the price chart's divergence with the MACD indicator is used in the well-known Elder Triple Screen Trading System. In fundamental research, divergences in central banks’ monetary policies and economic growth rates have served their fans for decades. Due to the pandemic, new strategies are emerging in the Forex market, and trading divergence in vaccination rates is gaining popularity.
Britain is considered to be one of the most COVID-19 affected countries. Due to the impressive share of the service sector as a whole (over 80%) and such spheres as recreation, culture, restaurants, and hotels (13%), in particular, in the UK's GDP, the UK economy faced the most destructive recession in the last three centuries. As a result, the country slipped into the last place among the G7 countries. It is all the more surprising to see the GBPUSD prices near the highs since April 2018 and the EURGBP prices near the 10-month bottom.
The vaccine changes the rules of the game. The currencies of the most COVID-19 affected countries that have a clear plan for overcoming the crisis are beginning to enjoy increased demand, and sterling has something to offer investors in this regard. At the end of January, 10% of Britain's population was inoculated which is five times more than in the European Union. Divergence in vaccination rates supports the EURGBP bears.
The EU is facing difficulties such as a delay in the supply of the AstraZeneca vaccine and Pfizer/BioNTech's intention to reduce its product offer outside the US. As a result, the vaccination campaign slows down, and the euro suffers. The surges of EURGBP are associated with weak statistics on retail sales, purchasing managers' index, and UK employment. The British economy is depressed, but this is a well-known fact. To predict exchange rates, you need to be able to predict the future. The belief that most of the UK population will receive the vaccine by summer allows Aberdeen Standard Investments to expect that the pound will rise by 20% against the euro.
I also believe that the primary beneficiaries of the victory over the pandemic will be the currencies of those countries that will eradicate COVID-19 first. Sterling will benefit from the booming economy following its release from the lockdown. Due to fiscal stimulus, the UK personal savings rate is near historic highs, and once people start spending that money, GDP will show strong growth.
As for the GBPUSD, despite the potential development of the correction in the short term, the growth of inflationary expectations in the US, measured by the break-even level, will push the USD index down.
EURGBP and GBPUSD trading plan for a month
In my opinion, after the release of disappointing data on the British economy, EURGBP price growth should be used for selling in the direction of 0.88, and rebounds from supports at 1.3565, 1.352, 1.349 for buying GBPUSD.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pound-the-vaccine-changes-rules-of-game-forecast-as-of-26012021/?uid=285861726&cid=79634
Dynamics of EURGBP and vaccination rate
Investors prefer to buy those countries' currencies that are actively fighting COVID-19, including with the help of vaccines. Let's discuss how the vaccination campaign's speed will affect the EURGBP and GBPUSD prices and make up a trading plan.
Monthly pound fundamental forecast
Traders love divergences. In technical analysis, the price chart's divergence with the MACD indicator is used in the well-known Elder Triple Screen Trading System. In fundamental research, divergences in central banks’ monetary policies and economic growth rates have served their fans for decades. Due to the pandemic, new strategies are emerging in the Forex market, and trading divergence in vaccination rates is gaining popularity.
Britain is considered to be one of the most COVID-19 affected countries. Due to the impressive share of the service sector as a whole (over 80%) and such spheres as recreation, culture, restaurants, and hotels (13%), in particular, in the UK's GDP, the UK economy faced the most destructive recession in the last three centuries. As a result, the country slipped into the last place among the G7 countries. It is all the more surprising to see the GBPUSD prices near the highs since April 2018 and the EURGBP prices near the 10-month bottom.
The vaccine changes the rules of the game. The currencies of the most COVID-19 affected countries that have a clear plan for overcoming the crisis are beginning to enjoy increased demand, and sterling has something to offer investors in this regard. At the end of January, 10% of Britain's population was inoculated which is five times more than in the European Union. Divergence in vaccination rates supports the EURGBP bears.
The EU is facing difficulties such as a delay in the supply of the AstraZeneca vaccine and Pfizer/BioNTech's intention to reduce its product offer outside the US. As a result, the vaccination campaign slows down, and the euro suffers. The surges of EURGBP are associated with weak statistics on retail sales, purchasing managers' index, and UK employment. The British economy is depressed, but this is a well-known fact. To predict exchange rates, you need to be able to predict the future. The belief that most of the UK population will receive the vaccine by summer allows Aberdeen Standard Investments to expect that the pound will rise by 20% against the euro.
I also believe that the primary beneficiaries of the victory over the pandemic will be the currencies of those countries that will eradicate COVID-19 first. Sterling will benefit from the booming economy following its release from the lockdown. Due to fiscal stimulus, the UK personal savings rate is near historic highs, and once people start spending that money, GDP will show strong growth.
As for the GBPUSD, despite the potential development of the correction in the short term, the growth of inflationary expectations in the US, measured by the break-even level, will push the USD index down.
EURGBP and GBPUSD trading plan for a month
In my opinion, after the release of disappointing data on the British economy, EURGBP price growth should be used for selling in the direction of 0.88, and rebounds from supports at 1.3565, 1.352, 1.349 for buying GBPUSD.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pound-the-vaccine-changes-rules-of-game-forecast-as-of-26012021/?uid=285861726&cid=79634
Dynamics of EURGBP and vaccination rate
LiteFinance
Euro has a compass. Forecast as of 22.01.2021
If you do not want to lose being in a losing position, you should create confusion. It is difficult to discourage investors who are willing to buy the EURUSD. The best way to press down the euro is to address uncertainty. Let us discuss the Forex outlook and make up a trading plan.
Weekly euro fundamental forecast
Christine Lagarde failed to drop the euro, but she didn’t let the single European currency grow, which could be recognized as the ECB success under the current conditions. Although the Governing Council admitted that concerns about the rapid strengthening of the euro have eased, and the euro-area bond yields increased, the EURUSD bulls failed to draw the price above figure 22 bottom. The reason is the confusion created by Lagarde.
What is good, what is bad. At a press conference shortly after the policy announcement, Lagarde spoke about both positive and negative aspects of the development of the world and European economies. As positive sides, Lagarde enumerated the beginning of vaccination, the Brexit deal, the European Rescue Fund, a decrease in political uncertainty in the United States, and the success of the euro-area manufacturing. The negative points are the pandemic and lockdowns in the euro-area countries, the likely double-dip recession, and stubbornly low inflation.
The Governing Council stands ready to adjust the pandemic asset purchase program but doesn’t say how exactly. Most of the uncertainty must result from Christine Lagarde's announcement that PEPP will be scaled up or down based on market data, including terms and conditions of bank lending and sovereign and corporate bond rates. It would seem that the ECB suggests yield targeting following the example of the central banks of Japan and Australia. Still, unlike them, the ECB uses not one but several criteria. The central bank doesn’t explain how exactly it should adjust its asset purchases. The market is confused, which is traditionally supports safe-haven assets. That is why the EURUSD could not rise high.
Christine Lagarde noted that financial conditions are the compass, and inflation is the anchor. At the same time, the fact that the ECB asset purchases under the PEPP are scaling down supports the euro.
ECB has given way to the Fed, whose meeting will highlight the last week of January. The Federal Reserve must be satisfied with the increase of inflation expectations suggested by different market indicators, including bond breakeven inflation rates, interest rate swaps, and hedging costs. But isn’t it an illusion? According to the Baupost Group, the US central bank and government have convinced investors that the risk has simply disappeared. As a result, the market cannot fulfill its function of determining prices.
In fact, the growth of the US stock indexes during the COVID-19 pandemic and GDP downturn is not natural. The higher the S&P 500 grow, the more likely the correction is to start. If the US equities go down, the euro will be pressed down.
Weekly EURUSD trading plan
If the euro-area PMI data are strong in January, it will signal that the euro-area economy has adopted to the pandemic. In this case, the EURUSD could rise above 1.22. Hold up the longs entered at 1.208 and 1.2125, but prepare for the violent price swings. As I noted earlier, the euro rally won’t be easy.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-has-a-compass-forecast-as-of-22012021/?uid=285861726&cid=79634
Dynamics of ECB asset purchases
If you do not want to lose being in a losing position, you should create confusion. It is difficult to discourage investors who are willing to buy the EURUSD. The best way to press down the euro is to address uncertainty. Let us discuss the Forex outlook and make up a trading plan.
Weekly euro fundamental forecast
Christine Lagarde failed to drop the euro, but she didn’t let the single European currency grow, which could be recognized as the ECB success under the current conditions. Although the Governing Council admitted that concerns about the rapid strengthening of the euro have eased, and the euro-area bond yields increased, the EURUSD bulls failed to draw the price above figure 22 bottom. The reason is the confusion created by Lagarde.
What is good, what is bad. At a press conference shortly after the policy announcement, Lagarde spoke about both positive and negative aspects of the development of the world and European economies. As positive sides, Lagarde enumerated the beginning of vaccination, the Brexit deal, the European Rescue Fund, a decrease in political uncertainty in the United States, and the success of the euro-area manufacturing. The negative points are the pandemic and lockdowns in the euro-area countries, the likely double-dip recession, and stubbornly low inflation.
The Governing Council stands ready to adjust the pandemic asset purchase program but doesn’t say how exactly. Most of the uncertainty must result from Christine Lagarde's announcement that PEPP will be scaled up or down based on market data, including terms and conditions of bank lending and sovereign and corporate bond rates. It would seem that the ECB suggests yield targeting following the example of the central banks of Japan and Australia. Still, unlike them, the ECB uses not one but several criteria. The central bank doesn’t explain how exactly it should adjust its asset purchases. The market is confused, which is traditionally supports safe-haven assets. That is why the EURUSD could not rise high.
Christine Lagarde noted that financial conditions are the compass, and inflation is the anchor. At the same time, the fact that the ECB asset purchases under the PEPP are scaling down supports the euro.
ECB has given way to the Fed, whose meeting will highlight the last week of January. The Federal Reserve must be satisfied with the increase of inflation expectations suggested by different market indicators, including bond breakeven inflation rates, interest rate swaps, and hedging costs. But isn’t it an illusion? According to the Baupost Group, the US central bank and government have convinced investors that the risk has simply disappeared. As a result, the market cannot fulfill its function of determining prices.
In fact, the growth of the US stock indexes during the COVID-19 pandemic and GDP downturn is not natural. The higher the S&P 500 grow, the more likely the correction is to start. If the US equities go down, the euro will be pressed down.
Weekly EURUSD trading plan
If the euro-area PMI data are strong in January, it will signal that the euro-area economy has adopted to the pandemic. In this case, the EURUSD could rise above 1.22. Hold up the longs entered at 1.208 and 1.2125, but prepare for the violent price swings. As I noted earlier, the euro rally won’t be easy.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-has-a-compass-forecast-as-of-22012021/?uid=285861726&cid=79634
Dynamics of ECB asset purchases
LiteFinance
Euro reads between the lines. Forecast for 21.01.2021
Investors do not expect anything new from the European Central Bank. This fact, as well as the return of the dollar bears and pleasant surprises from the euro-area economy, could encourage the EURUSD bulls to go ahead. Let us discuss the Forex outlook and make up a trading plan.
Fundamental Euro forecast today
People, who can earn money, can read between the lines. The US new administration and Joe Biden may suggest an unwillingness to weaken the dollar. However, the very fact of Janet Yellen's appointment to theTreasury Secretary gives the green light to the greenback sellers. At the press conference following the ECB's January meeting, Christine Lagarde may repeat the mantra that the central bank is closely monitoring the euro exchange rate. However, the repetition of the previous wording will most likely contribute to the EURUSD growth. It is simply because the ECB, after the pair’s correction, has fewer reasons to worry about the euro’s appreciation than in December.
The S&P 500 bulls correctly interpreted Joe Biden’s call for national unity. The new US president is preparing Congress to adopt the new $1.9 trillion fiscal stimulus package. In addition to the positive corporative reporting, this fact allowed the US stock index to hit a new all-time high. According to FactSet, as of January 20, actual earnings data were better than expected by 88% of companies reporting. Besides, investors believe in the rebound of the US economy in the second quarter, so the US stock market's bullish sentiment is natural.
History knows only a few examples of the S&P 500 fall during economic booms. In 1946, after a short downturn, investors feared that the economy would repeat the recession of the 1930s and sold stocks. In 1980, during a short-term recovery in the double-dip recession, the stock index fell as the Fed tried to mitigate excessive inflation growth. A drop in the S&P 500 during a time of GDP growth is rare. So, investors naturally stick to a strategy of buying the stocks on the corrections and selling the dollar on the price rise. The EURUSD current correction seems to be just the rebalancing of the large investors’ positions.
The ECB passive attitude will support the recovery of the euro uptrend. Investors don’t expect anything new from the central bank, so they should focus on Christine Lagarde’s press conference. Not long ago, the ECB president supported the central bank’s forecast for a 3.9% growth of the euro-area GDP in 2021 following a decline by 7.3%. She said that it is too early to discuss the ECB monetary policy tightening, and the ECB is monitoring the euro’s exchange rate. She is likely to repeat the same on January 21. The Central Bank has nothing to surprise investors, and the fact that the EURUSD correction reduces the need for verbal intervention, on the contrary, may strengthen the euro.
EURUSD trading plan for today
I do not think the ECB will expand the QE. The euro-area economy adjusts to the pandemic and improves its performance. The US dollar bears go ahead, and the EURUSD bulls could be only discouraged by slow vaccination. The EU, where 1.4% of the population have been inoculated, is behind the UK (7.1%) and USA (5%). However, the progress in the vaccination campaign supports the euro. If the euro breaks out the resistance at $1.215, it can be the reason to buy.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-reads-between-the-lines-forecast-for-21012021/?uid=285861726&cid=79634
Dynamics of USD index
Investors do not expect anything new from the European Central Bank. This fact, as well as the return of the dollar bears and pleasant surprises from the euro-area economy, could encourage the EURUSD bulls to go ahead. Let us discuss the Forex outlook and make up a trading plan.
Fundamental Euro forecast today
People, who can earn money, can read between the lines. The US new administration and Joe Biden may suggest an unwillingness to weaken the dollar. However, the very fact of Janet Yellen's appointment to theTreasury Secretary gives the green light to the greenback sellers. At the press conference following the ECB's January meeting, Christine Lagarde may repeat the mantra that the central bank is closely monitoring the euro exchange rate. However, the repetition of the previous wording will most likely contribute to the EURUSD growth. It is simply because the ECB, after the pair’s correction, has fewer reasons to worry about the euro’s appreciation than in December.
The S&P 500 bulls correctly interpreted Joe Biden’s call for national unity. The new US president is preparing Congress to adopt the new $1.9 trillion fiscal stimulus package. In addition to the positive corporative reporting, this fact allowed the US stock index to hit a new all-time high. According to FactSet, as of January 20, actual earnings data were better than expected by 88% of companies reporting. Besides, investors believe in the rebound of the US economy in the second quarter, so the US stock market's bullish sentiment is natural.
History knows only a few examples of the S&P 500 fall during economic booms. In 1946, after a short downturn, investors feared that the economy would repeat the recession of the 1930s and sold stocks. In 1980, during a short-term recovery in the double-dip recession, the stock index fell as the Fed tried to mitigate excessive inflation growth. A drop in the S&P 500 during a time of GDP growth is rare. So, investors naturally stick to a strategy of buying the stocks on the corrections and selling the dollar on the price rise. The EURUSD current correction seems to be just the rebalancing of the large investors’ positions.
The ECB passive attitude will support the recovery of the euro uptrend. Investors don’t expect anything new from the central bank, so they should focus on Christine Lagarde’s press conference. Not long ago, the ECB president supported the central bank’s forecast for a 3.9% growth of the euro-area GDP in 2021 following a decline by 7.3%. She said that it is too early to discuss the ECB monetary policy tightening, and the ECB is monitoring the euro’s exchange rate. She is likely to repeat the same on January 21. The Central Bank has nothing to surprise investors, and the fact that the EURUSD correction reduces the need for verbal intervention, on the contrary, may strengthen the euro.
EURUSD trading plan for today
I do not think the ECB will expand the QE. The euro-area economy adjusts to the pandemic and improves its performance. The US dollar bears go ahead, and the EURUSD bulls could be only discouraged by slow vaccination. The EU, where 1.4% of the population have been inoculated, is behind the UK (7.1%) and USA (5%). However, the progress in the vaccination campaign supports the euro. If the euro breaks out the resistance at $1.215, it can be the reason to buy.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-reads-between-the-lines-forecast-for-21012021/?uid=285861726&cid=79634
Dynamics of USD index
LiteFinance
Dollar listens to a teacher. Forecast as of 20.01.2021
Yellen’s speech in the US Congress met investors' expectations. Stock bulls hope for an additional fiscal stimulus, and dollar bears believe the Treasury will not interfere. Where will the EURUSD go? Let us discuss the Forex outlook and make up a EURUSD trading plan.
Monthly US dollar fundamental forecast
When the verdict is not as strict as expected, you feel relief. Markets expected Janet Yellen to voice her adherence to a strong dollar policy. However, Yellen says the US doesn’t seek a weaker dollar to gain a competitive advantage. The EURUSD bears are discouraged as the Treasury secretary nominee says the Treasury should oppose attempts by other countries to manipulate currency values artificially. Will the ECB resort to verbal interventions after that?
Markets must have missed the rural teacher. This is how investors once called Janet Yellen for her ability to sort things out. Yellen satisfied the market with her speech in Congress. US stocks bulls hope for an additional fiscal stimulus of $1.9 trillion; US dollar bears believe that the Treasury won’t oppose the dollar weakening, suggesting the value of the US dollar should be determined by markets. At the same time, Yellen expressed her opposition to the euro weakening.
If the European Central Bank wants to press the EURUSD down, it should outplay the Fed. Yes, Christine Lagarde and her fellow central bankers were aggressive during the recession, but they were hardly more aggressive than the Fed. The Governing Council can’t affect foreign exchange rates now. The QE expansion won’t accelerate inflation and will face serious opposition from the hawks. The transition to a yield targeting policy will strengthen the euro by reducing the volume of asset purchases. By the way, according to the Bloomberg source familiar with the matter, the ECB is already doing something similar, narrowing the yield spreads between the euro-area government bonds. Christine Lagarde will not dare to speak about it aloud. There are the Japanese and Australian experiences with the subsequent growth of the yen and "Aussie" rates.
As long as most investors expect the dollar to weaken, the ECB's failure to cut European bond yields suggests the euro should be growing in value. There is another problem. The EURUSD bulls bet on entirely different conditions.
Remember, the bullish euro projections for 2021 were based on the expected victory over the pandemic, exit from the lockdowns, and a rapid rebound of the euro-area economy. However, the vaccination progresses extremely slowly in Europe. About 4% of people received the vaccination in the US, while about 1% of people were inoculated in Germany.
Monthly EURUSD trading plan
The lockdown in the euro area could last longer than expected. If so, the euro-area GDP recovery won’t be that fast, and the EURUSD won’t reach level 1.25 soon. Of course, the rally might continue amid the euphoria about the pair consolidation above 1.208, followed by a successful test of the resistance at 1.215. However, I believe the euro-dollar should enter a short-term consolidation range of 1.208-1.238. If the bulls fail to break out the resistance at 1.215, the consolidation range will move lower.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-listens-to-a-teacher-forecast-as-of-20012021/?uid=285861726&cid=79634
Dynamics of bond yields and spread between euro-area bond yields
Yellen’s speech in the US Congress met investors' expectations. Stock bulls hope for an additional fiscal stimulus, and dollar bears believe the Treasury will not interfere. Where will the EURUSD go? Let us discuss the Forex outlook and make up a EURUSD trading plan.
Monthly US dollar fundamental forecast
When the verdict is not as strict as expected, you feel relief. Markets expected Janet Yellen to voice her adherence to a strong dollar policy. However, Yellen says the US doesn’t seek a weaker dollar to gain a competitive advantage. The EURUSD bears are discouraged as the Treasury secretary nominee says the Treasury should oppose attempts by other countries to manipulate currency values artificially. Will the ECB resort to verbal interventions after that?
Markets must have missed the rural teacher. This is how investors once called Janet Yellen for her ability to sort things out. Yellen satisfied the market with her speech in Congress. US stocks bulls hope for an additional fiscal stimulus of $1.9 trillion; US dollar bears believe that the Treasury won’t oppose the dollar weakening, suggesting the value of the US dollar should be determined by markets. At the same time, Yellen expressed her opposition to the euro weakening.
If the European Central Bank wants to press the EURUSD down, it should outplay the Fed. Yes, Christine Lagarde and her fellow central bankers were aggressive during the recession, but they were hardly more aggressive than the Fed. The Governing Council can’t affect foreign exchange rates now. The QE expansion won’t accelerate inflation and will face serious opposition from the hawks. The transition to a yield targeting policy will strengthen the euro by reducing the volume of asset purchases. By the way, according to the Bloomberg source familiar with the matter, the ECB is already doing something similar, narrowing the yield spreads between the euro-area government bonds. Christine Lagarde will not dare to speak about it aloud. There are the Japanese and Australian experiences with the subsequent growth of the yen and "Aussie" rates.
As long as most investors expect the dollar to weaken, the ECB's failure to cut European bond yields suggests the euro should be growing in value. There is another problem. The EURUSD bulls bet on entirely different conditions.
Remember, the bullish euro projections for 2021 were based on the expected victory over the pandemic, exit from the lockdowns, and a rapid rebound of the euro-area economy. However, the vaccination progresses extremely slowly in Europe. About 4% of people received the vaccination in the US, while about 1% of people were inoculated in Germany.
Monthly EURUSD trading plan
The lockdown in the euro area could last longer than expected. If so, the euro-area GDP recovery won’t be that fast, and the EURUSD won’t reach level 1.25 soon. Of course, the rally might continue amid the euphoria about the pair consolidation above 1.208, followed by a successful test of the resistance at 1.215. However, I believe the euro-dollar should enter a short-term consolidation range of 1.208-1.238. If the bulls fail to break out the resistance at 1.215, the consolidation range will move lower.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-listens-to-a-teacher-forecast-as-of-20012021/?uid=285861726&cid=79634
Dynamics of bond yields and spread between euro-area bond yields
LiteFinance
Cunning Aussie. Forecast as of 19.01.2021
By 2028, the American economy will be bypassed by China. This fact and the PRC's insatiable demand for iron ore will favor the AUUSD bulls for many years to come. Let us discuss the Forex outlook and make up a trading plan.
Fundamental Australian Dollar forecast for six months
Vaccine, incentives, and China are the recipe for a nearly 42% rally in AUDUSD from March lows to January highs. Looking at the astonishing rise of the Australian dollar, one may begin to doubt its continuation. But what if none of the investors will no longer buy, global risk appetite will stop growing so fast? Will Joe Biden's inauguration be a signal for profit-taking on US stock indices? Will China's GDP accelerate in 2021? Finally, can vaccine continue to push the S&P 500 up?
Investors cannot expect the same scale of monetary and fiscal stimulus as in 2020. At best, the Fed will continue to buy assets for $120 billion a month until the end of the year, and the factor of Joe Biden's $1.9 trillion aid package is already included in the prices of US stock indices. According to Nordea Markets, the number of positive news about vaccines has approached its extreme value and will no longer provide the previous support for the S&P 500. At least for a while. This is fraught with increased turbulence in the stock market and the strengthening of the greenback.
Will China's GDP Accelerate in 2021? The World Bank thinks so. According to its forecasts, China's economy will expand by 8% this year and exceed the 2019 level by 10%. Beijing's voracious demand for steel is fueling the rise in iron ore futures, which is a crucial component of Australian exports even as the US dollar strengthens. At the same time, in 2020, China fulfilled only 52% of its obligations to purchase US goods. If Joe Biden touches on this topic during the inauguration, the yuan's fall will create problems for the AUDUSD bulls.
Let's not forget about the potential expansion of the US Treasury bond issue due to the need to finance $1.9 trillion in fiscal stimulus. This action could provoke further growth in treasury yields and a correction of dollar pairs on Forex.
Thus, in the short term, the Australian dollar has a lot of risks. Nevertheless, in the medium and long term investment, it will probably be able to recoup. History shows that crises worked in China's favor. In 2001, when Beijing joined the WTO, its economy was only 13% of America's size. In 2009 this figure increased to 35%, in 2020 to 71%. By 2028, the American economy will be bypassed by China. Growth in its GDP and Aussie neutral positioning serves as bullish factors for AUDUSD.
AUDUSD trading plan for six months
In my opinion, the acceleration of the vaccination process and the more vigorous growth of the global economy than currently expected will help restore the uptrend in emerging markets' currencies and the Australian dollar. However, the AUDUSD correction may continue shortly. So much, the better. The fall of the AUDUSD pair to the supports at 0.763 and 0.759 will make it possible to buy the Australian dollar at a lower price. It is still relevant to open AUDUSD long positions on the price rise with the targets at 0.79 and 0.82.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/cunning-aussie-forecast-as-of-19012021/?uid=285861726&cid=79634
S&P 500 and virus/vaccines news dynamics
By 2028, the American economy will be bypassed by China. This fact and the PRC's insatiable demand for iron ore will favor the AUUSD bulls for many years to come. Let us discuss the Forex outlook and make up a trading plan.
Fundamental Australian Dollar forecast for six months
Vaccine, incentives, and China are the recipe for a nearly 42% rally in AUDUSD from March lows to January highs. Looking at the astonishing rise of the Australian dollar, one may begin to doubt its continuation. But what if none of the investors will no longer buy, global risk appetite will stop growing so fast? Will Joe Biden's inauguration be a signal for profit-taking on US stock indices? Will China's GDP accelerate in 2021? Finally, can vaccine continue to push the S&P 500 up?
Investors cannot expect the same scale of monetary and fiscal stimulus as in 2020. At best, the Fed will continue to buy assets for $120 billion a month until the end of the year, and the factor of Joe Biden's $1.9 trillion aid package is already included in the prices of US stock indices. According to Nordea Markets, the number of positive news about vaccines has approached its extreme value and will no longer provide the previous support for the S&P 500. At least for a while. This is fraught with increased turbulence in the stock market and the strengthening of the greenback.
Will China's GDP Accelerate in 2021? The World Bank thinks so. According to its forecasts, China's economy will expand by 8% this year and exceed the 2019 level by 10%. Beijing's voracious demand for steel is fueling the rise in iron ore futures, which is a crucial component of Australian exports even as the US dollar strengthens. At the same time, in 2020, China fulfilled only 52% of its obligations to purchase US goods. If Joe Biden touches on this topic during the inauguration, the yuan's fall will create problems for the AUDUSD bulls.
Let's not forget about the potential expansion of the US Treasury bond issue due to the need to finance $1.9 trillion in fiscal stimulus. This action could provoke further growth in treasury yields and a correction of dollar pairs on Forex.
Thus, in the short term, the Australian dollar has a lot of risks. Nevertheless, in the medium and long term investment, it will probably be able to recoup. History shows that crises worked in China's favor. In 2001, when Beijing joined the WTO, its economy was only 13% of America's size. In 2009 this figure increased to 35%, in 2020 to 71%. By 2028, the American economy will be bypassed by China. Growth in its GDP and Aussie neutral positioning serves as bullish factors for AUDUSD.
AUDUSD trading plan for six months
In my opinion, the acceleration of the vaccination process and the more vigorous growth of the global economy than currently expected will help restore the uptrend in emerging markets' currencies and the Australian dollar. However, the AUDUSD correction may continue shortly. So much, the better. The fall of the AUDUSD pair to the supports at 0.763 and 0.759 will make it possible to buy the Australian dollar at a lower price. It is still relevant to open AUDUSD long positions on the price rise with the targets at 0.79 and 0.82.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/cunning-aussie-forecast-as-of-19012021/?uid=285861726&cid=79634
S&P 500 and virus/vaccines news dynamics
LiteFinance
How long will the EURUSD be falling? Forecast as of 18.01.2021
What will signal the end of the EURUSD correction? The ECB meeting? Joe Biden’s inauguration? The Fed meeting? Each of these events could discourage euro bears. Let us discuss the Forex outlook and make up a trading plan.
Weekly Euro fundamental forecast
The US stock market is to face turmoil amid the US corporate earnings reporting season. The euro-area economy is likely to slide into a double-dip recession, and the ECB could discuss a possible monetary stimulus expansion at the meeting on January 21. The new Treasury secretary Janet Yellen will make clear the U.S. doesn’t seek a weaker dollar. The EURUSD bulls are discouraged, and the pair featured the worst weekly drop since October. After all, there is a good chance to buy when everyone else is selling.
In the week ended January 12, the US hedge funds boosted their dollar shorts up to the highest levels since 2018. Of course, many former EURUSD bulls, scared by the correction, turned into bears. However, Goldman Sachs still suggests that the dollar is overvalued, the Treasury nominal and real yields are low, and the global GDP should rapidly recover this year. All these factors will press the US dollar.
Of course, when the consensus forecast is clear, and the greenback net shorts are so high, the EURUSD correction must start. Nonetheless, the majority is not always correct. To resume the uptrend, the pair should first get rid of the ballast. The current information environment encourages doubting traders to exit longs. When they sell, somebody buys, don’t they?
In my opinion, the leading risk factor for the euro in the next week or two may be the drawdown of the S&P 500. In terms of P/E, the stock index is overvalued (22.65 with an average of 17.84 over the past 5 years), and the US corporate earnings reporting season will force some bulls to exit the longs. Janet Yellen's speech on January 19 should also be associated with the White House's desire to prevent turmoil in the US stock market. If the Treasury nominee abandoned the strong dollar policy, the panic would push the greenback up and crash the S&P 500.
I do not think the ECB will discuss the QE expansion amid the euro-area double-dip recession. Yes, the ECB officials used to hint at an additional monetary stimulus if the situation deteriorates and there are new lockdowns. However, the bond purchases' monthly pace decreases, and Bloomberg experts expect the euro-area GDP to rapidly rebound in the second quarter. Furthermore, Christine Lagarde, ahead of the ECB January meeting, says it is not the right time to discuss the tightening (!) of the monetary policy yet.
Weekly EURUSD trading plan
Obviously, the EURUSD correction is still likely to develop. I am interested in the moment when the major currency pair will stop falling. Will it be the ECB meeting or the Fed meeting? The euro may resume rising after Joe Biden’s inauguration. The market should return to the normal state after the president-elect assumes the duties of the position. In this case, the US dollar will lose one of its primary benefits – uncertainty caused by Trump. I won’t recommend catching falling daggers, so I suggest entering buy trades only after the euro closes above the key resistance levels of $1.208, $1.2125, and $1.215.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/how-long-will-the-eurusd-be-falling-forecast-as-of-18012021/?uid=285861726&cid=79634
Dynamics of USD and dollar speculative positions
What will signal the end of the EURUSD correction? The ECB meeting? Joe Biden’s inauguration? The Fed meeting? Each of these events could discourage euro bears. Let us discuss the Forex outlook and make up a trading plan.
Weekly Euro fundamental forecast
The US stock market is to face turmoil amid the US corporate earnings reporting season. The euro-area economy is likely to slide into a double-dip recession, and the ECB could discuss a possible monetary stimulus expansion at the meeting on January 21. The new Treasury secretary Janet Yellen will make clear the U.S. doesn’t seek a weaker dollar. The EURUSD bulls are discouraged, and the pair featured the worst weekly drop since October. After all, there is a good chance to buy when everyone else is selling.
In the week ended January 12, the US hedge funds boosted their dollar shorts up to the highest levels since 2018. Of course, many former EURUSD bulls, scared by the correction, turned into bears. However, Goldman Sachs still suggests that the dollar is overvalued, the Treasury nominal and real yields are low, and the global GDP should rapidly recover this year. All these factors will press the US dollar.
Of course, when the consensus forecast is clear, and the greenback net shorts are so high, the EURUSD correction must start. Nonetheless, the majority is not always correct. To resume the uptrend, the pair should first get rid of the ballast. The current information environment encourages doubting traders to exit longs. When they sell, somebody buys, don’t they?
In my opinion, the leading risk factor for the euro in the next week or two may be the drawdown of the S&P 500. In terms of P/E, the stock index is overvalued (22.65 with an average of 17.84 over the past 5 years), and the US corporate earnings reporting season will force some bulls to exit the longs. Janet Yellen's speech on January 19 should also be associated with the White House's desire to prevent turmoil in the US stock market. If the Treasury nominee abandoned the strong dollar policy, the panic would push the greenback up and crash the S&P 500.
I do not think the ECB will discuss the QE expansion amid the euro-area double-dip recession. Yes, the ECB officials used to hint at an additional monetary stimulus if the situation deteriorates and there are new lockdowns. However, the bond purchases' monthly pace decreases, and Bloomberg experts expect the euro-area GDP to rapidly rebound in the second quarter. Furthermore, Christine Lagarde, ahead of the ECB January meeting, says it is not the right time to discuss the tightening (!) of the monetary policy yet.
Weekly EURUSD trading plan
Obviously, the EURUSD correction is still likely to develop. I am interested in the moment when the major currency pair will stop falling. Will it be the ECB meeting or the Fed meeting? The euro may resume rising after Joe Biden’s inauguration. The market should return to the normal state after the president-elect assumes the duties of the position. In this case, the US dollar will lose one of its primary benefits – uncertainty caused by Trump. I won’t recommend catching falling daggers, so I suggest entering buy trades only after the euro closes above the key resistance levels of $1.208, $1.2125, and $1.215.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/how-long-will-the-eurusd-be-falling-forecast-as-of-18012021/?uid=285861726&cid=79634
Dynamics of USD and dollar speculative positions
LiteFinance
Euro is up to the old tricks. Forecast as of 14.01.2021
Any trend needs a correction. The EURUSD bears are drawing the price down. However, the correction shouldn’t be deep unless there are problems with vaccination. Let us discuss the Forex outlook and make up a trading plan.
Weekly Euro fundamental forecast
The talks that the fiscal stimulus under Joe Biden will be $2 trillion turned the Treasury yields up. The US bond market rates are going up, the dollar is strengthening, and the EURUSD is again back to the key support 1.2125-1.2145. If the price breaks out the support, the correction should continue. The ECB again resorts to verbal interventions. Goldman Sachs recommends its clients to use the greenback to hedge against the drop of the S&P 500, which now looks overvalued. The stock options are too expensive, and the currency market can achieve the same results.
The Treasuries auctions have been over, the demand is satisfied, and the bond yields should be rolling down. The yields had been falling until Joe Biden's advisers share details of the stimulus plan with their allies in Congress. The president-elect did not throw words to the wind, declaring trillions of dollars in aid to the US economy. In the document, which is to be presented to the general public on January 14, most likely, the amount of $ 2 trillion will appear. It means investors should expect more bonds to be issued, and the capital should flow from the secondary bond market to the primary market. If so, the bond yields will grow, and the greenback will strengthen.
The US bond yields are rising in January much faster than their German peers, pressing the EURUSD down. However, the rising inflation expectations are followed by an increase in the expected euro-area inflation. The hope for the rebound of the US economy, which will support the global GDP, as well as the euro-area economy, pushed the euro-area inflation expectations up to a level of 1.35%, the highest for more than a year. Will the ECB start monetary normalization soon?
Christine Lagarde doesn’t think so. The ECB president insists on the forecast for the euro-area GDP growth by 3.9% in 2021. However, Lagarde says it is too early to tighten the monetary policy. The central bank monitors the euro-dollar rate, whose growth slows down inflation by reducing import costs.
The ECB's verbal interventions and the central bank’s unwillingness to discuss any monetary tightening measures contrasts with the Fed’s hawkish comments, encouraging the EURUSD bears.
4 out of 18 FOMC members suggested winding down QE in January. In contrast, Fed Vice Chair Richard Clarida and three of his colleagues, including Lael Brainard, do not see the need to pull back on the Fed’s bond purchases. Investors expect Jerome Powell's opinion, which will likely be announced on January 14th.
Weekly EURUSD trading plan
In my opinion, Powell’s dovish stance will not allow the EURUSD bears to draw the price below the support levels of 1.208 and 1.204. A deeper correction will develop if there are problems with the COVID-19 vaccination, which will question the forecast for the global GDP rebound in the second quarter. Until it happens, I suggest opening euro medium-term purchases on the price decline.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-up-to-the-old-tricks-forecast-as-of-14012021/?uid=285861726&cid=79634
Dynamics of bond yields in USA and Germany
Any trend needs a correction. The EURUSD bears are drawing the price down. However, the correction shouldn’t be deep unless there are problems with vaccination. Let us discuss the Forex outlook and make up a trading plan.
Weekly Euro fundamental forecast
The talks that the fiscal stimulus under Joe Biden will be $2 trillion turned the Treasury yields up. The US bond market rates are going up, the dollar is strengthening, and the EURUSD is again back to the key support 1.2125-1.2145. If the price breaks out the support, the correction should continue. The ECB again resorts to verbal interventions. Goldman Sachs recommends its clients to use the greenback to hedge against the drop of the S&P 500, which now looks overvalued. The stock options are too expensive, and the currency market can achieve the same results.
The Treasuries auctions have been over, the demand is satisfied, and the bond yields should be rolling down. The yields had been falling until Joe Biden's advisers share details of the stimulus plan with their allies in Congress. The president-elect did not throw words to the wind, declaring trillions of dollars in aid to the US economy. In the document, which is to be presented to the general public on January 14, most likely, the amount of $ 2 trillion will appear. It means investors should expect more bonds to be issued, and the capital should flow from the secondary bond market to the primary market. If so, the bond yields will grow, and the greenback will strengthen.
The US bond yields are rising in January much faster than their German peers, pressing the EURUSD down. However, the rising inflation expectations are followed by an increase in the expected euro-area inflation. The hope for the rebound of the US economy, which will support the global GDP, as well as the euro-area economy, pushed the euro-area inflation expectations up to a level of 1.35%, the highest for more than a year. Will the ECB start monetary normalization soon?
Christine Lagarde doesn’t think so. The ECB president insists on the forecast for the euro-area GDP growth by 3.9% in 2021. However, Lagarde says it is too early to tighten the monetary policy. The central bank monitors the euro-dollar rate, whose growth slows down inflation by reducing import costs.
The ECB's verbal interventions and the central bank’s unwillingness to discuss any monetary tightening measures contrasts with the Fed’s hawkish comments, encouraging the EURUSD bears.
4 out of 18 FOMC members suggested winding down QE in January. In contrast, Fed Vice Chair Richard Clarida and three of his colleagues, including Lael Brainard, do not see the need to pull back on the Fed’s bond purchases. Investors expect Jerome Powell's opinion, which will likely be announced on January 14th.
Weekly EURUSD trading plan
In my opinion, Powell’s dovish stance will not allow the EURUSD bears to draw the price below the support levels of 1.208 and 1.204. A deeper correction will develop if there are problems with the COVID-19 vaccination, which will question the forecast for the global GDP rebound in the second quarter. Until it happens, I suggest opening euro medium-term purchases on the price decline.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-up-to-the-old-tricks-forecast-as-of-14012021/?uid=285861726&cid=79634
Dynamics of bond yields in USA and Germany
LiteFinance
EURUSD: who blinks first? Forecast as of 13.01.2021
Weekly Euro fundamental forecast
The dollar lost the growth driver and started falling. After completing auctions for US Treasury bonds for $ 38 billion, Treasury yields went down, and the EURUSD price went up above the bottom of figure 22. As I expected, the rise of the US bond market rates, based on the greater offer amid the fiscal stimulus expansion, has been temporary. Everything goes back to the norm.
Perhaps the most remarkable feature of the USD rally in January has been the rejection of individual banks and investment companies' previous bearish views. As I mentioned earlier, Morgan Stanley and other major players have not passed the strength test. Deutsche Bank has announced it intends to exit greenback short trades as the fiscal stimulus has accelerated the US economy and will ease pressure on the Fed to keep the federal funds rate artificially low. JP Morgan noted that one of the main drivers of the US dollar weakening was the confidence that the Fed will long tolerate high inflation. Investors are less confident now.
Therefore, not only the ordinary traders got nervous, but experienced Forex analysts also did. So, do not be upset about the unsuccessful sales of EURUSD. I believe the euro-dollar will reach the level of 1.25-1.27 in the first half of 2021, although its rally won’t be so fast and easy as it was in November-December. The reasons for a potential short-term consolidation are both in the euro-area economy's weakness and the increased volatility of the US stock indexes.
The second wave of COVID-19 and the lockdowns in Europe encourage experts to revise their predictions. Bloomberg suggests the euro-area GDP should contract by 4.1% in the first quarter, although it was earlier suggested that the indicator will grow by 1.3%. JP Morgan's forecasts for the January-March period (current is -1%, previous is +2%) and UBS (-0.4% and +2.4%) are less pessimistic, but all analysts expect the recession to continues. This fact increases the pressure on the ECB in terms of the monetary stimulus expansion, which could weaken the euro ahead of the Governing Council meeting on January 21.
Furthermore, excessively overestimated fundamental assessments and higher political risks due to a potential impeachment of Donald Trump and a delay of additional fiscal stimulus by trillions of dollars could start the consolidation of the S&P 500. Nonetheless, effective vaccinations will support the euro-area economy in the second and third quarters (up 4.8% and 3.1% according to Bloomberg estimates) and increase global risk appetite, which will continue pressing down the US dollar.
Weekly EURUSD trading plan
By and large, the EURUSD medium-term outlook remains bullish. However, the pair is likely to start a short-term consolidation in the range of 1.208-1.238. I recommend holding up the long trades entered at the level of 1.2145.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/eurusd-who-blinks-first-forecast-as-of-13012021/?uid=285861726&cid=79634
Dynamics of USD and 10-year Treasury yield
Weekly Euro fundamental forecast
The dollar lost the growth driver and started falling. After completing auctions for US Treasury bonds for $ 38 billion, Treasury yields went down, and the EURUSD price went up above the bottom of figure 22. As I expected, the rise of the US bond market rates, based on the greater offer amid the fiscal stimulus expansion, has been temporary. Everything goes back to the norm.
Perhaps the most remarkable feature of the USD rally in January has been the rejection of individual banks and investment companies' previous bearish views. As I mentioned earlier, Morgan Stanley and other major players have not passed the strength test. Deutsche Bank has announced it intends to exit greenback short trades as the fiscal stimulus has accelerated the US economy and will ease pressure on the Fed to keep the federal funds rate artificially low. JP Morgan noted that one of the main drivers of the US dollar weakening was the confidence that the Fed will long tolerate high inflation. Investors are less confident now.
Therefore, not only the ordinary traders got nervous, but experienced Forex analysts also did. So, do not be upset about the unsuccessful sales of EURUSD. I believe the euro-dollar will reach the level of 1.25-1.27 in the first half of 2021, although its rally won’t be so fast and easy as it was in November-December. The reasons for a potential short-term consolidation are both in the euro-area economy's weakness and the increased volatility of the US stock indexes.
The second wave of COVID-19 and the lockdowns in Europe encourage experts to revise their predictions. Bloomberg suggests the euro-area GDP should contract by 4.1% in the first quarter, although it was earlier suggested that the indicator will grow by 1.3%. JP Morgan's forecasts for the January-March period (current is -1%, previous is +2%) and UBS (-0.4% and +2.4%) are less pessimistic, but all analysts expect the recession to continues. This fact increases the pressure on the ECB in terms of the monetary stimulus expansion, which could weaken the euro ahead of the Governing Council meeting on January 21.
Furthermore, excessively overestimated fundamental assessments and higher political risks due to a potential impeachment of Donald Trump and a delay of additional fiscal stimulus by trillions of dollars could start the consolidation of the S&P 500. Nonetheless, effective vaccinations will support the euro-area economy in the second and third quarters (up 4.8% and 3.1% according to Bloomberg estimates) and increase global risk appetite, which will continue pressing down the US dollar.
Weekly EURUSD trading plan
By and large, the EURUSD medium-term outlook remains bullish. However, the pair is likely to start a short-term consolidation in the range of 1.208-1.238. I recommend holding up the long trades entered at the level of 1.2145.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/eurusd-who-blinks-first-forecast-as-of-13012021/?uid=285861726&cid=79634
Dynamics of USD and 10-year Treasury yield
LiteFinance
Dollar follows Treasuries. Forecast of 12.01.2021
Before you start rising, you need to get rid of everything, keeping you down, the ballast. The EURUSD correction has scared off some former bulls. What’s next? Let us discuss the Forex outlook and make up a EURUSD trading plan.
Weekly US dollar fundamental forecast
The dollar has become oversold, so, naturally, it should rise for some time. The rally of the Treasury yields encouraged speculators to exit short trades on the greenback, which have been expanding over the past few weeks and reached multi-year highs. Emerging markets currencies and the euro have suffered the most from the USD rebound. The EURUSD correction has questioned the former consensus forecast and even turned yesterday’s bulls into bears.
Morgan Stanley, which suggested at the end of 2020 that the US dollar should be 10% down over the next twelve months, now says the greenback has reached the bottom. New fiscal stimulus and the Fed’s discussion of monetary normalization, which could start already in June, will support the Treasury yield growth. I must admit the arguments are quite convincing: in my December euro price prediction, I noted that the EURUSD uptrend could turn down amid the talks about the federal funds rate hike, but I expected it to happen in late 2021. I still keep my point of view, the current euro’s drawdown is a normal correction, the pair should exceed the January highs before the uptrend reverses.
After Joe Biden promised trillions of dollars of additional assistance to the economy, the Treasury yields are rallying up. The rates on 10-year Treasuries have reached 1.158%, the highest value since February. Besides, Citi anticipates that the new fiscal stimulus will be $600 billion, Goldman Sachs expects $750 billion, and BofA Merrill Lynch - $1 trillion.
The situation in the US bond market doesn’t yet concern the Fed. Conversely, Atlanta Fed President Raphael Bostic said that if the US economy recovers quickly, the central bank will begin to roll back QE as early as 2021. Dallas Federal Reserve President Robert Kaplan says he expects the US economic growth to be strong enough to allow the Fed to consider pulling back on the asset purchase program. The money markets suggest the Fed should hike the interest rate twice by the end of 2023. Not long ago, there were doubts even about a single rate hike during the suggested period.
Weekly EURUSD trading plan
I think the Fed is not concerned about the rise of the Treasury nominal yield, as the real yield is still low. The 10-year yield should be up to 1.6-1.8% to scare the Fed and the markets, which is yet unlikely. On the contrary, the idea of Trump’s impeachment could delay Congress’s consideration of Joe Biden’s stimulus offer, discourage the bears on the US Treasuries, and suspend the EURUSD correction. To buy the euro-dollar, we need additional signals. The first buy signal will be sent when the euro sellers fail to draw the price below the support zone of $1.212-$1.2145. If the price goes below the support zone, we shall pick up the rebound and buy the euro at a low price around $1.208 and $1.204.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-follows-treasuries-forecast-of-12012021/?uid=285861726&cid=79634
Projections for new stimulus package
Before you start rising, you need to get rid of everything, keeping you down, the ballast. The EURUSD correction has scared off some former bulls. What’s next? Let us discuss the Forex outlook and make up a EURUSD trading plan.
Weekly US dollar fundamental forecast
The dollar has become oversold, so, naturally, it should rise for some time. The rally of the Treasury yields encouraged speculators to exit short trades on the greenback, which have been expanding over the past few weeks and reached multi-year highs. Emerging markets currencies and the euro have suffered the most from the USD rebound. The EURUSD correction has questioned the former consensus forecast and even turned yesterday’s bulls into bears.
Morgan Stanley, which suggested at the end of 2020 that the US dollar should be 10% down over the next twelve months, now says the greenback has reached the bottom. New fiscal stimulus and the Fed’s discussion of monetary normalization, which could start already in June, will support the Treasury yield growth. I must admit the arguments are quite convincing: in my December euro price prediction, I noted that the EURUSD uptrend could turn down amid the talks about the federal funds rate hike, but I expected it to happen in late 2021. I still keep my point of view, the current euro’s drawdown is a normal correction, the pair should exceed the January highs before the uptrend reverses.
After Joe Biden promised trillions of dollars of additional assistance to the economy, the Treasury yields are rallying up. The rates on 10-year Treasuries have reached 1.158%, the highest value since February. Besides, Citi anticipates that the new fiscal stimulus will be $600 billion, Goldman Sachs expects $750 billion, and BofA Merrill Lynch - $1 trillion.
The situation in the US bond market doesn’t yet concern the Fed. Conversely, Atlanta Fed President Raphael Bostic said that if the US economy recovers quickly, the central bank will begin to roll back QE as early as 2021. Dallas Federal Reserve President Robert Kaplan says he expects the US economic growth to be strong enough to allow the Fed to consider pulling back on the asset purchase program. The money markets suggest the Fed should hike the interest rate twice by the end of 2023. Not long ago, there were doubts even about a single rate hike during the suggested period.
Weekly EURUSD trading plan
I think the Fed is not concerned about the rise of the Treasury nominal yield, as the real yield is still low. The 10-year yield should be up to 1.6-1.8% to scare the Fed and the markets, which is yet unlikely. On the contrary, the idea of Trump’s impeachment could delay Congress’s consideration of Joe Biden’s stimulus offer, discourage the bears on the US Treasuries, and suspend the EURUSD correction. To buy the euro-dollar, we need additional signals. The first buy signal will be sent when the euro sellers fail to draw the price below the support zone of $1.212-$1.2145. If the price goes below the support zone, we shall pick up the rebound and buy the euro at a low price around $1.208 and $1.204.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-follows-treasuries-forecast-of-12012021/?uid=285861726&cid=79634
Projections for new stimulus package
LiteFinance
Euro is to pass stability test. Forecast as of 11.01.2021
Any trend needs a correction. Bloomberg experts suggest the EURUSD reach level 1.25 in 2021, but it won’t happen in January, of course. Let us discuss the market outlook and make up a trading plan.
Weekly Euro fundamental forecast
Stability test. That is how the current market situation looks like. As I expected, the US weak jobs report opened the door to the EURUSD correction. The euro bulls are so worried about the drop in the US nonfarm payrolls by 140,000 that allowed the major currency pair to go down to the middle of figure 21. There is a clear divergence between the euro-dollar and the US stock indexes, which looks strange as the S&P 500 and the EURUSD were moving in sync during most of 2020.
The euro bulls are scared, and as the price is going lower, the fear is growing. Most large banks and investment companies, including Goldman Sachs, BofA Merrill Lynch, Citi, Standard Chartered unanimously claim that the dollar assets will lose their appeal due to the inflation growth. The Fed will have to hike the federal funds rate to prevent it, but it won’t do anything, so the greenback should weaken in 2021. As a result, the EURUSD should rise to 1.25. However, nobody says it will happen in January. The market can’t be growing all the time, and it needs a correction.
Yes, in 2020, the US economy lost 9.4 million jobs. This is the worst result since the beginning of accounting in 1939. However, everything will radically change in 2021! According to IHS Markit, US employment will increase by 6.7 million new jobs. Oxford Economics expects +5.8 million new jobs, University of Michigan - +5.3 million. In any case, it will be more than in the record employment rise in 1946 (+4.3 million).
The recovery of the labor market is a sign of the US economic rebound. If so, the US economy, along with the Chinese one, will push the global GDP up, increasing the global risk appetite, and encouraging sell-offs of safe-havens. The current EURUSD correction is a good chance to enter long-term purchases at reasonable prices.
What is happening in the market? Why are the S&P 500 and the EURUSD going in the opposite directions? The stock index is rising amid the expected additional fiscal stimulus. Following a weak jobs report for December, Joe Biden promised the Americans to spare trillions of dollars on a new aid package. This results in the growth of equities and Treasury yields amid the expectations of new loans. However, suppose the Treasury yield rally continues. In that case, it will press down both the S&P 500 (the index will start to look overvalued given the income discounted model) and the rate-sensitive sectors of the US economy.
Weekly EURUSD trading plan
The above scenario is not what the Fed wants. I think the central bank’s officials should sound dovish. Federal Reserve Vice Chairman Richard Clarida says he doesn’t see a QE pullback anytime this year even though he expects growth to accelerate. I expect other Fed officials to continue their dovish stance and the Treasury yield to fall. If so, buy the EURUSD at the breakout of the resistances at 1.2225, 1.2285, and 1.2305.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-to-pass-stability-test-forecast-as-of-11012021/?uid=285861726&cid=79634
Dynamics of US employment
Any trend needs a correction. Bloomberg experts suggest the EURUSD reach level 1.25 in 2021, but it won’t happen in January, of course. Let us discuss the market outlook and make up a trading plan.
Weekly Euro fundamental forecast
Stability test. That is how the current market situation looks like. As I expected, the US weak jobs report opened the door to the EURUSD correction. The euro bulls are so worried about the drop in the US nonfarm payrolls by 140,000 that allowed the major currency pair to go down to the middle of figure 21. There is a clear divergence between the euro-dollar and the US stock indexes, which looks strange as the S&P 500 and the EURUSD were moving in sync during most of 2020.
The euro bulls are scared, and as the price is going lower, the fear is growing. Most large banks and investment companies, including Goldman Sachs, BofA Merrill Lynch, Citi, Standard Chartered unanimously claim that the dollar assets will lose their appeal due to the inflation growth. The Fed will have to hike the federal funds rate to prevent it, but it won’t do anything, so the greenback should weaken in 2021. As a result, the EURUSD should rise to 1.25. However, nobody says it will happen in January. The market can’t be growing all the time, and it needs a correction.
Yes, in 2020, the US economy lost 9.4 million jobs. This is the worst result since the beginning of accounting in 1939. However, everything will radically change in 2021! According to IHS Markit, US employment will increase by 6.7 million new jobs. Oxford Economics expects +5.8 million new jobs, University of Michigan - +5.3 million. In any case, it will be more than in the record employment rise in 1946 (+4.3 million).
The recovery of the labor market is a sign of the US economic rebound. If so, the US economy, along with the Chinese one, will push the global GDP up, increasing the global risk appetite, and encouraging sell-offs of safe-havens. The current EURUSD correction is a good chance to enter long-term purchases at reasonable prices.
What is happening in the market? Why are the S&P 500 and the EURUSD going in the opposite directions? The stock index is rising amid the expected additional fiscal stimulus. Following a weak jobs report for December, Joe Biden promised the Americans to spare trillions of dollars on a new aid package. This results in the growth of equities and Treasury yields amid the expectations of new loans. However, suppose the Treasury yield rally continues. In that case, it will press down both the S&P 500 (the index will start to look overvalued given the income discounted model) and the rate-sensitive sectors of the US economy.
Weekly EURUSD trading plan
The above scenario is not what the Fed wants. I think the central bank’s officials should sound dovish. Federal Reserve Vice Chairman Richard Clarida says he doesn’t see a QE pullback anytime this year even though he expects growth to accelerate. I expect other Fed officials to continue their dovish stance and the Treasury yield to fall. If so, buy the EURUSD at the breakout of the resistances at 1.2225, 1.2285, and 1.2305.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-to-pass-stability-test-forecast-as-of-11012021/?uid=285861726&cid=79634
Dynamics of US employment
LiteFinance
Dollar is clutching at straws. Forecast as of 08.01.2021
Weekly US dollar fundamental forecast
The Fed’s hawkish stance and the surge of the Treasury yield made EURUSD bulls nervous. Speculators have been building up US dollar shorts for the 40th week in a row, and the bullish factors for the greenback encourage the sellers to exit trades. Furthermore, Bloomberg experts expect a weak growth of the US nonfarm payrolls by 50,000. A quarter of the analysts polled suggest the indicator should enter a negative area.
A ‘blue wave’ allowed the S&P 500 to hit new all-time highs and supported the Treasury yield growth. The rates on 10-year Treasuries have reached 1.1% for the first time since February, have featured the best four-day rally since the presidential election. The yield is growing too fast. On the one hand, it makes the US assets more appealing; on the other hand, it sets back carry traders and emerging markets’ currencies. According to Reuters experts, the EM currencies should rally in 2021. 47 out of 57 analysts expect the EM currencies to perform better than the advanced economies’ currencies.
35 out of 63 economists, which about 55%, predict the dollar downtrend should continue for more than a year. The median forecast for the EURUSD is 1.25 at the end of 2021.
The greenback is supported by the Treasury yield growth, which resulted from the growing chance of an extra fiscal stimulus provided by Joe Biden’s administration. The stimulus will increase the volume of bonds issue and lead to the capital outflow from the secondary market to the initial one. The US dollar grew amid the hawkish tone of the Fed’s officials. Richmond Fed President Thomas Barkin says the Treasury yield increase indicates that investors expect the Fed to hike the interest rates. Philadelphia Fed President Patrick Harker says the Fed may begin paring bond purchases in late 2021.
I don’t think the EURUSD bears should expect the US bond market rates to continue the rally. History hasn’t proven that an increase in bond issue volumes leads to a rise in yields. In contrast, the US debt to GDP ratio has hit the level that was last since during the Second World War, and rates are at near-record lows. The US government and the Fed remember very well that the debt must be paid, and the lower the yield, the cheaper it will cost to service them.
Weekly EURUSD trading plan
Therefore, I do not think that EURUSD bears will develop a deep correction unless there are new drivers. If the US jobs report for December is weak, the euro-dollar will go down to 1.218 or 1.2145. However, it is likely to encourage the buyers to buy at a better price, as the target at 1.25 is still relevant.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-clutching-at-straws-forecast-as-of-08012021/?uid=285861726&cid=79634
Dynamics of US Treasury yield
Weekly US dollar fundamental forecast
The Fed’s hawkish stance and the surge of the Treasury yield made EURUSD bulls nervous. Speculators have been building up US dollar shorts for the 40th week in a row, and the bullish factors for the greenback encourage the sellers to exit trades. Furthermore, Bloomberg experts expect a weak growth of the US nonfarm payrolls by 50,000. A quarter of the analysts polled suggest the indicator should enter a negative area.
A ‘blue wave’ allowed the S&P 500 to hit new all-time highs and supported the Treasury yield growth. The rates on 10-year Treasuries have reached 1.1% for the first time since February, have featured the best four-day rally since the presidential election. The yield is growing too fast. On the one hand, it makes the US assets more appealing; on the other hand, it sets back carry traders and emerging markets’ currencies. According to Reuters experts, the EM currencies should rally in 2021. 47 out of 57 analysts expect the EM currencies to perform better than the advanced economies’ currencies.
35 out of 63 economists, which about 55%, predict the dollar downtrend should continue for more than a year. The median forecast for the EURUSD is 1.25 at the end of 2021.
The greenback is supported by the Treasury yield growth, which resulted from the growing chance of an extra fiscal stimulus provided by Joe Biden’s administration. The stimulus will increase the volume of bonds issue and lead to the capital outflow from the secondary market to the initial one. The US dollar grew amid the hawkish tone of the Fed’s officials. Richmond Fed President Thomas Barkin says the Treasury yield increase indicates that investors expect the Fed to hike the interest rates. Philadelphia Fed President Patrick Harker says the Fed may begin paring bond purchases in late 2021.
I don’t think the EURUSD bears should expect the US bond market rates to continue the rally. History hasn’t proven that an increase in bond issue volumes leads to a rise in yields. In contrast, the US debt to GDP ratio has hit the level that was last since during the Second World War, and rates are at near-record lows. The US government and the Fed remember very well that the debt must be paid, and the lower the yield, the cheaper it will cost to service them.
Weekly EURUSD trading plan
Therefore, I do not think that EURUSD bears will develop a deep correction unless there are new drivers. If the US jobs report for December is weak, the euro-dollar will go down to 1.218 or 1.2145. However, it is likely to encourage the buyers to buy at a better price, as the target at 1.25 is still relevant.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-clutching-at-straws-forecast-as-of-08012021/?uid=285861726&cid=79634
Dynamics of US Treasury yield
LiteFinance
Run, Dollar, run! Forecast as of 06.01.2021
While Georgia counts election votes, the EURUSD traders forgot about the pandemic. Regardless of who wins, the S&P 500 should continue the rally, and global risk appetite will rise. How will the dollar react? Let us discuss the Forex outlook and make up a EURUSD trading plan.
Quarterly US dollar fundamental forecast
Do not make hasty decisions! The EURUSD pair is trading around level 1.23 but doesn’t rise higher, expecting Georgia's voting results. The Republicans’ victory will restore the status quo supporting the growth of large US tech companies, which are now concerned about tightening tax laws under Joe Biden. The triumph of Democrats will increase the likelihood of additional fiscal stimulus, a reflationary environment, supporting the stock indexes. The S&P 500 should continue rally anyway. If so, the US dollar bulls will step back.
Donald Trump is making weak attempts to stay in power, which results in a division of opinion among Republicans. Some members of the Republican party believe that Trump will be responsible in case the Elephants lose. Traders realize that Trump’s attempts to overturn the election are groundless so, the greenback will hardly start a correction up. Investors still remember the slogan ‘what is good for Trump is good for the dollar,’ and Trump is in trouble now.
Regardless of Georgia's election results, the US fiscal policy will remain stimulating, and the monetary policy – ultra-easy. Federal Reserve Bank of Chicago President Charles Evans says monetary policy needs to focus on the economy and that Fed officials should turn to regulatory tools if they see any problems in the stock market related to, for example, the risks of financial instability or bubbles. The Federal Reserve is not going to change its stance, and the ‘blue wave’ could push the S&P 500 even higher. The EURUSD bears can do nothing but run.
US politics has distracted investors' attention from the coronavirus for a while. According to the World Bank’s forecasts, if vaccination yields positive results, global GDP will expand by 4% in 2021. If vaccines are not effective, the global economy will grow by 1.6%. The first gauge was lowered by 0.2% compared to the data reported in June, which results from the second COVID-19 wave and associated lockdowns.
The World Bank lowered its forecasts for euro-area GDP in 2021 from 4.5% to 3.6%, the expected US GDP growth is down from 4% to 3.5%. The growth gap is narrowing, which is a bearish factor for the EURUSD in the middle term. The euro rally might end in the first quarter already. The matter is how far the pair will rise before it starts consolidation or a correction.
The uptrend is strong in the meanwhile. The Fed will hardly hike the interest rate before 2024. Neither the status quo in Congress nor a ‘blue wave’ will stop the US stock indexes' rally. Besides, investors are not concerned about an increase in COVID-19 cases or the record number of hospitalizations in the USA. Yes, humankind could face the third and the fourth pandemic waves, but vaccination will eventually help to win the battle with the coronavirus.
Quarterly EURUSD trading plan
I reckon the S&P 500 could hit its all-time highs, and the EURUSD should be up to 1.25-1.27 in the first quarter. It is still relevant to buy the euro versus the US dollar.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/run-dollar-run-forecast-as-of-06012021/?uid=285861726&cid=79634
World Bank’s forecasts
While Georgia counts election votes, the EURUSD traders forgot about the pandemic. Regardless of who wins, the S&P 500 should continue the rally, and global risk appetite will rise. How will the dollar react? Let us discuss the Forex outlook and make up a EURUSD trading plan.
Quarterly US dollar fundamental forecast
Do not make hasty decisions! The EURUSD pair is trading around level 1.23 but doesn’t rise higher, expecting Georgia's voting results. The Republicans’ victory will restore the status quo supporting the growth of large US tech companies, which are now concerned about tightening tax laws under Joe Biden. The triumph of Democrats will increase the likelihood of additional fiscal stimulus, a reflationary environment, supporting the stock indexes. The S&P 500 should continue rally anyway. If so, the US dollar bulls will step back.
Donald Trump is making weak attempts to stay in power, which results in a division of opinion among Republicans. Some members of the Republican party believe that Trump will be responsible in case the Elephants lose. Traders realize that Trump’s attempts to overturn the election are groundless so, the greenback will hardly start a correction up. Investors still remember the slogan ‘what is good for Trump is good for the dollar,’ and Trump is in trouble now.
Regardless of Georgia's election results, the US fiscal policy will remain stimulating, and the monetary policy – ultra-easy. Federal Reserve Bank of Chicago President Charles Evans says monetary policy needs to focus on the economy and that Fed officials should turn to regulatory tools if they see any problems in the stock market related to, for example, the risks of financial instability or bubbles. The Federal Reserve is not going to change its stance, and the ‘blue wave’ could push the S&P 500 even higher. The EURUSD bears can do nothing but run.
US politics has distracted investors' attention from the coronavirus for a while. According to the World Bank’s forecasts, if vaccination yields positive results, global GDP will expand by 4% in 2021. If vaccines are not effective, the global economy will grow by 1.6%. The first gauge was lowered by 0.2% compared to the data reported in June, which results from the second COVID-19 wave and associated lockdowns.
The World Bank lowered its forecasts for euro-area GDP in 2021 from 4.5% to 3.6%, the expected US GDP growth is down from 4% to 3.5%. The growth gap is narrowing, which is a bearish factor for the EURUSD in the middle term. The euro rally might end in the first quarter already. The matter is how far the pair will rise before it starts consolidation or a correction.
The uptrend is strong in the meanwhile. The Fed will hardly hike the interest rate before 2024. Neither the status quo in Congress nor a ‘blue wave’ will stop the US stock indexes' rally. Besides, investors are not concerned about an increase in COVID-19 cases or the record number of hospitalizations in the USA. Yes, humankind could face the third and the fourth pandemic waves, but vaccination will eventually help to win the battle with the coronavirus.
Quarterly EURUSD trading plan
I reckon the S&P 500 could hit its all-time highs, and the EURUSD should be up to 1.25-1.27 in the first quarter. It is still relevant to buy the euro versus the US dollar.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/run-dollar-run-forecast-as-of-06012021/?uid=285861726&cid=79634
World Bank’s forecasts
LiteFinance
TOP five investment strategies for 2021. Forecast as of 31.12.2020
Betting on the victory over the pandemic, the global economy's rapid growth, and the underestimate, we can find currencies, commodities and stocks that are worth a closer look in 2021.
The article covers the following subjects:
East European currencies
Platinum
Oil
FTSE 100 index
Boeing stock
East European currencies
They believe in the market that the euro's moves in 2021 will be similar to those in 2017. Back then, the EURUSD soared by 17% amid a lower political risk after Emmanuel Macron's victory over French eurosceptics, the eurozone's GDP growing faster than its US peer - for the first time in 10 years -, and Mario Draghi's hints about monetary policy normalization. Today, the pent-up demand effect, the global trade's fast growth, the unity within the EU and ECB President Christine Lagarde's current penchant for hawks let us hope that the major currency pair will continue rallying to at least 1.25-1.27.
When it comes to East European currencies, in 2017 they looked even better than the euro: the Czech koruna rose by 18.6% and the Polish zloty - by 18%. Only the Hungarian forint "dropped the ball", consolidating by as little as 13%. I think history will repeat itself. The currencies of the countries whose exports are mainly targeted on the EU will be in their element. So, I recommend selling USDPLN, USDCZK and USDHUF on retracements.
Platinum
Platinum has been the worst 2020 performer among precious metals. Its cost rose as little as 11% while palladium, gold and silver grew 20%, 25%, and 49%, respectively. Nevertheless, the XPTUSD bulls don't despair and plan to make up for missed profits in 2021. Sixty-two percent of platinum is used in industrial production, with Europe and China accounting for 50% of total demand for autocatalysts. These regions' fast development in the coming year, producers' intention to replace expensive materials with cheaper ones (palladium's cost is 2.2 times higher than platinum's) and transition to clean energy are drawing a bright future for platinum.
World Platinum Investment Council forecasts that the demand for platinum will exceed the supply by record 1.2 million ounces in 2020. There even will be a deficit for the next few years. According to CRU Group, a hydrogen vehicle will require four times more platinum than modern diesel cars.
Oil
Black gold is considered to be an indicator of the global economy's health. Once it improves, oil prices rise. Brent closed the year 2020 with minus 22% and WTI dropped 21%. The International Energy Agency estimates that the pandemic-driven loss in global demand amounts to nearly 10 million b/d. The demand is expected to grow to 96.9 million b/d (+6 million b/d) next year, still remaining below the pre-crisis value of 100 million b/d.
At the end of 2019, North Sea oil was trading at $65-70 a barrel. I think it can return to those levels - not only because of demand, but also because of limited supply. The US is unlikely to return to its record high production rates, while the OPEC and Russia will be careful as an increase in production can scare investors and destabilise the market. My advice will be buying Brent and WTI.
FTSE 100 index
The FTSE 100 index has been underperforming compared to its global peers since 2016 when the referendum on the UK membership was held and resulted in an unexpected Eurosceptics victory. A no-deal Brexit was priced in the UK stocks as a bearish factor. However, the trade deal of the UK and the EU signed at the very last moment has eliminated it.
According to Boris Johnson, the trade deal brought about confidence, which is the most important. The uncertainty, pressing down the UK assets for many years, has eased at last. So, the UK stocks could be booming up in 2021. In 2020, the FTSE 100 has lost about 13% in value. In 2021, the bulls should at least gain back the lost points.
Boeing stock
Boeing has faced severe problems so far. The company was already challenged before 2020. There were crashes of two 737 MAX aircrafts, which killed 346 people. As a result, Boeing was banned from using machines of this type in March 2019. Considering that the 737 MAX orders accounted for about 80% of total demand, this was a disaster for the corporation. In 2020, COVID-19 worsened the situation, and Boeing stock crashed to a seven-year low. So, Boeing has been -33.5% this year, which suggests the stock is now undervalued.
In late December, the Boeing 737 Max was back in service in the US after the ban on this type of jets had been lifted in November. According to Cirium, Boeing plans to make 588 flights on 737 Max in January. The jets are actively utilized in Brazil. Gol Linhas Aereas Inteligentes SA performed 516 flights in December, Grupo Aeromexico SAB - 73. I believe that everything will be fine in the States. I think the Boeing stock should be rising in 2021. Besides, the rapid growth of the world economy and tourism suggests that the Boeing stock price should be up to $335.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/top-five-investment-strategies-for-2021-forecast-as-of-31122020/?uid=285861726&cid=79634
EURUSD's dynamics
Betting on the victory over the pandemic, the global economy's rapid growth, and the underestimate, we can find currencies, commodities and stocks that are worth a closer look in 2021.
The article covers the following subjects:
East European currencies
Platinum
Oil
FTSE 100 index
Boeing stock
East European currencies
They believe in the market that the euro's moves in 2021 will be similar to those in 2017. Back then, the EURUSD soared by 17% amid a lower political risk after Emmanuel Macron's victory over French eurosceptics, the eurozone's GDP growing faster than its US peer - for the first time in 10 years -, and Mario Draghi's hints about monetary policy normalization. Today, the pent-up demand effect, the global trade's fast growth, the unity within the EU and ECB President Christine Lagarde's current penchant for hawks let us hope that the major currency pair will continue rallying to at least 1.25-1.27.
When it comes to East European currencies, in 2017 they looked even better than the euro: the Czech koruna rose by 18.6% and the Polish zloty - by 18%. Only the Hungarian forint "dropped the ball", consolidating by as little as 13%. I think history will repeat itself. The currencies of the countries whose exports are mainly targeted on the EU will be in their element. So, I recommend selling USDPLN, USDCZK and USDHUF on retracements.
Platinum
Platinum has been the worst 2020 performer among precious metals. Its cost rose as little as 11% while palladium, gold and silver grew 20%, 25%, and 49%, respectively. Nevertheless, the XPTUSD bulls don't despair and plan to make up for missed profits in 2021. Sixty-two percent of platinum is used in industrial production, with Europe and China accounting for 50% of total demand for autocatalysts. These regions' fast development in the coming year, producers' intention to replace expensive materials with cheaper ones (palladium's cost is 2.2 times higher than platinum's) and transition to clean energy are drawing a bright future for platinum.
World Platinum Investment Council forecasts that the demand for platinum will exceed the supply by record 1.2 million ounces in 2020. There even will be a deficit for the next few years. According to CRU Group, a hydrogen vehicle will require four times more platinum than modern diesel cars.
Oil
Black gold is considered to be an indicator of the global economy's health. Once it improves, oil prices rise. Brent closed the year 2020 with minus 22% and WTI dropped 21%. The International Energy Agency estimates that the pandemic-driven loss in global demand amounts to nearly 10 million b/d. The demand is expected to grow to 96.9 million b/d (+6 million b/d) next year, still remaining below the pre-crisis value of 100 million b/d.
At the end of 2019, North Sea oil was trading at $65-70 a barrel. I think it can return to those levels - not only because of demand, but also because of limited supply. The US is unlikely to return to its record high production rates, while the OPEC and Russia will be careful as an increase in production can scare investors and destabilise the market. My advice will be buying Brent and WTI.
FTSE 100 index
The FTSE 100 index has been underperforming compared to its global peers since 2016 when the referendum on the UK membership was held and resulted in an unexpected Eurosceptics victory. A no-deal Brexit was priced in the UK stocks as a bearish factor. However, the trade deal of the UK and the EU signed at the very last moment has eliminated it.
According to Boris Johnson, the trade deal brought about confidence, which is the most important. The uncertainty, pressing down the UK assets for many years, has eased at last. So, the UK stocks could be booming up in 2021. In 2020, the FTSE 100 has lost about 13% in value. In 2021, the bulls should at least gain back the lost points.
Boeing stock
Boeing has faced severe problems so far. The company was already challenged before 2020. There were crashes of two 737 MAX aircrafts, which killed 346 people. As a result, Boeing was banned from using machines of this type in March 2019. Considering that the 737 MAX orders accounted for about 80% of total demand, this was a disaster for the corporation. In 2020, COVID-19 worsened the situation, and Boeing stock crashed to a seven-year low. So, Boeing has been -33.5% this year, which suggests the stock is now undervalued.
In late December, the Boeing 737 Max was back in service in the US after the ban on this type of jets had been lifted in November. According to Cirium, Boeing plans to make 588 flights on 737 Max in January. The jets are actively utilized in Brazil. Gol Linhas Aereas Inteligentes SA performed 516 flights in December, Grupo Aeromexico SAB - 73. I believe that everything will be fine in the States. I think the Boeing stock should be rising in 2021. Besides, the rapid growth of the world economy and tourism suggests that the Boeing stock price should be up to $335.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/top-five-investment-strategies-for-2021-forecast-as-of-31122020/?uid=285861726&cid=79634
EURUSD's dynamics
LiteFinance
Euro remembers alphabet. Forecast as of 30.12.2020
The trends of stock markets and the world’s leading economies have diverted this year. The trajectory of their movement resembled different letters of the English alphabet. How has this affected the EURUSD? Let us discuss and make up a trading plan.
Weekly euro fundamental forecast
In 2020, it has been fashionable to use the English alphabet letters as a market term. At the peak of the recession, the White House insisted on a V-shaped recovery of the US GDP. The Fed, which, along with the ECB and the Bank of Japan, provided $8 trillion in liquidity, the same amount as in eight years since the beginning of the previous crisis in 2008, was more cautious. Jerome Powell and his fellow central bankers suggested a U-shaped recovery trend. Investors discussed W-, L-, Nike-, and even K-shaped recovery. The K-shaped rebound means that some sectors recover faster, others – slower. For example, Nasdaq has added 40% since the beginning of the year, and it has been 90% up from the March lows. These figures are enormous compared to the banking or the UK’s FTSE 100 that has been 12% down in 2020.
In fact, markets and different economies have been following differently shaped recovery trends. The stock indexes preferred a V-shaped trend, and the likely double-dip recession in the euro area (W) didn’t encourage the EURUSD bears. Conversely, at the end of December, the euro reached its highest level against the US dollar for the last more than two years amid the massive sell-offs of the safe-havens. Donald Trump’s defeat at the presidential election in November and the new package of fiscal stimulus and spending of $2.3 trillion have eased the uncertainty and sent the greenback down.
Investors do not worry about the fact that activity in several of the world's largest advanced economies plummeted over the Christmas holidays and restrictions because of COVID-19. They expect the victory over the pandemic in 2021
According to 33 experts polled by Financial Times, the euro-area GDP will expand by 4.3% due to vaccines. The economy will grow at the fastest pace since the introduction of the euro, which, of course, should encourage the EURUSD bulls. Although the median forecast is lower than the IMF’s projections of 5.2%, it is higher than the ECB’s predictions (+3.9%). Individual gauges ranged from + 1.5% to 6%.
The US GDP should be growing faster than the euro-area economy, in the first quarter at least. Nonetheless, it doesn’t discourage the EURUSD bulls. So, the US economy will contribute to the global economic expansion and increase the risk appetite, pressing down safe-haven assets, including the US dollar.
Weekly EURUSD trading plan
Senate Majority Leader Mitch McConnell tied the increase in COVID-19 relief checks from $600 to $2,000, demanded by Trump, to two other measures the president wants - a probe of the November election resultsand a provision scrapping the social media legal protections. In fact, it could override the expansion of the fiscal stimulus. However, investors still believe that the financial aid packaged will be boosted (either under Trump or Biden) and continue buying the EURUSD. As long as the pair is above 1.213, the bulls are controlling the market.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-remembers-alphabet-forecast-as-of-30122020/?uid=285861726&cid=79634
Dynamics of economic activity
The trends of stock markets and the world’s leading economies have diverted this year. The trajectory of their movement resembled different letters of the English alphabet. How has this affected the EURUSD? Let us discuss and make up a trading plan.
Weekly euro fundamental forecast
In 2020, it has been fashionable to use the English alphabet letters as a market term. At the peak of the recession, the White House insisted on a V-shaped recovery of the US GDP. The Fed, which, along with the ECB and the Bank of Japan, provided $8 trillion in liquidity, the same amount as in eight years since the beginning of the previous crisis in 2008, was more cautious. Jerome Powell and his fellow central bankers suggested a U-shaped recovery trend. Investors discussed W-, L-, Nike-, and even K-shaped recovery. The K-shaped rebound means that some sectors recover faster, others – slower. For example, Nasdaq has added 40% since the beginning of the year, and it has been 90% up from the March lows. These figures are enormous compared to the banking or the UK’s FTSE 100 that has been 12% down in 2020.
In fact, markets and different economies have been following differently shaped recovery trends. The stock indexes preferred a V-shaped trend, and the likely double-dip recession in the euro area (W) didn’t encourage the EURUSD bears. Conversely, at the end of December, the euro reached its highest level against the US dollar for the last more than two years amid the massive sell-offs of the safe-havens. Donald Trump’s defeat at the presidential election in November and the new package of fiscal stimulus and spending of $2.3 trillion have eased the uncertainty and sent the greenback down.
Investors do not worry about the fact that activity in several of the world's largest advanced economies plummeted over the Christmas holidays and restrictions because of COVID-19. They expect the victory over the pandemic in 2021
According to 33 experts polled by Financial Times, the euro-area GDP will expand by 4.3% due to vaccines. The economy will grow at the fastest pace since the introduction of the euro, which, of course, should encourage the EURUSD bulls. Although the median forecast is lower than the IMF’s projections of 5.2%, it is higher than the ECB’s predictions (+3.9%). Individual gauges ranged from + 1.5% to 6%.
The US GDP should be growing faster than the euro-area economy, in the first quarter at least. Nonetheless, it doesn’t discourage the EURUSD bulls. So, the US economy will contribute to the global economic expansion and increase the risk appetite, pressing down safe-haven assets, including the US dollar.
Weekly EURUSD trading plan
Senate Majority Leader Mitch McConnell tied the increase in COVID-19 relief checks from $600 to $2,000, demanded by Trump, to two other measures the president wants - a probe of the November election resultsand a provision scrapping the social media legal protections. In fact, it could override the expansion of the fiscal stimulus. However, investors still believe that the financial aid packaged will be boosted (either under Trump or Biden) and continue buying the EURUSD. As long as the pair is above 1.213, the bulls are controlling the market.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-remembers-alphabet-forecast-as-of-30122020/?uid=285861726&cid=79634
Dynamics of economic activity
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Pandemic strengthened the euro. Forecast as of 29.12.2020
When everything is bad, people buy the dollar. When everyone hopes for the better, the greenback loses its shine. The EURUSD sentiment has radically changed in 2020. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Weekly euro fundamental forecast
In the first half of 2020, the pandemic was the primary source of uncertainty, pressing down the global risk appetite. Everything has radically changed in the third and fourth quarters. COVID-19 saved American democracy, strengthened EU unity, and even pushed the UK and the European Union towards a Brexit deal. News about the development and successful trials of vaccines, as well as the launch of a vaccination campaign against coronavirus, has supported the global stock indices. The first half of 2021 should be more similar to the end of 2020 than the beginning. This is a bearish factor for safe-havens, including the US dollar.
Let us remember January 2020. Donald Trump’s positions were strong; he launched the tax reform and made China meet the US trade demands. Trump’s approval ratings were high, and few doubted that he would be re-elected for the second term. However, the inefficient pandemic management resulted in Trump’s defeat in the November election. The U.S. President used to be the main source of uncertainty due to his eccentric speeches and decisions, and the U.S. dollar was growing. The pandemic was one of the reasons for Trump’s loss, and, in fact, the uncertainty eased, weakening the greenback.
Something like this happened in the euro area. There had been the risks of the euro-area breakup before the first pandemic wave. However, the EU coronavirus recovery fund eliminated the breakup risks, eased political risks, and pressed down safe-haven assets. But for the COVID-19, the UK wouldn't have so readily agreed to sign the Brexit deal. The pandemic caused the UK economy to slide into the worst recession over the past three hundred years, and a no-deal Brexit could have made it worse.
Therefore, the pandemic contributed to the uncertainty easing and the US dollar weakening as a safe haven. So, it is not surprising that the USD net bearish non-commercial positions have reached the highest levels since 2011.
At the end of the year, each new day is more likely to remove uncertainty than add it. So, the greenback’s weakness is not surprising. The markets are optimistic, and the S&P 500 hits fresh highs. The vaccination has started in the euro area. Besides, Donald Trump signed the new fiscal stimulus package. Furthermore, the House of Representatives voted to meet Trump’s demand to boost COVID-19 relief checks from $600 to $2,000, adding $464 billion to the aid plan. These factors support the growth of global stock indexes and EURUSD.
An obstacle to the euro’s rally is the pound’s drop. Traders exit pound longs and market analysts admit that the Brexit deal terms are not optimal for the UK.
Weekly EURUSD trading plan
If the US Senate adopts the House's bill, it will support the S&P 500 rally and increase the global risks appetite. In this case, the EURUSD could break out the resistances at 1.2245 and 1.226 and continue growing towards 1.2305 and 1.234.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pandemic-strengthened-the-euro-forecast-as-of-29122020/?uid=285861726&cid=79634
When everything is bad, people buy the dollar. When everyone hopes for the better, the greenback loses its shine. The EURUSD sentiment has radically changed in 2020. Let us discuss the Forex outlook and make up a EURUSD trading plan.
Weekly euro fundamental forecast
In the first half of 2020, the pandemic was the primary source of uncertainty, pressing down the global risk appetite. Everything has radically changed in the third and fourth quarters. COVID-19 saved American democracy, strengthened EU unity, and even pushed the UK and the European Union towards a Brexit deal. News about the development and successful trials of vaccines, as well as the launch of a vaccination campaign against coronavirus, has supported the global stock indices. The first half of 2021 should be more similar to the end of 2020 than the beginning. This is a bearish factor for safe-havens, including the US dollar.
Let us remember January 2020. Donald Trump’s positions were strong; he launched the tax reform and made China meet the US trade demands. Trump’s approval ratings were high, and few doubted that he would be re-elected for the second term. However, the inefficient pandemic management resulted in Trump’s defeat in the November election. The U.S. President used to be the main source of uncertainty due to his eccentric speeches and decisions, and the U.S. dollar was growing. The pandemic was one of the reasons for Trump’s loss, and, in fact, the uncertainty eased, weakening the greenback.
Something like this happened in the euro area. There had been the risks of the euro-area breakup before the first pandemic wave. However, the EU coronavirus recovery fund eliminated the breakup risks, eased political risks, and pressed down safe-haven assets. But for the COVID-19, the UK wouldn't have so readily agreed to sign the Brexit deal. The pandemic caused the UK economy to slide into the worst recession over the past three hundred years, and a no-deal Brexit could have made it worse.
Therefore, the pandemic contributed to the uncertainty easing and the US dollar weakening as a safe haven. So, it is not surprising that the USD net bearish non-commercial positions have reached the highest levels since 2011.
At the end of the year, each new day is more likely to remove uncertainty than add it. So, the greenback’s weakness is not surprising. The markets are optimistic, and the S&P 500 hits fresh highs. The vaccination has started in the euro area. Besides, Donald Trump signed the new fiscal stimulus package. Furthermore, the House of Representatives voted to meet Trump’s demand to boost COVID-19 relief checks from $600 to $2,000, adding $464 billion to the aid plan. These factors support the growth of global stock indexes and EURUSD.
An obstacle to the euro’s rally is the pound’s drop. Traders exit pound longs and market analysts admit that the Brexit deal terms are not optimal for the UK.
Weekly EURUSD trading plan
If the US Senate adopts the House's bill, it will support the S&P 500 rally and increase the global risks appetite. In this case, the EURUSD could break out the resistances at 1.2245 and 1.226 and continue growing towards 1.2305 and 1.234.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pandemic-strengthened-the-euro-forecast-as-of-29122020/?uid=285861726&cid=79634
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Gold got hooked on steroids. Forecast as of 28.12.2020
Six-month gold fundamental analysis
To see the future, you need to look back at the past. Gold is ready to demonstrate the best annual growth since 2010. Stimuli have been the main driver of the XAUUSD rally. In response to the recession caused by the pandemic, the US Congress and the Federal Reserve spared no expense, and most importantly, they acted quickly and decisively. As a result, in August, the precious metal managed to reach an all-time high of $2075 per ounce. In October, gold rallied in the hope of the blue wave. Finally, $892 billion fiscal stimulus endorsed by Congress and Donald Trump pushed gold up to the 6-week high. Can it count on the old trump cards in 2021?
I strongly doubt that next year the Federal Reserve is going to demonstrate a tenth of the madness that has become the Fed's calling card in the spring of 2020. Indeed, the FOMC's December forecasts suggest that the regulator is not going to raise the rate in 2021-2023. However, it is quite possible that it was just overreacting. If inflation expectations rise sharply due to oil, the blue wave, and the booming US economic recovery, the Fed's outlook will definitely change. The hawkish rhetoric and the earlier start of monetary policy normalization will lead to the dollar strengthening. However, I don't think this will happen before the second half of 2021.
In the period from January to June, financial markets will be dominated by the topics of defeating the pandemic, global economic recovery, and fiscal stimulus. The first two of them are likely to support the bears on the USD index. This is good news for the precious metal, but in reality, the gold trend will depend on the US Congress. Even more precisely, it will be determined by American voters. In January, they are going to decide who will get two seats in the Senate. If the Democrats win, the blue wave will become a reality, an $892 billion fiscal stimulus will mark the beginning, and a reflationary environment will become very possible.
On the contrary, the Republican victory would split Congress, make it harder for Joe Biden to push his ideas through lawmakers, and the XAUUSD upward movement will lose momentum. In the first case, gold will have the opportunity to return above $2000 per ounce. In the second, it risks entering the zone of mid-term consolidation of $1750-1950.
These scenarios are based on the weakness of the greenback in the first half of 2021. However, unexpected circumstances can lead to increased uncertainty and return the demand for safe-havens. As a result, the dollar will start to recover earlier than expected. This option is supported by the EURUSD reaction to the US presidential elections. Since 2000, the main currency pair has consistently peaked for one to three months after the vote, after which the prices began to fall.
Six-monthgold trading plan
In my opinion, there is a 60% probability of a divided Congress and a consolidation of gold in the range of $1750-1950 per ounce during the first half of 2021. I give the 30% chances of the blue wave and the rise of a precious metal’s price above $2000. There is a 10% probability of the premature strengthening of the US dollar, which will initiate the bear trend in XAUUSD.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/gold-got-hooked-on-steroids-forecast-as-of-28122020/?uid=285861726&cid=79634
EURUSD reaction to the US presidential election
Six-month gold fundamental analysis
To see the future, you need to look back at the past. Gold is ready to demonstrate the best annual growth since 2010. Stimuli have been the main driver of the XAUUSD rally. In response to the recession caused by the pandemic, the US Congress and the Federal Reserve spared no expense, and most importantly, they acted quickly and decisively. As a result, in August, the precious metal managed to reach an all-time high of $2075 per ounce. In October, gold rallied in the hope of the blue wave. Finally, $892 billion fiscal stimulus endorsed by Congress and Donald Trump pushed gold up to the 6-week high. Can it count on the old trump cards in 2021?
I strongly doubt that next year the Federal Reserve is going to demonstrate a tenth of the madness that has become the Fed's calling card in the spring of 2020. Indeed, the FOMC's December forecasts suggest that the regulator is not going to raise the rate in 2021-2023. However, it is quite possible that it was just overreacting. If inflation expectations rise sharply due to oil, the blue wave, and the booming US economic recovery, the Fed's outlook will definitely change. The hawkish rhetoric and the earlier start of monetary policy normalization will lead to the dollar strengthening. However, I don't think this will happen before the second half of 2021.
In the period from January to June, financial markets will be dominated by the topics of defeating the pandemic, global economic recovery, and fiscal stimulus. The first two of them are likely to support the bears on the USD index. This is good news for the precious metal, but in reality, the gold trend will depend on the US Congress. Even more precisely, it will be determined by American voters. In January, they are going to decide who will get two seats in the Senate. If the Democrats win, the blue wave will become a reality, an $892 billion fiscal stimulus will mark the beginning, and a reflationary environment will become very possible.
On the contrary, the Republican victory would split Congress, make it harder for Joe Biden to push his ideas through lawmakers, and the XAUUSD upward movement will lose momentum. In the first case, gold will have the opportunity to return above $2000 per ounce. In the second, it risks entering the zone of mid-term consolidation of $1750-1950.
These scenarios are based on the weakness of the greenback in the first half of 2021. However, unexpected circumstances can lead to increased uncertainty and return the demand for safe-havens. As a result, the dollar will start to recover earlier than expected. This option is supported by the EURUSD reaction to the US presidential elections. Since 2000, the main currency pair has consistently peaked for one to three months after the vote, after which the prices began to fall.
Six-monthgold trading plan
In my opinion, there is a 60% probability of a divided Congress and a consolidation of gold in the range of $1750-1950 per ounce during the first half of 2021. I give the 30% chances of the blue wave and the rise of a precious metal’s price above $2000. There is a 10% probability of the premature strengthening of the US dollar, which will initiate the bear trend in XAUUSD.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/gold-got-hooked-on-steroids-forecast-as-of-28122020/?uid=285861726&cid=79634
EURUSD reaction to the US presidential election
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Euro goes out on the ice. EURUSD forecast 24.12.2020
Weekly fundamental forecast for the euro
Most recessions begin when excessively high central bank rates reduce demand, which worsens the situation in the labour market and further reduces demand. The current downturn is reminiscent of the economy's response to a natural disaster, an earthquake or a tsunami. When they happen, businesses are closed and the supply decreases. Once the disaster is over, the economy faces a V-shaped recovery. In this regard, effective vaccinations will lead to rapid growth in global GDP, increase risk appetite and help continue the EURUSD rally. Everything seems to be very simple, however, life, and in particular Forex life, resembles an ice rink. You could fall at any moment.
I would like to remind you that 2020 began positively. Markets rallied on expectations of a US-China trade deal that would have revived international trade, accelerated global GDP and boosted the euro. Alas, at the turn of winter and spring there was a force majeure in the form of a pandemic, cancelling the bulls' ambitious plans for EURUSD. But not for long. The second half of the year turned out to be great for the main currency pair. Today, the belief in its bright future is based not only on the positive impact of vaccinations on global GDP but also on the high demand for European assets. Particularly, for Italian bonds. Commerzbank, JP Morgan, HSBC and UBS believe in the further reduction in the yield spread between the Italian bonds and the German ones.
The main problems for the bulls on EURUSD are the two trump cards of the dollar. Will it get them out or not? I am talking about the potential strengthening of the greenback when uncertainty increases or in case of the American economy outpacing the world economy in growth (the dollar smile theory). Uncertainty is good for the USD index - it can be judged by its reaction to Donald Trump's threat to veto the $892 billion fiscal stimulus bill. The greenback rose, but the EURUSD bears weren't happy for long.
Congress passed the bill with more than 2/3 of the vote, therefore it has the right to override the president's veto. Trump's own party might cross his way. Democrats clung to the proposal of the president to increase the relief check for Americans from $600 to $2000 but the Republicans are ready to block it. If the 45th US president does not veto or sign the document, it will become law in 10 days. During these days, the dollar will continue finding support in uncertainty.
Trading plan for EURUSD for the week
Brexit is quickly becoming the main growth driver for EURUSD. The EU and the UK have agreed on fisheries and government aid and are about to conclude a historic deal. In theory, this should inspire the pound and the euro to rise, but bulls may start fixing their profits, being guided by "buy the rumour, sell the news" principle. A breakout of the resistance levels at 1.2225 and 1.2245 could trigger EURUSD to go up to the December high, but wouldn't it be better to act after Christmas?
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-goes-out-on-the-ice-eurusd-forecast-24122020/?uid=285861726&cid=79634
Yield spread dynamics for bonds in Italy and Germany
Weekly fundamental forecast for the euro
Most recessions begin when excessively high central bank rates reduce demand, which worsens the situation in the labour market and further reduces demand. The current downturn is reminiscent of the economy's response to a natural disaster, an earthquake or a tsunami. When they happen, businesses are closed and the supply decreases. Once the disaster is over, the economy faces a V-shaped recovery. In this regard, effective vaccinations will lead to rapid growth in global GDP, increase risk appetite and help continue the EURUSD rally. Everything seems to be very simple, however, life, and in particular Forex life, resembles an ice rink. You could fall at any moment.
I would like to remind you that 2020 began positively. Markets rallied on expectations of a US-China trade deal that would have revived international trade, accelerated global GDP and boosted the euro. Alas, at the turn of winter and spring there was a force majeure in the form of a pandemic, cancelling the bulls' ambitious plans for EURUSD. But not for long. The second half of the year turned out to be great for the main currency pair. Today, the belief in its bright future is based not only on the positive impact of vaccinations on global GDP but also on the high demand for European assets. Particularly, for Italian bonds. Commerzbank, JP Morgan, HSBC and UBS believe in the further reduction in the yield spread between the Italian bonds and the German ones.
The main problems for the bulls on EURUSD are the two trump cards of the dollar. Will it get them out or not? I am talking about the potential strengthening of the greenback when uncertainty increases or in case of the American economy outpacing the world economy in growth (the dollar smile theory). Uncertainty is good for the USD index - it can be judged by its reaction to Donald Trump's threat to veto the $892 billion fiscal stimulus bill. The greenback rose, but the EURUSD bears weren't happy for long.
Congress passed the bill with more than 2/3 of the vote, therefore it has the right to override the president's veto. Trump's own party might cross his way. Democrats clung to the proposal of the president to increase the relief check for Americans from $600 to $2000 but the Republicans are ready to block it. If the 45th US president does not veto or sign the document, it will become law in 10 days. During these days, the dollar will continue finding support in uncertainty.
Trading plan for EURUSD for the week
Brexit is quickly becoming the main growth driver for EURUSD. The EU and the UK have agreed on fisheries and government aid and are about to conclude a historic deal. In theory, this should inspire the pound and the euro to rise, but bulls may start fixing their profits, being guided by "buy the rumour, sell the news" principle. A breakout of the resistance levels at 1.2225 and 1.2245 could trigger EURUSD to go up to the December high, but wouldn't it be better to act after Christmas?
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-goes-out-on-the-ice-eurusd-forecast-24122020/?uid=285861726&cid=79634
Yield spread dynamics for bonds in Italy and Germany
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Dollar is humiliated. EURUSD forecast 23.12.2020
The 45th President of the United States demands Congress to reconsider the $900 billion bill it has passed and threatens not to sign it. How will this affect the dynamics of EURUSD? Let's discuss this and create a trading plan.
Weekly US dollar fundamental forecast
Many traders prefer technical analysis to fundamental analysis not because they trust the charts. In their opinion, fundamental analysis is just too complex. Indeed, after Congress approved an $892 billion fiscal stimulus, Capital Economics and Oxford Economics raised their forecasts for US GDP for 2021 by 0.5-1 percentage points, the IMF warned that due to the spread of COVID-19 in Europe it will be forced to lower its eurozone GDP estimates, yet the forecast for EURUSD is still bullish! Donald Trump threatens not to sign the fiscal stimulus bill, thus depriving the economy of financial aid, but the greenback is rising. Finally, rumours are heard in the market that if Joe Biden and Janet Yellen abandon their strong dollar policies, the USD Index will skyrocket. Where is the logic? In fact, fundamental analysis is simple.
In times of recession and in the post-crisis period, investors have a heightened sense of global risk appetite, so all events should be viewed through the S&P 500 perspective and the inverse correlation of the stock index with the US dollar. If the US economy accelerates thanks to the new fiscal stimulus, it would be good news for stocks but bad news for the greenback as a safe-haven asset. When Donald Trump brings confusion with his intention not to sign the bill approved by the Congress, the S&P 500 falls and pulls EURUSD down with it. The White House's abandonment of the strong dollar policy will be a blow to the financial markets that are used to it. Now let's wait for the correction of stock indices and the strengthening of the dollar. It's simple, isn't it?
As for the IMF warnings about the reduction of forecasts for the eurozone GDP for 2020 (-8.3%) and 2021 (+ 5.2%) due to the spread of COVID-19 in the Old World, this is a matter of the euro, not the US dollar. Investors firmly believe in the victory over the pandemic with vaccines, in the acceleration of the global economy and international trade next year. Well, forecasts may be adjusted both for the worse and for the better.
Despite the loud statements of Donald Trump who called the fiscal stimulus bill a disgrace and demanded to increase checks for Americans from $600 to $2,000, many investors consider the 45th President's trick as a show-off. At the same time, the quiet reaction of the S&P 500 indicates that financial markets are confident that the document will be signed.
The same can be said about Brexit, which, along with the global risk appetite, is currently the key driver of EURUSD price changes. The EU's chief negotiator Michel Barnier calls Britain's proposal that it should have 35-60% of the €650 million in European fishermen's revenues unacceptable, but the pound is not falling. It looks like investors continue to believe in a last-minute trade.
Trading plan for EURUSD for the week
The second attempt of EURUSD to consolidate above the previously indicated resistance at 1.224-1.2245 was not successful. Will there be a third time? Or will the market decide to calm down on the eve of Christmas and go into short-term consolidation in the range of 1.2085-1.2245? In my opinion, the latter option is more likely. Time to relax?
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-humiliated-eurusd-forecast-23122020/?uid=285861726&cid=79634
IMF GDP Forecasts for 2020
The 45th President of the United States demands Congress to reconsider the $900 billion bill it has passed and threatens not to sign it. How will this affect the dynamics of EURUSD? Let's discuss this and create a trading plan.
Weekly US dollar fundamental forecast
Many traders prefer technical analysis to fundamental analysis not because they trust the charts. In their opinion, fundamental analysis is just too complex. Indeed, after Congress approved an $892 billion fiscal stimulus, Capital Economics and Oxford Economics raised their forecasts for US GDP for 2021 by 0.5-1 percentage points, the IMF warned that due to the spread of COVID-19 in Europe it will be forced to lower its eurozone GDP estimates, yet the forecast for EURUSD is still bullish! Donald Trump threatens not to sign the fiscal stimulus bill, thus depriving the economy of financial aid, but the greenback is rising. Finally, rumours are heard in the market that if Joe Biden and Janet Yellen abandon their strong dollar policies, the USD Index will skyrocket. Where is the logic? In fact, fundamental analysis is simple.
In times of recession and in the post-crisis period, investors have a heightened sense of global risk appetite, so all events should be viewed through the S&P 500 perspective and the inverse correlation of the stock index with the US dollar. If the US economy accelerates thanks to the new fiscal stimulus, it would be good news for stocks but bad news for the greenback as a safe-haven asset. When Donald Trump brings confusion with his intention not to sign the bill approved by the Congress, the S&P 500 falls and pulls EURUSD down with it. The White House's abandonment of the strong dollar policy will be a blow to the financial markets that are used to it. Now let's wait for the correction of stock indices and the strengthening of the dollar. It's simple, isn't it?
As for the IMF warnings about the reduction of forecasts for the eurozone GDP for 2020 (-8.3%) and 2021 (+ 5.2%) due to the spread of COVID-19 in the Old World, this is a matter of the euro, not the US dollar. Investors firmly believe in the victory over the pandemic with vaccines, in the acceleration of the global economy and international trade next year. Well, forecasts may be adjusted both for the worse and for the better.
Despite the loud statements of Donald Trump who called the fiscal stimulus bill a disgrace and demanded to increase checks for Americans from $600 to $2,000, many investors consider the 45th President's trick as a show-off. At the same time, the quiet reaction of the S&P 500 indicates that financial markets are confident that the document will be signed.
The same can be said about Brexit, which, along with the global risk appetite, is currently the key driver of EURUSD price changes. The EU's chief negotiator Michel Barnier calls Britain's proposal that it should have 35-60% of the €650 million in European fishermen's revenues unacceptable, but the pound is not falling. It looks like investors continue to believe in a last-minute trade.
Trading plan for EURUSD for the week
The second attempt of EURUSD to consolidate above the previously indicated resistance at 1.224-1.2245 was not successful. Will there be a third time? Or will the market decide to calm down on the eve of Christmas and go into short-term consolidation in the range of 1.2085-1.2245? In my opinion, the latter option is more likely. Time to relax?
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-humiliated-eurusd-forecast-23122020/?uid=285861726&cid=79634
IMF GDP Forecasts for 2020
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Yen will count up to 100. Forecast as of 22.12.2020
The uncertainty connected with the trade wars and the pandemic is gradually leaving the market, and safe-haven assets are growing weaker. How will the USDJPY feel in 2021? Let's find it out and make a trading plan.
Quarterly fundamental forecast for yen
Will the USDJPY bears reach the level of the century of 100 JPY to 1 USD? More and more large American and Japanese banks and investment companies think so. The question is, will the pair drop lower, or pull back from the 2016 levels instead amid the BoJ's discontent? The yen risks closing in the green zone for the sixth consecutive year. However, this time, the reason isn't its strength but the opponent's weakness.
JP Morgan, Goldman Sachs, BNP Paribas, Mizuho Bank, and MUFG forecast that the USDJPY quotes will fall to 100 or 98 amid the USD's weakness. Double deficit, U.S. assets' lower investment appeal expressed in lower real bond yield and a huge money base pull the USD index down. The U.S. Q2 negative current account reached a record level since 2008, while Japan's surplus is only growing.
The Fed spares no money to save the economy and plans to continue its emergency bond-buying program of $120 billion a month until the unemployment and inflation develop to an improved condition. The Central Bank predicts that the federal funds rate will be at the current level until 2024 at least. And that's not a limit. If there's a smell of double recession, the Fed is ready for more. The Bank of Japan's potential is limited, though. It has purchased a major part of local bonds and is often compared with the whale in the Japanese pond/debt market. Although the evolution of consumer prices has been the worst in the past ten years, Haruhiko Kuroda didn't do anything at the BoJ's latest meeting, only saying that the Central Bank could revise the monetary policy.
The BoJ's passivity and the Fed's aggressive extension of the money base narrow U.S.-Japan yield spreads and foster the development of a downtrend in the USDJPY.
Some may think that the U.S. economy will be growing faster than Japan's because of the large monetary stimulus. Tokyo spares no fiscal support either. Cabinet of Japan approved the record big budget of $1 trillion for the fiscal year 2021, which can be easily extended through additional budgets as the 2020 experience has shown.
Quarterly trading plan for USDJPY, EURJPY, GBPJPY, and AUDJPY
If both the USA and Japan demonstrate booming economic growth next year, high-risk assets will benefit from that situation while safe-haven assets will still be kept down. I think the U.S. dollar and the yen will be the main Forex outsiders in 2021. The USDJPY is very likely to reach the level of 100, but I would suggest following November's strategy of buying EURJPY, GBPJPY, and AUDJPY with targets at 126.4 and 128.5, 142.5 and 144.7, 79.5 and 82.4. The first of them has already worked out.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/yen-will-count-up-to-100-forecast-as-of-22122020/?uid=285861726&cid=79634
USDJPY and U.S.-Japan yield differential
The uncertainty connected with the trade wars and the pandemic is gradually leaving the market, and safe-haven assets are growing weaker. How will the USDJPY feel in 2021? Let's find it out and make a trading plan.
Quarterly fundamental forecast for yen
Will the USDJPY bears reach the level of the century of 100 JPY to 1 USD? More and more large American and Japanese banks and investment companies think so. The question is, will the pair drop lower, or pull back from the 2016 levels instead amid the BoJ's discontent? The yen risks closing in the green zone for the sixth consecutive year. However, this time, the reason isn't its strength but the opponent's weakness.
JP Morgan, Goldman Sachs, BNP Paribas, Mizuho Bank, and MUFG forecast that the USDJPY quotes will fall to 100 or 98 amid the USD's weakness. Double deficit, U.S. assets' lower investment appeal expressed in lower real bond yield and a huge money base pull the USD index down. The U.S. Q2 negative current account reached a record level since 2008, while Japan's surplus is only growing.
The Fed spares no money to save the economy and plans to continue its emergency bond-buying program of $120 billion a month until the unemployment and inflation develop to an improved condition. The Central Bank predicts that the federal funds rate will be at the current level until 2024 at least. And that's not a limit. If there's a smell of double recession, the Fed is ready for more. The Bank of Japan's potential is limited, though. It has purchased a major part of local bonds and is often compared with the whale in the Japanese pond/debt market. Although the evolution of consumer prices has been the worst in the past ten years, Haruhiko Kuroda didn't do anything at the BoJ's latest meeting, only saying that the Central Bank could revise the monetary policy.
The BoJ's passivity and the Fed's aggressive extension of the money base narrow U.S.-Japan yield spreads and foster the development of a downtrend in the USDJPY.
Some may think that the U.S. economy will be growing faster than Japan's because of the large monetary stimulus. Tokyo spares no fiscal support either. Cabinet of Japan approved the record big budget of $1 trillion for the fiscal year 2021, which can be easily extended through additional budgets as the 2020 experience has shown.
Quarterly trading plan for USDJPY, EURJPY, GBPJPY, and AUDJPY
If both the USA and Japan demonstrate booming economic growth next year, high-risk assets will benefit from that situation while safe-haven assets will still be kept down. I think the U.S. dollar and the yen will be the main Forex outsiders in 2021. The USDJPY is very likely to reach the level of 100, but I would suggest following November's strategy of buying EURJPY, GBPJPY, and AUDJPY with targets at 126.4 and 128.5, 142.5 and 144.7, 79.5 and 82.4. The first of them has already worked out.
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USDJPY and U.S.-Japan yield differential