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January 21, 2021
Optimistic investors are now that Democrat Joe Biden is ahead of the world’s largest economy. In his first speech as President of the USA, Biden highlighted:
- About the pandemic: “We are entering the most severe and deadly phase of the virus. We must put aside political ideas and face this pandemic as a nation. ” Biden has indicated he will work to make masks mandatory in public places in the USA and that will direct more resources to the vaccination campaign. Biden has also reversed the Trump administration’s decision to leave the World Health Organization (WHO): “WHO plays a crucial role in worldwide fight against the deadly Covid-19 pandemic, as well as countless other threats to global health and security sanitary. The United States will continue to be a full participant and global leader in addressing such threats and advancing global health and health security “. Today the government’s plan to combat the pandemic was released Biden, allowing you to use the wartime powers (Defense Production Act) to demand that US companies provide all the necessary equipment to fight the pandemic. A key component of the plan is to restore American public confidence, safely reopening schools, business and travel, as well as delaying spread of the virus.
- About his way of doing politics: “The right to disagree peacefully, within the limits of our republic, is perhaps the greatest strength of our nation. But listen to me well, disagreement does not have to lead to disunity. ” In his first hours in the cargo Biden returned the US to the Paris Agreement, resuming commitments to reduce carbon emissions in the atmosphere to contain global warming. This decision in relation to US environmental policies tends to open opportunities for sectors such as biofuels, in addition to reinforcing trends in favor of diversity and sustainable development.
EURUSD made the Asian session higher, opening the European session above 1.2135. Today the asset is influenced by expectations on the European Central Bank’s monetary policy decision to be released later in the day. Employees are expected to of the ECB leave monetary policy unchanged, however, the market tends to price an expectation to later sell the reality. DXY is being traded at the level of 90.2 thousand points. The USDJPY is oscillating close to 103.4. USDCHF is hovering close to $ 0.8869.
Gold is trading at $ 1,871.9 an ounce, and silver at $ 25.9 an ounce. Metals follow Page 2 in appreciation especially because they are the hedge used by the market in relation to inflation that the trillions of dollars that will be injected into the economy by the new US government is expected to cause. Among the many news expected today are: unemployment insurance claims in the USA, and the Confidence Index of the Consumer in Europe, and inflation in Japan and Consumer Confidence Index in the UK, those last 2 at night, after the closing of markets.
The main factors considered by investors for their decision making at the moment are:
- MACROECONOMICS: The Industry Confidence Index in France increased by 4 points in January 2021 compared to the previous month reaching its highest level since March 2020. There was an improvement in the opinion on order books (- 25 vs -32 in December) and in the evaluation of previous production (12 vs 5). However, the general prospects for production worsened (-9 vs -5). o Sales by the Italian industry fell 2.0% in November 2020 compared to the previous month. New orders of industrial goods in Italy fell 1.3% in relation to the previous month, with the demand of the domestic market decreasing 3.8% and the foreign market increasing 2.5%. In relation to the same period in the previous year, sales fell 4.6%, factory orders increased 5.3%. o Spain recorded a trade deficit of 593 million euros in November 2020, well below the deficit 1.948 million euros a year earlier, the smallest trade deficit in any month of November since 1985. Exports fell 1.3%, dragged by a 1.2% drop in capital goods, and a 13.6% drop in planes. Exports of food, beverages and tobacco increased by 5.2%, while by the automotive sector 4.3%. At imports fell 5.9%, due to a drastic cut in energy imports (-45.3%), automobiles (-19.4%) and textiles (-8.1%). o The UK Industry Confidence Index fell to -22.0 in the first quarter of 2021, as manufacturers expect a sharp drop in both production and new orders over the next three months. The stock rose before Britain left the EU.
- ACTIONS: the earnings release season continues with Baker Hughes, Union Pacific and Citrix reporting ahead of opening of the market, while Intel, IBM and CSX after closing. Bankinter of Spain said its net profit in 2020 it fell 42.4% in relation to the previous year, still exceeding market expectations, since it registered more loan loss provisions to offset a potential impact of the coronavirus crisis on their Business. Procter & Gamble Co increased its sales forecast for 2021 for the second time as it benefited from the demand driven by COVID-19 for cleaning products. However, the Company warned that the pace of sales may decline as vaccine distribution continues.
January 20, 2021
EURUSD opened the session higher, recovering the devaluation of the finalizations, as shown in the graph below, exceeding the level of 1,216. However, during a European session it fell sharply, and breached a 1.21 barrier. DXY is being traded at the level of 90.6 thousand points, with the market awaiting the inauguration of Joe Biden and the execution of his proposals. O USDJPY is hovering close to 103.8. The USDCHF is oscillating close to $ 0.8904. Gold is trading at $ 1,840.5 a ounce, and silver at $ 25.3 an ounce.
Among the news expected for today are: inflation and PPI (producer price index, or producer inflation index) for the Zone of the euro and the United Kingdom. And Joe Biden’s inaugural address.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: The European Commission asked member states to accelerate the implementation of vaccination across the block, so that they vaccinate at least 80% of health professionals and citizens over 80 by March, and at least 70% of the total populations this summer. Germany set yesterday to extend the lockdown until February 14.
- Eurozone consumer prices fell 0.3% in December 2020 compared to the previous year, pulled mainly by energy (-6.9%) and non-energy industrial goods (-0.5%).
- Food inflation, on the other hand, alcohol and tobacco slowed to 1.3%, while the cost of services increased 0.7%. The core of inflation which excludes volatile energy, food, alcohol and tobacco prices and for which the ECB analyzes its policy decisions, remained virtually unchanged in December, at 0.2%, the lowest value ever recorded.UK inflation rose to 0.6% in December 2020 from 0.3% in November and slightly above market forecasts of 0.5%, as some restrictions on coronavirus have been eased. The biggest upward contribution came from transportation (1.9%), especially airline tickets and used cars; clothing and footwear (-1.8%); recreation and culture (2.6%); and alcohol and tobacco (3.6%). Conversely, the ATR Up ATR Down ATR% POC VWAP 1.2182 1.2093 62% 1.2143 1.2139 Page 2 main downward pressures came from food and non-alcoholic beverages (-1.4%); furniture (-0.7%); Communication (2.6%); and restaurants and hotels (0.1%).
- German producer prices unexpectedly increased by 0.2% in December 2020 compared to the previous year, the first annual increase since January, and failing market forecasts for a fall in 0.3%. Intermediate goods prices increased 0.8%, mainly due to precious metals (18.4%), secondary metallic raw material (17.0%) and copper (11.5%). There have also been increases in capital goods (0.9%) and durable consumer goods (1.6%). Meanwhile, energy prices fell 0.1%, led by lower costs for oil products (-13.5%) and distribution of natural gas (-3.3%); while the cost of non-durable consumer goods decreased by 1.9%, driven by food prices (-3.3%). Considering the year 2020, producer prices fell 1%, after increasing 1.1% in 2019.
- USA ELECTIONS: Joe Biden takes office today as the 46th president of the United States. The ceremony will be marked by absence of the usual crowds for inaugurations due to the Covid-19 pandemic. The death toll from the pandemic in the USA it reached 400,000 yesterday. Although the outbreak of infections appears to have peaked, it is on track to overcome the number of deaths in the USA in World War 2 by the end of the month.
- ACTIONS: several companies in Europe, including ASML (integrated circuits, such as RAM, flash memory chips and CPU), Richemont (Swiss luxury goods conglomerate) and Burberry reported strong quarterly results. The actions of the BHP Group rose 1% after the company forecast record iron ore production for fiscal year 2021, while Burberry jumped more than 4% in its optimistic outlook for sales growth in Asia. The result Netflix’s performance was below expectations, but the company reported strong growth in subscriber numbers. Walt Disney said on Tuesday that it discarded performance bonuses last year for top executives. Morgan Stanley, Bank Of New York Mellon, UnitedHealth and P&G release the results today.
January 19, 2021
EURUSD opened the session higher, recovering the devaluation of the last sessions, as shown in the graph below, returning to the above 1,212. DXY is being traded at the level of 90.5 thousand points, after reaching 90.9, with the more conservative market in the face of the growing economic challenges faced by the world’s major economies. The USDJPY is hovering close to 103.9. The USDCHF is oscillating close to $ 0.8879. Gold is trading at $ 1,841.8 an ounce, and silver at $ 25.3 an ounce.
Entre as notícias esperadas para hoje se destacam: audiência de audiência da Secretária do Tesouro Yellen no Senado norteamericano; o Índice de Sentimento Econômico ZEW, que aponta o ânimo dos analistas de investimento a respeito da atividade econômicos nos próximos meses na Europa e na Alemanha; e o ritmo de crescimento do setor de construção civil da Zona do euro.
Among the news expected today, the following stand out: the confirmation hearing of the Secretary of the Treasury Yellen in the North American Senate; the ZEW Economic Sentiment Index, which points the mood of investment analysts regarding the activity in the coming months in Europe and Germany; and the pace of growth in the eurozone construction sector.
Today is Donald Trump’s last day ahead of the USA, tomorrow Joe Biden takes office. The climate of insecurity is strong in Washington, following the invasion of Trump supporters to the Capitol a few weeks ago. The first 100 days of the government of Joe Biden should be focused on the vaccination campaign against COVID-19 and on providing great tax aid. Biden must also present a comprehensive immigration bill on the first day of his administration, providing a eight-year path to citizenship for about 11 million people living in the United States without status cool.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: The German Chancellor and the heads of German states are due to announce today an extension and tightening of the current lockdown until mid-February. The pandemic continues to spread strongly across Europe, with the United Kingdom, France, Italy and Spain have one of the highest death tolls in the world, the highest on record. To date, 94.8 million cases have been recorded worldwide, with more than 2 million deaths, while almost 40 million doses of the vaccine have already been applied.e casos levou a OMS a fazer um apelo por medidas mais rígidas em todo o continente. A chanceler alemã Angela Merkel advertiu que “os meses mais difíceis” da pandemia ainda estão por vir. O total de infecções na Alemanha aumentou em 26.663 nas últimas 24 horas, totalizando 1,84 milhão de pessoas infectadas no país, enquanto as mortes mais do que dobraram desde o início de dezembro, totalizando 38.000 fatalidades. Em Londres, os hospitais podem ficar sem leitos de UTI em duas semanas se o ritmo atual de disseminação da doença se mantiver como está. A farmacêutica alemã Bayer AG, em parceria com a CureVac NV, está em buscando aprovação internacional para distribuir sua vacina contra o coronavírus, que usa a mesma tecnologia de RNA mensageiro das vacinas da Moderna e da Pfizer
- MACROECONOMY: the construction sector in the Eurozone contracted 1.3% in November 2020 in relation to the the same month in the previous year. It is the third consecutive month of decline in the sector. In relation to October, month immediately previous year, the sector grew 1.4%. The ZEW Economic Sentiment Indicator for the Euro Zone rose 3.9 points in compared to the previous month to 58.3 in January 2021, with about 69% of analysts interviewed improvement in economic activity in the coming months, 11% expecting a worsening and 20% estimating stability. Already the indicator on the current economic situation in the Eurozone fell 3.2 points to -78.9. The ZEW Sentiment Indicator Economic for Germany rose 6.8 points from the previous month to 61.8 in January 2021, exceeding the market expectations of 60.0. The economic outlook for the German economy has improved, reinforced by export expectations. About 71% of analysts interviewed predicting an improvement in economic activity in the coming months, 9% of them expect worsening and 20% expecting stability. The assessment of the economic situation in Germany has changed little at -66.4.
- USA ELECTIONS: Investors awaiting confirmation hearing from former Fed chairman Janet Yellen for the post Secretary of the Treasury, which takes place today in the Senate. According to the Wall Street Journal, Yellen must state the US commitment to market-determined exchange rates, making it clear that the US does not seek a weaker dollar to gain competitive advantage. Biden outlined a $ 1.9 stimulus package proposal trillion last week, saying that an investment of this size would be necessary. The proposed package includes US $ 415 billion for the vaccination campaign against COVID-19, about $ 1 trillion in direct aid to families and about $ 440 billion for small businesses and communities particularly hard hit by the pandemic. “Neither President-elect nor I propose this relief package without an assessment of the country’s debt burden. But now, with interest rates at historic lows, the smartest thing we can do is act grand, ”said Yellen, former EDF president. Yellen also said that the US economy must be rebuilt “so that it creates more prosperity for more people and ensure that American workers can compete in a global economy increasingly competitive “
- ACTIONS: the shares of companies in the automotive sector are operating at a low level, through the disclosure of demand for new passenger cars in the European Union, which fell 3.3% in December 2020. Italy (-14.9%) and France (-11.8%) suffered double-digit losses, while Germany recorded a solid gain (9.9%) and Spain remained stable. Considering 2020, the EU passenger car market decreased 23.7% with all 27 EU markets registering falls. Spain recorded the sharpest drop (-32.3%), followed by Italy (-27.9%), France (-25.5%) and Germany (-19.1%). In the USA, in the middle of the earnings release season, Bank of America and Goldman Sachs disclose the 2020 balance sheet before the market opens while Netflix does so after the market closes. THE Qualcomm said it will acquire Nuvia Inc, a chip startup founded by Apple for $ 1.4 billion.
Reuters article states that Joe Biden’s management may be uncomfortable for Wall Street, with the appointment of two people left to lead the country’s main financial agencies.
Gary Gensler’s appointment to head the Securities and Exchange Commission (SEC) and Rohit Chopra, to the Bureau of Protection Consumer Finance (CFPB), means that these bodies will work on political priorities on climate change and justice Social. President of the derivatives regulator from 2009 to 2014, Gensler implemented new swap trading rules created by Congress after the financial crisis, developing a reputation as a tough trader willing to face powerful interests from Wall Street. Chopra helped establish the CFPB after the crisis and served as its first loan ombudsman student. At the FTC, he campaigned for tougher rules for big tech companies about privacy and consumer competition, and stricter enforcement penalties
Sherrod Brown, who is expected to lead the Senate’s powerful Banking Committee, said he plans to try to repeal the rules friendly to Wall Street introduced by Donald Trump. On Monday, Brown hailed Chopra as a “bold” choice that it would ensure that the CFPB “played a leading role in combating racial inequalities in our financial system”. Chopra is expected to review the rules on payment and debt collection loans, which consumer groups influential people say they will not protect Americans. They also expect it to eliminate exorbitant lending rates and abusive debt collection practices, address the burden of student debt and the gaps in minority access to credit. Gensler “would hold bad actors accountable” and put “working families first,” according to Borwn. Expected Gensler to seek new corporate disclosures about risks related to climate change, political spending and the composition and treatment of the company’s workforce, and complete post-crisis executive compensation restrictions, other rules.
January 07, 2021
While the US Congress was meeting to close the case and declare Joe Biden the winner of the previous presidential 2020 yesterday afternoon, Trump supporters broke into the Congress building, smashed windows and climbed walls, in the desperate intention to keep or republican in power. Four people died (one shot and three due to medical emergencies) and 52 people were arrested. Chaos ensued after Trump – who before the election refused to commit to a peaceful transfer of power should he lose – speak to thousands of supporters near the White House and ask them to march towards the Capitol to express their discontent to parliamentarians. After a long debate, the The Senate and the Chamber rejected two objections to the vote count and certified the final result of the election, with 306 votes to Biden and 232 for Trump. This result places Donald Trump as the first American president since 1932 to lose the White House and both Houses of Congress in just one term. Twitter, Facebook and Snap temporarily blocked Trump’s accounts on his social networks.
Also yesterday afternoon, Democrat Jon Ossoff won the second seat of the state of Georgia in the North American Senate, guaranteeing Democrats control of the Senate, increasing the chance of implementing the Senate’s proposals. President Joe Biden, and the approval of progressive judges and the promotion of legislative priorities such as aid coronavirus and measures to contain climate change.
While all this was going on, EURUSD shot up from 1.227 to 1.233, at which point today’s session opened. THE The Asian session kept the currency at this level but with the opening of the European market, the asset plummeted to 1.225. Before opening of the North American market, ATR was already at 126%. DXY is being traded at 89.8 thousand points. O USDJPY is hovering close to 103.6, higher. The USDCHF is oscillating close to $ 0.884, with a slight devaluation of the currency Switzerland. Gold is trading at $ 1,917 an ounce in a slight drop, as is silver at $ 27.1 an ounce.
Investor optimism may begin to wane as the pandemic continues to spread, and the possibility that the holiday season may have spread the virus even more begins to confirm itself.
The market is monitoring the release of unemployment data in the US, which happens today and gives strong indications about the general panorama of the country’s economy.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: o governo do Japão declarou estado de emergência na capital japonesa, Tóquio, e nas vizinhas Kanagawa, Saitama e Chiba, desde esta sexta-feira até 7 de fevereiro. Esta medida é menos restritiva do que as tomadas pelos governos europeus, pois o país já enfrenta a pior contração econômica já registrada. A China proibiu todos os veículos e pessoas de deixar a cidade de Shijiazhuang, ao sul de Pequim, após a confirmação de quase 200 infecções por coronavírus. Mais de 10 milhões de pessoas serão testadas para o vírus na região. Houve 90 casos confirmados e mais de 100 infecções assintomáticas detectadas em Shijiazhuang e nas proximidades de Xingtai. As infecções aumentaram em Hebei após o feriado de Ano Novo, com o primeiro caso confirmado relatado no sábado. A paciente, uma mulher de 61 anos, visitou parentes e compareceu a eventos antes de ser diagnosticada. Na Europa, o número crescente de casos levou a OMS a fazer um apelo por medidas mais rígidas em todo o continente. A chanceler alemã Angela Merkel advertiu que “os meses mais difíceis” da pandemia ainda estão por vir. O total de infecções na Alemanha aumentou em 26.663 nas últimas 24 horas, totalizando 1,84 milhão de pessoas infectadas no país, enquanto as mortes mais do que dobraram desde o início de dezembro, totalizando 38.000 fatalidades. Em Londres, os hospitais podem ficar sem leitos de UTI em duas semanas se o ritmo atual de disseminação da doença se mantiver como está. A farmacêutica alemã Bayer AG, em parceria com a CureVac NV, está em buscando aprovação internacional para distribuir sua vacina contra o coronavírus, que usa a mesma tecnologia de RNA mensageiro das vacinas da Moderna e da Pfizer
- MACROECONOMY: The core of European annual inflation, which excludes volatile prices for energy, food, alcohol and tobacco and for which the ECB analyzes its policy decisions, remained unchanged at 0.2%, the lowest ever recorded. The indicator consumer confidence in the Eurozone stood at -13.9 in December 2020, representing an increase of 3.7 points compared to the previous month. There was recovery in all four components: household assessments of your past and future financial conditions, your intentions to make important purchases and your expectations about general economic situation. The services confidence indicator in na decreased by 0.3 points to -17.4 in December 2020, well below market expectations of -15.0, due to more negative views on the situation. The industry confidence rose to -7.2 in December 2020, from -10.1 in the previous month and above expectations of the -8.1 market, with considerable improvements in the current level of order books. The Sentiment Indicator Economy in the Eurozone increased by 2.7 points over the previous month, to 90.4 in December 2020, easily surpassing the market consensus of 90.0, but still well below pre-pandemic levels. The recovery was driven by significantly greater confidence in the industry and among consumers and, to a lesser extent, in construction. In contrast, there were moderate declines in services and retail trade. Among the largest bloc economies, sentiment improved significantly in Italy (+6.8 points), Spain (+3.3 points) and, in to a lesser extent, in the Netherlands (+2.5 points) and France (+2.1 points), while it remained virtually unchanged in Germany (+0.1 points). However, new orders for German manufactured products increased unexpectedly 2.3% in November 2020 compared to the previous month. It is the 7th consecutive month of orders to factories, mainly in intermediate goods (4.9%), capital goods (1.1%) and consumer goods (0.5%). At domestic orders increased 1.6% and foreign orders 2.9%, with Eurozone orders increasing 6.1% and those of other countries 0.9%. Compared to February, factory orders were 4% higher.
- MONETARY POLICY: the minutes of the last 2020 meeting of the FOMC were released yesterday, maintaining the country’s interest rate between 0% and 0.25% per year. According to the document, the Fed should maintain the stimulus program via the purchase of securities and the market will be widely advised if this strategy changes. The EDF has been buying at least $ 120 billion in Treasury bills and mortgage-backed assets per month. EDF members believe that positive news about vaccine development strengthens the medium-term outlook for families. However, they also estimate that the challenges for the economy will grow in the coming months due to the pandemic proliferation. For them, the conditions of the North American labor market have improved, but still are far from the goal of full employment.
- ACTIONS: in the UK, retail giant Sainsbury’s reported strong Christmas sales and updated its earnings forecast for the whole year. In France, Veolia’s shares were among the best performing after the company said have sent an offer to the Suez board to buy the rest of its competitor’s shares. Both operate in the water and sewage treatment sector. In Japan, Fujifilm Holdings said it would invest $ 2 billion in a new productive plant in the USA. The Trump administration is considering adding Alibaba Group and Tencent to a list Chinese companies that are supposedly controlled by the Chinese military. In addition, the Stock Exchange from New York said on Wednesday it would remove three Chinese telecommunications stocks from the list, saying its last This reversal was due to the new orientation of the US government. The gaming website Roblox said it plans to go public for through a direct sale instead of an IPO, and raised new funds in a business that values almost $ 30 billion.
January 06, 2021
Facing the weakness of the dollar and a discouraging PMI, showing that the European economy contracted more than expected in December, EURUSD reached 1.2345 this morning, and remained at the level of 1.2335. DXY is being traded not level of 89.2 thousand points. The USDJPY is hovering close to 102.8, stable. Gold is trading at $ 1,955 an ounce rising, as well as silver at US $ 27.7 an ounce, due to the increase in expectations of disclosure in the main economies of the world. The USDCHF is oscillating close to $ 0.876, its lowest level since January 2015. The currencies of Australia and New Zealand reached its highest value in the past 3 years against the USD today. New Zealand reported only 2,186 cases and 25 deaths by COVID-19.
Investors are positioning themselves in riskier assets, excited about the possibility of a recovery faster economic growth as coronavirus vaccination campaigns are being carried out in the main economies of the world, indicating the end of the blockages caused by the pandemic. However, investor optimism may shrink if end-of-year parties have reinforced the pandemic and hospital occupancy rates are starting to rise this week.
For EURUSD, the D1 Stoch index remains in the middle of the chart. Stoch has not gone beyond the lines since December 18, 2020. Stoch does not go beyond the 30-point line, indicating oversold, since November 2, 2020. RSI in the same timeframe is just below the 70-point line, a position maintained since 12/21/20. The RSI does not go beyond the 30-point line, indicating oversold, since February 17, 2020.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: The European Medicines Agency must approve the use of Moderna’s vaccine today. In Spain, after partially easing restrictions during the Christmas holiday, regional governments once again imposed lockdowns, in amid what experts already describe as a third wave of the country’s pandemic, with 23,700 new cases registered yesterday. Chinese authorities are stepping up efforts to stem the spread of the coronavirus, amid an increase in infections transmitted locally near Beijing.
- MACROECONOMY: The US unemployment report for December is due on Friday. In the states United States, the Redbook Index, which points to the weekly growth of retail sales in the country, 5.5% growth in the week ended on January 2, 2021 compared to the same week in the previous year.
- MONETARY POLICY: the minutes of the last 2020 meeting of the FOMC will be released today. The Bank of England announced which will inject more money into the economy, as a compensation measure for the new blockade announced this week.
- USA ELECTIONS: The US Congress meets today to close the process and declare Joe Biden the winner of the elections presidential elections 2020. The market continues to follow the electoral process of senators in Georgia, which will determine whether Democrats, who already have a majority in the House, could also take over the Senate majority, which could increase the chance of implementing President Joe Biden’s proposals. Among these proposals are the increased fiscal stimulus, higher taxes through revision of the tax code, more regulation and higher infrastructure spending. Of the 2 seats to which the state of Georgia is entitled in the Senate, one will be occupied by Democrat Raphael Warnock, who defeated current Republican Senator Kelly Loeffler to become the first black senator from Georgia. The other seat is being contested by Democrat Jon Ossoff, a documentary filmmaker who, if win, he will become the youngest member of the Senate at 33, and by the current Republican Senator David Purdue. The victory in both contests she will give Democrats control of the Senate, creating a 50-50 split in the House and giving elected vice president, Kamala Harris, the tiebreaker after she and Biden took office on January 20.
- ACTIONS: The French tire industry Michelin has announced a plan to reduce its workforce by 10%, the equivalent to 2,300 jobs over the next 3 years. Amazon bought 11 jets from Delta and WestJet airlines to boost its growing delivery network. American jewelry store Tiffany & Co reported record sales at Christmas 2020, especially in China. US President Donald Trump yesterday signed an executive order banning transactions with eight Chinese software applications, including Ant Group’s Alipay. Despite having announced yesterday the decision to withdraw from the trading floor the trio of Chinese companies in the communications sector China Mobile Ltd., China Telecom Corp. and China Unicom Hong Kong Ltd., the NYSE today announced the cancellation of the decision. This movement made the 3 companies lost more than $ 30 billion in market value. “The intention was to penalize these companies and penalize the Chinese government, ”said Shang-Jin Wei, professor of Chinese business and finance at Columbia Business School. “The problem is that it ends up penalizing investors based in the USA.” China Mobile, which was once part of a “red chip” boom in the late 1990s, was one of the first giants in the Asian country to sell shares in the USA. Until the Treasury Secretary Steven Mnuchin got into this fight yesterday, calling the NYSE president to express his discontent with the stock exchange’s decision to let the three companies continue to negotiate. They were also Head of Cabinet Mark Meadows, National Security Adviser Robert O’Brien and Director of the National Economic Council Larry Kudlow. The NYSE went back on the decision to take companies off the floor after realizing that he would be setting precedents and that he would have to do the same with other companies that don’t have nothing to do with the matter.
New car registrations in the UK in December 2020 decreased 10.9% from the previous year to 132,682 units. Demand fell in all segments: private (-13.9%), fleet (-8.3%) and business (-25.7%). Considering the year of 2020, new car registrations fell 29.4% to 1.63 million units, the lowest level since 1992. The Demand for private vehicles fell by 26.6% and registrations for large fleets declined by 31.1%.
Today, IHS Markit / PMI data were released, a survey conducted with Purchasing Managers, which shows the current pace and the perspectives of several economies.
January 04, 2021
EURUSD started the first session of 2021 upwards, reaching 1.23, remaining at least 4 hours at the level of 1,229. DXY is being traded at 89.5 thousand points, with an unattractive dollar. The USDJPY is oscillating close to 102.7, down. Gold is trading at $ 1.934 an ounce at a high, as well as silver at $ 27.3 an ounce due to rising expectations of the world’s major economies. The SDCHF is hovering close to $ 0.88, at one of their lowest levels since 2015.
Investors are positioning themselves in riskier assets, excited about the possibility of a recovery faster economic growth as coronavirus vaccination campaigns are being carried out in the main economies of the world, indicating the end of the blockages caused by the pandemic.
For EURUSD, the D1 Stoch index remains in the middle of the chart, just above the 50-point line. Stoch does not go beyond lines since December 18, 2020. Stoch does not go beyond the 30-point line, indicating oversold, since 2 November 2020. The RSI on the same timeframe is just below the 70-point line, a position maintained since 12/21/20. The RSI does not go beyond the 30-point line, indicating oversold, since February 17, 2020.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: more than 85 million people have contracted COVID-19 and almost 1.9 million people have died from it, with countries like the USA and Japan reporting record numbers of infections and deaths daily. In Japan, just like in the UK, Italy, Greece, Austria and Germany, governments are about to enact new blockades, already that pandemic figures continue to rise. In the UK, where even schools remain closed, and yet the pandemic remains uncontrolled, more than one million people have already received the Pfizer and more than 500 thousand doses of the AstraZeneca vaccine will be available starting today for the vaccination. In the USA, 4.2 million doses of the vaccine have been administered. The German government has been criticized for ATR Up ATR Down ATR% POC VWAP 1.2292 1.2232 112% 1.2252 1.1258 Page 2 relation to its vaccination plan as the country could purchase and distribute vaccines independently from the EU, accelerating the country’s recovery, which has not been done.
- MACROECONOMY: IHS Markit / Manufacturing PMI data was released today, a survey conducted with Managers of Purchases, which indicate the current pace and prospects in the industry of several economies. IHS Markit / Services PMI will be released this Thursday, January 6th. More details in the “News” section of this report.
- FISCAL POLICY: Nancy Pelosi was re-elected yesterday as President of the US House, maintaining the Democratic leadership at home.
- MONETARY POLICY: dadps released by the Bank of England showed that mortgage approvals increased in November to the highest level since August 2007 and well above market expectations.
- ACTIONS: future indices in the US pointed to new records at the opening of the first trading day of 2021, amid expectations that vaccination against covid-19 could help control the pandemic and that fiscal support and continued monetary growth will drive the country’s economic recovery. Tesla Inc shares opened at record high today, after the electric car maker reported better-than-expected vehicle deliveries in 2020. In the United Kingdom, the shares of Ladbrokes’ owner Entain Plc rose more than 20% after receiving a $ 11 billion sale by US casino operator MGM Resorts. In Italy, Fiat shares Chrysler rose about 2%, as investors will be asked to approve a merger with Peugeot to form the Stellantis, the fourth largest automaker in the world.
- OTHERS: Bitcoin fell sharply after reaching the record high of $ 34,800 the previous day, confirming the expected volatility in these highly leveraged markets. Bitcoin occurred reached $ 20,000 by first time on December 16, 2020. The world’s largest cryptocurrency has more than quadrupled in price in the year past.
In the United Kingdom, in November 202, the net indebtedness of households in the United Kingdom was GBP 5.7 billion, higher than market forecasts of GBP 4.35 billion. November’s indebtedness was the highest since March 2016, and significantly higher than the GBP 3.9 billion average seen in the six months to February 2020.
Today, IHS Markit / Manufacturing PMI data were released, a survey conducted with Purchasing Managers, which current pace and prospects in the industry of several economies.
In the United Kingdom, the IHS Markit / CIPS UK Manufacturing PMI was 57.5 in December 2020, pointing to the pace of sharpest expansion in the manufacturing sector since November 2017, supported by the increase in new orders, as that customers put forward orders to protect themselves against possible disruptions caused by the end of the transition period Brexit. However, delays at ports and other logistical disruptions meant that delays in the supply chain supply increased to one of the largest extensions in the history of research. In relation to prices, cost inflation of inputs was the highest in two and a half years. Looking ahead, business optimism declined in December.
In Germany, the IHS Markit / BME Germany Manufacturing PMI was 58.3 in December 2020, pointing to the stronger growth in manufacturing activity since February 2018, as it continued to recover from outages pandemic-induced. Production continued to increase, albeit at a slightly lower rate, while producers of goods reported strong optimism about the outlook for the coming year. The number of the workforce remained in decline, while increased pressure on manufacturing supply chains led to an increase accentuated in cost pressures. Looking at the prospects for 2021, the survey showed high expectations for the production next year. Many said they expected the impact of the pandemic on economic activity to diminish and that the customers’ appetite for investments continues to recover.
In France, the IHS Markit France Manufacturing PMI was 51.1 in December 2020 of 49.6 pointing to a new expansion of the manufacturing sector, sustained by a renewed increase in production. This occurred despite another drop in new orders, as the recent blockade of COVID-19 weighed on demand conditions. Meanwhile, the Employment rose for the first time since December 2019, although only marginally. Purchasing activity is also recovered solidly and at the fastest pace since August 2018. Input prices had the highest growth in almost two years, due to the higher prices of raw materials, especially metals such as steel and aluminum. Thus, the rate of charge inflation accelerated to the fastest since October 2019. Looking ahead, sentiment business was the highest since April 2019, amid expectations that a coronavirus vaccine could become widely available throughout 2021.
In Italy, the IHS Markit Italy Manufacturing PMI was 52.8 in December 2020, below market expectations of 53.7. The most recent reading signaled a moderate improvement in the health of the manufacturing sector, supported by a seventh increase consecutive monthly production and a slight recovery in the volume of new orders, since more flexible restrictions related to COVID-19 in the main markets led to an increase in external demand. Employment had the highest growth rate in more in two and a half years, while pending work continued to decrease. At the same time, the supplier’s performance worsened further, with delivery times for elongated inputs to a large extent since May. Input cost inflation was the highest since July 2018 and product charge inflation accelerated to a two-year high, although it remained modest. Looking to the future, business sentiment is stable.
In Spain, the IHS Markit Spain Manufacturing PMI was 51.0 in December 2020, below expectations of the 52.8. The reading indicated a modest improvement in operating conditions, with industrial production growing again after a slight drop in November. At the same time, the volume of new orders continued to fall, amid weak demand despite the higher growth in new export orders since July. Input delivery times kept decreasing. Input price inflation accelerated to its highest level since January 2018. Looking at for the future, business optimism has been its best since July 2018 amid hopes that the pandemic will have order soon.
December 22, 2020
EURUSD started today’s session lower after rising 0.25% yesterday, but soared until the opening of the North American market, reaching 1.2256. DXY is operating in a slight drop, at the level of 90.1 thousand points, since the current large US budget and current account deficits have made the dollar an unattractive investment. In addition, US monetary policy will remain dovish for a long time, anchoring US nominal yields at a low level. The yen is hovering close to 103.4, stable, while the country surpasses the 200,000 mark infected by COVID-19. Gold is trading at $ 1,874 an ounce and silver at $ 25.9 an ounce.
In yesterday’s session, assets fell sharply amid concerns about the spread of a new variant of COVID-19 in the UK, with more than 40 countries imposing blockages on travelers and previous cargo from the country. However, today, the CEO of BioNTech said he is confident that the Pfizer / BioNTech vaccine will also work against the new variant and added that a new version can be developed in six weeks, if necessary.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: vaccination against COVID-19 in the European Union is expected to start before the end of the year, now that the European Medicines Agency has authorized the use of the Pfizer / BioNTech vaccine. The pandemic has killed more than 1.7 million and infected more than 77.4 million people worldwide, according to Johns Hopkins University. According to Bloomberg, more than 2.1 million people in six countries (China, Russia, USA, Canada, Israel and the United Kingdom) already received the vaccine. It is the beginning of the largest vaccination campaign in history and one of the biggest logistical challenges ever faced. Vaccination in the US began on December 14 with healthcare professionals and so far 614,117 doses were administered in the country. These numbers are expected to increase in the coming days with the distribution of a second vaccine option by Moderna Inc. There are already 6 vaccine options available for public use, another 3 are in the final testing phase.
- MACROECONOMY: economic data show that the UK economy shrank 8.6% in 3Q20 compared to 3Q19, pointing to the beginning of a recovery, since in the previous quarters the falls were much greater. O household consumption fell 10.1%, fixed investment fell 11.3%, public investment decreased 8.8%, and demand foreign trade contributed positively to GDP, as exports decreased less than imports. At compared to the previous quarter, business investment showed the first increase in four periods, driven by increased investments in buildings, information technology equipment and communication and transport.
- FISCAL POLICY: The US Congress finally approved a new $ 892 stimulus package on Monday billion for the economic recovery of the country devastated by the pandemic. This amount includes payment $ 600 a week for millions of unemployed people during the COVID-19 pandemic, which continues infecting more than 200,000 people every day and slowing the economic recovery. Almost 320,000 Americans have died. This package also renews a small business loan program Payroll) by about $ 284 billion and directs money to schools, airlines, transit and distribution of vaccines. The deal rules out the Republicans’ desire to protect companies from lawsuits related to coronavirus, as well as the Democrats’ request for a large disbursement of money to governments state and municipal penniless. This is the second largest stimulus package in US history, behind only the $ 2 trillion package approved in March 2020.
- BREXIT: the market was encouraged by the possibility of a commercial agreement being reached before Christmas, considering that the UK government has delivered a major counter-proposal on access to fishing in British waters by European vessels. However, the EU rejected this offer. The British Prime Minister spoke to the President of the European Commission, Ursula von der Leyen, twice by phone on Monday, to try to break the impasse in the negotiations. The UK made an offer that would reduce the value of fish caught by EU boats by 30% in British waters, a drop substantially less than the 60% required last week. The block refused to accept a reduction of more than 25%, saying that even that was difficult for countries like France and Denmark accept, according to authorities with knowledge of the discussions. Together with this percentage value, both sides are discussing how much time fishermen will have to adjust to the new rules. The United Kingdom demanded that the EU accept a five-year transition period, after having previously suggested three years. The bloc had initially required ten years and now offers seven. In addition, the EU wants to be able to impose tariffs on the United Kingdom if, in the future, the United Kingdom access to its waters. In its latest offer, the United Kingdom said it would accept tariffs on fishing, but not on other areas, such as energy, as required by the block. Although the issue is financially insignificant – the two sides trade $ 40 million worth of fish a year – the British see control of their waters, previously under EU jurisdiction, as a key element of its sovereignty, which is being recovered with Brexit.
- ACTIONS: Apple has announced that it must produce a passenger vehicle using its own battery technology innovative until 2024. Meanwhile, IBM announced the acquisition of Nordcloud, based in Helsinki, a European leader in implementation of cloud and managed services, for an undisclosed amount. The Wall Street Journal reported that the Facebook and Google agreed to “cooperate and help each other” if they ever faced a research into the pact of working together in online advertising.
The D1 Stoch index is just below the 70-point line, on a downward trend. The lines were briefly overbought position considering this timeframe
December 21, 2020
EURUSD started today’s session in a sharp decline, reaching 1.2135, correcting the 1.02% appreciation obtained in the week last. News that the trade agreement that will regularize relations between Europe and the United Kingdom as of January 1 2021 will not come out this year caused this correction, as the market positioned itself on EURUSD throughout the week with based on the expectation of the agreement (among other factors, such as the negotiation of the fiscal stimulus package in the USA and the of a new coronavirus strain, but Brexit is one of the most important). DXY is operating at a high level, at 90.8 thousand points. The yen is hovering close to 103.8, up. Gold is trading at $ 1,873 an ounce and silver at $ 25.9 the ounce.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: British Health Secretary Matt Hancock said a new strain of coronavirus is out of control in the country, which made France, Germany, Italy, Holland, Belgium, Austria, Ireland, Switzerland, Bulgaria and Canada, among others announced blockades for people from the UK. London and south east England were placed under a total emergency block on Sunday to contain this new strain of rapid spread. Prime Minister Boris Johnson requested an emergency meeting for this Monday to discuss travel international and cargo flow inside and outside the UK. Britain announced a record 35,900 infections Covid-19 on Sunday, bringing the country’s total to over 2 million. The European Medicines Agency will examine the Pfizer / BioNTech coronavirus vaccine on Monday, paving the way for vaccination campaigns start in the European Union in less than a week.
- MACROECONOMY: in the UK, retailers rated December sales as good. Between the subsectors, grocery stores, furniture and retailers of ‘other normal goods’ (cards, flowers and jewelry, etc.) saw strong growth, clothing, footwear and department stores continued to report volumes below those observed in the previous year. At the At the end of the afternoon, the European consumer confidence index will be released.
- MONETARY POLICY: the US tax agreement took too long to come out because at the heart of the discussions was the Democrats’ request to establish a direct flow of payments to state and municipal governments with cash problems. Republicans struggled to limit not only fiscal stimulus but also the Fed’s power to provide credit to municipalities, companies or other institutions, widely used in 2020, through a series of emergency loan programs aimed at stabilizing the economy during the pandemic in times of crisis. Senator Patrick J. Toomey, a Republican from Pennsylvania, made an effort to ensure that these programs were closed and prevent both the EDF and the Treasury Department from creating any similar in the future.
- FISCAL POLICY: The United States Congress has finally approved a fiscal stimulus package aimed at recovery of the post-pandemic economy. Democrats and Republicans will allocate $ 900 billion, including payments direct to Americans, unemployment benefits, company funds and vaccine distribution. Although necessary, that many citizens are facing enormous difficulties to survive this pandemic, this expenditure without precedent is leading to large budget and current account deficits. Senator Mitch McConnell, Republican from Kentucky and leader of the majority, said on Sunday night: “More help is on the way.” Both chambers approved the measured on Sunday night, and President Trump signed it just before midnight. Although Trump’s signature is in the law, its effect will be much more significant for President-elect Joe Biden, who silently pressed legislators to reach this agreement, and that it should seek another major economic relief package after taking office in January: “This action is just the beginning. Our work is far from over. ” The agreement is expected to provide weekly payments of $ 600 to millions of adult Americans earning up to $ 75,000 a year, more than US $ 284 bilhões para empresas, retomando o Programa de Proteção à Folha de Pagamento, um popular programa de empréstimo federal para pequenas empresas que expirou durante o verão, expandindo a elegibilidade do programa para organizações sem fins lucrativos, jornais locais e emissoras de rádio e TV, US $ 15 bilhões para teatros, cinemas independentes e outras instituições culturais devastadas pelas restrições impostas para impedir a disseminação do coronavírus. O acordo também deve fornecer bilhões de dólares para testes, rastreamento e distribuição de vacinas, bem como US $ 82 bilhões para faculdades e escolas, US $ 13 bilhões em assistência nutricional, US $ 7 bilhões para acesso a banda larga e US $ 25 bilhões em assistência para aluguel.
- BREXIT: authorities should not ratify any agreement before January 1, when the transition period of the Brexit will have expired, which can cause practical problems as of this date. The next deadline is now Christmas, although it is possible to be extended again.
- SHARES: Tesla enters the S&P 500 today, after the company’s shares rose nearly 500% last year.
The D1 Stoch index is just below the 70-point line, on a downward trend. The lines were briefly overbought position, but have crossed, indicating a real possibility that the EURUSD value will fall in today’s session, which opened at 1.2212.
December 17, 2020
Today’s main highlights are:
- Signs of progress in US fiscal stimulus negotiations ($ 900 billion, which includes payments to individuals and excludes aid to state and municipal governments. Senate majority leader Mitch McConnell warned senators Republicans that they should be prepared to work over the weekend)
- Signs of progress in post-Brexit trade agreement negotiations in Europe
- FED did not change the terms of its asset purchase program and outlined an optimistic growth outlook for 2021. With this less dovish stance, it will not bring back investor interest in the dollar
- European Parliament approved the € 1.8 trillion budget and the coronavirus recovery package
- Expectation about US unemployment insurance claim data, which will be released today
EURUSD started today’s session sharply higher, reaching 1.2244, its strongest level since April 2018. DXY is trading down, at 89.8 thousand points, as the unprecedented volume of spending by the US government is leading large budget deficits and current account, making the dollar an increasingly less attractive investment. The yen is oscillating close to 103.0, even with the country at its most serious level since the beginning of the pandemic. Gold is being traded at $ 1,876 an ounce and silver at $ 25.7 an ounce, both up. The price of these two metals is already strengthening, as they offer security to the market, as protection against inflation, in face of the increase in the volume of economic stimuli in the USA and in Europe.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: the pandemic continues to plague Europe, with an average of seven days of new cases in Germany now almost a record 179 per 100,000 inhabitants. The government already predicts that the first two months of 2021 will be particularly difficult, with a new peak of infections expected in January, and has already warned of an extension of the lockdown beyond January 10th. Spain reported its biggest jump in new daily coronavirus infections in the Wednesday, with 11,078 new cases, compared to 10,328 on Tuesday. Spain will now allow regions to strengthen their anti-virus measures as part of your Christmas plan, meaning that meetings can be limited to six curfews can be prolonged and travel between regions prohibited. Prime Minister Pedro Sanchez suspended all activities and will be quarantined until December 24, after coming into contact with French President Emmanuel Macron, who had a positive result for COVID-19. The USA recorded a record 3,835 deaths from the virus yesterday, however, case growth is slowing, mainly in the Midwest. US President-elect Joe Biden and Vice President Mike Pence will receive the first dose of the vaccine in the next few days. A panel of external consultants from the US Food and Drug Administration will meet today to endorse the emergency use of Moderna’s vaccine against coronavirus.
- MACROECONOMY: Eurozone consumer prices fell for the third consecutive month, amid demand repressed due to the coronavirus crisis. Prices fell for both energy (-8.3%) and non-industrial goods energy (-0.3%). Food, alcohol and tobacco increased at a slightly milder rate (1.9%) and inflation of services increased (0.6%). The core of annual inflation, which excludes volatile prices for energy, food, alcohol and tobacco and for which the ECB analyzes its policy decisions, it was unchanged at 0.2%, the lowest ever recorded. In the US, initial unemployment insurance claims are expected to drop to 800,000 in the week ended December 12, compared to 853 thousand reported in the previous week. Orders are far from the 200,000 level reported in February and will likely remain elevated for some time. Meanwhile, continued benefits are expected to drop to 5,598 million in the week of December 5, after rising for the first time in eleven weeks
- MONETARY POLICY: The US Federal Reserve has pledged to continue executing its program to purchase until “substantial progress is made” towards their goals of full employment and job stability. prices. The Bank of England voted unanimously to keep the interest rate at a record low of 0.1% and the size of its bond purchase program at £ 875 billion during its December meeting. The bank noted that successful testing of some coronavirus vaccines and initial plans to implement them widely in the first half of next year they are likely to reduce the downside risks to economic prospects. Looking to the future, the authorities promised to take all additional measures necessary to achieve the target inflation of 2%, in a way that helps sustain growth and employment. Inflation is expected to increase by rather sharply towards the target in the spring, as the VAT cut comes to an end and the big drop in energy prices earlier this year comes out of the annual comparison.
- BREXIT: The news that Prime Minister Boris Johnson has put parliamentarians on standby to approve a deal last minute with the EU animated the market. The pound sterling remained at $ 1.36 on Thursday, its lowest level strong since April 2018. EU Brexit chief negotiator Michel Barnier tweeted that “good progress” is being done in the negotiations, although the “last hurdles” still remain.
- ACTIONS: In the U.S., Google was allegedly sued by the state of Texas and nine other states on Wednesday under allegations that the company makes an illegal deal that gave Facebook special privileges in exchange for a promise not to support a competing ad system.
- OTHERS: Bitcoin hit a new high of $ 23,774 on Thursday, more than 10% over the previous session, supported the growing interest of large investors as a potential form of protection against rising inflation.
The D1 Stoch index is above the 70-point line, on an upward trend. It is possible that you are heading towards overbought zone, which would make the asset appreciate another day.
The Federal Reserve left the target for its federal funds rate unchanged at 0-0.25% during its December meeting in line with market forecasts. The Fed will continue to increase its holdings in Treasury bills by at least US $ 80 billion per month and agency mortgage-backed securities at least $ 40 billion per month until a substantial progress is made in relation to employment and inflation.
The Federal Reserve is committed to using all available tools to support the American economy in these “challenging” times, to promote as many jobs as possible and achieve the price stability goals, since the economic activity and the labor market continued to recover, but are still well below the levels of the beginning of the year. The committee said it was prepared to adjust monetary policy in the event of risks that could prevent achievement of goals.
Financial conditions remain dovish (accommodative), partly reflecting monetary policy measures and the liquidity of credit to households and businesses, and mentions that weaker demand and falling oil prices have held up inflation to consumers.
The Fed also announced that it will continue to increase the Treasury bond purchase program by $ 80 billion a month and $ 40 billion in mortgages until the employment and price stability targets are met. “These purchases of assets help the market to function and in accommodative financial conditions, which helps to maintain the flow of credit to families and businesses ”, they write. The current pace of bond buying will continue “until substantial progress is made in towards the Committee’s maximum employment and price stability goals, “said the Fed.” These asset purchases help to promote the functioning of the market and accommodative financial conditions, thus supporting the flow of credit to families and companies. “
With rates close to zero, the central bank has relied on its bond purchases to contain the economic downturn, buying $ 120 billion in bonds monthly. The bond purchase program raised the EDF balance sheet to more than $ 7 trillion – from about $ 4 trillion just before the pandemic.
The median drop in US GDP for Fed members in 2020 fell to 2.4%, against a projection of a 3.7% contraction in September. For 2021 and 2022, growth with expansion of 4.2% and 3.2%, respectively, slightly above median September, 4% and 3%. The projection for the job market has improved significantly. The median of the projection the unemployment rate in 2020 was 6.7%, decreasing in 2021 and 2022 to 5% and 4.2%, respectively. In September, the projection was, respectively, 7.6%, 5.5% and 4.6%. Inflation in 2020 is expected to increase by 1.2%, accelerating to 1.8% and 1.9%, still below target above 2% for a period of time since the maximum possible employment is achieved, as well respecting the dual mandate of ensuring inflationary control and stimulating the labor market. Even so, the projection for 2021 and 2022 it is better compared to September, when the median was, respectively, 1.7% and 1.8%. The core of inflation suffered a reduction in the 2020 projection, with the expectation of ending the year at 1.4%, compared to 1.5% in the median of September. For 2021 and 2022, the expectation is higher than in September, rising from 1.7% to 1.8% and 1.8% respectively to 1.9%. There is no projection of an increase in the rate of Feds Funds for the next three years, respecting the statement of the decision in that the institution will maintain the dovish monetary policy as long as necessary.
December 16, 2020
Today’s main highlights are:
- Signs of progress in US fiscal stimulus negotiations
- Signs of progress in post-Brexit trade agreement negotiations in Europe
- Launch of more vaccines against COVID-19
- Better-than-expected PMI for Europe’s largest economies
- Expectation for the results of the EDF meeting
EURUSD started today’s session upwards, with a very strong candlestick just at the opening of the European market that took the asset of the level from 1.2161 to 1.2200, reaching its strongest level since April 2018 at the beginning of the session. The falling DXY is oscillating at the level of 90.2 thousand points. The yen is falling, near 103.4. Gold is trading at $ 1,860 a ounce and silver at $ 25 an ounce, both up slightly. The price of these two metals is expected to strengthen in the coming weeks, because they continue to offer security to the market, as protection against inflation since an increase in the volume of economic stimulus in the near future.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: Germany reported 952 deaths and 27,728 new COVID-19 infections on Wednesday, the biggest increase daily since the start of the pandemic. The country is now entering a phase of greater restrictions, which should last at least until January 10, with non-essential stores and schools closed. In the US, the FDA said that Moderna’s vaccine against COVID-19 is “highly effective”, setting the stage for an emergency use authorization to be released on the end of this week.
- MACROECONOMY: in the USA, data from the Mortgage Bankers Association showed that mortgage applications increased 1.1% in the week ended December 11, recovering from two consecutive weeks of decline. House purchase orders increased 1.8% in the week, however, they represent an increase of 26% when compared to the same period last year. Real estate loan refinancing requests, which advanced 1.4% in the week, presenting an increase of 105% in relation to the same period in the previous year. The rate average interest rate for 30-year mortgages fell 5 basis points, to 2.85% last week, a record low. At US retail sales fell 1.1% month-on-month in November 2020. It’s the second consecutive drop in retail sales amid declining income and lower income for the population. Clothing store sales were those that fell the most (-6.8%), followed by food and beverage services (-4%); electronics and home appliance stores (-3.5%); gas stations (-2.4%) and concessionaires of motor vehicles and parts (-1.7%). Other falls also were observed in sales at furniture stores (-1.1%); general merchandise stores (-1%); health and personal care (-0.7%); sporting goods, hobby, musical instrument and book (-0.6%); and several (-0.5%). In contrast, the high occurred in food and beverage stores (1.6%) and in construction material resellers (1.1%). Retail sales which exclude automobiles, gasoline, building materials and food services decreased 0.5%. In the Euro Zone hourly labor costs increased 1.6% in 3Q20 compared to the same period in the previous period. Wages and salaries increased by 2.2% and the non-salary component decreased by 0.4%. Still in the Eurozone, the trade surplus eurozone increased to EUR 30 billion in October 2020, with exports falling 9% – especially in mineral fuels, lubricants and related materials (-38.3%); transport machinery and equipment (-9.8%) and manufactured goods classified mainly by materials (-7.7%). Imports fell 11.7% to EUR 169.3
- billion – mainly due to mineral fuels, lubricants and related materials (-37.9%); drinks and smoke (-13.7%) and transportation machinery and equipment (-12.3%). China was the EU’s main partner in the period. O trade with the USA recorded a significant drop in both imports (-13.0%) and exports (-10.2%). Another piece of information, still in the Eurozone, shows that the civil construction segment contracted 1.4% in October 2020 compared to the previous year, with construction activity falling 1.5% and civil engineering falling 0.3%. Today were disclosed the PMI information for the Eurozone, they are in the “News” section of this report.
- FISCAL POLICY: both Democrats and Republicans are confident that Congress would agree to a about $ 900 billion package before the holidays. House Speaker Nancy Pelosi, the leader of the majority in the Senate, Mitch McConnell, the Senate minority leader, Chuck Schumer, and the House minority leader, Kevin McCarthy, discussed the bill on Tuesday and seemed optimistic about it.
- MON MONETARY POLICY: The EDF is expected to keep its rate stable at 0-0.25% at its last meeting in 2020, and adopt a more dovish tone. Investors will keep an eye out for any changes to the bond purchase program, be it in pace or composition, like buying more long-term bonds and fewer short-term bonds. The EDF has been buying $ 80 billion in Treasury bonds and $ 40 billion in mortgage bonds every month. Investors they will also monitor the existence of links between asset purchases and employment and inflation measures. In addition, the FED to disclose a new outlook for the US economy, with better long-term forecasts due to the launch of the coronavirus vaccine.
- BREXIT: Negotiations between the EU and the UK continue, although it is still uncertain whether there will be a trade agreement. EU negotiator Michel Barnier has identified a “narrow path” for Brexit’s trade deal.
- ACTIONS: European stocks hit their highest since February this Wednesday
- OTHERS: Bitcoin surpassed the $ 20,000 level for the first time today, after Reuters reported that the manager British fund manager Ruffer Investment Management added bitcoin to its portfolio. Cryptocurrency increased more 200% this year as it is seen as a hedge against inflation amid increasing fiscal and monetary stimulus all around the world.
The D1 Stoch index is just below the 70-point line, on an upward trend. It is possible that you are heading towards overbought zone, which would make the asset appreciate another day.
The economic recovery of the private sector in the eurozone bloc came close to stabilizing in December 2020, a since a second wave of coronavirus cases and restrictions on the circulation of people imposed to contain it affected the economic activity as industrial production growth accelerated and service sector activity contracted, as shown in the Purchasing Managers Index (PMI) survey, released today.
IHS Markit Eurozone Composite PMI rose to 49.8 in December 2020 from 45.3 in the previous month, and easily surpassed market expectations of 45.8. IHS Markit Eurozone Services PMI increased to 47.3 in December 2020 from 41.7 in the previous month, also exceeding market expectations of 41.9. Service production contracted for the fourth month consecutive, albeit at a smoother pace, with fewer companies reporting that production was hit by coronavirus block compared to November. Exports dropped again sharply due to strict travel and tourism restrictions; and employment in the sector continued to decline. Looking to the future, the feeling among service providers on future prospects reached a 27-month high in December. The IHS Markit Eurozone Manufacturing PMI jumped from 53.8 in November to 55.5 in December 2020, exceeding market forecasts of 53. The reading pointed to the strongest growth in manufacturing activity in the last 31 months, as growth in production and new order volume accelerated and goods exports increased by the second fastest rate in 34 months, while employment continued to fall. Input costs increased at the fastest rate in just over two years, linked in many cases to the increasingly widespread shortage of many important raw materials. Meanwhile, the sentiment about future prospects reached the highest level in the last 34 months.
In Germany, the IHS Markit Germany Composite PMI increased to 52.5 in December 2020 from 51.7 in November, exceeding market forecasts of 50.4. Manufacturing continues to make up for the weakness in the service sector. THE However, the survey pointed to a small setback in employment, although companies remain optimistic about prospects for the coming year. There are signs of increasing pressure on the supply chain, leading to a sharp increase in manufacturing input costs. The IHS Markit Germany Services PMI increased to 47.7 in December 2020 from 46 in November, exceeding market forecasts of 44. Still, the reading pointed to the third consecutive month of contraction in service activity as blocking measures continue to weigh. Employment grew at a rapid pace slower and price pressures intensified. Finally, businessmen’s confidence in the prospects for activity for the following year remained strongly optimistic in December. The IHS Markit Germany Manufacturing PMI increased to 58.6 in December 2020 from 57.8 in November. It is the highest reading in 34 months, since manufacturing showed little impact of virus containment measures at home or abroad. The order book volumes increased sharply, supported by increased exports, amid increased demand from China. Employment fell and producer prices have increased to the greatest extent since March 2019, due to the scarcity of raw materials. Finally, manufacturers remained optimistic and businessmen’s confidence in the outlook for activity in the following year remained strongly optimistic.
IHS Markit France Composite PMI rose to 49.6 in December 2020 from 40.6 in November and above expectations 42.9 market. The most recent reading points to the milder contraction in business activity in the current sequence of falls of four months, although the country continues to face strict blocking restrictions due to coronavirus disease. The new ones Orders received increased for the first time in four months, with French companies slightly increasing their number of employees in December. Looking ahead, confidence has reached its highest level in almost a year, supported by for an early recovery in demand when COVID-19 vaccines become widely available. The Markit IHS France Manufacturing PMI rose to 51.1 in December 2020 from 49.6 in the previous month and above market expectations of 50.1. The most recent reading pointed to a further expansion in the manufacturing sector, although the growth rate has historically moderate. New orders fell at a smoother pace, with foreign sales recovering lightly; employment has increased and work delays have increased marginally. In terms of costs, prices of inputs were the ones that rose the most in almost two years. IHS Markit France Services PMI rose to 49.2 in December 2020 of 38.8 in the previous month and above market expectations of 40. The most recent reading pointed to the most service activity in the current four-month downturn. New orders have recovered, mainly due to the domestic market, while international orders decreased sharply. In addition, the employment increased and work delays fell less in the current five-month and only marginal sequence. In terms of costs, input prices increased and product prices decreased.
The IHS Markit / CIPS UK Composite PMI rose to 50.7 in December 2020 from 49.0 in the previous month, but market forecasts of 51.3. The most recent reading signaled only a slight increase in private sector production driven by a solid expansion in industrial production. Meanwhile, service sector activity has stagnated due to the continued restrictions induced by coronavirus in several non-core businesses. Total new business volumes remained unchanged, while the job reduction rate was the slowest in 10 months. In relation to prices, input costs increased at a faster and more robust pace. Meanwhile, business optimism about prospects for the following year have decreased only slightly since November and meanwhile have remained much stronger than than the visa from March to October 2020. The IHS Markit / CIPS UK Manufacturing PMI increased to 57.3 in December 2020 55.6 in November, well above the forecasts of 55.9. The reading pointed to the strongest expansion of manufacturing activity since November 2017. New orders expanded at the fastest pace since August, supported by a temporary boost for purchases before the Brexit deadline, while purchasing stocks have accumulated to a greater extent since April 2019. A slower rate of layoffs and a faster increase in supplier leadership times also contributed for an increase in PMI in December. The IHS Markit / CIPS UK Services PMI rose to 49.9 in December 2020 from 47.6 in the previous month, below the market consensus of 50.5. Even so, the most recent reading pointed to a stagnation in the service sector activity due to the continued restrictions of the coronavirus to the hospitality, leisure and travel businesses. At New order entries fell for the third month, while staffing levels were cut at the slowest pace since the beginning of the retraction in March. Several survey respondents commented that the hope of a resumption of activity over the next 12 months, along with the use of leave schemes, encouraged them to retain employees whenever as possible.
December 07, 2020
The week starts with a high value in the EURUSD pair, in the range of 1.21, due to the depreciation of the dollar and not due to the appreciation of the euro. This is because the American government is expected to make a new round of economic incentives this December, already that the country continues to suffer from the expansion of the coronavirus pandemic, as pointed out by a payroll released at the end of the last week. News about a vaccine against the disease no longer moves the market, which has already priced them.
On the euro side, the market is closely monitoring news about Brexit and the outcome of the EU meeting that happens on Thursday and will define a new stimulus package aiming at the economic recovery of the post-pandemic bloc.
With the liquidity of the American currency rising, there is an intensification of financial flows, increasing the risk appetite of the market, favoring markets such as ForEx.
EURUSD started today’s session down to 1.2081 but rebounded to close to 1.2139 after the market opened North American. DXY opened the session on a high, reaching 91.2 thousand points, but returned to the level of 90.8 thousand points after the opening of the market in the USA. The yen is stable near 104.1, after the Japanese prime minister said on Friday that will decide on an economic stimulus package earlier this week. Gold is trading at $ 1,830 an ounce and silver at $ 24 an ounce. The price of these two metals should increase in the coming weeks, as they continue to offer security to the market, as protection against inflation since an increase in the volume of economic stimulus is expected in a near future.
The main factors considered by investors for their decision making at the moment are:
COVID-19: the measures taken to contain the spread of COVID-19 in Europe are beginning to take effect: in France, infections are now around 10,000 / day, compared to 50,000 / day in early November. Belgium has the fifth smallest Europe’s infection rate, after being the country hardest hit in the previous month. Italy has announced a loosening of restrictions last Friday. Even so, in Germany, Bavaria announced a more rigid block from this Wednesday through January 5. On the other hand, in the USA, the number of diagnoses continues to rise daily, reaching 14.7 million people, with more than 282 thousand deaths. In California, bars and beauty salons will return to close. In Asia, the South Korean authorities have tightened the rules of social distance for the capital Seoul and surroundings until at least the end of December. The UK starts its vaccination program this week
- COVID-19: the measures taken to contain the spread of COVID-19 in Europe are beginning to take effect: in France, infections are now around 10,000 / day, compared to 50,000 / day in early November. Belgium has the fifth smallest Europe’s infection rate, after being the country hardest hit in the previous month. Italy has announced a loosening of restrictions last Friday. Even so, in Germany, Bavaria announced a more rigid block from this Wednesday through January 5. On the other hand, in the USA, the number of diagnoses continues to rise daily, reaching 14.7 million people, with more than 282 thousand deaths. In California, bars and beauty salons will return to close. In Asia, the South Korean authorities have tightened the rules of social distance for the capital Seoul and surroundings until at least the end of December. The UK starts its vaccination program this week.
- MACROECONOMY: German industrial production grew 3.2% in October 2020 compared to the previous month, exceeding market expectations of 1.6%, but still 4.9% below the February level. Production grew so much for intermediate goods (4.0%) and for capital goods (5.2%), but decreased for consumer goods (-2.4%). THE energy production increased 4.0% and civil construction 1.6%. In Japan, the index of economic indicators coincident, which consists of a series of data including factory production, employment and retail sales, increased to 89.7 in October 2020, the highest since February, suggesting that economic activity in the third largest economy the world stopped contracting after the shock of the COVID-19. In China, the trade surplus increased to $ 75.42 billion in November 2020, from US $ 37.18 billion in the same month of the previous year, and well above the expectations of the US $ 53.5 billion market. This was the largest trade surplus since at least 1981. Exports jumped 21.1% over the previous year in November 2020, the strongest growth since February 2018 and above market consensus of an increase of 12%. This is despite the strong appreciation of the yuan in recent months, supported by strong demand abroad for personal protective equipment (PPE) and electronic products for work from home, as well as seasonal Christmas demand. Among trading partners, exports increased mainly for the USA (46.1%), Australia (22.6%), Taiwan (18.1%), EU (8.6%), ASEAN (8.8%) and Japan (5.6%).
- MONETARY POLICY: at its next meeting, which takes place between 16 and 18 December, the EDF should give more details about how long it will continue to buy bonds to support the U.S. economy, which could weaken the dollar even more if the Institution decides to increase the money supply. The ECB, which meets on Thursday, December 10, to expand its € 1.35 trillion emergency asset purchase program by another € 500 billion. The ECB’s challenge will be to work this euro stronger, at its highest level since April 2018, which gets in the way the bloc’s trade balance and, consequently, economic activity.
- BREXIT: The pound reached its highest level since May 2018 last week, with investors waiting signs of how the bloc’s commercial relationship with the European Union will begin in January. Negotiators have given signs that an agreement is increasingly distant. British Prime Minister Boris Johnson and the President of the European Commission, Ursula von der Leyen, must review the situation tonight.
- USA PRESIDENCY TRANSITION: US President-elect Joe Biden said on Friday that the current administration would not has a vaccination plan against the coronavirus. Meanwhile, the chief advisor of Operation Warp Speed Initiative government official said he planned to meet with Biden this week to discuss the program before the first vaccination round scheduled for this month.
- STOCKS: European stock markets are down on Monday, as are the Americans. Reuters reported that the US was preparing to impose sanctions on a dozen more Chinese officials. The change came after an increase in visa restrictions for members of the Chinese Communist Party and their families, announced at the end of last week.
The D1 Stoch index is over the 70-point line, indicating that the market is overbought, pointing to a trend that the EURUSD price will fall in today’s session.
A Reuters survey of foreign exchange strategists pointed to the possibility that the weakening dollar would last for the at least another six months, as investors continue to migrate to riskier assets, which offer higher returns. The availability of vaccines made investors price an end to the pandemic and its consequences locks. The possibility of greater fiscal and monetary stimulus provides the necessary support for these strategists start working with significant economic growth worldwide, making this investment in assets viable riskier. As such, EURUSD is well supported within what appears to be a new trading range, between 1.2000-1.2500.
November 18, 2020
The growth in numbers of coronavirus infections and new restrictions on social distancing in the United States and Europe are raising concerns about the global economic recovery and highlighting the need for additional fiscal stimulus. The disappointing US retail sales in October also raised concerns and today investors are more pessimistic.
EURUSD started session today on a likely downward path. It opened at 1.1864, has already reached 1,189, but is oscillating close to 1,187. The DXY is oscillating around 92,200 points, the yen close to 103.9, the gold right below $ 1,900 an ounce and silver at $ 26 an ounce. These two metals are offering security to the market, as protection against inflation, since an increase in the volume of economic stimulus is expected in the coming months.
Bitcoin has risen to over $ 18,000 today, a level not seen since December 2017. Bitcoin’s value has more than doubled since the beginning of the year, driven by validation by public companies and interest from major investors. The recovery is expected to continue towards the $ 20,000 level, as many see digital currency as a possible protection against inflation.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: The global daily number of coronavirus fatalities reached 10,816 yesterday, the highest since the pandemic began. The UK recorded the biggest increase in COVID-19 daily fatalities since May 6 yesterday. France, which became the first country in Europe to exceed 2 million cases, on Monday reported its lowest number of cases for the last month. In Germany, the federal government and regional leaders will meet again in a week to discuss the need for further restrictions. Poland reported a record 603 fatalities on the day and Bulgaria 4,828 new cases, also a record. In the United States, 161,934 new cases were registered yesterday, the third highest daily rate since the beginning of the pandemic, with 1,707 fatalities, the highest number since May 14. However, Pfizer said today that its vaccine for Covid-19 is 95% effective, adding that it has the required safety data, and that it would request authorization for emergency use in the United States within a few days.
- MACROECONOMICS: Mortgage orders in the United States fell 0.3% in the week ending November 13. Requests for refinancing home loans fell 1.8%, while home mortgage applications increased 3.5%. The average interest rate on 30- year fixed mortgages rose 1bps to 2.99%, one of the lowest levels in history. In the United Kingdom, the inflation rate was slightly higher than expected in October. New passenger car registrations in Europe fell back into negative territory in October.
- MONETARY POLICY: ECB President Christine Lagarde said yesterday that an effective coronavirus vaccine will not fundamentally change the institution’s economic projections, since a medical solution has already been considered in the forecasts. FED President Jerome Powell noted that the United States economy still has a “long way to go” before fully recovering from the new coronavirus pandemic, warning that there are significant risks, even with the development of new vaccines and therapies.
- BREXIT: a person familiar with the discussion said the authorities are planning the possibility of an announced as early as Monday, while British Prime Minister Johnson said: “It is far from certain that an agreement will be possible, and the time now it’s too short.”
- STOCKS: in the US, Lowe’s and Target’s profits exceeded forecasts. British RSA Insurance gained 4% after saying it received a £ 7.2 billion cash offer from Canadian firm Intact Financial and Danish insurer Tryg. Deutsche Boerse rose 3% after the German stock exchange operator said it would acquire an 80% stake in corporate governance consultancy Institutional Shareholder Services; In the UK, positive highlights for Ubisoft and Micro Focus International, which jumped nearly 30% Página 2 after disclosing guidelines that their annual earnings should be higher than their expectations, while disappointing quarterly results were reported by Schaeffler and Maersk. In Italy, Banca Generali confirmed its financial targets for 2021. Finecobank, CNH Industrial, Azimut Holding, Intesa Sanpaolo and Poste Italiane appreciated more than 1%. In Spain, Banco Sabadell is among the biggest losses, after gaining almost 30% in the previous two days.
Japan registered a trade surplus of JPY 872.9 billion in October, the fourth consecutive month of surplus and the largest since February, with exports falling 0.2% over the previous year, while imports fell 13.3%.
New passenger car registrations in the European Union fell 7.8% compared to the previous year in October 2020. Declines were observed in all markets, except Ireland and Romania. Demand fell in Spain (-21%), France (-9.5%) and Germany (-3.6%). In Italy, on the other hand, demand remained almost unchanged (-0.2%). From January to October, new car registrations fell 26.8%.
Mortgage applications in the United States fell 0.3% in the week ending Nov. 13, data from the Mortgage Bankers Association showed. Requests for refinancing home loans fell 1.8%, while home mortgage applications increased 3.5%. The average interest rate on 30-year fixed mortgages rose by 1bps to 2.99%, one of the lowest levels in history and one of the main factors responsible for the increase in demand: “The demand for housing remains sustained by the continuous recovery in the labor market and a growing appetite for families looking for more space because of the pandemic, ”said Joel Kan, associate vice president of economic forecasts and the MBA sector
November 17, 2020
The week started with investors increasing their risk appetite for new news about vaccines against coronavirus, although the pandemic remains uncontrolled in Europe and the USA. Hungary and Poland filed lawsuits preventing the use of the ECB’s € 750 billion monetary stimulus package, raising concerns about the recovery bloc’s economic growth. In the USA, investors are concerned about rising levels of debt and its consequences on economic recovery in the country.
In today’s American session we’ll see the publication of one of this week’s most influential data sets: sales data US retail sales in October can be highly influential to the US dollar’s outlook if investors.
Tomorrow we will see the publication of US industrial production and manufacturing figures. And more speeches from members of the broad ECB summit, including a speech by President Christine Lagarde.
EURUSD started today’s session looking for appreciation. It opened at 1.1859 and has already reached 1.1886. DXY is oscillating close to 92.4 thousand points, the yen close to 104.54, gold just below $ 1,900 an ounce and silver at $ 26 an ounce. These two metals are offering security to the market, as protection against inflation as an increase in the volume of stimuli is expected in the coming months.
The main factors considered by investors for their decision making at the moment are:
- COVID-19: In the USA, New Jersey, California, Iowa and Ohio announced new restrictive measures to contain the pandemic, since 1 million cases were confirmed in less than a week in the country. German Chancellor Angela Merkel said this Tuesday that the coronavirus situation in Germany is still very serious, although the number of infections has not is going up so fast. The increase in the number of cases was smaller than last week, but the deaths soared in that same comparison. In the United Kingdom, the Deputy Director of Public Health in England advised the government to strengthen blocking measures when the current one ends on December 2. In France, the government wants allow stores to reopen on December 1, but bars and restaurants can be closed. In Italy, Lombardia and Piedmont, the first regions of the country to enter a blockade, saw a drop in the infection rate in the last few four days.
- MACROECONOMY: US retail sales rose 0.3% from the previous month in October 2020, below forecasts of a 0.5% increase. Sales at motor vehicle dealerships and gas stations increased at a slower pace, while sales fell at food and beverage stores, clothing, furniture and sporting goods, hobby and bookstores. Compared to the previous year, retail sales increased by 5.7%. Prices of US imports showed the first monthly drop in the index since the beginning of the pandemic. Prices of fuels decreased by 1.9% while non-fuels increased by 0.1% led by supplies and materials industrial products and food, feed and beverages that more than compensated for the fall in prices of consumer goods and automotive vehicles. In the annual comparison, import prices decreased 1.0% in October.
- MONETARY POLICY: Investors are assessing the chances of the FED increasing its government debt purchases in the coming weeks to counteract the economic consequences of a resurgence of COVID-19, a intervention that could reverse a recent increase in Treasury yields, although asset purchases have already are at record levels and the EDF has not indicated that it intends to increase them at its next policy meeting Page 2 December 15-16. EDF President Jerome Powell is due to speak this afternoon, and investors they will listen carefully to any insight. The Fed can also be forced to adjust its Treasury purchases if the news positive about the vaccine raise 10-year yields above 1%, which increases the cost of borrowing for companies and individuals, which can threaten economic growth.
- BREXIT: The UK’s chief negotiator, David Frost, told Prime Minister Boris Johnson to expect a trade agreement with the EU “early next week”, possibly next Tuesday. That came after the news last week that Dominic Cummings, one of the political architects of the Brexit project, was about to leave the government, prompting some observers to predict a greater chance of an agreement soon.
- USA ELECTIONS: President-elect of the United States, Joe Biden, will dedicate himself to shaping his team this Tuesday. O deputy Cedric Richmond, who was national co-chairman of the Biden team and chaired the Congress’s Black Caucus, he must hold a high-ranking post in the government, as does Steve Ricchetti, Biden’s longtime adviser. THE Richmond’s promotion would leave his Louisiana parliamentary seat vacant. Jen O’Malley Dillon, who took over manages the Biden campaign earlier this year and is the first woman to lead a presidential campaign winning democrat, should be appointed deputy chief of staff
The Japanese currency, the yen, achieved the highest yield among the top three currencies this year. In the past few weeks the yen reached high with news of a Biden presidency and a possible COVID-19 vaccine, which is at odds with its tendency to weaken when investors look for risk and growth prospects. Analysts cite two major reasons: as a net creditor nation in a world of fiscal extravagance, the yen retained some of its safe haven, and as interest rates in Europe and the United States plummet, Japanese government bonds offer comparatively higher returns on an inflation-adjusted basis. At levels around 104 per dollar, the yen rose 4% this year. Analysts estimate that it may steadily reach the level 100 last seen in 2016. Japanese investments in foreign bonds have already slowed down, with the country’s largest pension fund, GPIF, having a limited room for maneuver to increase foreign bonds, since their allocation is close to their goals. JPMorgan analysts say their model suggests that Japanese portfolio allocations to overseas assets will decrease even more towards the end of the year and in 2021, helping to sustain the yen over time.
Investors are hesitant to buy the euro due to the persistence of dovishness by the European Central Bank (ECB), whose members indicated today that the bank is likely to continue to intensify its easing policy: the Governing Council should increase monetary accommodation to avoid market fragmentation, given the worsening outlook for both activity both economic and inflation.
The statistics released today about US retail in October came below market expectations, which increases market concerns about the recovery of the US economy from the pandemic. However, Walmart Inc today released a greater than expected increase in same-store quarterly sales and exceeded profit expectations, amid a 79% increase in your online business. Total revenue increased 5.2% to $ 134.71 billion, exceeding estimates for US $ 132.23 billion. Sales in US stores opened at least a year increased by 6.4%, excluding fuels in 3Q20. Analysts estimated an increase of 4.16%. The increase in demand for essential products at Walmart seen at the height of blockages extended to the second half of the year, with consumers relying on delivery options on the same day and in-store pick-up services to buy everything from groceries to sneakers. Walmart said on Tuesday that incurred approximately $ 600 million in additional COVID-19 expenses, which included higher salaries for employees deposits and bonuses for store employees, as well as spending more to keep their facilities clean.
November 16, 2020
EURUSD opened the week close to 1.183, after rising 0.24% on Friday. Today, it is hovering between 1.1815 and 1.177 without a well-defined direction. Investors are more open to risk earlier this week after yet another drugmaker announces that its coronavirus vaccine is highly effective in preventing COVID-19. In addition, 15 economies in the Asia-Pacific region signed an important agreement with the aim of reducing commercial tariffs. China and Japan’s 3Q20 industrial production and GDP were above expectations, raising hopes for a global economic recovery.
Also, without a defined direction and close to stability, the DXY is oscillating between 92.4 and 92.7 thousand points, the yen opened the week close to 104.9, gold is trading at around $ 1,892 an ounce and silver is trading at $ 24.4 an ounce.
The main factors considered by investors for their decision making at the moment are:
- VID COVID-19: The American pharmaceutical company Moderna announced on Sunday that its experimental vaccine is 94.5% effective in preventing coronavirus. In addition to last week’s Pfizer / BioNTech vaccine news, the announcement of Moderna brought encouragement to investors, who now more confidently price the end of the pandemic and the resumption economy around the world. US COVID-19 cases continue to rise to 11 million on Sunday. Meanwhile, states are tightening circulation restrictions, with Michigan closing schools, bars and restaurants. In Washington, restaurants, gyms, cinemas, theaters and museums will be closed. Germany reported 16,947 new Covid-19 cases and the government wants to increase social isolation, as the disease is spreading at a rapid rate despite the blockade implemented in early November. France recorded 27,228 new cases in the last 24 hours, raising hopes that the peaks of the second wave of the pandemic have passed. Prime Minister Briton Boris Johnson isolated himself after contacting someone infected, but said he had no symptoms. Austria will close schools and non-essential businesses from tomorrow.
- MACROECONOMY: Industrial production in Japan grew for the fourth consecutive month in September and the economy of country came out of recession in 3Q20, growing 5% better than expected due to an increase in domestic demand and exports. China’s economy gained momentum in October, supported by gains in industrial production (+ 6.9% yoy in October), retail sales (+ 4.3%, third consecutive month of expansion) and investment in assets (+ 1.8% yoy in the first ten months of the year). Meanwhile, 15 nations in the Asia Pacific signed one of the largest free trade agreements in history, covering 2.2 billion people and 30% of world economic production. The benefits of the agreement include the elimination of tariffs of at least 92% on goods traded between countries participants, as well as stricter provisions to deal with non-tariff measures, improvements in areas such as protection of personal and consumer information online, transparency and paperless commerce.
- BREXIT: Brexit chief negotiator Frost said the UK will “not change” its position as it returns to Brussels for negotiations. Negotiations between the UK and the EU have made no progress on competition and fisheries rules, while the EU summit on 19 November is seen as the deadline for a draft Brexit deal
- USA USA ELECTIONS: President-elect Joe Biden’s scientific advisers will meet this week with companies companies that develop coronavirus vaccines to assess the logistical challenges of vaccination widespread.
- ACTIONS: In the UK, Vodafone Plc’s shares rose after the mobile operator said it was increasingly confident about their performance throughout the year. In Spain, the shares of the financial group BBVA rose more than 15% after the announcement that its business in the USA, BBVA USA Bancshares, will be sold to PNC Financial Services Group. The entire European banking sector is operating on a high after this news. In Italy, the Page 2 payments Nexi SpA announced another stage of its market consolidation process: it is buying its competitor, Nets A / S, of a private equity and Poste Italiane announced a preliminary agreement to sell its 80% stake in the Nexive Group. In France, Nissan has announced that it wants to sell some or all of its stake 34% at Mitsubishi Motors, which would change the alliance that the two companies have for Renault. In the USA, the launch success of Elon Musk’s SpaceX rocket on Sunday night is helping to appreciate Tesla and other companies in the technology segment.
The American pharmaceutical Modern announced on Sunday that its experimental vaccine is 94.5% effective in preventing the coronavirus. In addition to last week’s Pfizer / BioNTech vaccine news, Moderna’s announcement investors, who are now more confident in pricing the end of the pandemic and the resumption of the economy worldwide, already that the US may have two vaccines authorized for emergency use in December, with up to 60 million doses available until the end of the year. Next year, the US government may have access to more than 1 billion doses from drug manufacturers. vaccine, more than necessary for the country’s population of 330 million people. A crucial advantage of the vaccine Modern is not requiring ultra-cold storage, like Pfizer, which makes it easier to distribute. Moderna believes that it remains stable at typical refrigerator temperatures, between 2 and 8 degrees Celsius, for 30 days and that it can be stored for up to six months at minus 20º Celsius. The Pfizer vaccine needs to be transported and stored at 70º Celsius negative and under typical refrigerator temperatures, it can be stored for up to five days.
Test data from 30,000 Moderna participants also showed that the vaccine prevented severe cases of Covid-19, a question not yet answered by the Pfizer vaccine. Of the 95 cases in the Moderna test, 11 were severe and all of them occurred among volunteers who received the placebo
Moderna, which is part of the US government’s Operation Warp Speed program, expects to produce around 20 million of vaccine doses to the US this year, much of which the company has already manufactured, and is ready to send them if it receives authorization from the US Food and Drug Administration (FDA). The company expects to have sufficient safety data to receive authorization in the U.S. next week, and apply for emergency use authorization in the coming weeks.
In Asia, the Integral Regional Economic Partnership (RCEP) was signed this Sunday, aiming to progressively reduce tariffs trade, combat protectionism, increase investment and allow freer movement of goods in the region. O agreement includes China, Japan, South Korea, Australia, New Zealand and the 10 members of the Association of Southeast Nations Asia: Brunei, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia and the Philippines. India was involved in the first discussions, but gave up last year due to concerns about Chinese imports. The states ATR Up ATR Down ATR% POC VWAP 1.1900 1.1795 58% 1.1844 1.1848 Page 3 members said there is still room for India to join the RCEP. Anyone can join the RCEP 18 months after their entry into force, but India, as one of the original negotiating partners, may join at any time as soon as the agreement comes into force. The agreement must be ratified before it comes into force, a process that will take months to begin and years to complete.
The Japanese economy advanced 5% in 3Q20 compared to the previous quarter, surpassing the market consensus of 4.4%. It is was the first quarterly growth rate in a year, as activity and demand recovered from serious damage caused by the COVID-19 crisis. Private consumption increased for the first time in four quarters (4.7%), while the fixed capital investment decreased at a smoother pace (-3.4%). Exports grew for the first time in three quarters (7%) while imports fell (-9.8%).
November 11, 2020
This Tuesday, the EURUSD opened extending gains, reaching 1.184, and then dropped to 1.178. Once the new support was established, the asset gained again to the level of 1.18. This drop was influenced by news that France’s unemployment rate has reached its highest level in the last 2 years and that investor mood in Germany have dropped more than expected. The second wave of coronavirus infections remains very strong, and blockages to circulation continue to take Europe. France, Spain and the United Kingdom have already reached more than 1 million confirmed cases, all with more than 20 thousand cases per day. France recorded 551 new deaths on Monday, the highest number in this second wave.
DXY continues to operate between 92.5 and 92.8 thousand points. The market is optimistic about the post-pandemic economic recovery in the US, and is already operating in the expectation that FED may shorten the period of low interest rates. This optimism is the result of news about the vaccine developed by the Pfizer / BioNTech partnership, proving 90% effectiveness in preventing infection among people without evidence of previous disease, which could be made available soon, at affordable prices, as stated by the head of BioNTech strategy, Ryan Richardson: “We seek to pursue a balanced approach that recognizes that innovation requires capital investment, so the plan for the price of our vaccine is well below typical market rates, reflecting the situation we are in and the objective to guarantee wide access around the world”.
In the United States, which is the epicenter of COVID-19, the number of infections has surpassed the mark of 10 million, with almost 59 thousand patients hospitalized on Monday, the highest number of patients in treatment for the disease ever registered in the country. In the past 24 hours, about 120,000 new infections were reported in the United States.
US futures pointed to losses at the opening on Tuesday. On Monday, the Dow Jones jumped 835 points or 3.0% to 29,158, reserving its best day since early June. The S&P 500 rose 41 points or 1.8% to 3551. The Nasdaq fell 182 points or 1.5% to 11,714.
Gold is rising close to 1% today, to $ 1,885 an ounce, after falling close to 4.5% in the previous session. Silver rose slightly to $ 24.2 an ounce today, after falling close to 6% in the previous session.
In the United Kingdom, the issues that are dominating the financial market are the Brexit negotiations, resumed yesterday, and the vote on the Internal Market Bill, a package that aims to establish the conditions of trade between the four British nations in the post-Brexit period. British Finance Minister Rishi Sunak said yesterday that the UK and the EU had made significant progress in the negotiations. Also yesterday, the House of Lords voted Prime Minister Boris Johnson’s proposal for the Internal Market Bill, which goes against the Brexit deal. The proposal contains clauses necessary to protect Northern Ireland’s delicate status as part of the United Kingdom, as it remains a member of the European Union. Johnson says the clauses exist to act as a safety net if ongoing negotiations with the EU fail to figure out how goods can flow between Britain, the British province of Northern Ireland and across the open border with Ireland. However, many see this bill as a negotiating ploy to obtain concessions from the EU in trade negotiations. Including Joe Biden, who has already spoken out on this issue. Despite the strong opposition faced in the House of Lords, the bill had already been passed in the House of Commons
Still in the United Kingdom, employment figures came in worse than expected by the market. In the third quarter of 2020, 164,000 vacancies were eliminated, totaling 32.51 million people in the labor market, when investors expected a drop of 148 thousand. Now 675,000 jobs have been lost since the coronavirus pandemic began, despite efforts by the government, which subsidizes wages, and has prevented even more jobs from being cut.
Against this backdrop, markets have reduced expectations that UK interest rates will be negative, for June 2021 starting in May
In Germany, the November ZEW indicator (which measures market sentiment for the next 6 months, through a survey with 350 German institutional investors and analysts) fell 17.1 points from the previous month to 39, 0, way below the market expectation of 41.7. Investors expressed concern about the economic impact of the second wave of coronavirus infections and the resulting prospect of the German economy returning to recession. According to the survey participants, neither the Brexit negotiations nor the outcome of the presidential elections in the United States are impacting economic expectations for Germany. The assessment of Germany’s economic situation has worsened somewhat, currently standing at -64.3 points, 4.8 points below that recorded in the previous month.
In France, the highlights today are data on industrial production and unemployment. Industrial production in France in September 2020 increased 1.4% over the previous month, above market forecasts of 0.8%. The figures show that the industrial sector has been recovering, growing for the 5th consecutive month, after a record drop of 20.7% in April, despite still being 5.1% below the pre-pandemic level. Manufacturing grew by 2.2%, with production of transportation equipment increasing by 8.8%. Meanwhile, mining and utilities shrank 2.8%. France’s unemployment rate increased to 9% in the third quarter of 2020, above market expectations of 7.9%. Unemployment data for the first two quarters of 2020 were distorted because of the mid-March to mid-May block, which reduced the number of people technically classified as unemployed, since it was impossible to look for a job. The behavior of labor demand resumed in the third quarter, consequently unemployment increased sharply in the third quarter of 2020. However, the increase in unemployment compared to the third quarter of 2019 (+0.6 points), shows a clear deterioration in the labor market.
In Italy, the highlight is industrial production, which fell 5.6% in September 2020 compared to the previous month, above market expectations of a 2% drop. Production fell for consumer goods (-4.8%); capital goods (-3.9%); intermediate goods (-1.6%) and energy (-0.3%). In comparison with the previous year, industrial production fell by 5.1%.
Considering the Eurozone, the ZEW indicator decreased from 19.5 points in November 2020, to 32.8 points, the lowest since April. In November, 17.2% of analysts interviewed expected a deterioration in economic activity, 32.8% did not expect changes, and 50% predicted an improvement.
In this scenario, European stocks are extending gains on Tuesday. In Germany, Adidas and the Deutsche Post reported negative quarterly results. Adidas led the losses, falling about 4%, as it said it expected sales to grow again in China in the fourth quarter, but predicted an overall drop in sales similar to that reported in the third quarter. Logistics group Deutsche Post shares fell more than 3% after pessimistic results; while the consumer goods group Henkel rose slightly after the company reported sales growth of 3.9% in the third quarter, but warned that the pandemic will weigh on its results in the final three months of the year. Meanwhile, Thyssenkrupp’s stocks jumped about 5%, as the group is in talks with the German government about more than € 5 billion in steel aid.
Considering Stoch in an overbought position, and pessimistic data regarding the European economic situation, EURUSD was expected to fall today.
With the POC at 1.1832, VWAP at 1.1816, the asset opened extending gains, close to 1.1816. The asset found resistance at 1.1841 and started a downward trend until reaching support at 1.178.
Throughout the session there were several green and red candles, demonstrating that the market was not on a specific course.
Following the M1 and M5 Stoch, I opened 3 BUY orders, between 1.178 and 1.18. I opened 4 SELL orders between 1.18 and 1.181. With these 7 orders, with a volume of 0.1 each, I scored 18.46 points.
However, also following Stoch, I opened 3 SELL orders between 1.1782 and 1.1784 that have not yet closed. I believe that in the next few hours EURUSD will still return to this level and these orders will reach their TP before SL. Let´s wait and see.
October 27 2020
Amid growing concerns over government measures to be taken to stem the sharp rise in the number of coronavirus cases in Europe and the US, as well as the lack of solution to the Brexit issue and the US economic stimulus package, on Tuesday the euro is trading close to $ 1.18 and the DXY to 93,000 points.
As winter comes to the northern hemisphere, coronavirus cases in Europe have skyrocketed and hospitalization rates continue to rise, rising the need for lockdowns. USA, Russia and France reported records in the numbers of new infections per day, and deaths in the USA exceeded the 225,000 mark. Spain and Italy already announced stricter blocking measures last weekend, which Germany is expected to do soon. France could close borders again, increase curfew and ban people from leaving on weekends, Belgium is considering a new lockdown, Poland and the Czech Republic have signaled that new restrictions will soon be imposed; and Ireland paralyzed its economy for 6 weeks.
The Mayor of London said that he is waiting for the city to reach the limit of 100 new infections per day for every 100,000 inhabitants to enter level 2 of restrictions, where Londoners could not meet anyone outside their homes, and do their best not to leave their houses for at least 2 weeks. The current level is already 90 new cases for every 100,000 inhabitants, and these restrictions are expected to be announced later this week.
Contrary to what happened during the first wave of infections, governments now face opposition to new blockades, both from companies and people. Protests erupted in major cities like London, Naples and Berlin.
However, news that the vaccine against COVID-19, which is being developed by AstraZeneca and the University of Oxford, produced an immune response in the elderly and young people and that the adverse reactions were less among the elderly encouraged the market.
On the other hand, scientists at Imperial College London tracked antibody levels in the British population after the first wave of Covid-19 infections in March and April this year and found that the prevalence of antibodies dropped from 6% of the population at the end of June to 4.4% in September, suggesting that protection after infection may not last.
Meanwhile in the U.S., hopes for a new economic stimulus project ahead of next week’s presidential election have faded, especially after White House economic adviser Larry Kudlow said the differences between the two sides “have narrowed” , but “the narrower it is, the more conditions arise on the other side.” In addition, the Senate majority leader suspended the House’s activities until November 9, after the election.
Today, the quarter earnings release of 3M, Caterpillar, Merck & Co, Pfizer and Advanced Micro Devices exceeded expectations and excited the market.
The growing risk aversion in the market, caused by the US presidential election, is starting to limit major movements in assets. With only a week left until the election, polls are giving Democratic candidate Joe Biden a solid advantage over President Donald Trump, although only a small advantage in some decisive states.
In France, in September 2020, the number of unemployed people decreased by 15.2 thousand in relation to the previous month, to 3.606 million, still well above pre-pandemic levels, since in comparison with the same month of the previous year, the number of people registered as unemployed increased by 274.5 thousand.
Still in France, the prices of industrial products rose 0.2% in September in relation to the previous month, pulled upwards by mining, energy and water (1.65%), especially distribution of electricity, gas, steam and air conditioning; chemical products (0.6%); and transportation (0.4%), especially automobiles. On the other hand, the price of refined oil fell 7.5% and that of food and beverages 0.1%. Compared to the previous year, producer prices overall fell 2.4%
The unemployment rate in Spain increased to 16.26% in the third quarter of 2020. This rate does not include licensed workers, which means that the real number can be significantly higher. This was the biggest quarterly jump since 2012, with the number of unemployed increasing by 355 thousand, to 3.723 million people. Young people were the most affected, as the unemployment rate among those under 25 was 40.45% in the third quarter. The third quarter is generally the time of year when more people are working in Spain, as summer vacation tourism increases seasonal employment. However, hospitality, accommodation and transportation are among the activities that suffered most from the Covid-19 pandemic.
In the UK, retail has shown signs of slowing down, with sales dropping unexpectedly from the reading taken in October 2020, as coronavirus cases increase and restrictions are tightened in many parts of the country. Food volumes were stable after five months of strong growth. There was a drop in sales in the non-food segments of department stores, clothing and “other normal products”, while the furniture, DIY and recreational items segments reported strong growth. Internet sales growth has also returned to the long-term average. According to trends, sales and order volumes are expected to fall again in November.
Loans to households in the Eurozone increased 3.1% in September 2020, still at the slowest rate of increase observed in the last 2 years. Loans to companies rose 7.1% in the period, maintaining the strongest increase in the last 11 years.
Will the dollar continue to be considered the “safe heaven” for a long time? Even in the face of so many economic changes? An article published by Bloomberg shows that yes, it will.
When thinking about the future of the US dollar, it is crucial to separate the analysis on two fronts: the devaluation of the US currency against other currencies and the prospect of the United States losing its place as the issuer of the world’s main reserve currency.
Regarding the exchange rate, it is important to highlight that the dollar has historically fluctuated in multi-annual cycles since the early 1970s. Therefore, any devaluation could be considered one-off and should not cause concern in the long time. This means that the dollar will maintain its “safe-heaven” place on the global stage, no matter how weak it may become in the coming months. And there are a number of reasons showing that the dollar will fall further:
• The dollar tends to appreciate when US interest rates rise and to weaken when it falls. Short-term Treasury yields are set
at close to zero and are expected to remain so for years, while long-term yields have increased somewhat, but remain
close to their historic lows.
• The federal budget deficit has increased this year in response to the Covid-19 pandemic. The market is already working
with growing deficit for next year, especially if the Democratic Party takes the White House and both chambers of
Congress, as polls indicate. America’s so-called twin deficits – current account and budget – are so extreme that a
Bloomberg News regression analysis projects a 31% drop in the next two years on DXY.
• Urban chaos, violent conflict and uncertainty about who will control the country in the coming years create a very bad
business environment. Worst case scenario, companies and investors may decide that the United States is a bankrupt
state and that it is better to keep your money elsewhere, at least until things calm down. The result could be an
unprecedented capital flight – money leaving one of the largest economies in the world and abandoning the reserve
currency at the same time. This would likely mean a fall in the dollar, rising inflation in the US and destabilizing hot money
flows to Europe, Japan, Canada, Australia, South Korea and other more stable developed nations. As unlikely as this
scenario appears, it must be considered.
• Four more years of the Trump administration and its protectionist trade policies and withdrawal from crucial global
deals would likely erode the dollar’s value because the rest of the world would view America as an unreliable global
• On the other hand, a non-contested victory by Joe Biden, combined with a Republican Senate and a Democratic
Chamber, could mean even greater impasses and budget deficits than today.
Data from the International Monetary Fund show that there are USD 6.8 trillion in foreign exchange reserves in dollars, USD 2.2 trillion in euros, USD 625 billion in yen and USD 486 billion in pounds. Therefore, it is not in anyone’s interest (at least not soon) for the US dollar to lose its place as a reserve currency. So don’t worry about the dollar’s continuing decline. Whether considered weak or strong, it must remain the epicenter of the financial world for many years to come.
October 22 2020
After reaching USD 1,188 yesterday, its highest level since September 16th, the market is bearish on EURUSD trading. The USD weakened yesterday as market confidence increased expecting a close for fiscal stimulus deal for the U.S., generating demand for riskier assets, but that optimism dissipated today as House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin did not announce a deal on Wednesday as promised, even though they will resume talks again today. Investors, however, are already considering unlikely for a deal to be struck before the presidential election, which takes place in less than 2 weeks. Negotiators on both sides acknowlegded that the lack of scheduling and the resistance in the Republican-controlled Senate make any agreement very unlikely before the elections. The US dollar was also pressured by the pound sterling, which jumped to a six-week high after the BoE rejected negative interest rates.
As such, the DXY index is trading higher at around 92.8 this Thursday. The market is looking forward to the final debate between Donald Trump and Joe Biden that takes place tonight. Biden remains ahead in the polls, and Wall Street has positioned itself in his favor. At the debate they will probably discuss the news that Iran and Russia are trying to interfere in the presidential election and the weakening of the dollar amid growing optimism about the global economic recovery, especially a robust recovery in China.
After a few days with a strong appetite for risk, investors are more cautious as they await news about Brexit and the US fiscal stimulus package. At the same time, concerns about the spread of the coronavirus pandemic across Europe continued to increase, especially after Spain and France reached 1 million infected, Italy and Germany released their highest numbers for new infections by Covid- 19 in one day, and the UK has seen a marked increase in new infections, raising fears that Europe is inevitably heading back to the lockdowns seen earlier this year.
European leaders across the continent have introduced new restrictions to curb the spread of the disease, with a combination of national and regional measures and curfews in regions such as Paris, Rome and Madrid. Globally, the number of people infected with the coronavirus has exceeded 41.2 million, of which at least 1.13 million have died and 28.12 million have recovered, according to data released by Johns Hopkins University. Vaccine testing continues to move around the world, with good and bad news.
European leaders across the continent have introduced new restrictions to curb the spread of the disease, with a combination of national and regional measures and curfews in regions such as Paris, Rome and Madrid. Globally, the number of people infected with the coronavirus has exceeded 41.2 million, of which at least 1.13 million have died and 28.12 million have recovered, according to data released by Johns Hopkins University. Vaccine testing continues to move around the world, with good and bad news.
The GfK index, which points the consumer sentiment in Germany, fell to -3.1 in November 2020, worse than expected by the market consensus of -2.8. The index has worsened since August amid fears about another lockdown after the resurgence of COVID-19 cases in the country. Consumers are working with a scenario where the recovery of the German economy is expected to take even longer than expected, or the pandemic is expected to last longer than anticipated.
In France, industry sentiment dropped to 93 in October 2020, from 94 in September, and below forecasts of 96, remaining below pre-pandemic levels and the long-term average of 100.
In the UK, the British Industry Confederation’s order book rose 14 points to -34 in October 2020, its highest level since March and exceeding market expectations of -45. Despite the improvement, conditions in British industry remain difficult. In the next quarter, manufacturers expect production to grow at a moderate pace. However, total new orders are expected to remain unchanged, reflecting a steady growth in domestic orders and a slower decline in export orders. Employment is expected to remain virtually unchanged in the next quarter, after six quarters of decline. The manufacturers showed tranquility regarding access to financing, however, they showed concern with access to raw materials and components.
In the USA, the FED “Beige Book” was published yesterday (a report published eight times a year, which gathers information on the current economic conditions of each of the 12 districts – presented on the map below, through reports from bank directors and agencies and interviews with key business contacts, economists, market experts and other sources) suggesting that the United States economy has been expanding at a “light to modest” pace. The residential housing sector has shown the best performance of the economy, demonstrating that the increase in demand for mortgages is the main driver of the general demand for loans. The low interest rate in the country helps this scenario. Vehicles demand remained stable, but low inventories restricted sales to varying degrees. The sources consulted said they were generally optimistic or positive about the future, but with a considerable degree of uncertainty. Many expressed concern that default rates may increase in the coming months, however, default rates have remained stable so far. FED member Lael Brainard said yesterday that the American economic recovery remains highly uncertain and uneven, emphasizing the need for additional fiscal support.
With that in mind, investors will look at the release of weekly unemployment insurance claims data this Thursday. The expectation is that 860 thousand American workers applied for unemployment benefits during the week ended on October 17, the lowest level of the last two months, and below the figures obtained in the previous week of 898 thousand applications. It would be the 8th consecutive week with orders above 800 thousand, pointing to a slow recovery in the labor market. Meanwhile, claims for continuing benefits are expected to drop to less than 10 million for the first time since March 28, but will still remain well above the 1.7 million average reported before the pandemic.
Tonight Donald Trump faces Joe Biden in the last broadcast debate of the presidential election campaign, probably the last opportunity for Trump to gain some room in the polls before the election. The debate comes a day after Trump’s director of national intelligence, John Ratcliffe, and FBI chief Christopher Wray, said Iranian and Russian agents had invaded registered voter lists and were using the information to influence the election. While Ratcliffe said the Iranian effort was aimed at undermining the Trump campaign, reports indicate that the Iranian effort focused on sending intimidating emails to registered Democrats, telling them to “vote for Trump or…”. The emails were supposedly sent by the right-wing group “Proud Boys”.
In this scenario, gold and silver are being traded bearishly, with the USD recovering some ground in view of the reduced risk appetite in the market.
In the book “The Consistent Trader”, author Sam Eder defends the importance of consistency in the trader’s work. The “consistent trader” is the one capable of reading the market to use the right strategy for the momentary conditions; capable to find very good settings to increase your probability of winning; capable to identify the low risk / high reward entry point; and capable to set appropriate goals.
Throughout the book, the author instructs traders to:
- Build a position sizing model to achieve your goals
- Protect yourself from losses with a hard-to-reach stop loss
- Operate in the market ahead of you with a complex exit strategy
- Stay calm and be error free for executing perfect order
The author uses a methodology to build a winning ForEx trading system. A Forex trading system is a set of rules that you have to place a buy or sell order. The first part of developing a high quality Forex trading system is setting goals. The second step is to develop a set of position sizing rules that are designed to meet these objectives.
- Maximum drawdown
- Maximum drawdown chance
- Negotiation opportunity
- Win rate
- Target risk / reward ratio
- Maximum number of positions
Once you are clear about these objectives, you will have the necessary ingredients to develop a robust system for building a set of trading rules to achieve your goals and to negotiate with discipline
The drThe drawdown is the maximum drop in the value of an asset in relation to its highest quote. For example, if you had a trading account with $ 10,000 in it and lost $ 1,000, you would be having a drawdown of 10%. Although you may never want to have a drawdown, they cannot be avoided in trading. And they must be seen as an intrinsic cost to the business and, therefore, must be planned before it occurs. When traders don’t plan their drawdowns, they tend to make mistakes and leave trading at the wrong time.
The author suggests that the trader must be more conservative with his drawdowns and does not risk more than 2-3% per month if he wants to earn 10%, or 10% per year if he wants to earn 50%. However, it is important not to limit yourself to taking advantage of the opportunities in front of you because of your drawdown limit. For some people, taking a big risk allows them to generate big profits.
On page 108 of the book the author presents a table showing that after exceeding the established drawdown it can be difficult to recover, and the greater the drawdown, the greater the effort to be made:
If you reach your drawdown, you have a few options, including: reducing the size of your position; continue trading and waiting for winning trades, pause your trading and analyze what is working and what is not, or stop trading altogether. It is important to write down on your trading plan exactly what to do.
October 7, 2020
In yesterday’s trading session, the USD rose sharply with investors seeking security after US President Donald Trump ended talks with Democratic leaders on a new stimulus package until after the election, scheduled for November 3, 2020. ” I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business ” Trump wrote in a Tweet.
As shown in the graph below, the euro strengthened against the dollar during the day, but in the late afternoon it reversed and ended up loosing.
Investors will now turn their attention to the European Central Bank’s monetary policy meeting, which takes place on Thursday, in the hope of further stimulus for the recovery of the post-pandemic European economy.
Industrial production in Germany unexpectedly dropped 0.2% in August 2020 in comparison to the previous month, impacted especially by the capital goods (-3.6%), consumer goods (-1.3%) and construction (-0.3%) sectors. This was the first drop in Germany´s industrial production since April. Automotive industry production fell 12.5%, after an 8.9% increase in July, placing it at a level close to 25% below the level of February 2020, before the pandemic hit the country. On the other hand, production grew in the sectors of intermediate goods (3.3%) and energy (6.7 percent). In comparison to August 2019, German industrial production fell 9.6%.
Retail sales in Italy rose 8.2% in August 2020 in comparison to the previous month. Sales of non-food products (13.8%) and food (1.6%) recovered the losses obtained in July. Compared to August 2019, Italian retail trade rose 0.8%
According to author Thomas N. Bulkowski, in the book “Getting Sarted in Chart Patterns”, the patterns are like footprints on the road, which you can follow to get along with the money at your destination.
According to Bulkowski, to be assertive in your trading, what you observe in the trend lines, how many times the price touched that line, what is the time interval that this line is reaching and what is the angle that this line forms.
From this analysis the trader can start to establish his/hers target price. One way, which works between 63% (upward trend lines) and 80% (downward trend lines) of the time, uses the distance from the trend line to the high price (A – B), measured vertically and then projected to low from breakout (D) to obtain a post-breakout target price.
Using the same interval of time to draw the external trend line of the peaks and the one of the valleys will make you form a channel – two parallel trend lines with prices fluctuating between them. Think of the canal as a river where the price runs. You will ride your canoe between the banks: when you reach the bottom of the channel, buy; and sell when it shows signs that will not be reaching the top line. If the price does not reach the top (or bottom) of the channel, it may signal a weakening (or strengthening) trend and a time to sell (or buy).
Pay close attention since its more likely – but not guarantee – that when the price reaches the channel’s trend lines, prices stage a breakdown (or upward) and the trendline bursts. There we found a “change in trend”.
The author suggests a trend change identification method called 1-2-3, which follows the following 3 rules:
- Draw a trend line from the lowest valley before the highest peak and leading to the highest peak on the graph, so that the trend line does not replace any price between them. Notice how the line replaces prices. Rotate the line from point B to the right until the line touches, but do not override the prices. Find the breakout, which is your target price.
- The price should test the rise again after the trend line breaks. This means that the price should try to rise back to the price level of the highest peak, but not exceed it much, if any.
- Finally, the price should close below the lowest valley between points 1 (the breakout price) and 2 (the upward retest).
Let´s make a test using EURUSD prices in the last month, in the chart below:
- I identified the highest peak
- I identified the lowest valley before this highest peak
- I draw a line between them (here, the yellow line with longer strokes)
- Look at the price behavior on the right and look for the next highest peak
- Draw a line between the lowest valley before the highest peak and the new peak (here, the yellow line with shorter strokes)
- Set your target price below this second line.
After this analysis, the author gives some tips regarding the analysis of the trend lines looking for the target price:
- Expect a pullback (break-down) or throwback (break-up) after the price pierces a trend line.
- When the price deviates from the trend line, momentum increases. When the price moves towards the trend line, momentum is decreasing. When the price goes up along the trend line, the rate of change is constant.
- Trend line mirrors: sometimes a price increase on one side of the trend line reflects on the other side of the line as a drop and vice versa.
- When the price crosses a steep trend line, it usually rises at a slower pace, following a new trend line.
- When the price pierces a downward trend line and makes a higher peak (note: this is the second highest peak), connect the two peaks with an upward trend line. Then, draw a new line parallel to the original trend line, starting at the bottom between the two peaks. The lower trend line will show where the price is likely to reverse.
- During strong bullish trends, the price may pierce the trend line and fall for about a month before resuming the bullish trend at almost the same angle. This stair climb is a graphical pattern called measured move up. The reverse also applies and forms a graphic pattern called measured move down.
- When prices exceed the trend line, note the previous day’s close. For upward trend lines, if the previous close was close or at the intraday high, the chances of a downward break being false increase (because the profit realization has been taken away, forcing the price down). If the close was close to the intraday low, chances are high that the break is valid.
Looking at the EURUSD´s last day chart, plotting two trend lines from the lowest valley, I would establish the pullback close to 1.178 and the throwback close to 1.174. Throughout today’s trading, I would observe the times when the price is far from this range to place my positions. The strength of my orders would depend on the volume at the moment: the greater the volume, the greater the force and vice versa.
October 6, 2020
EURUSD is trading at 1,178 today after ECB President Christine Lagarde told the Wall Street Jornal that the ECB is ready to launch further monetary stimulus to the eurozone’s economic recovery, including further cuts in its interest rates, which are already negative. Lagarde also warned that the production level should not return to pre-pandemic levels until the end of 2022.
Next Thursday the ECB’s monetary policy meeting will take place, and investors will closely monitor its results, in the expectation of knowing what the Institution’s proposed stimulus for European economic recovery will be. Trading the rumor, EURUSD continues to appreciate this week, from 1.1715 to almost 1.18.
The European Central Bank warned the markets that the profitability of the largest banks in the euro zone plummeted in 2Q20 even with defaults under control. The return on equity in the first half of 2020, at the height of the pandemic, was 0.01%, well below the 6.01% achieved in the previous year, with at least 7 of the 19 eurozone countries showing negative returns.
Negotiations on the post-Brexit trade agreement between the UK and the EU continue to attract investors’ attention. At the moment, there is optimism in the market, as British Prime Minister Boris Johnson and European Commission President von der Leyen approved another month of negotiations. Chief negotiators on both sides confirmed that there has been enough progress in recent negotiations to justify a last push for an agreement. Negotiations will resume tomorrow and EU chief negotiator Michel Barnier will meet today with German Chancellor Angela Merkel in Berlin. Merkel suggested on Friday that the EU should show greater flexibility in negotiations.
Polls over the American presidential election are pointing to a victory for Democratic candidate Joe Biden, with more than a 10% margin over his opponent and current president, Republican Donald Trump. Trump, who was diagnosed with COVID19 last Friday and has been hospitalized since, left the hospital yesterday and promised to resume the campaign as soon as possible. The next debates are scheduled for October 15 and 22, however, this calendar may change due to Trump’s illness and Biden’s age (who is 77 years old).
According to author Thomas N. Bulkowski, in the book “Getting Sarted in Chart Patterns”, patterns are like footprints on the road, which you can follow to get along with the money at your destination.
According to Bulkowski, in almost all price charts for an asset, there will be a zigzag. If you draw a line connecting the peaks of this zigzag and another connecting its valleys, you will obtain an external trend line. The trend lines indicate buying or selling opportunities when the price crosses them. When the price touches the valley line, it is a sign that the price should go up so it’s time to buy. When the price touches the peak line, it is a sign that the asset price will fall, so it is time to sell.
Internal trend lines are drawn on the flat, or bottom, of peaks or valleys and often cut prices. They represent the behavior of the masses.
The curved trend lines show that prices have risen or fallen more than expected, but indicate that this movement will eventually stop, so everyone runs for exits, forcing prices to change dramatically. When the price closes below a rising but curved trend line, this is the sell signal and can help you to be one of the first to exit. An abrupt reversal generally follows the breaking of a curved trendline.
To be assertive in your trading, what should you do besides drawing these lines? Observe how many times the price has touched that line, what is the time interval that this line is reaching and what is the angle that this line forms.
The more times price touches a trendline, the more significant becomes a breakout from the trendline. The author gives the following example: “observing 85 downward trend lines that were priced by touching the trend lines 3 times. After an upward breach, the price rose by an average of 33%. Then I compared 40 trend lines with 5 touches and found that the post-break increase was on average 57%. To verify this result, I divide the trend lines into 4 rings or less. They showed gains on average 35%. Those trend lines with more than four touches went up an average of 48%. ”
Long trend lines perform better than short ones. The author says that “139 days is a good time to establish a long enough line. While shorter trend lines led the trading decision to profit by an average of 33%, long trend lines made 43% gains ”.
The steeper the trendline, the worse the performance. Look for trend lines with an inclination from 30 to 45 degrees, they are more reliable. Outside this range the price movement can reverse very quickly.
In addition to looking at the information inherent to the trendlines, it is also relevant to observe the volume traded. If the volume is increasing, the tendency is to reinforce the direction of the line. If the volume is decreasing, the trend is that the direction of the line will be weakened.
October 5, 2020
The profits were modest today for the EURUSD pair, with the release of encouraging data regarding the sentiment of purchasing managers, as a trend for the economy, both in Europe and in the USA.
Investors are concerned with the inflation levels in the largest economies, especially in the euro zone, where the consumer inflation was negative by 0.3% in September, which marked the second consecutive month of deflation. In order to improve that fact, the ECB reduced interest rates to negative territory and implemented stimulus programs injecting trillions of euros into countries, but the economic activity continued weak and steadily declining. The expectation is that any decision by the ECB will only come in December, when the bank publishes its economic projections, including about inflation. This would be a logical moment for the ECB to announce an increase in its Pandemic Emergency Purchase Program (PEPP), as this would probably weaken the euro value, throughout the increasing in its availability.
The D1 Stoch index is moving out of its overbought position.
The IHS Markit US Services PMI, an index that points to the sentiment of purchasing managers in the North American services sector, or the trend for this market, was 54.6 in September 2020, below the previous month (55.0 ) but signaling a solid recovery in the service sector. The volume of new business in the month had the greatest expansion since the beginning of the pandemic, driven by the strengthening in the domestic demand and an increase in exports. In addition, the rate of job creation was encouraging as were pending jobs. About prices, input costs increased at a marked rate due to higher wage and equipment costs, with many highlighting the increase in fixed asset and freight prices. Sales prices increased and reached the best monthly rate since September 2018, allowing prices to increase more than costs.
The IHS Markit US Composite PMI, an index that points to the sentiment of North American purchasing managers in the private sector, which points to a trend, stood at 54.3 in September 2020, little changed compared to the August measurement of 54.6. As we have seen, service sector activity continued to grow at a solid rate, and industrial production in September 2020 was the fastest growing since November 2019. The volume of new business increased at a more pronounced pace and employment continued growing. Sales prices increased sharply and at a faster rate than the costs of inputs, with the consumer absorbing the transfer price.
Payroll data was released last Friday, showing that the United States economy added 661,000 jobs in September 2020, well below the 1.489 million obtained in the previous month, and market forecasts of 850,000. In September, non-agricultural employment was below February’s level, before the pandemic hit the US, at 10.7 million. Of the more than 22 million jobs lost in March and April, only about 11.3 million have been recovered so far. The private sector created 877 thousand new vacancies in September, while the sector published eliminated 216 thousand, mainly in education.
The IHS Markit Eurozone Services PMI, an index that points to the sentiment of purchasing managers in the European service sector, was 48.0 in September 2020, from a preliminary estimate of 47.6 and below the 50.5 obtained in August. The reading signaled a contraction in the services sector, with the overall volume of new business falling for the second consecutive month and the export business also falling sharply, extending the current period of contraction to more than two years. In addition, employment continued to fall and pending jobs decreased for the seventh consecutive month. About prices, operating expenses increased for the fourth consecutive month, while production charges fell again. Still, business confidence has strengthened for the next 12 months in September compared to the previous month. By country, Spain recorded the sharpest monthly decline, followed by Ireland. Germany was the only one to register growth.
The IHS Markit Eurozone Composite PMI, an index that points to the sentiment of purchasing managers in the European private sector, went to 50.4 in September 2020, down from 51.9 in the previous month. This reading indicated a marginal expansion in the economy, with service sector activity falling back to contraction amid an increase in coronavirus cases, while industrial production grew at the fastest pace in more than two and a half years. In general, the entry of new businesses increased slightly, and exports increased for the first time in more than two years. Meanwhile, job numbers have been reduced again, marking a seventh consecutive monthly drop. About prices, operating expenses increased for the fourth consecutive month, while production charges fell for the seventh consecutive month. Finally, business confidence grew stronger for the next 12 months in September, reaching its highest level in seven months.
Eurozone retail trade volume increased 4.4% over the previous month, in August 2020, exceeding market expectations of 2.4% growth, while countries in the region continued to relax measures COVID-19 containment system. Sales of non-food products grew 6.1%, driven by online commerce (12.4%), textiles, clothing and footwear (7.7%) and pharmaceuticals and medical goods (3.2%). The food, beverage and tobacco trade grew 2.4% after being unchanged in July, while sales of automotive fuels increased 2.1%, compared to 8.9% in the previous month. Compared to the previous year, retail sales increased 3.7%, the best result for the last 3 years.
According to author Thomas N. Bulkowski, in the book “Getting Sarted in Chart Patterns”, the patterns are like footprints on the road, which you can follow to get along with the money at your destination. In other words, a trader capable of analyzing graphic patterns has a good chance of making money.
According to the author, the basic questions a trader should ask.
- Did you use stops on all of your orders? Use the stop loss on all orders. That way, you don’t have to make a difficult decision at the time of the loss. In addition, a well-positioned SL is sure to provide less loss than if you try to manage the operation without a stop. As you get the hang of trading, start working with larger SL.
- Did you buy close to the annual high to increase earnings? The longer you trade, the better your trading habits will be. Regardless of the method you adopt, try to follow it as long as possible, this will make you more skilled at making an assertive reading of trends. Practice makes perfect, they say.
- Do you see trading as a business? Set realistic goals, observe your costs, track your inventory, study before making a decision (don’t be impulsive), have a plan, follow that plan.
- Did you look at the market averages and related assets before placing your orders, to see which way they were going? Did you observe the moments when you could have made a profit if you were trading that asset? Now visualize what decisions you will make from now on to profit from this asset. Also note the importance of being patient, and knowing how to wait for the right time to act.
- Are you aware of your comfort zone? In which moments of trading do you feel anxious? Worried? What works best for you, looking at the price of the asset or the profit from the order? How do you feel when you profit? And when do you profit a lot? Do you doubt the assertiveness of your own decisions? In what situations do you hesitate? How do you view your mistakes? Self-knowledge is very important for you to have control of your emotions and allow them to help you, and not hinder you, in trading. This is a very emotional job, yes, but it can be done without stress if you are in control of your reactions.
- Are you ready? Do your analysis, and set the prices you believe are your goals. From there keep in mind that sometimes it is better to profit than to be right.
Euro is trading between $ 1,171 and 1,177 this Thursday, after suffering a 1.8% loss in September, its biggest single-month percentage drop since July 2019, amid concerns about a second wave of infections in Europe and their impact on the region’s economic recovery.
After gaining around 2% in September, the best monthly gain since July 2019, DXY extended losses for the 4th consecutive session to close to 93.5 on this first day of the fourth quarter, with investors’ risk appetite returning to market amid prospects for more government stimulus, and data release showing that the US economy is recovering from the pandemic (private companies created more jobs than expected in September, GDP contraction for the second quarter was revised downwards for the second time and home sales also increasing).
US House of Representatives President Nancy Pelosi and Treasury Secretary Steven Mnuchin expressed hope for an advance in the stimulus plan negotiations even today. The Democrats’ updated proposal includes funding for schools, small businesses, restaurants and airline companies. The plan targeted $ 75 billion in funding for coronavirus exams, contact tracking and isolation measures. The plan would also update the PayCheck Protection Program, including a second round of payments of USD 1,200 per taxpayer and USD 500 per dependent, and extending the unemployment payment of USD 600 per week until January 2021. The plan also aims to offer USD 436 billion to state, local, territorial and tribal governments to pay for rescuers and health professionals.
Today will be published the sentiment of the industrial manager in Europe and the USA, the expenses and revenues of the Americans and, as every Thursday, the data related to the distribution of unemployment claims in the USA, a thermometer that measures the pace of recovery of the economy and the expectation of purchase power increase, among other less relevant information.
The market is already preparing for the disclosure of the payroll for the month of September, which takes place tomorrow, the first Friday of October.
The D1 Stoch index continues on its way to the overbought position.
Today several data on jobs and purchasing power in the USA were released.
This year, 2,082 million jobs were extinguished and 2,673 million were created, creating a surplus of 591 thousand jobs in the USA. US-based employers announced 118,804 thousand job cuts and 929,860 hires in September 2020. The volume of layoffs in September is 2.6% higher than in August 2020. Among sectors, bars, restaurants, hotels and parks entertainment cut 32,099 positions; the aerospace / defense industry 18,971; and the transport sector 16,628.
Last week, which ended on September 26, the number of Americans applying for unemployment insurance increased by 837,000, just below market expectations of 850,000. It was the fifth consecutive week at the level of 800 thousand, signaling a slowdown in the recovery of the labor market. Since mid-March, when the coronavirus pandemic hit the United States, nearly 63 million people have applied for unemployment insurance.
Also in the USA, personal income fell 2.7% in August 2020 compared to the previous month. The decrease in personal income in August, as well as in September, is explained by the decrease in the value of unemployment insurance, which provided a supplementary weekly payment of USD 600 until July 31 and has fallen to USD 300 since then. Government wages and salaries disbursements increased by $ 17.5 billion in August, after an increase of $ 14.5 billion in July, through temporary hiring of people working on the census.
Personal consumption in the USA increased by 1% in August 2020 compared to July, reflecting higher spending on food and accommodation services, and health care, where hospital and outpatient services increased. In contrast, the amount spent on consumer goods decreased, mainly on food and beverages purchased for consumption outside the establishment.
Facing this scenario, future business in the US tried to start the last quarter of the year positivly this Thursday. On the last day of September, the Dow Jones closed at 329 points, up 1.2%. The S&P 500 ended at 3,363 points, up 0.8%. The Nasdaq closed at 11,168, up 0.7%.
In Europe, a survey confirmed that the eurozone manufacturing sector achieved the highest monthly growth in September since August 2018. The IHS Markit Eurozone Manufacturing PMI increased to 53.7 in September 2020, mainly due to the resurgence of exports. At the same time, the rate of layoffs has slowed to the lowest observed in the past seven months, while backlogs have increased. In relation to prices, input prices were slightly higher overall, while product taxes fell for the fifteenth consecutive month. Finally, the expectation reached its highest level since April 2018.
While the number of people infected with coronavirus worldwide reaches almost 34 million, of which at least 1 million have died, markets are experiencing a period of fear regarding the resumption of a strong wave of infections that would lead to the closing of business and consequent economic stagnation. In the last 24 hours, in the USA, the current epicenter of the disease, 42.8 thousand people contracted COVID-19 (7.23 million so far), India registered 86.8 thousand new cases (6.31 million in total), and Brazil, 33.4 thousand (4.81 million in total). In Europe, a second wave of infections continues to affect several countries, in particular Spain, France, the United Kingdom and Germany. In terms of fatalities, the USA and Brazil continued to lead with a total of over 206 thousand and 143 thousand people, respectively. India has the third highest number of deaths in the world, with 98.6 thousand, followed by Mexico (77.6 thousand) and the United Kingdom (42.1 thousand).
On the eve of the September Payroll release, investors are betting on more fiscal stimulus, through the Democrats proposed package that will be negotiated with Republicans, especially now that data has shown that the recovery in the US labor market is cooling. Given the statistics and forecasts already released, Payroll is likely to show little difference in relation to market expectations. In this case, following the logic of “buy the rumor, sell the fact”, investors are building positions today in DXY, causing the asset to fluctuate considerably, as shown in the graph below:
According to Credit Suisse, EURUSD is approaching what appears to be a tougher resistance at 1.1764 and extending to 1.1804 (last 55-day average), with a downward trend since the peak at the beginning of September and a 38.2% decline from the September drop: “We hope this is an ideal limit for maintaining the top and the risk of falling again. Support is seen initially at 1.1709, then at 1.1693, with a break below 1.1665 / 61 needed to reaffirm a bearish tone again with support then seen at 1.1642 before the recent 1.1598 low with 1.1495 / 85″.
Looking at the latest payroll disclosures for August 2020, the market was frustrated when it expected 1400K and the result was 1371 thousand. However, given the disclosure, the asset fell only 0.02%.
In June, the result of 4800K was much better than expected, of 3000K. On July 2, when this news was released, DXY closed neutral.
Analyzing the past, the view of Credit Suisse and the current scenario, I believe that the trend for tomorrow is a slight devaluation of the DXY, and consequent appreciation of the EURUSD, with a lot of liquidity in the market, through the realization of the positions set up this week. From the current level of 1.1745, it is possible that the EURUSD will come close to USD 1.18 tomorrow and then correct it back to close to USD 1.175.
Last day of September, the euro is trading around USD 1.17 this Wednesday after European Central Bank President Christine Lagarde signaled a change in the ECB’s strategy to align it with the of the US Federal Reserve, which is likely to allow the rate to rise without the institution intervening. The reason for that isinflation data for Europe’s biggest economies is weaker than expected in September, raising concerns about the pace of economic recovery amid the coronavirus pandemic. At the same time, the dollar is gaining value as investors, worried about the risk, digest the debate between Donald Trump and Joe Biden, candidates for the presidency of the United States, which happened last night.
The D1 Stoch index remains right in the middle of the bands, on the way to overbought position.
The United States economy shrank by 32.9% in the second quarter of 2020. This figure is practically in line with market projections and mainly reflects higher personal consumption expenses (PCE) and low exports and non-residential fixed investment. Still, it remains the biggest contraction of all time, as shown in the graph below, taking the economy into a recession while the coronavirus pandemic has forced many businesses, especially restaurants, cafes, stores and factories to close and people to stay home, decreasing consumer and business spending. “The outlook is not very good,” says Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Los Angeles, to Reuters. “Americans are not behaving well in terms of social distance, the infection rate is unacceptably high and that means that economic growth cannot gain momentum.” This data is a first estimate, and will undergo two revisions in the coming months.
Looking at the behavior of the EURUSD price this week, we realize that today the asset is correcting the gains obtained so far. The pair started the week at USD 1.1618, closed the day yesterday at 1.1741 and today trades lower, around 1.1700. However, the EURUSD pair started the month at 1.1955. Without news about the vaccine against COVID-19, without a clear definition of the election in the USA, without the approval of a strong economic stimulus package for the American economy, it is possible that the EURUSD pair will continue to fluctuate considerably, as investors oscillate between the need for liquidity and security.
News about the ECB’s decisions and the presidential debate can even drive some price moves in the ForEx market, but the it is really subject to normal fluctuation today.
September 28, 2020
This week is starting expecting further appreciation of the DXY and consequent drop in the EURUSD. The perception that the pandemic was under control in the Eurozone no longer exists and the Brexit negotiations going badly are making investors seek USD security:
The ECB President will make a statement today to the European Parliament’s Economic Committee and the market is monitoring any clues about possible economic stimuli.
This Tuesday takes place the first debate between the 2 candidates for the presidency of the USA, Donald Trump and Joe Biden. Questions about Trump’s tax situation should fuel the debate, as lawyers point out accounting maneuvers between companies and Trump’s individual reports to avoid paying taxes
Hopes for a stimulus package for the US economy soared after House Speaker Nancy Pelosi said yesterday that an agreement could be reached soon with the White House and in the face of rumors that Democrats would be open to lessen the value of their proposal to reach an agreement with Republicans.
The last round of negotiations between the UK and the European Union on BREXIT begins tomorrow, with key negotiators Michel Barnier and David Frost meeting next Friday. Both sides are under strong pressure to reach an agreement, given the economic needs of the entire area.
The past few months have been challenging for the British. Prime Minister Boris Johnson is being accused of jeopardizing the agreement with the European Union and of taking the country to the position of the most punished by the coronavirus in Europe, with almost 42 thousand deaths. According to UK Finance Minister Rishi Sunak, the government is about to launch an employment protection plan. Despite the clear need for this plan, it is possible that its approval will encounter strong resistance, since opposition to Boris Johnson’s management is growing stronger.
The D1 Stoch index continues to show that the market is oversold even with the euro at USD 1.167. Lateralized market, but with good opportunities, with Stoch pointing to overbought on several opportunities in M5.
Chinese industries’ profit jumped 19% in August, for the fourth consecutive month of high and the country’s central bank will inject the equivalent of US $ 3 million into the economy, via securities repurchase. The scenario boosted US indices after negative four straight weeks.
September 25, 2020
This past week had few important facts but lots of concerns about both a second wave of coronavirus infections and the pace of economic recovery around the world, which made investors rush for security. The USD continues to maintain the level of 94.5 thousand points, in the process of registering a gain of 1.5% for a week, EURUSD testing a slight recovery, within the range of USD 1.16, as shown in the graph below:
The D1 Stoch index shows that the market is oversold in euro at $ 1,163. Market moving laterally, but with good opportunities within the 1,163 to 1,164 range. During the week, the EURUSD pair had two consecutive daily closings below the main Fibo and Murray patterns:
The D1 Stoch index shows that the market is oversold in euro at $ 1,163. Market moving laterally, but with good opportunities within the 1,163 to 1,164 range. During the week, the EURUSD pair had two consecutive daily closings below the main Fibo and Murray patterns:
US and European futures stocks are going down this week, amid risk concerns. In Europe, the Stoxx 600 index fell 1%. Automotive and travel and leisure companies led the decline, with losses of 2.1% and 1.6%, respectively, with Lufthansa AG, Ryanair Holdings Plc and IAG among the biggest declines.
With a less peaceful tone than that of the ECB, several senior FED members, including Chairman Jerome Powell, asked the US government to provide more fiscal support, warning that otherwise a slowdown in the economic recovery will take place. The need for fiscal incentives is becoming increasingly relevant, however, the proximity of the presidential elections in the USA is making it difficult. Goldman Sachs and JPMorgan reduced their US growth forecast for the fourth quarter.
This week the current president and candidate for re-election, Donald Trump, refused a peaceful transfer of power, if his opponent, Democrat Joe Biden wins the election (Republican lawmakers promised to make a presidential transition without interruption, in a rebuke to Trump). In addition, Trump is pressuring the Senate to approve his Supreme Court candidate as soon as possible, because he believes that the Court will have to decide on an election outcome. This indicates that the Legislative and Executive branches have other priorities in the coming months, other than the fiscal stimulus package to recover the economy from the coronavirus pandemic.
There are rumors about Democratic lawmakers to be drafting a $ 2.3 trillion stimulus proposalt, lowering its initial $ 3 trillion suggestion and approaching the Republicans’ proposal.
Still in the US, new orders for durable goods increased 0.4% month-on-month in August 2020, below market forecast for a 1.5% increase. Still, it was the fourth consecutive month of growth in orders, as the economy recovers from the coronavirus. Transport (0.5%), machinery (1.5%) and computers and electronics (1.2%) led the increase, while orders for electrical equipment and appliances (-1.5%), motor vehicles (-21, 7%) and defense capital goods (-3.3%) shrank. Orders for non-defense capital goods, excluding aircraft, increased 1.8%, down from 2.5% in July, but above 0.5% proposals. This volume is an important indicator to show how much companies are preparing to increase their productive capacity.
In France, the number of people without work fell by 171.0 thousand in relation to the previous month, to 3.622 million in August 2020, as the labor market continues to recover from the pandemic. In comparison with the same month of the previous year, the number of people registered as unemployed increased by 263.0 thousand.
More than 32.2 million people have been infected with the coronavirus worldwide, of which at least 983,000 people have died and 22.2 million have recovered, according to Johns Hopkins University. In Europe, a second wave of infections continues to hit several countries, putting pressure on hospitals. Among the most affected countries, France reported more than 12,000 new cases, followed by Spain (+10,653), the United Kingdom (+6,634) and Germany (+2,153). The USA and India continued to lead with a total of more than 6.9 million and 5.8 million, respectively. Brazil has the third largest number of confirmed coronavirus infections in the world, with more than 4.6 million. Italy, which has been protected from the second wave so far, has reported 1,786 new cases (against 1,640 the previous day) and is slowly increasing. Meanwhile, Poland (1,136), France (16,096) and the United Kingdom (6,648) recorded one-day increases in new cases, albeit with a much higher level of testing than during the first wave. In the US, weekly cases have increased to over 300,000 again, after falling below that level in late August. The country may be seeing the start of another round of infections. Officials across Europe warn of difficult times ahead.
The $ 10 trillion corporate bond market is under pressure. In the last two times this has happened, the FED has announced a new monetary policy, leading investors to believe that the institution is about to intervene.
Or would the Institution let this bubble burst? The Fed and the US government are caught in a vicious cycle by which they create bubbles and then deal with their consequences. We had the technology bubble in the 90s. The housing bubble in the mid-2000s. And now, the bubble of everything in 2020. Everything indicates that won´t be this time the FED will let the bubble burst.
This intervention should inject more dollars into the economy, which would make the EURDXY pair gain value, especially in the short term.
September 24, 2020
News week, with USD recovering, returning to the level of 94 thousand points, EURUSD at the level of 1.16, as shown in the graph below:
This week, several senior members of the EDF, including President Jerome Powell, asked the US government US to provide more fiscal support, warning that otherwise a slowdown in the economic recovery will happen. Everyone knows, however, that a new stimulus project will not be approved before the presidential election, that happens in early November.
Among the data released in the last few days, the mood of German business has been weaker than expected in September, while France’s industrial pace exceeded forecasts.
Sales of new homes in the United States increased 4.8% in August 2020 compared to the month immediately previous year, reaching 1,011 thousand units in the period, surprising the market, which anticipated a drop in this comparison, with an estimate of 895 thousand new units in the period. New home sales exceeded 1 million by first time since September 2006, as the housing market continues to recover from the pandemic, motivated by very low interest rates and increased demand, as many people are choosing to move out of the big cities. Sales of new homes increased 13.4% in the South (636 thousand) and 5% in the Northeast (42 thousand), but fell 21.4% in the Midwest (99 thousand) after an increase of 59.5% in July, and 1.7% in the West (234 thousand). The average selling price per unit it dropped to $ 369,000 from $ 392,700 a year earlier. The number of new houses for sale available on the market fell 3.1%, to 282 thousand units.
While the market expected 840, 870,000 Americans applied for unemployment insurance in the week ended 19 September 2020, keeping this volume below 1 million in the last 2 weeks, a sign that the work is slowly recovering from the coronavirus pandemic. However, the number remained well above 665 thousand registered in March 2009, the worst period of the great recession caused by the financial crisis of 2008-2009, suggesting that the labor market recovery has stalled as government support has waned. The moving average week, which removes week-to-week volatility, was 878,250, a decrease of 35,250 from the revised average from the previous week. Continued benefits fell to 12,580,000, a decrease of 167,000 from the level released the previous week.
Faced with this scenario, in which FED authorities indicate a slowdown in the economic recovery and the need for more fiscal support in the U.S., and also where the number of coronavirus infections remains high worldwide, increasing the risk of another set of blockages in Europe, investors are looking for more investment insurance, like the dollar. The USD reached today the highest value in the last 2 months, 94.6.
Gold continues to fall, trading near $ 1,855 an ounce on Thursday. At the start of the session, gold it reached $ 1,849 an ounce, a level not seen since July 22.
The silver accompanies, being traded around $ 22 an ounce this Thursday. At the start of the session, the ounce value reached $ 21.65 an ounce, a level not seen since July 22.
The US listed stocks are operating down on Thursday. The Dow Jones dropped more than 150 points, the S&P 500 more than 15, I reach the lowest value of the last 7 weeks (3,223 points).
European equities are also down on Thursday, with the DAX 30 falling 0.2%.
September 16, 2020
Today, the decisions taken at the FOMC (FED’s monetary policy committee) meeting, held yesterday will be released.
Today, retail sales in the USA are also disclosed.
Now, the focus of the market is on the Bank of England policy-setting meeting, which is due to be completed tomorrow. Market expectations won´t change, but the division of votes and the minutes of the meeting will be carefully studied to give an idea of the bank’s intentions in the future, given the economic challenges facing the UK.
US retail sales increased 0.6% in August 2020 compared to the previous month, below market forecasts for a 1% increase. Sales increased more in food and beverage services (4.7%), clothing (2.9%), furniture (2.1%) and construction materials and garden equipment (2%). Gas station sales increased 0.4% and that of automobiles, 0.2%. Declines were observed in sales in department stores (-2.3%), supermarkets (-1.6%), sporting goods, hobby and music (-5.7%). Retail sales, which correspond more closely to the consumer spending component of GDP, fell 0.1%. The reduction in the value of unemployment insurance checks probably weighed on the pace of recovery in consumption in the USA.
At its meeting, FED´s FOMC decided to keep the basic rate of the American economy close to zero (0 to 0.25% per year) until at least the end of 2023 to help the economy recover from the coronavirus pandemic, which was widely expected. However, the Institution showed optimism regarding the impact of the pandemic on the American economy in 2020, raising its forecast of GDP contraction to a 3.7% drop, compared to a previous estimate of a 6.5% drop, based upon employment and inflation improving. On the other hand, these estimates worsened for the years 2021 and 2022, to 4% and 3%, to 5% and 3.5%, respectively. The unemployment rate is expected to rise to 7.6% this year (at the June meeting the estimate was 9.3%) and drop to 5.5% in 2021 (6.5% was expected in June).
The FOMC’s strategy is to achieve inflation moderately above 2% for some time, so that average inflation is 2% over time and long-term inflation expectations remain well anchored at 2%. The votes were 8 to 2, with the Dallas FED chairman preferring to maintain “greater interest rate flexibility”, and the Minneapolis FED chairman in favor of waiting for rate hikes until “core inflation reaches 2% sustainably. “
The US NAHB housing market index jumped 5 points to 83 in September 2020, exceeding market forecasts of 78. It is the highest reading ever recorded, as low interest rates for real estate financing continue to drive demand for new houses and many people are moving from big cities in this pandemic period. The current sub-index of single family increased to 88 from 84 in August and that of potential buyers increased from 64 to 73. In addition, the indicator of home sales in the following six months rose from 78 to 84 in the previous month.
The OECD (Organization for Economic Cooperation and Development) pointed that the world economy could shrink by 4.5% in 2020, improving its outlook from the June forecast, which was a 6% contraction. US GDP is expected to fall 3.8% in 2020, while the eurozone is expected to contract 7.9% and Britain’s GDP is expected to fall 10.1%. China is likely to grow only 1.8%, while India’s GDP is expected to fall 10.2%. The OECD expects the global economy to recover 5.0% in 2021, but warns that world production will still be below the levels at the end of 2019.
The fall in the value of DXY since the end of May 2020 is a reflection of FED´s low interest policy practiced by the. Investors are coming out of the currency looking for higher yields on other assets.
News of economic activity in the US recovering faster than expected, at least in 2020, raises expectations that values above 93,000 points in the DXY will be nothing more than a short-term phenomenon. The asset is expected to fluctuate between 90,000 and 93,000 points, causing the EURUSD to fluctuate between $ 1,170 and $ 1,190. The FED’s struggle to maintain positive inflation involves maintaining DXY at this level of devaluation, which increases its exports and makes imports more expensive, generating jobs domestically.
In the coming weeks, news about the US presidential election and Brexit negotiations could move asset values, with an upward trend towards the DXY, as the dollar is close to its lowest level in 16 months. Net future bets on a lower dollar totaled $ 32.67 billion, according to the latest data from the Commodity Futures Trading Commission.
Uncertainty about the American elections, in which the results may be uncertain or even contested, can lead investors to sell their riskiest investments and head for safer assets, such as the US dollar. The greater the uncertainty regarding the elections, the more the dollar tends to appreciate. Still on the elections, the leadership of current President Donald Trump values DXY, as he shows less appetite for fiscal expansion and more likely to muddle markets with a hard line towards China. If your opponent, Joe Biden takes the lead in the polls, DXY should devalue itself.
Today starts the FOMC meeting, FED´s monetary policy committee, the last one before the US presidential elections, which takes place on November 4, 2020. Market is waiting for even more accommodative measures aimed at accelerating the recovery of the US economy in the post-pandemic coronavirus disease, especially after US Treasury Secretary Steven Mnuchin said yesterday that there are “clearly” areas of the US economy, especially in the tourism sector (travel, entertainment, hotels, etc.), small businesses and restaurants, which still need support, and that fear of increasing the national debt should not prevent Congress from passing another stimulus bill.
The FOMC reduced the basic interest rate to almost zero at the start of the pandemic and announced that there would be
no hikes until the economy was “on the right track” to meet the FED targets (maximum employment and price stability).
Analysts already question this strategy and expect FED to readjust that decision, although, do not believe it will happen this
meeting, as officers have minimized any sense of urgency in making such a decision in recent public comments.
When the last set of projections was released in June, the report showed that all but 2 of the 17 FOMC members expected to keep rates close to zero until the end of 2022. The projections to be released tomorrow will extend the forecast horizon by the end of 2023, which does not seem to be enough for the market to trust the results projected by the FED. “We have to forecast five to ten years ahead if we want to talk about average inflation targets,” said Andrew Levin, a former FED economist who participated in the development of projections in the Ben Bernanke and Janet Yellen administrations, and is now a professor at Dartmouth College. The crucial question is: what is the FED’s long-term plan?
EURUSD started the day higher, starting at USD $ 1.1870 and coming very close to USD $ 1.19. With the market opening in Europe, the price fell to the range of USD $ 1,188. The expectation is that it will fall even further in the opening of the operation in the USA, as investors should appreciate the dollar against the euro awaiting the stimulus measures that should be announced by the FED tomorrow.
The dollar remained under pressure on Tuesday, with risk appetite returning to markets amid hopes for a coronavirus vaccine and major corporate deals in the U.S. The US dollar hit a 28-month low of 92.144 on August 31, but has since gone up amid growing optimism about the US economic recovery.
This morning, data on industrial production in the USA will be released.
As shown in the graph below, the ZEW Indicator (which measures market expectations for the next 6 months, through a survey made with about 350 German institutional investors and analysts) for Germany, in September 2020, rose 5, 9 points compared to the previous month, to 77.4, exceeding market estimates of 69.8. Good news about the recovery of the economy in Europe after several days of pessimism in the market.
For the Euro Area, this same ZEW indicator increased 9.9 points over the previous month to 73.9 in September 2020, the highest reading since February 2004. In September, 77.9% of analysts surveyed predicted an improvement in economic activity, while 4% expected it to worsen and 18.1% did not expect changes.
The mood is positive today, despite Brexit negotiations stalled and COVID-19 cases rising. However, the banking sector has shown fears of an increasing number of loan defaults in the next six months.
The price of gold reached its highest value in almost two weeks (US $ 1,969 an ounce) and that of silver continues to rise (above US $ 27 an ounce) this Tuesday, with the dollar repressed, while investors await the result of the FED meeting, and the continued increase in coronavirus cases worldwide.
Despite all the recent volatility in the ForEx markets, there are still many opportunities for profits for traders, especially in very short-term operations, those that ignore the news and analyze only the movement of the candles.
The chart below shows how many pips the EURUSD pair has traded daily in the last 12 months. In the last 10 weeks, there were 88 pips on average per day. This means that with 10,000 euros deposited, it would be possible to make US $ 880 a day. Discounting 15% income tax, it would still be possible to make more than USD 3.7 thousand in a week or USD 16.5 thousand in a month.
In order to take full advantage of these opportunities, one of the things the trader must do is to monitor the level of aggression in the market.
While small investors support their operations in charts, indicators and fundamentalist analysis concepts, which uses the past as a basis, large institutions make their decisions always looking to the future. The structure of a large institution guarantees its ability to estimate more assertively the variables that will impact assets value in the future. Small investors Página 3 should accept and work with this “disadvantage” in accessing information. It is by monitoring the “aggression” of the market that the small investor will have evidence of the performance of the big players.
As these institutions demand immediate execution and they usually have a high volume to execute, they use “aggression” to form their positions in the market. The greater the amount taken, the greater the signal that there is an urgency to execute and if there is an urgency to execute there are indications of information accessible to institutions but not to small investors.
There are tools that show all the deals that took place on a certain asset throughout the day. It´s possible to see exactly these aggressions through it, as in the example below:
However, traders must always monitor factors such as interest rates, trade and tourism flows, economic strength and geopolitical risk, which affect the supply and demand for currencies.
September 14, 2020
The FOMC, FED´s monetary policy committee, will meet this week. Investors are waiting for even more accommodative measures aimed at the recovery of the American economy in post-pandemic times.
Albert Bourla, CEO of the Swiss pharmaceutical Pfizer, said last weekend that the vaccine the company is developing against the coronavirus could be available for distribution in the U.S. by the end of this year. According to Bourla, phase 3 of the drug test would be completed by October. However, this same Bourla said recently that there is no guarantee about the longevity of immunity: efficacy and supply still are important challenges. On efficacy, Pfizer must monitor 70,000 trial participants for at least two years to assess immunity and determine whether people need extra doses of the vaccine. On supply, large parts of Africa, South America and Asia will not be able to receive volumes of the vaccine due to the lack of logistical capacity with an adequate refrigerated chain.
Anglo-Swedish pharmaceutical company AstraZeneca, which is also developing a coronavirus vaccine, in partnership with the University of Oxford, received approval from UK authorities last weekend to resume the phase 3 trial of its vaccine.
Phase 3 is the last stage of the vaccine development process. It carries out large-scale tests to assure the safety and efficacy of the product on the target audience.
The CEO of Serum Initiative of India, the world’s largest vaccine manufacturer, warned that, given the production capacity available for the vaccine, 20% of the countries in the world would be immunized by the end of 2021 and only in 2024 would all those in risk groups for COVI-19 will be immunized.
In July 2020, eurozone industrial production increased 4.1% over the previous month, as the bloc’s economy continued to recover from the pandemic. Production increased for capital goods (5.3%), durable consumer goods (4.7%), intermediate goods (4.2%), non-durable consumer goods (3.9%) and energy (1, 1%). Compared to July 2019, industrial production contracted 7.7%. The numbers are similar to market expectations
September 11, 2020
Many inflation disclosures today (Germany, UK, Spain, USA). Investors continue to digest the decisions of the European Central Bank, released yesterday indicating that the Institution will not act to insure the appreciation of the euro. For this week, the euro is likely to end up practically stable.
Next week, the FED holds its last meeting before the US presidential election, and while everyone expects it to remain dovish, it may not deliver everything investors want.
Continuing the tension mood between the US and China, President Trump decided to ban the TikTok app in the country, which belongs to the Chinese company ByteDance, reaffirming that they have until September 15 to sell their operations in the US to an American company, as Microsoft, or it will no longer be allowed to operate in its territory. Trump is calling it a security issue as the video app is accused of sharing data with the Beijing government (the company denies the charges). TikTok, which has more than 80 million users in the US, is one of the most popular social medias at the moment. The Chinese Foreign Ministry opposes the forced sale of TikTok, an operation that, they believe, violates the principles of the World Trade Organization (WTO). However, ByteDance said today that it plans to move its headquarters to Singapore and invest billions of dollars there over the next three years, in what appears to be an effort to prevent these changes in the U.S.
India has already blocked TikTok and other Chinese apps. Australia, which has already banned Chinese technology company Huawei and telecommunications equipment maker ZTE, is also considering banning TikTok.
In Europe, in contrast to the peaceful tone used by ECB President Christine Lagarde yesterday, the Institution’s chief economist Philip Lane said that he is concerned about the strength of the euro and its consequent impact on European inflation: “The Governing Council is ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards the target in a sustained manner.” The euro dropped with this news before rising again in the late morning in Europe.
The ECB President’s optimistic tone and her lack of direct action to slow the euro surprised many analysts, but were consistent with a modest upward revision of the ECB’s growth forecast for this year. For the investors, this contradiction between her and Lane is enough to speculate a lack of direction in the ECB’s decisions and generate more volatility in the ForEx market.
As much as Lagarde remains faithful to what was agreed, it is inevitable that she is under a lot of pressure. If, on the other side of the ocean, the FED remains dovish (inclined to offer more and more stimulus), other authorities, in particular the ECB, will have to use a more accommodative policy as a way to contain the appreciation of their currencies against the dollar.
In anticipation of the FED meeting, which takes place next Wednesday, September 16, the market is expected to operate with considerable volatility next week. According to the “buy the rumor, sell the fact” rule, investors must bet on strong stimulus from the FED, which would favor the dollar against the euro, at least until Wednesday, when, probably, the FED will come with a policy still dovish but not so aggressive, disappointing the market, since the American economy is already showing signs of a good recovery pace. On Wednesday, with the release of the FED decision, the dollar is likely to reverse the week’s gains, and will move back to 93,000 points between Thursday and Friday.
For the coming weeks, the ForEx market is expected to follow news about the US election, which includes the potential conflict with China, Brexit negotiations, economic data from European countries and possible coronavirus vaccines.
September 10, 2020
Investors have their eyes and ears on the results of the European Central Bank meeting. Speech by the President of the Institution Christine Lagarde started around 9:30 am, BSB time, causing the euro to skyrocket, being traded close to USD 1.19 (“buy the rumour, sell the fact”).
This afternoon, weekly US unemployment insurance claims will be released, and the Republican-controlled Senate votes on a stimulus package.
At the meeting held today, the European Central Bank decided to keep the interest rate at 0% and the commitment to buy up to € 1.35 trillion in debt securities until June 2021 (flexible as to type of assets, country and duration), within the scope of the Pandemic Emergency Purchase Program (PEPP). On June 4, 2020, the ECB increased this program, which was € 750 billion, by € 600 billion.
The ECB today also released new projections for the Eurozone economy, as shown in the graph below:
Through these small changes, the bank shows that it is unnecessary to increase the stimuli already used for the economic recovery of the Euro Area.
On the strong appreciation of the euro against the dollar, especially since May 2020, as shown in the graph below, ECB President Christine Lagarde said that the bank does not aim to maintain the exchange rate. The Institution’s focus is to maintain price stability (meaning inflation), which the bank does through fiscal and monetary, not exchange rate, policies. The appreciation of the euro reduces the competitiveness of European exporters on the international market and creates a deflationary effect on domestic prices. Even so, analysts are forecasting a further rise in the value of the euro, estimating that it will reach $ 1.25 in the coming months.
The US Senate was due to vote today on a fifth economic stimulus package for the coronavirus, which would allocate approximately $ 300 billion to renew federal unemployment insurance and establish new protections for companies against lawsuits filed during the pandemic, labeled by Democrats as a “poison pill”. However, the package was not approved.
This may be the latest news about the stimulus package for the American economy in 2020, as from now on, lawmakers will
likely focus on returning to their home states and starting the campaign for re-election.
Meanwhile, unemployment insurance claims have been below 1 million for two consecutive weeks, a sign that the job market is slowly recovering from the coronavirus pandemic.
Concerns about the conclusion of Brexit are growing among investors, as negotiations are heading into uncertain directions. In this scenario, the value of the GBP, in dollars, fell from USD $ 1,346 on 9/1/2020 to USD $ 1,275 today.
On September 1, 2020 – the day the euro peaked against the dollar – ECB board member and chief economist Philip Lane said that “the euro-dollar rate matters”, signaling for the market that the bank could change its performance in relation to the currency value. The euro promptly declined from its highs. Since then, the market has been looking forward to the ECB meeting, in the expectation that the Institution would start to inject money directly into the foreign exchange market.
The dollar has remained stable above the 93,000-point mark, supported by gains against the GBP and by the sell-off in the American stock market, especially in technology companies. Tesla, Apple, Microsoft, Amazon, Alphabet and Facebook, together, lost $ 1 trillion in market value between Monday and Wednesday this week, with investors pulling out of those stocks.
Meanwhile, the price of silver continues to hover around $ 27 an ounce, with an increase in purchase intentions, but limited by a stronger dollar. The price of gold is heading for the second consecutive weekly gain.
September 8, 2020
The Eurozone GDP was released today for the 2Q20, with a reduction of 11.8% in relation to the 1Q20 and 14.7% in relation to the same period in the previous year. The level of employment in the Euro Zone was also released, decreasing 2.9% in relation to the 1Q20 year and 3.1% in relation to the same period in the previous year. Were also released retail in Italy and Balance of Trade in France and Germany, all of them with numbers below market expectations, increasing the investors pessimism in relation to the pace of economic recovery in the European bloc. This week, investors are focused on the outcome of the European Central Bank meeting, which takes place this Thursday and should decide on the projections and the stimulus policy. Investors are also following the increase in tension between the US and China.
The Eurozone economy shrank 11.8% in 2Q20 compared to 1Q20, slightly less than market estimates, which expected a drop of 12.1%. Still, it is the biggest contraction ever recorded. Household consumption dropped 12.4%, investment 17% and government spending 2.6%. Exports fell 18.8% and imports 18%. Among the biggest economies in the bloc, Spain recorded the biggest drop in economic activity (-18.5%), followed by France (-13.8%), Italy (-12.8%) and Germany (-9.7 %).
The number of people employed in the Eurozone decreased by 2.9% in 2Q20 compared to 1Q20. It is the biggest decline in the series, which started in 1995. Compared to the same period last year, employment decreased by 3.1%.
In July 2020, retail sales in Italy fell 7.20% in comparison to the same month of the previous year and 2.2% in relation to the immediately previous month. In the first scenario, the market estimated a decrease of 0.2% and, in the second, an increase of 5.1%.
The trade deficit in France was EUR 6.99 billion in July 2020, while the market estimated EUR 4.8 billion. Exports increased 9.6% over the previous month and are now at 83% of 2019 average level. Sales increased mainly in capital goods (21.3%), such as aeronautical equipment, telephones and communications equipment, and automobiles. Sales also increased for intermediate goods (4.3%) and consumer goods (3.7%). Imports increased 4.9% and are at 90% of 2019 average level. Purchases increased in investment goods (10.6%) and intermediate goods (5.7%) segments, but stopped in consumption.
Germany’s trade surplus fell to EUR 19.2 billion in July 2020, from EUR 21.3 billion in the same month last year. Exports fell 11%, due to the decrease in sales to the European Union (-10.7%), the United Kingdom (-12.6%), the USA (-17.0%) and China (-0.1%). Imports fell 11.3%, with purchases from the EU falling 13.1%, from the UK 24.8% and from the USA 14.8%. On the other hand, imports from China increased 7.4%. On a seasonally adjusted basis, exports increased 4.7% in July 2020 compared to July 2019, below market expectations of 5%, while imports increased 1.1%, also below market expectations of 3.3%.
After the disclosure of Payroll, with figures that did little to encourage the market, added to unfavorable numbers about the European economic recovery, investors began to operate awaiting the decisions of governments regarding recovery packages, both in America and in Europe.
The next 2 months will bring even more volatility to the market due to the electoral dispute in the USA. Democrat Joe Biden, who is personally insignificant but carries the force of rejection to his opponent, the current president of the United States and candidate for re-election, Donald Trump.
Last night, Trump delivered a speech in which he promised to drastically reduce economic relations between the United States and China if re-elected: American companies would be punished if they sent jobs abroad and rewarded if they brought them back, aiming to make the USA the most powerful global industrial area. Trump also promised to break the partnership between the two countries’ armed forces. These promises are old and were already on Trump’s list of proposals when he ran for office 4 years ago. Throughout his term he put the relationship between the two countries on a tightrope but did nothing concrete. Has he now gathered the necessary context to carry out his campaign promises?
As in the last election, the unexpected can happen. Trump could be re-elected. Or not. By November 4, ForEx traders should be prepared to operate on dollar volatility, with caution, and a lot of cold blood.
September 4, 2020
Friday, PayRoll’s disclosure day, market waiting for numbers below the estimate. If the economy continues to create jobs at an average rate of 1.5 million per month, as it has been, it will take at least another 8 months to complete the recovery and return to the level of February 2020. Investors are also concerned with the difficult negotiations between Democrats and Republicans to launch a new recovery package for entrepreneurs and individuals.
This week is ending with pessimism regarding the economic recovery in Europe, with data showing the sixth consecutive month of contraction in the construction sector.
The bias at this point is pessimistic for both EUR and USD, increasing market volatility and valuing gold and silver. The postpandemic economic recovery is likely to take place in both America and Europe. There are more risks in the USA but Europe is more conservatism.
The market continues to price the EUR close to USD $ 1.18 awaiting the US government’s economic recovery package.
The IHS Markit Eurozone Construction PMI, an index that indicates the sentiment of purchasing managers in the construction sector, or the trend for this market, fell to 47.8 in August 2020. This is the sector’s 6th consecutive contraction and the more pronounced in three months. The production of commercial buildings recorded the greatest reduction. The moderate growth in housing construction in Germany and Italy was insufficient to offset the decline in France. In the sector as a whole, the number of jobs was reduced, input price inflation has intensified and general sentiment among European construction companies is negative.
Order entry for Germany’s industry increased 2.8% in July 2020 compared to the previous month. However, orders in July were 8.2% lower than in February, before restrictions were imposed. By category, the demand was higher for intermediate goods (9.5%) and consumer goods (0.2%), while the demand for capital goods decreased (-0.4%). In the automotive industry, orders increased 8.5% in July compared to June, but were still 2.4% lower than in February. Year-onyear, order entry for German industry fell 7.3% in July 2020.
In the US, Payroll data showed that the pandemic is still far from being under control and many companies have not even started to expand their workforce, maintaining lay-offs. In addition, large companies like United Airlines, American Airlines and Ford have announced job cuts. 1.371 million non-agricultural jobs were created in August 2020, down from the 1.734 million created in the previous month, and slightly below the market forecast of 1.4 million. There are still 11.5 million vacancies to reach the pre-pandemic level, since more than 22 million jobs were lost between March and April. Among the sectors that created more jobs in August are the public sector (344K), largely reflecting the temporary hiring for the 2020 Census, retail (249K), services (197k), entertainment / leisure (174K), education and health (147K), transport and storage (78K), financial activities (36K) and industry (29K).
The US unemployment rate fell to 8.4% in August 2020, totaling 13.6 million unemployed, still above 3.5% in February, before the pandemic hit the economy, but below the peak of the global financial crisis of 2008/2009, when it reached 10%. Considering the way the survey is conducted, these numbers may be far from reality, as many people are being classified as employees, although they are away from work.
The USD rose about 0.4% this week, its biggest weekly increase in almost four months, due to optimistic data about the US economy. The EUR has been oscillating near its lowest level since August 27, amid concerns about the eurozone’s economic recovery.
Recent releases showed that economic recovery in both America and Europe, should take at least 1 year to return to February levels, when restrictions imposed by the pandemic started. In this scenario, the valuation of asset values should consider more than just numbers.
While the economic packages are holding back the financial market, which is supporting companies and individuals to survive the crisis, some facts are frightening. It is expected that more than 50 million Americans will fight hunger by the end of this year, out of the 330 million people who live in the United States, this means 15% of the population. Those who are not eating will not be consuming, nor will honor their debts.
According to a survey commissioned by the European Parliament between 23 April and 1 May 2020, 58% of the population in Europe is facing economic difficulties due to the restrictions imposed by the pandemic. Among the problems reported are income decrease (mentioned by 30% of respondents), total or partial unemployment (23%), use of personal savings ahead of schedule (21%), difficulties in paying rent, invoices or loans (14 %) and complications to have a “decent” diet (9%). One in ten respondents said they had to ask financial help from relatives or friends, while 3% said they went bankrupt. Respondents from Hungary, Bulgaria, Greece, Italy and Spain were the ones who had the most financial problems, while those from Denmark, the Netherlands, Sweden, Finland and Austria were the least affected.
This adverse situation contributed to increase the demand for precious metals as a safer investment. It is possible that a wealth transfer will occur if investors decide to move out of speculative financial bubbles to solid real assets, and precious metals are the highest quality solid assets on the market, as are gold and silver.
The graph below shows the behavior of the silver price in the last 5 years, in USD. Between February 20 and March 19, 2020, the price of silver fell sharply, as at this moment the market was looking for liquidity, and this metal is really not the best option for this purpose. However, facing the concerns with the post-pandemic economic recovery, the market’s attention turned to this type of investment and the silver price skyrocketed.
Silver is much cheaper than gold (approximately US $ 25 against US $ 1,900 an ounce) easing the investments into this commodity. On the other hand, the gold market is much larger than that of silver (annual gold supply is estimated to be five times greater than silver).
The industrial demand for silver tends to increase too, mainly with the increase of renewable energy sources, which relies on batteries for its daily use. There is even evidence that the rapid increase in the silver price is due to physical purchase, not financial speculation. There was a downward trend of the commercial net short position, as the price continued to rise. Typically, in the past, when the silver price increased, speculators increased their net short position.
While gold has already broken value records this year, exceeding $ 2,000, the price of silver is still only halfway to its record of more than $ 48 in April 2011, offering opportunity for profits while the uncertainty of economic recovery lasts
September 3, 2020
Thursday, with disclosure of weekly initial claims and Trade Balance for the United States. In Europe, disclosure of general Markit and retail sales. Market is waiting for PayRoll’s release this Friday.
Eurozone retail sales fell 1.3% in July 2020 compared to the previous month, disappointing the market, which expected 1.5% growth. In this comparison, sales of non-food products fell 2.9% due to the lower trade in textiles, clothing, footwear (- 10.6%), computer equipment, books and others (-6.7%), pharmaceuticals and medical products (-1.7%) and electrical and mobile products (-1.6%). E-commerce contracted 7.7%. Meanwhile, sales of food, beverages and tobacco remained unchanged, while fuel sales increased 4.3%.
The French government announced a € 100 billion stimulus package that will be 40% financed by the European Union Recovery Fund. This package aims to reduce corporate taxes by more than 20 billion euros over the next 10 years, one of the central policies by which Macron was elected in 2017, but has not been able to carry out.
In the United States, ADP’s National Employment Report released yesterday showed that 428,000 jobs were created in the private sector in August 2020. This indicator measures employment levels in the non-agricultural private sector, based on actual payroll data for around 24 million employees, processed by Automatic Data Processing, Inc. Despite being below the median of economists’ projections, which expected 1 million new jobs, this data began to show post-pandemic recovery.
The Challenger Job-Cut report, which provides monthly information on the number of layoffs in the private sector, was released this morning pointing to 115,762 cuts in August 2020 in the U.S. This is the highest number for the month of August since 2002. Among the most affected sectors are transportation (26,545), especially the airlines, and entertainment / leisure (17,271), including bars, restaurants, hotels and amusement parks. Considering the first eight months of the year, there were 1.963 million job-cuts.
The number of Americans applying for unemployment insurance for the first time, however, dropped to 881 thousand in the week ending August 29, the lowest level since the effects of the pandemic began to be felt and below market expectations of 950 thousand.
America’s July 2020 trade balance release pointed to a $ 63.6 billion trade deficit, above market projections of a $ 58 billion deficit. Exports and imports increased in July, but remained below pre-pandemic levels, as many companies continued to operate with limited capacity or ceased operations altogether. July exports were $ 168.1 billion, $ 12.6 billion above June. July imports were $ 231.7 billion, $ 22.7 billion more in the same comparison.
The euro widened its losses to $ 1.183 this Thursday after crossing the $ 1.20 mark on Tuesday for the first time since May 2018, amid concerns about the eurozone’s economic recovery, after data showed that retail sales across the block fell unexpectedly in July. At the same time, demand for the USD has increased due to optimistic data on the recovery of the US economy. All eyes will be on the ECB policy meeting next week, as markets are still waiting for more stimulus before the end of the year, now that the eurozone entered deflationary territory for the first time in four years. The Financial Times reported that several ECB officials were worried about the rise in the value of the euro, however, an interview by ECB board member Isabel Schnabel to Reuters contradicted this view.
Traders today have their short-term eyes on the expectation of the disclosure of the American Payroll this Friday. However, looking at the data already released, we conclude that the bias could be negative for the USD. Both the cut in job openings and the number of applications for unemployment insurance came below market expectations, which is a Página 3 good thing, however, estimates pointed to a much higher number of new jobs than observed. Adding these factors together, we conclude that the recovery of the labor market in August will still not be enough for investors to believe in the recovery of the post-pandemic American economy.
In relation to the EUR, the investor is also cautious, even with the news of the French economic stimulus package, as the latest news shows that the economic recovery in the bloc may be longer than expected.
In a scenario like this, in which the two strongest currencies available inspire prudence, the market’s attention is turned to gold and silver.
In the last 5 years the value of gold in USD has been rising consistently, having reached a very strong appreciation since the beginning of the coronavirus pandemic in 2020, as shown in the graph below. This metal has always been an important ballast of the world economy and will probably continue to be, regardless of the path it takes.
It is worth noting that gold does not pay dividends, does not pay interest, has no cash flow, and that is why it is very difficult to find a fair value for it. So, is it still worth investing in gold? Is it metal strength enough to surpass the value of 2 thousand USD per ounce?
Gold has a negative correlation with the US interest rate. In other words, when the American future interest curve falls, the value of gold tends to rise. The interest rate is already close to zero and should remain close to this value, therefore, the correlated appreciation of gold has already happened, it has already been priced, which helped the metal to reach these record values.
Analysts believe that, as long as the policy of monetary stimulus in the United States lasts, gold would be able to remain close to US $ 2 thousand, and may even reach US $ 2.1 thousand. The table below shows the banks’ consensus on the metal’s future price:
It is still possible to make some profits from gold trading, however, they are reduced and require a longer payback period than ForEx trading.
September 2, 2020
Wednesday, the market is optimistic awaiting the release of PayRoll this Friday, September 4th, with a consensus expectation of 167,000 job openings in July 2020. Today’s main disclosures are Australia’s GDP, sales data in German Retail and PPI (Producer Price Index) for the Euro Zone. Many speeches from the EDF team this afternoon.
The Australian economy shrank 7% in 2Q20 due to the pandemic, an even stronger drop than the 5.9% forecast. It was the sharpest quarterly contraction recorded, opening the first recession in 30 years. Household consumption fell (-12.1%) as did gross fixed capital formation (-4.9%). In contrast, government spending had the fastest growing since the fourth quarter of 1995 (2.9%). Exports decreased (-6.7%), as well as imports (-12.9%). On the production side, most sectors contracted, except mining, finance and insurance, public administration and education. In 1H20, the Australian economy shrank 6.3%.
Retail sales in Germany increased by 4.20% in 2020 compared to the same period in last year, below the forecast of 5.1%, raising concerns about the recovery of Europe’s largest economy. Analysts expected an increase of 0.5% in July compared to the previous month, however there was a decrease of 0.9% in this comparison.
The Euro Zone PPI (Producer Price Index) decreased by 3.30% in 1H20 compared to the same period in last year, in line with forecasts of a 3.4% decline. In July 2020, in comparison with the previous month, prices increased in energy (2.1%), durable consumer goods (0.4%) and intermediate goods (0.1%). On the other hand, the price of capital goods remained unchanged and non-durable consumer goods fell 0.2%
n the US, the eyes are on FED decisions, whose strategy is to keep interest rates low (close to zero) for a longer period, despite the inflation (around 2% per year). This will happen through a flexible monetary policy (currency issuance). FED believes this will be able to stimulate the economy enough to reach a maximum level of employment. In real life, US authorities are working to neutralize the risks to consumer / voter confidence. Yesterday, for example, they issued a national order temporarily preventing millions of US tenants from being evicted, claiming that the evictions would accelerate the spread of Covid-19.
The USD has been recovering its value against other currencies, trading around 92.6 this Wednesday. The market is optimistic based on the latest data released on the North American economy (Manufacturing PMI reached the highest number in almost 2 years and vehicle sales returned to pre-pandemic levels). However, the USD remains far from 100, awaiting the new economic recovery package, and the euro hit the $ 1.20 mark for the first time since May 2018.
Higher-than-expected manufacturing data in the US raised hopes for a faster recovery in the world’s largest economy. The Industrial Activity Index of the Institute of Supply Management (ISM), which indicates the pace of industrial activity in the previous month, resulting from a survey with more than 400 companies from 20 industries across the 50 states, reached 56 points in its last release. This information is considered a very important measure of economic confidence. Below 50 indicates an economic recession, especially if the trend continues for several months. A number above 50 indicates a period of economic growth. The graph below shows this index growing and close to 55 between May and July 2020.
This situation shows that the FED’s decisions are supporting the economy and that this situation will continue until the coronavirus vaccine is launched and the economy regains its normal pace. In an election year, the White House insists on a solid economic recovery forecast, and the figures released recently even confirm this thesis. However, it is increasingly evident that this economic recovery is unlikely to be V-shaped.
Due to the pandemic, the US government has allocated more than US $ 3 trillion in tax incentives, a record amount, to people and companies. However, that support ended abruptly on July 31, when Congress and the White House were unable to agree on a second round of stimulus, which is removing at least $ 750 billion a month from the economy in the second quarter.
In response to this situation, the August consumer confidence index fell 7 points, to 84.8. Meanwhile, the financial market turns its attention to stocks, causing the S&P 500 to reach a new record, as shown in the graph below:
There is also an expectation that there will be a second wave of contamination by the coronavirus in the coming months, due to the arrival of the autumn-winter season. Another point is inflation, which is being pulled upwards by strong monetary intervention, and which can take the country’s debt to too high levels. The transition from physical money to a digital version should also impact the dollar’s strength in the long run. In contrast to the government’s theory, the analysts of financial institutions are already betting more on the W-shaped recovery, that is, it will get worse before it gets better.
This 2020 crisis is affecting the economy in general. What will happen when the fiscal well runs dry, companies operate with record levels of indebtedness and the monetary tap is unable to pour liquidity as fast as it has been doing?
These doubts are keeping the ForEx market in a situation of strong volatility. Anything can happen while people are not solidly vaccinated against coronavirus. In the meantime, we believe that the dollar is still a safe currency, backed by the largest economy in the world, and that provides the basis for most contracts signed globally. However, it is recommended to make the most conservative decisions possible in your trading, and be emotionally prepared for the unexpected
August 25, 2020
Tuesday is bringing the release of German GDP data, a preview of the Brazilian IPCA and the number of new homes in the USA. EURUSD opened in appreciation, with the market still operating with considerable volatility.
Industrial production in Austria shrank 10.3% compared to the previous year, in June 2020. Production decreased in mining (-20.4%); manufacturing (-12.5%); construction (-6.8%) and electricity supply (-3.8%). In relation to May 2020, industrial production increased by 5% pointing towards recovery.
Germany’s GDP for the second quarter declined by 9.7%, less than the estimated 10.1%. Consumption and exports were largely responsible for this result. The market takes this information as positive, but with little encouragement, since the recovery for the coming quarters should be slower than expected. The indicator that measures the expectations of companies in the country for the coming months continued to improve (97.5 in August vs 96.7 in July 2020). Encouragement improved in the industrial segment (-5.4 vs -12.1), services (7.8 vs 2.1), commerce (-4.8 vs -5.1) and construction (0.0 vs – 2.5).
It is interesting to highlight the latest restoration of DowJones (DJIA), an index that represents the evolution of the share price of the 30 main North American companies. Exxon Mobil, a giant in the oil and gas segment, left the composition of the index, pointing to the future decline of the natural resource extraction industry. Were also excluded from the index Raytheon (defense) and Pfizer (Swiss pharmaceutical). They were replaced by Salesforce (CRM software), Amgen (biotechnology) and Honeywell (industry).
The commercial relationship between the USA and China is in a good moment. China has set record quantities of US oil to be imported next month.
The hurricane season is beginning in the USA with 2 storms affecting oil production in the southern region of the country.
The S & P500 closed at 3,431.28 this Monday, driven especially by the FDA’s approval of the use of blood plasma to treat COVID-19.
The United States of America is currently going through a very turbulent time. In addition to the pandemic, the electoral dispute, the potential conflict with China, the bubble in the stock market, the excessive government intervention to keep the economy going, the country is also going through a series of riots, with people protesting against systemic racism and police brutality in several cities. Last weekend in Chicago, the protests resulted in two dozen people arrested, and 17 police officers and at least two injured protesters.
It is increasingly evident that no ‘V’ shaped economic recovery will soon reach the American economy. There is an expectation that there will be a second wave of contamination by the coronavirus in the coming months, due to the arrival of the autumn-winter season. Another point is inflation, which is being pulled upwards by strong monetary intervention, and which can take the country’s debt to higher levels. The transition from physical money to a digital version of it should also impact the dollar’s strength in the long term. The country, which has always been managed as a federation, is moving towards to a centralized administration, increasing the power of the Federal Government.
Analysts at financial institutions are already betting more on the W-shaped recovery, meaning that it will get worse before it gets better. And that recovery will take longer to happen.