LiteFinance
- Forex Broker en LiteFinance Global LLC
- San Vicente y las Granadinas
- 1052
Desde el año 2005, LiteFinance (ex. LiteForex) es un bróker de ECN online, que ofrece a los clientes la posibilidad de acceder a la más profunda liquidez en divisas, materias primas y mercados de valores. Para operar a través de LiteFinance (ex. LiteForex) están disponibles todos los principales pares de divisas, tasas cruzadas, petróleo, metales preciosos, índices bursátiles, acciones corporativas y el conjunto más grande de pares de criptomonedas entre los brókeres.
LiteFinance
The dollar spoiled it all. Forecast for 29.10.2020
Fundamental forecast for dollar for today
Donald Trump risks being remembered as a person who spoiled everything. He inherited a record-long employment growth streak, but in September, the indicator lacked 10.7 million people to equal February's values. He got a weak dollar and tried to make it even weaker to support US exporters. But in fact, the USD index has consolidated by 18% since Barack Obama's 2008 victory. Trump wanted to do his best to slow down China. Instead, he approached the moment when China's economy will outperform the US' one due to the difference in pandemic management approaches.
It's not surprising that ordinary Americans and financial markets have changed their attitude to the current president. He's losing to Joe Biden, and the S&P 500's fall on the eve of the election indicates the Republican's eventual defeat. According to Strategas Research Partners' study, the stock market has predicted election results right 20 out of 23 times since 1928. If it was growing one week before the elections, the party in power's candidate won in 86% of cases.
The drowning Trump is catching at a straw. He says US GDP can grow over 30% in Q3, but obviously, the economy risks slowing down in Q4 amid fiscal stimulus exhaustion and epidemiological state worsening. According to Oxford Economics, the slowdown may go down to 3%.
Fears of the S&P 500's another collapse result in the US stock market sales and the USD consolidation. Investors consider the upcoming election to be the most uncertain ever, even more so because the White House current tenant may not recognize the results. One month ago, markets were sure restrictions would be targeted, yet they face a different picture in October.
The sharp growth of new cases in Europe forced Germany and France into closing bars, restaurants, and other service sector businesses. According to Bloomberg, that will cut French Q4 GDP by 0.8-2%.
The eurozone may face a double recession faster than the US, and the economic growth divergence is advantageous to EURUSD bears. The current correction now looks reasonable, and even more so because the pandemic's spread urges on the ECB. Bloomberg's experts expected the ECB would expand QE in December, but now no one can tell for sure it won't do that on 29 October.
Trading plan for EURUSD for today
Fundamentally, the main currency pair's pullback is quite logical. However, it's surprising that the market isn't trying to exploit the factor of Joe Biden's victory. The EURUSD's rally in the next 5-7 days, followed by a sudden reversal, would be an optimal scenario. The bulls still can do some fighting if the quotes rise above 1.179-1.18 against a backdrop of the ECB's meeting.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/the-dollar-spoiled-it-all-forecast-for-29102020/?uid=285861726&cid=79634
COVID-19 cases in Europe
Fundamental forecast for dollar for today
Donald Trump risks being remembered as a person who spoiled everything. He inherited a record-long employment growth streak, but in September, the indicator lacked 10.7 million people to equal February's values. He got a weak dollar and tried to make it even weaker to support US exporters. But in fact, the USD index has consolidated by 18% since Barack Obama's 2008 victory. Trump wanted to do his best to slow down China. Instead, he approached the moment when China's economy will outperform the US' one due to the difference in pandemic management approaches.
It's not surprising that ordinary Americans and financial markets have changed their attitude to the current president. He's losing to Joe Biden, and the S&P 500's fall on the eve of the election indicates the Republican's eventual defeat. According to Strategas Research Partners' study, the stock market has predicted election results right 20 out of 23 times since 1928. If it was growing one week before the elections, the party in power's candidate won in 86% of cases.
The drowning Trump is catching at a straw. He says US GDP can grow over 30% in Q3, but obviously, the economy risks slowing down in Q4 amid fiscal stimulus exhaustion and epidemiological state worsening. According to Oxford Economics, the slowdown may go down to 3%.
Fears of the S&P 500's another collapse result in the US stock market sales and the USD consolidation. Investors consider the upcoming election to be the most uncertain ever, even more so because the White House current tenant may not recognize the results. One month ago, markets were sure restrictions would be targeted, yet they face a different picture in October.
The sharp growth of new cases in Europe forced Germany and France into closing bars, restaurants, and other service sector businesses. According to Bloomberg, that will cut French Q4 GDP by 0.8-2%.
The eurozone may face a double recession faster than the US, and the economic growth divergence is advantageous to EURUSD bears. The current correction now looks reasonable, and even more so because the pandemic's spread urges on the ECB. Bloomberg's experts expected the ECB would expand QE in December, but now no one can tell for sure it won't do that on 29 October.
Trading plan for EURUSD for today
Fundamentally, the main currency pair's pullback is quite logical. However, it's surprising that the market isn't trying to exploit the factor of Joe Biden's victory. The EURUSD's rally in the next 5-7 days, followed by a sudden reversal, would be an optimal scenario. The bulls still can do some fighting if the quotes rise above 1.179-1.18 against a backdrop of the ECB's meeting.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/the-dollar-spoiled-it-all-forecast-for-29102020/?uid=285861726&cid=79634
COVID-19 cases in Europe
LiteFinance
Dollar rocks on the waves. Analysis as of 28.10.2020
Weekly fundamental forecast for the dollar
The fear of coronavirus makes US stock market bulls retreat, which results in the US dollar’s consolidation. The number of new cases hits a record high in the USA. The US also reported record high hospitalization rates since 19 August, while France recorded the highest daily death toll since April. Emmanuel Macron is rumored to introduce another lockdown. That dropped the EURUSD quotes below the bottom of figure 18. The fall might have been deeper if not for expectations of the Democrats’ victory on 3 November.
According to 75% of 59 Reuters experts, a blue wave will be the best option for the US economy. It will help the fiscal stimulus package worth $1.8 trillion pass easily through Congress. Experts forecast that the US GDP will draw down 4% in 2020 and expand 3.7% and 2.9% in 2021-2022, respectively.
A blue wave and post-election reduction in political uncertainty suggest that volatility may fall. That’s good news for S&P 500 and bad news for the greenback. The world’s largest financial manager BlackRock, which manages assets worth $7.3 trillion, thinks that the USD will be moderately weak for 1-3 years. The giant joints USD bulls, such as Goldman Sachs and UBS. Its position explains why hedge funds are selling out dollars in the forward market.
Uncertainty feeds the dollar. The markets seem to know already the presidential election’s results. The election factor excluded, the second wave may drop EURUSD quotes significantly. We may face the global economy’s double recession and another collapse of the S&P 500 and the greenback’s hike like it was in March. All the previous achievements will be canceled. Few are those who will remember the housing prices’ growth in the USA and the fifth consecutive month of increase in US durable goods orders.
At first sight, the second pandemic wave must push the ECB to active actions as early as at the 29 October meeting. However, QE expansion won’t solve the COVID-19 issue. European banks stop crediting, fearing bad debt growth. So, Christine Lagarde’s main task is to calm down financial markets. A hint about an additional stimulus in December may help with that task.
Weekly trading plan for EURUSD
Thus, the pandemic returned to Forex’s forefront and consolidated the USD. However, I think it’s still possible to exploit the factor of Joe Biden’s victory in the short term. The EURUSD’s retracement from support at 1.1745 or return to 1.1815 and higher may be a signal to open long positions for impatient and adventurous traders.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-rocks-on-the-waves-analysis-as-of-28102020/?uid=285861726&cid=79634
Reuters survey: What will support the US economy?
Weekly fundamental forecast for the dollar
The fear of coronavirus makes US stock market bulls retreat, which results in the US dollar’s consolidation. The number of new cases hits a record high in the USA. The US also reported record high hospitalization rates since 19 August, while France recorded the highest daily death toll since April. Emmanuel Macron is rumored to introduce another lockdown. That dropped the EURUSD quotes below the bottom of figure 18. The fall might have been deeper if not for expectations of the Democrats’ victory on 3 November.
According to 75% of 59 Reuters experts, a blue wave will be the best option for the US economy. It will help the fiscal stimulus package worth $1.8 trillion pass easily through Congress. Experts forecast that the US GDP will draw down 4% in 2020 and expand 3.7% and 2.9% in 2021-2022, respectively.
A blue wave and post-election reduction in political uncertainty suggest that volatility may fall. That’s good news for S&P 500 and bad news for the greenback. The world’s largest financial manager BlackRock, which manages assets worth $7.3 trillion, thinks that the USD will be moderately weak for 1-3 years. The giant joints USD bulls, such as Goldman Sachs and UBS. Its position explains why hedge funds are selling out dollars in the forward market.
Uncertainty feeds the dollar. The markets seem to know already the presidential election’s results. The election factor excluded, the second wave may drop EURUSD quotes significantly. We may face the global economy’s double recession and another collapse of the S&P 500 and the greenback’s hike like it was in March. All the previous achievements will be canceled. Few are those who will remember the housing prices’ growth in the USA and the fifth consecutive month of increase in US durable goods orders.
At first sight, the second pandemic wave must push the ECB to active actions as early as at the 29 October meeting. However, QE expansion won’t solve the COVID-19 issue. European banks stop crediting, fearing bad debt growth. So, Christine Lagarde’s main task is to calm down financial markets. A hint about an additional stimulus in December may help with that task.
Weekly trading plan for EURUSD
Thus, the pandemic returned to Forex’s forefront and consolidated the USD. However, I think it’s still possible to exploit the factor of Joe Biden’s victory in the short term. The EURUSD’s retracement from support at 1.1745 or return to 1.1815 and higher may be a signal to open long positions for impatient and adventurous traders.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-rocks-on-the-waves-analysis-as-of-28102020/?uid=285861726&cid=79634
Reuters survey: What will support the US economy?
LiteFinance
Euro: slow start and fast drive. Analysis as of 27.10.2020
Weekly fundamental forecast for euro
There are a few reasons for the EURUSD’s drop to the bottom of figure 18: the US stock indexes’ fall amid loss of faith in fiscal stimuli and record-high growth of new cases in the USA; disappointing macrostatistics in Germany, and fears that the ECB may expand QE as early as in October. Investors were expecting the second wave of COVID-19, but they didn’t know it would come so fast. The record high growth of new cases in the USA, France, and Russia, the introduction of new restrictions, and emergency announcements in some European countries made the S&P 500 fall by 1.9%. The German DAX went further and dropped 3.7 %, drawing the euro down too.
The increase in new coronavirus cases in Germany provoked the Ifo’s Business Climate Index’s fall, the first in six months. It’s a bad signal about an eventual slump after a 6-month recovery. Growing risks of a double recession and reflation may urge the ECB to expand QE by €500 billion already on 29 October, in contrast to the Bloomberg experts’ bet on December. That will be an unpleasant surprise for EURUSD bulls.
The States look preferable to the eurozone, which lost illusions about fast recovery. Three months ago, Bloomberg surveyed economists forecast that the US GDP would grow 18% in Q3. The estimate rose to 31.8% by the publication date against a backdrop of a large fiscal stimulus as a faster-than-expected removal of restrictions. If the fiscal stimulus isn’t extended, the US double recession chance will be as big as in Europe.
The market doesn’t believe in any extra support before the elections and has already started to doubt that the issue will be resolved after 3 November as a blue wave is becoming less likely. That results in the S&P 500’s fall, which contradicts history. Since 1928, the stock index has closed in the green zone in the week before the presidential election. If we take a Tuesday to Friday period, the indicator will increase by up to 91%. Thus, the week's bad start isn’t as bad a signal for the stock market and the euro.
Not only will Joe Biden’s victory inspire S&P 500 bulls, but it will also reduce the risk of a trade war resumption, the reason for which may be China’s slow execution of its obligations under January’s agreement. According to Bloomberg, China has bought $65.5 billion in US goods, while the agreement is $170 billion.
The Democrats’ victory will weaken the US protectionism and allow the global trade to breathe deeply. That’s good news for the export-oriented eurozone and its currency.
Weekly trading plan for EURUSD
S&P 500’s fall on 26 October should be interpreted as market noise. The story is likely to repeat itself, and the stock index will close in the green zone in the last week before the election.
The strategy for the EURUSD remains the same. Buy at a breakout of resistance at 1.1865.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-slow-start-and-fast-drive-analysis-as-of-27102020/?uid=285861726&cid=79634
German business climate index
Weekly fundamental forecast for euro
There are a few reasons for the EURUSD’s drop to the bottom of figure 18: the US stock indexes’ fall amid loss of faith in fiscal stimuli and record-high growth of new cases in the USA; disappointing macrostatistics in Germany, and fears that the ECB may expand QE as early as in October. Investors were expecting the second wave of COVID-19, but they didn’t know it would come so fast. The record high growth of new cases in the USA, France, and Russia, the introduction of new restrictions, and emergency announcements in some European countries made the S&P 500 fall by 1.9%. The German DAX went further and dropped 3.7 %, drawing the euro down too.
The increase in new coronavirus cases in Germany provoked the Ifo’s Business Climate Index’s fall, the first in six months. It’s a bad signal about an eventual slump after a 6-month recovery. Growing risks of a double recession and reflation may urge the ECB to expand QE by €500 billion already on 29 October, in contrast to the Bloomberg experts’ bet on December. That will be an unpleasant surprise for EURUSD bulls.
The States look preferable to the eurozone, which lost illusions about fast recovery. Three months ago, Bloomberg surveyed economists forecast that the US GDP would grow 18% in Q3. The estimate rose to 31.8% by the publication date against a backdrop of a large fiscal stimulus as a faster-than-expected removal of restrictions. If the fiscal stimulus isn’t extended, the US double recession chance will be as big as in Europe.
The market doesn’t believe in any extra support before the elections and has already started to doubt that the issue will be resolved after 3 November as a blue wave is becoming less likely. That results in the S&P 500’s fall, which contradicts history. Since 1928, the stock index has closed in the green zone in the week before the presidential election. If we take a Tuesday to Friday period, the indicator will increase by up to 91%. Thus, the week's bad start isn’t as bad a signal for the stock market and the euro.
Not only will Joe Biden’s victory inspire S&P 500 bulls, but it will also reduce the risk of a trade war resumption, the reason for which may be China’s slow execution of its obligations under January’s agreement. According to Bloomberg, China has bought $65.5 billion in US goods, while the agreement is $170 billion.
The Democrats’ victory will weaken the US protectionism and allow the global trade to breathe deeply. That’s good news for the export-oriented eurozone and its currency.
Weekly trading plan for EURUSD
S&P 500’s fall on 26 October should be interpreted as market noise. The story is likely to repeat itself, and the stock index will close in the green zone in the last week before the election.
The strategy for the EURUSD remains the same. Buy at a breakout of resistance at 1.1865.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-slow-start-and-fast-drive-analysis-as-of-27102020/?uid=285861726&cid=79634
German business climate index
LiteFinance
Dollar is afraid of risk on steroids. Analysis as of 26.10.2020
Weekly fundamental forecast for dollar
The pandemic revealed the drawbacks of the eurozone’s two-speed economy. While Germany’s business activity grew, mainly due to the industrial sector, the currency bloc’s composite Purchasing Managers Index dropped to 4-month lows at 49.4. When that value is less than the key level of 50, the economy falls. Thus, the eurozone may face a double recession against the backdrop of the second wave of COVID-19. That allows selling EURUSD amid the US business activity’s continuous growth. Unfortunately, the market is overwhelmed with quite different investment ideas. At least for now.
Bank of New York Mellon notes that the correlation between currencies and the US stock indexes is significantly higher than in 2019. That allows us to presume their increased sensitivity to risk appetite. The bank interpreted that unusual occurrence as “risk on steroids”: the markets are waiting for Joe Biden’s victory, the S&P 500’s rally, and the greenback’s dive, which will affect dollar pairs and cross rates.
The USD is under serious pressure, but the euro itself has some trumps. There is too much spare cash in the eurozone’s bank system amid large monetary stimuli. The index reached a record high level of €3.2 trillion in October. As there’s too much spare money, it goes to the debt market: demand for the European Commission’s first bonds was €233 billion while the issuance volume was €17 billion. Since the ECB has already got a large piece of the pie by means of its pandemic-driven bond-buying program, the remaining part is fiercely contended for.
Central banks are interested in buying bonds too: according to Deutsche Bank’s research, their share in the volume of 10-year bond issuance was 40%, two times bigger than previous issuance values. Diversification of gold and currency reserves in favor of the euro is one of the key factors in the EURUSD’s consolidation.
The ECB will hardly decide to expand QE in the current circumstances at the meeting on 29 October. It doesn’t need to hurry in spite of the pandemic’s second wave, deflation, Brexit, and double recession risks. The CPI’s fall below zero may be due to temporary factors, such as Germany’s VAT cut. The program’s unused resources amount to $750 billion, whereas economic forecasts will be updated only in December. There are plenty of arguments to continue to “idle on the roadside,” but Christine Lagarde can still surprise us.
Weekly trading plan for EURUSD
If not for the ECB’s meeting and the fiscal stimulus story, we could buy EURUSD at the breakout of resistance at 1.1865 amid expectations of Joe Biden’s victory, then fix profits after 3 November and sell the pair amid the divergence in the US’ and the eurozone’s economic growth. However, other factors may interfere with that plan. The last week of October promises to be wild.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-afraid-of-risk-on-steroids-analysis-as-of-26102020/?uid=285861726&cid=79634
Business activity
Weekly fundamental forecast for dollar
The pandemic revealed the drawbacks of the eurozone’s two-speed economy. While Germany’s business activity grew, mainly due to the industrial sector, the currency bloc’s composite Purchasing Managers Index dropped to 4-month lows at 49.4. When that value is less than the key level of 50, the economy falls. Thus, the eurozone may face a double recession against the backdrop of the second wave of COVID-19. That allows selling EURUSD amid the US business activity’s continuous growth. Unfortunately, the market is overwhelmed with quite different investment ideas. At least for now.
Bank of New York Mellon notes that the correlation between currencies and the US stock indexes is significantly higher than in 2019. That allows us to presume their increased sensitivity to risk appetite. The bank interpreted that unusual occurrence as “risk on steroids”: the markets are waiting for Joe Biden’s victory, the S&P 500’s rally, and the greenback’s dive, which will affect dollar pairs and cross rates.
The USD is under serious pressure, but the euro itself has some trumps. There is too much spare cash in the eurozone’s bank system amid large monetary stimuli. The index reached a record high level of €3.2 trillion in October. As there’s too much spare money, it goes to the debt market: demand for the European Commission’s first bonds was €233 billion while the issuance volume was €17 billion. Since the ECB has already got a large piece of the pie by means of its pandemic-driven bond-buying program, the remaining part is fiercely contended for.
Central banks are interested in buying bonds too: according to Deutsche Bank’s research, their share in the volume of 10-year bond issuance was 40%, two times bigger than previous issuance values. Diversification of gold and currency reserves in favor of the euro is one of the key factors in the EURUSD’s consolidation.
The ECB will hardly decide to expand QE in the current circumstances at the meeting on 29 October. It doesn’t need to hurry in spite of the pandemic’s second wave, deflation, Brexit, and double recession risks. The CPI’s fall below zero may be due to temporary factors, such as Germany’s VAT cut. The program’s unused resources amount to $750 billion, whereas economic forecasts will be updated only in December. There are plenty of arguments to continue to “idle on the roadside,” but Christine Lagarde can still surprise us.
Weekly trading plan for EURUSD
If not for the ECB’s meeting and the fiscal stimulus story, we could buy EURUSD at the breakout of resistance at 1.1865 amid expectations of Joe Biden’s victory, then fix profits after 3 November and sell the pair amid the divergence in the US’ and the eurozone’s economic growth. However, other factors may interfere with that plan. The last week of October promises to be wild.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-afraid-of-risk-on-steroids-analysis-as-of-26102020/?uid=285861726&cid=79634
Business activity
LiteFinance
No illusions for dollar. Forecast for 23.10.2020
A blue wave is more and more likely to happen, but the greenback is growing ahead of the EU business activity data publication. How will the EURUSD react to bad stats? Let’s find it out and make a trading plan.
Fundamental forecast for dollar for today
The markets are tired of the US fiscal stimulus story and want to “play uncertainty” ahead of the US presidential election. Together with US strong macrostatistics, that made EURUSD’s quotes fall. My strategy of selling the pair from the levels of 1.185 and 1.181 is working out, but don’t get carried away with it. Joe Biden’s victory prospects are more and more clear. So is the euro’s bright future.
According to Morgan Stanley and JP Morgan, the democrats’ victory will cut a risk of the US protectionist policy’s second wave. That will have a positive impact on the export-oriented eurozone and the local currency. Deutsche Bank forecasts that the EURUSD will rally to 1.2 in case the White House has a new tenant. Tax hikes, budget deficit growth and lower trading tension will put pressure on the dollar as a safe-haven asset. On the contrary, Trump’s unexpected victory will support the greenback amid higher uncertainty and the risk of a new trading war.
Despite the ratings and Biden’s confident looks during the last debates, there’s still a chance of losing the race to the Republicans, as it happened in 2016. So, investors are not in a hurry for selling dollars. What’s more, the US economy is showing a surprising resistance to the pandemic: jobless claims are at their lowest since March, while sales in the secondary housing market have soared to 14-year peaks.
New Covid cases grew to record highs in Europe, and Spain became the first European country to have over 1 million of cases. That puts pressure on the euro. Besides, the demand for the eurozone’s peripheral bonds isn’t a high as expected: the Italian, Greek, and Portuguese bond yield is growing, which means the ECB is unlikely to expand the asset-buying program on 29 October. However, if the business activity data turn out to be disappointing, QE expansion will be more probable, and bond prices will grow too.
Even if the pandemic hit both demand and supply, the industrial sector is recovering faster. Its share in Germany’s and Italy’s GDPs (21% and 17%) is higher than in France and Spain (12% and 11%), so Germany and Italy are supposed to feel better.
Trading plan for EURUSD for today
Traders are more interested in the EURUSD’s reaction to October’s business activity statistics. There are fears that actual data may turn out worse than Bloomberg’s forecasts because of the second coronavirus wave. At the same time, the euro’s fall ahead of the important releases lets us presume that negative news have already been factored in quotes in part. So, there will be an opportunity to buy the regional currency after a slight drawdown. I think the bears’ inability to draw the pair below 1.177-1.178 will point to their weakness and allow us to go long at a breakout.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/no-illusions-for-dollar-forecast-for-23102020/?uid=285861726&cid=79634
US labour market stats
A blue wave is more and more likely to happen, but the greenback is growing ahead of the EU business activity data publication. How will the EURUSD react to bad stats? Let’s find it out and make a trading plan.
Fundamental forecast for dollar for today
The markets are tired of the US fiscal stimulus story and want to “play uncertainty” ahead of the US presidential election. Together with US strong macrostatistics, that made EURUSD’s quotes fall. My strategy of selling the pair from the levels of 1.185 and 1.181 is working out, but don’t get carried away with it. Joe Biden’s victory prospects are more and more clear. So is the euro’s bright future.
According to Morgan Stanley and JP Morgan, the democrats’ victory will cut a risk of the US protectionist policy’s second wave. That will have a positive impact on the export-oriented eurozone and the local currency. Deutsche Bank forecasts that the EURUSD will rally to 1.2 in case the White House has a new tenant. Tax hikes, budget deficit growth and lower trading tension will put pressure on the dollar as a safe-haven asset. On the contrary, Trump’s unexpected victory will support the greenback amid higher uncertainty and the risk of a new trading war.
Despite the ratings and Biden’s confident looks during the last debates, there’s still a chance of losing the race to the Republicans, as it happened in 2016. So, investors are not in a hurry for selling dollars. What’s more, the US economy is showing a surprising resistance to the pandemic: jobless claims are at their lowest since March, while sales in the secondary housing market have soared to 14-year peaks.
New Covid cases grew to record highs in Europe, and Spain became the first European country to have over 1 million of cases. That puts pressure on the euro. Besides, the demand for the eurozone’s peripheral bonds isn’t a high as expected: the Italian, Greek, and Portuguese bond yield is growing, which means the ECB is unlikely to expand the asset-buying program on 29 October. However, if the business activity data turn out to be disappointing, QE expansion will be more probable, and bond prices will grow too.
Even if the pandemic hit both demand and supply, the industrial sector is recovering faster. Its share in Germany’s and Italy’s GDPs (21% and 17%) is higher than in France and Spain (12% and 11%), so Germany and Italy are supposed to feel better.
Trading plan for EURUSD for today
Traders are more interested in the EURUSD’s reaction to October’s business activity statistics. There are fears that actual data may turn out worse than Bloomberg’s forecasts because of the second coronavirus wave. At the same time, the euro’s fall ahead of the important releases lets us presume that negative news have already been factored in quotes in part. So, there will be an opportunity to buy the regional currency after a slight drawdown. I think the bears’ inability to draw the pair below 1.177-1.178 will point to their weakness and allow us to go long at a breakout.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/no-illusions-for-dollar-forecast-for-23102020/?uid=285861726&cid=79634
US labour market stats
LiteFinance
Dollar checks its watch. Analysis as of 22.10.2020
Weekly fundamental forecast for dollar
In the financial markets, time is as important a factor as a price direction. Many traders would lose their money having chosen a wrong moment for making a trade, even though an asset’s price direction was predicted correctly. It is believed that fiscal stimulus will weaken the US dollar as stocks will grow, global risk appetite will increase, and demand for safe-haven assets will fall. The question is: will the economic support be provided before or after the elections? In the latter case, Donald Trump’s unwillingness to recognize voting results will support uncertainty and the greenback.
According to economic adviser Larry Kudlow, the stimulus talks are going really well, and both the economy and the market will profit if a deal is made within the next two weeks. At the same time, the Republicans don’t accept the prospective amount of $1.9 trillion. Speaker of the US House of Representatives Nancy Pelosi believes, a deal will be signed in spite of the Republicans’ resistance, but admits it may happen only after the elections.
An extra support before the election would give Trump and the USD extra points. That’s why the dollar’s weakness and the S&P 500’s fall mean the markets are doubting that the Congress will approve of the Democrats’ package before Joe Biden takes the president’s chair.
Unlike fiscal stimulus, the US elections have already been scheduled. At the same time, the Blue Wave may raise the S&P 500 in the short term, and weaken the greenback, with a subsequent correction. On the other hand, the markets are overconfident about the Democrats’ victory, which shows itself in lower volatility at Forex. In 2016, Hillary Clinton was on the top of ratings, but it was Trump who opened a bottle of champaign. If he is re-elected unexpectedly, investors should consider selling the AUDUSD and buying the USDCNH amid a risk of US-China trade war resumption.
Weekly trading plan for EURUSD
The QE programme extension period is a question of time too. If that happens at the ECB’s meeting on 29 October, we can develop a trading strategy of buying the EURUSD as the quotes will fall amid weak statistics on Germany’s and the eurozone’s business activity, and fixing profits after the Executive Board’s meeting. Such a strategy is based on high demand for periphery countries’ bonds. The price for them will grow if QE gets extended. The problem is, the ECB may not take that step at the end of October.
I think that such factors as Joe Biden’s victory and a capital flow from the US debt market to Europe may raise EURUSD quotes despite the second pandemic wave and the eurozone’s economic weakness. Wait for data on Europe’s PMI to make a decision about medium-term trades. Until then, focus on intraday trading with narrow targets.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-checks-its-watch-analysis-as-of-22102020/?uid=285861726&cid=79634
US candidates rating
Weekly fundamental forecast for dollar
In the financial markets, time is as important a factor as a price direction. Many traders would lose their money having chosen a wrong moment for making a trade, even though an asset’s price direction was predicted correctly. It is believed that fiscal stimulus will weaken the US dollar as stocks will grow, global risk appetite will increase, and demand for safe-haven assets will fall. The question is: will the economic support be provided before or after the elections? In the latter case, Donald Trump’s unwillingness to recognize voting results will support uncertainty and the greenback.
According to economic adviser Larry Kudlow, the stimulus talks are going really well, and both the economy and the market will profit if a deal is made within the next two weeks. At the same time, the Republicans don’t accept the prospective amount of $1.9 trillion. Speaker of the US House of Representatives Nancy Pelosi believes, a deal will be signed in spite of the Republicans’ resistance, but admits it may happen only after the elections.
An extra support before the election would give Trump and the USD extra points. That’s why the dollar’s weakness and the S&P 500’s fall mean the markets are doubting that the Congress will approve of the Democrats’ package before Joe Biden takes the president’s chair.
Unlike fiscal stimulus, the US elections have already been scheduled. At the same time, the Blue Wave may raise the S&P 500 in the short term, and weaken the greenback, with a subsequent correction. On the other hand, the markets are overconfident about the Democrats’ victory, which shows itself in lower volatility at Forex. In 2016, Hillary Clinton was on the top of ratings, but it was Trump who opened a bottle of champaign. If he is re-elected unexpectedly, investors should consider selling the AUDUSD and buying the USDCNH amid a risk of US-China trade war resumption.
Weekly trading plan for EURUSD
The QE programme extension period is a question of time too. If that happens at the ECB’s meeting on 29 October, we can develop a trading strategy of buying the EURUSD as the quotes will fall amid weak statistics on Germany’s and the eurozone’s business activity, and fixing profits after the Executive Board’s meeting. Such a strategy is based on high demand for periphery countries’ bonds. The price for them will grow if QE gets extended. The problem is, the ECB may not take that step at the end of October.
I think that such factors as Joe Biden’s victory and a capital flow from the US debt market to Europe may raise EURUSD quotes despite the second pandemic wave and the eurozone’s economic weakness. Wait for data on Europe’s PMI to make a decision about medium-term trades. Until then, focus on intraday trading with narrow targets.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-checks-its-watch-analysis-as-of-22102020/?uid=285861726&cid=79634
US candidates rating
LiteFinance
Euro follows rouble's example. Forecast for EURUSD for 21.10.2020
Fundamental forecast for euro for today
Money controls the world. Everything seems to be against the euro: the second wave of COVID-19 in Europe, the S&P 500’s retracement, the worsening of the eurozone’s economy and the ECB’s hints at monetary policy softening. Nevertheless, the EURUSD jumps up like a scalded cat. If the reason is the Chinese yuan that has reached its 27-month high against the USD, then why aren’t the Australian and the NZ dollars consolidating? Australia’s and New Zealand’s shares in Chinese exports are higher than the eurozone’s one. As it turns out, it’s carry trade that should be blamed for the euro’s rise.
The story that occurred to the Russian rouble is still fresh in our minds: carry trade made it the best Forex performer in 2019. USDRUB’s fall looked paradoxical too. The state of the Russian economy left much to be desired, trade wars slowed down the main partners’ GDP and the Bank of Russia dropped the key rate to stimulate inflation. It’s the latter factor that made non-residents buy out governmental bonds in expectation of a rise in price. A similar story appears to be happening in Europe now.
The European Commission made the first issuance of 10-year and 20-year bonds as part of common debt on 20 October. The sale will finance the EU’s coronavirus-relief programs. The issuance volume amounted to €17 billion, and that’s just a beginning. The fund’s total volume is €750 billion. The mass media once presented those bonds as an alternative to treasuries. That was one of the factors in the EURUSD’s summer rally. I think it’s a mere flow of capital from the USA and developing countries to Europe. Buying EM bonds doesn’t seem to be a good idea amid global GDP’s potential slowdown in Q4. Europe’s periphery is another thing. Greek, Italian and Portuguese bonds look tasty. That lowers their spreads, in comparison with German ones, and points to smaller political risks. Hi, Russia-2019!
The more the ECB speaks about softening monetary policy, the more actively non-residents buy out European bonds, hoping for a price rise in the future. Obviously, German bonds have no room for growth, but the periphery still offers some earning opportunities. By the way, EURUSD’s 3-month swap spreads became negative in August. That means the Americans can make profit from both a rise in price in EU bonds and hedging.
The risk of a Blue Wave in the USA aggravates the situation. Joe Biden’s victory and the Democrats’ takeover of the Congress will unblock $4-5 trillion in fiscal aid. That will increase the volumes of Treasuries issuance and drop their price. Investors need an alternative urgently, and they find it in Europe.
Trading plan for EURUSD for today
How long will the euro continue growing, considering the growth isn’t fundamentally backed up? The rouble’s last year example says that everything is possible. The EURUSD’s quotes can be rising up to the ECB’s meeting on 29 October. Then a sale-out may follow. I recommend staying outside the market for a while.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-follow-roubles-example-forecast-for-eurusd-for-21102020/?uid=285861726&cid=79634
Yield spreads in European and German bonds
Fundamental forecast for euro for today
Money controls the world. Everything seems to be against the euro: the second wave of COVID-19 in Europe, the S&P 500’s retracement, the worsening of the eurozone’s economy and the ECB’s hints at monetary policy softening. Nevertheless, the EURUSD jumps up like a scalded cat. If the reason is the Chinese yuan that has reached its 27-month high against the USD, then why aren’t the Australian and the NZ dollars consolidating? Australia’s and New Zealand’s shares in Chinese exports are higher than the eurozone’s one. As it turns out, it’s carry trade that should be blamed for the euro’s rise.
The story that occurred to the Russian rouble is still fresh in our minds: carry trade made it the best Forex performer in 2019. USDRUB’s fall looked paradoxical too. The state of the Russian economy left much to be desired, trade wars slowed down the main partners’ GDP and the Bank of Russia dropped the key rate to stimulate inflation. It’s the latter factor that made non-residents buy out governmental bonds in expectation of a rise in price. A similar story appears to be happening in Europe now.
The European Commission made the first issuance of 10-year and 20-year bonds as part of common debt on 20 October. The sale will finance the EU’s coronavirus-relief programs. The issuance volume amounted to €17 billion, and that’s just a beginning. The fund’s total volume is €750 billion. The mass media once presented those bonds as an alternative to treasuries. That was one of the factors in the EURUSD’s summer rally. I think it’s a mere flow of capital from the USA and developing countries to Europe. Buying EM bonds doesn’t seem to be a good idea amid global GDP’s potential slowdown in Q4. Europe’s periphery is another thing. Greek, Italian and Portuguese bonds look tasty. That lowers their spreads, in comparison with German ones, and points to smaller political risks. Hi, Russia-2019!
The more the ECB speaks about softening monetary policy, the more actively non-residents buy out European bonds, hoping for a price rise in the future. Obviously, German bonds have no room for growth, but the periphery still offers some earning opportunities. By the way, EURUSD’s 3-month swap spreads became negative in August. That means the Americans can make profit from both a rise in price in EU bonds and hedging.
The risk of a Blue Wave in the USA aggravates the situation. Joe Biden’s victory and the Democrats’ takeover of the Congress will unblock $4-5 trillion in fiscal aid. That will increase the volumes of Treasuries issuance and drop their price. Investors need an alternative urgently, and they find it in Europe.
Trading plan for EURUSD for today
How long will the euro continue growing, considering the growth isn’t fundamentally backed up? The rouble’s last year example says that everything is possible. The EURUSD’s quotes can be rising up to the ECB’s meeting on 29 October. Then a sale-out may follow. I recommend staying outside the market for a while.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-follow-roubles-example-forecast-for-eurusd-for-21102020/?uid=285861726&cid=79634
Yield spreads in European and German bonds
LiteFinance
If only euro could. Forecast for EURUSD for 20.10.2020
Weekly fundamental forecast for euro
In spite of, not thanks to.
EURUSD’s yesterday rise could seem strange amid the US stock indexes’ fall and the second pandemic wave in Europe. However, we need simply to understand, what investment idea is prevailing in the market these days. The euro’s descending move is seen as a mere correction. Most investors are sure that Joe Biden’s victory at the elections on 3 November will weaken the dollar, whereas the vaccine will give a boost to the whole global economy. In those circumstances, any hint at the pair’s growth appears to a be a reason for buying it. No one wants to miss the train that will go to the north sooner or later.
Formally, the reasons of EURUSD’s rally were Speaker of the US House of Representatives Nancy Pelosi’s statement that a fiscal stimulus deal is still likely to be made before the election, and the Fed’s dovish comments.
If the Democrats and the Republicans agree on economic help, S&P 500’s rally may continue, the global risk appetite will improve, and the greenback’s position will worsen. Still, the market didn’t believe Pelosi: a deal would raise Trump’s rating. What do the Democrats need that for? Also, Pelosi’s statement sounded too ultimatum-like: if not on Tuesday, then never!
Fed’s Vice Chair Richard Clarida asserts that GDP’s pullback is connected in part with the Central bank’s and the Congress’ relief packages. He thinks that both the lawmakers and the Fed will need to provide additional support for GDP to continue recovering. Atlanta FED President Raphael Bostic believes that some areas of the US economy hardly ever recovered, or didn’t recover at all.
If the Fed is planning to provide an extra stimulus and GDP isn’t recovering, how can we speak about any divergence between monetary policy and economic growth, selling EURUSD in the short term?
During the fortnight ended on 13 October, hedge funds cut euro longs at the fastest pace over the last 8 months.
Still, speculative positions aren’t likely to become net shorts: the negative US assets yield and Joe Biden’s probable victory don’t allow investors to buy out dollars.
The Chinese yuan’s consolation may suggest the reasons of EURUSD’s rise to the top of figure 17. In spite of the People’s bank’s intention to put a spoke into USDCNH bears’ plans, the pair returned to the area of its 18-month lows and is ready to update them. That will draw it to the lowest value since July 2018. Investors overestimated the negative impact of China’s GDP’s moderate growth in Q3, and paid attention to strong statistics on industrial production and retail sales.
Weekly trading plan for EURUSD
I mentioned the yuan’s impact on the euro rate many times. Nevertheless, the eurozone’s domestic problems will prevent EURUSD from continuing the rally. The market is concerned about October’s data on European PMI. Most likely, the traders will be selling the euro at $1.178, $1.181 and $1.185 in the nearest time.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/if-only-euro-could-forecast-for-eurusd-for-20102020/?uid=285861726&cid=79634
EURUSD and speculative positions in euro
Weekly fundamental forecast for euro
In spite of, not thanks to.
EURUSD’s yesterday rise could seem strange amid the US stock indexes’ fall and the second pandemic wave in Europe. However, we need simply to understand, what investment idea is prevailing in the market these days. The euro’s descending move is seen as a mere correction. Most investors are sure that Joe Biden’s victory at the elections on 3 November will weaken the dollar, whereas the vaccine will give a boost to the whole global economy. In those circumstances, any hint at the pair’s growth appears to a be a reason for buying it. No one wants to miss the train that will go to the north sooner or later.
Formally, the reasons of EURUSD’s rally were Speaker of the US House of Representatives Nancy Pelosi’s statement that a fiscal stimulus deal is still likely to be made before the election, and the Fed’s dovish comments.
If the Democrats and the Republicans agree on economic help, S&P 500’s rally may continue, the global risk appetite will improve, and the greenback’s position will worsen. Still, the market didn’t believe Pelosi: a deal would raise Trump’s rating. What do the Democrats need that for? Also, Pelosi’s statement sounded too ultimatum-like: if not on Tuesday, then never!
Fed’s Vice Chair Richard Clarida asserts that GDP’s pullback is connected in part with the Central bank’s and the Congress’ relief packages. He thinks that both the lawmakers and the Fed will need to provide additional support for GDP to continue recovering. Atlanta FED President Raphael Bostic believes that some areas of the US economy hardly ever recovered, or didn’t recover at all.
If the Fed is planning to provide an extra stimulus and GDP isn’t recovering, how can we speak about any divergence between monetary policy and economic growth, selling EURUSD in the short term?
During the fortnight ended on 13 October, hedge funds cut euro longs at the fastest pace over the last 8 months.
Still, speculative positions aren’t likely to become net shorts: the negative US assets yield and Joe Biden’s probable victory don’t allow investors to buy out dollars.
The Chinese yuan’s consolation may suggest the reasons of EURUSD’s rise to the top of figure 17. In spite of the People’s bank’s intention to put a spoke into USDCNH bears’ plans, the pair returned to the area of its 18-month lows and is ready to update them. That will draw it to the lowest value since July 2018. Investors overestimated the negative impact of China’s GDP’s moderate growth in Q3, and paid attention to strong statistics on industrial production and retail sales.
Weekly trading plan for EURUSD
I mentioned the yuan’s impact on the euro rate many times. Nevertheless, the eurozone’s domestic problems will prevent EURUSD from continuing the rally. The market is concerned about October’s data on European PMI. Most likely, the traders will be selling the euro at $1.178, $1.181 and $1.185 in the nearest time.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/if-only-euro-could-forecast-for-eurusd-for-20102020/?uid=285861726&cid=79634
EURUSD and speculative positions in euro
LiteFinance
Second wave hits euro. Analysis as of 19.10.2020
Weekly fundamental forecast for euro
Which is worse: to be always on a losing streak or to have glimpses of hope between losing streaks? EURUSD may help answer that question. The second wave of COVID-19 is spreading across Europe so fast that the eurozone’s double recession is being discussed in the market. Not only will that increase the risk of the EURUSD’s further correction, but it also suggests an eventual turn to downtrend. What’s more, neither China nor Brexit haven’t lived up to the euro fans’ expectations so far.
China’s GDP grew by 4.9% in quarter 3. That’s better than the Q2 value (+3.2%) and worse than the Bloomberg experts’ consensus forecast of 5.3%. Export-oriented China is in trouble as foreign demand is weak. It can’t assume responsibility for the global economy’s fate. Next, the risk of double recession is growing due to another round of restrictions in Germany, France, Spain, Italy amid the severe worsening of the epidemiological situation. That’s the main factor in EURUSD’s collapse.
According to Societe Generale, any central bank that can soften monetary policy will do that, especially in the regions with high infection rates and restrictions on movement. Christine Lagarde says the second wave compromises the most the service sector, which accounts for 75% of the eurozone’s GDP. While Europe is facing the risk of QE expansion, the US forward markets presume that Joe Biden’s victory, fiscal stimulus extension, and inflation acceleration will make the Fed raise borrowing costs before 2024.
Thus, the divergence in economic growth and monetary policies starts showing favor to the USD, and that’s not the euro’s only problem. The market still believes that the Brexit issue will be solved at the last moment, just like it happened many times before. However, the clock is ticking, and they still can’t get the things rolling. They say more often that the pound can collapse 10% and draw the euro to the bottom in an unfavorable scenario.
Hopes for a bright future did good for the eurozone’s currency in summer, but they may eventually turn out to be harmful. Germany and the currency bloc plan to cut the budget deficit from 6.25% to 4.25% and from 8.9% to 6% of GDP in 2021. I hope the inopportune phaseout of monetary stimulus won’t stir up a debt crisis in Europe like in 2010-2012.
Weekly trading plan for EURUSD
Thus, EURUSD bulls have plenty of arguments to close long positions. A breakout of support at 1.169 may drop quotes to 1.162 and 1.159. Use a successful bearish storm for opening and building up short positions.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/second-wave-hits-euro-analysis-as-of-19102020/?uid=285861726&cid=79634
Weekly fundamental forecast for euro
Which is worse: to be always on a losing streak or to have glimpses of hope between losing streaks? EURUSD may help answer that question. The second wave of COVID-19 is spreading across Europe so fast that the eurozone’s double recession is being discussed in the market. Not only will that increase the risk of the EURUSD’s further correction, but it also suggests an eventual turn to downtrend. What’s more, neither China nor Brexit haven’t lived up to the euro fans’ expectations so far.
China’s GDP grew by 4.9% in quarter 3. That’s better than the Q2 value (+3.2%) and worse than the Bloomberg experts’ consensus forecast of 5.3%. Export-oriented China is in trouble as foreign demand is weak. It can’t assume responsibility for the global economy’s fate. Next, the risk of double recession is growing due to another round of restrictions in Germany, France, Spain, Italy amid the severe worsening of the epidemiological situation. That’s the main factor in EURUSD’s collapse.
According to Societe Generale, any central bank that can soften monetary policy will do that, especially in the regions with high infection rates and restrictions on movement. Christine Lagarde says the second wave compromises the most the service sector, which accounts for 75% of the eurozone’s GDP. While Europe is facing the risk of QE expansion, the US forward markets presume that Joe Biden’s victory, fiscal stimulus extension, and inflation acceleration will make the Fed raise borrowing costs before 2024.
Thus, the divergence in economic growth and monetary policies starts showing favor to the USD, and that’s not the euro’s only problem. The market still believes that the Brexit issue will be solved at the last moment, just like it happened many times before. However, the clock is ticking, and they still can’t get the things rolling. They say more often that the pound can collapse 10% and draw the euro to the bottom in an unfavorable scenario.
Hopes for a bright future did good for the eurozone’s currency in summer, but they may eventually turn out to be harmful. Germany and the currency bloc plan to cut the budget deficit from 6.25% to 4.25% and from 8.9% to 6% of GDP in 2021. I hope the inopportune phaseout of monetary stimulus won’t stir up a debt crisis in Europe like in 2010-2012.
Weekly trading plan for EURUSD
Thus, EURUSD bulls have plenty of arguments to close long positions. A breakout of support at 1.169 may drop quotes to 1.162 and 1.159. Use a successful bearish storm for opening and building up short positions.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/second-wave-hits-euro-analysis-as-of-19102020/?uid=285861726&cid=79634
LiteFinance
Euro is rolling down. Forecast as of 16.10.2020
Weekly euro fundamental forecast
The EURUSD is down to its two-week low for several reasons. The US stock indexes have been trading down for three consecutive days; additional restrictions are introduced in Paris and London because of COVID-19. Besides, the EU officials announce that agreeing a "fair" new partnership with Britain was "worth every effort" but that the bloc would not compromise at any cost, which sends the pound down. The euro bulls are trying to consolidate the price at the bottom of figure 17, betting on China’s rebound and the ECB’s unwillingness to boost the monetary stimulus before December.
China has attracted $6 billion in the dollar-backed obligations, which repeats the record of 2019. According to the median forecast of the financial analysts polled by the Wall Street Journal, China’s GDP will grow by 5.3% Y-o-Y in the third-quarter report, which is much higher than in the April-June period (+3.2%) and close to the data recorded in 2019 (6.1%). The foreign demand for Chinese securities and the optimism about economic rebound allowed the yuan to compensate for most losses resulted from PBoC’s FX interventions. These facts support the euro.
The euro bulls are also encouraged by the ECB’s unwillingness to expand the monetary stimulus at its October meeting. Despite a sharp downturn of the euro-area economy amid the second pandemic waves, the ECB officials believe there is no need yet to ease the monetary policy. According to the head of the Bank of Holland, Klaas Knot, the regulator needs additional information. The ECB Vice-President Luis de Guindos believes that since less than half of the money in the QE framework has been spent, there is no need to boost asset purchases.
The euro is supported by the fact that China’s economy is growing, and the ECB is unlikely to take active measures. However, the dollar demand increases amid the political uncertainty in the US associated with a lower global risk appetite, which sets the EURUSD bulls back.
The number of Americans filing for unemployment benefits rose by 898 thousand in the week ended October 10th, proving the US labor market needs an additional fiscal stimulus. A poor reading has sent the S&P 500 down and strengthened the greenback. Investors still bet on the Democrats’ victory on November 3. However, they are not willing to buy US stocks now, as they remember how Hillary Clinton, who was leading in the ratings, eventually lost to Donald Trump. If the US stock indices continue falling, the market situation will be similar to that of 2017. At that time, the ECB, discontent with the euro strengthening, used verbal interventions, and the pair failed to consolidate above 1.2.
Weekly EURUSD trading plan
Remarkably, the EURUSD trend depends on the pound now. The UK is discontent with the EU's willingness to prepare for a no-deal Brexit can drop the GBPUSD deeper and send the euro towards $1.159-$1.162. I suggest one continue holding down the EURUSD shorts entered at level 1.178.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-rolling-down-forecast-as-of-16102020/?uid=285861726&cid=79634
Dynamics of EURUSD in 2017 and 2020
Weekly euro fundamental forecast
The EURUSD is down to its two-week low for several reasons. The US stock indexes have been trading down for three consecutive days; additional restrictions are introduced in Paris and London because of COVID-19. Besides, the EU officials announce that agreeing a "fair" new partnership with Britain was "worth every effort" but that the bloc would not compromise at any cost, which sends the pound down. The euro bulls are trying to consolidate the price at the bottom of figure 17, betting on China’s rebound and the ECB’s unwillingness to boost the monetary stimulus before December.
China has attracted $6 billion in the dollar-backed obligations, which repeats the record of 2019. According to the median forecast of the financial analysts polled by the Wall Street Journal, China’s GDP will grow by 5.3% Y-o-Y in the third-quarter report, which is much higher than in the April-June period (+3.2%) and close to the data recorded in 2019 (6.1%). The foreign demand for Chinese securities and the optimism about economic rebound allowed the yuan to compensate for most losses resulted from PBoC’s FX interventions. These facts support the euro.
The euro bulls are also encouraged by the ECB’s unwillingness to expand the monetary stimulus at its October meeting. Despite a sharp downturn of the euro-area economy amid the second pandemic waves, the ECB officials believe there is no need yet to ease the monetary policy. According to the head of the Bank of Holland, Klaas Knot, the regulator needs additional information. The ECB Vice-President Luis de Guindos believes that since less than half of the money in the QE framework has been spent, there is no need to boost asset purchases.
The euro is supported by the fact that China’s economy is growing, and the ECB is unlikely to take active measures. However, the dollar demand increases amid the political uncertainty in the US associated with a lower global risk appetite, which sets the EURUSD bulls back.
The number of Americans filing for unemployment benefits rose by 898 thousand in the week ended October 10th, proving the US labor market needs an additional fiscal stimulus. A poor reading has sent the S&P 500 down and strengthened the greenback. Investors still bet on the Democrats’ victory on November 3. However, they are not willing to buy US stocks now, as they remember how Hillary Clinton, who was leading in the ratings, eventually lost to Donald Trump. If the US stock indices continue falling, the market situation will be similar to that of 2017. At that time, the ECB, discontent with the euro strengthening, used verbal interventions, and the pair failed to consolidate above 1.2.
Weekly EURUSD trading plan
Remarkably, the EURUSD trend depends on the pound now. The UK is discontent with the EU's willingness to prepare for a no-deal Brexit can drop the GBPUSD deeper and send the euro towards $1.159-$1.162. I suggest one continue holding down the EURUSD shorts entered at level 1.178.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-is-rolling-down-forecast-as-of-16102020/?uid=285861726&cid=79634
Dynamics of EURUSD in 2017 and 2020
LiteFinance
Bulls are selling off the euro. Forecast for 15.10.2020
Fundamental euro forecast today
The single European currency is trading flat, and the traders wonder what signals they should consider. The price may go up following the pound, rising amid the UK's willingness to continue negotiation with the EU after the summit on October 15-16. It may also go down, following the US stock indexes. Steven Mnuchin has sent the S&P 500 down. The Treasury Secretary says a fiscal stimulus deal is unlikely to be reached before the election. It has started the sell-off in the US stock market and strengthened the greenback.
The dollar will now respond to pathetic speeches and promises. According to Donald Trump, the vote on November 3 is a choice between “historic prosperity” and a “steep depression.” The US president is focusing on economic expansion. It looks like Trump has ruled in two different countries. The first economy was flourishing and reached record highs of such indicators as employment, household incomes, and equity prices. The second economy has had the worst performance ever, being damaged by the COVID-19.
The Americans are ready to forgive Trump for unfulfilled promises about 3% GDP growth, reducing the foreign trade deficit, and building a wall on the Mexican border. However, they will hardly forgive the inefficient management of the pandemic. According to the Gallup survey, 56% of the respondents believed they were better off now compared to four years ago. It is more than that of Ronald Reagan and Barack Obama when they were re-elected. Simultaneously, the survey showed that Trump, in general, loses to Biden because of COVID-19.
The US pandemic management was inefficient, which cost the lives of more than 200,000 people. It is evident from Bloomberg's research, according to which, the pandemic management in the UK and the EU was more effective than in the US. It remains uncertain how long the fiscal stimulus will last in the US, and some aid packages have exhausted. Therefore, economic stimulating in the US was less effective than in the euro-area.
The positive effect of the stimulus supported the EURUSD rally in the June-August period. Amid the timely and large-scale aid packages, the euro-area economy performed better than the US. The second wave of the pandemic turned everything upside down. Some European countries are currently closing schools, canceling surgeries, and recruiting medical students, getting prepared for a repeat of the nightmare scenario that took place in the spring.
The market is growing on rumors and falling on the facts. The EURUSD bulls hoped that the euro-area GDP recovery would be faster than in the USA. They are exiting longs now, being disappointed. If the euro breaks out the support at $1.1715, one could add up to the euro shorts entered level $1.178.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/bulls-are-selling-off-the-euro-forecast-for-15102020/?uid=285861726&cid=79634
Economic effect of stimulus
Fundamental euro forecast today
The single European currency is trading flat, and the traders wonder what signals they should consider. The price may go up following the pound, rising amid the UK's willingness to continue negotiation with the EU after the summit on October 15-16. It may also go down, following the US stock indexes. Steven Mnuchin has sent the S&P 500 down. The Treasury Secretary says a fiscal stimulus deal is unlikely to be reached before the election. It has started the sell-off in the US stock market and strengthened the greenback.
The dollar will now respond to pathetic speeches and promises. According to Donald Trump, the vote on November 3 is a choice between “historic prosperity” and a “steep depression.” The US president is focusing on economic expansion. It looks like Trump has ruled in two different countries. The first economy was flourishing and reached record highs of such indicators as employment, household incomes, and equity prices. The second economy has had the worst performance ever, being damaged by the COVID-19.
The Americans are ready to forgive Trump for unfulfilled promises about 3% GDP growth, reducing the foreign trade deficit, and building a wall on the Mexican border. However, they will hardly forgive the inefficient management of the pandemic. According to the Gallup survey, 56% of the respondents believed they were better off now compared to four years ago. It is more than that of Ronald Reagan and Barack Obama when they were re-elected. Simultaneously, the survey showed that Trump, in general, loses to Biden because of COVID-19.
The US pandemic management was inefficient, which cost the lives of more than 200,000 people. It is evident from Bloomberg's research, according to which, the pandemic management in the UK and the EU was more effective than in the US. It remains uncertain how long the fiscal stimulus will last in the US, and some aid packages have exhausted. Therefore, economic stimulating in the US was less effective than in the euro-area.
The positive effect of the stimulus supported the EURUSD rally in the June-August period. Amid the timely and large-scale aid packages, the euro-area economy performed better than the US. The second wave of the pandemic turned everything upside down. Some European countries are currently closing schools, canceling surgeries, and recruiting medical students, getting prepared for a repeat of the nightmare scenario that took place in the spring.
The market is growing on rumors and falling on the facts. The EURUSD bulls hoped that the euro-area GDP recovery would be faster than in the USA. They are exiting longs now, being disappointed. If the euro breaks out the support at $1.1715, one could add up to the euro shorts entered level $1.178.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/bulls-are-selling-off-the-euro-forecast-for-15102020/?uid=285861726&cid=79634
Economic effect of stimulus
LiteFinance
Dollar is getting high on politics. Forecast as of 14.10.2020
Fundamental US dollar forecast today
The optimism about the ‘blue wave’ prospects in the US, when democrats take control of the White House and Congress and boost the US fiscal stimulus, is gradually being replaced by skepticism. The Republicans may not lose the majority in the Senate. If so, the disputes about the financial aid package could continue after November 3. Does it make sense to buy stocks? The S&P 500 has dropped. The People’s Bank of China is willing to weaken the yuan. Speculators are existing record euro longs. Under the above conditions, the EURUSD fell below the support 1.178 earlier indicated.
The bets on Joe Biden’s victory are bets against the US dollar. However, this fact alone is not enough. If Democrats fail to control the Congress, the Republicans will oppose the new president just like their opponents did in 2017 when Donald Trump tried to carry out the tax and the medical reforms. Or like it was in 2020 when the White House offers a stimulus package, and the House rejects it. After the US election is over, continuous political uncertainty should support safe-havens, including the US dollar.
Investors wonder what will be after November 3. I don’t think the bet on the growing gap between the US and the euro-area economies should stop working soon. According to San Francisco Fed president Mary C. Daly, the US economy is strong and should withstand a new storm. At the same time, investor confidence in Germany's GDP rebound has fallen to the lowest level over the past five months. The number of COVID-19 cases in Germany has reached 6500, the highest value since April’s peak.
The expectations are also pressed down by the International Monetary Fund. The IMF has revised the US GDP forecast for 2020 up to -4.3%, from the previous gauge of 8%. The forecast for the euro-area economy has been raised from -10.2% to -8.3%. According to the IMF, the global GDP will contract this year not by 5.2%, projected in June, but by 4.4%. The recession has been mitigated by huge stimulus packages provided by the world’s central banks and governments and the rebound of China’s economy. According to the IMF, China’s economy has already reached the level of 2019 and will exceed it by 1.9 at the end of 2020. In 2021, the Chinese GDP should reach 8.2%.
Investors also doubt that the Fed’s monetary expansion is more aggressive than that of the ECB. According to Bloomberg's research, the European Central Bank is buying more assets within the QE than needed to cover the euro-area budget deficit. So, the ECB monetary expansion seems to be more aggressive than the Fed’s.
So, the bet on the divergence in the economic expansion and monetary policy may not work after the US presidential election. Speculators are exiting the euro longs, and the EURUSD is going down towards 1.1715 and 1.1625. Hold down short trades entered at level 1.178.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-getting-high-on-politics-forecast-as-of-14102020/?uid=285861726&cid=79634
GDP forecasts
Fundamental US dollar forecast today
The optimism about the ‘blue wave’ prospects in the US, when democrats take control of the White House and Congress and boost the US fiscal stimulus, is gradually being replaced by skepticism. The Republicans may not lose the majority in the Senate. If so, the disputes about the financial aid package could continue after November 3. Does it make sense to buy stocks? The S&P 500 has dropped. The People’s Bank of China is willing to weaken the yuan. Speculators are existing record euro longs. Under the above conditions, the EURUSD fell below the support 1.178 earlier indicated.
The bets on Joe Biden’s victory are bets against the US dollar. However, this fact alone is not enough. If Democrats fail to control the Congress, the Republicans will oppose the new president just like their opponents did in 2017 when Donald Trump tried to carry out the tax and the medical reforms. Or like it was in 2020 when the White House offers a stimulus package, and the House rejects it. After the US election is over, continuous political uncertainty should support safe-havens, including the US dollar.
Investors wonder what will be after November 3. I don’t think the bet on the growing gap between the US and the euro-area economies should stop working soon. According to San Francisco Fed president Mary C. Daly, the US economy is strong and should withstand a new storm. At the same time, investor confidence in Germany's GDP rebound has fallen to the lowest level over the past five months. The number of COVID-19 cases in Germany has reached 6500, the highest value since April’s peak.
The expectations are also pressed down by the International Monetary Fund. The IMF has revised the US GDP forecast for 2020 up to -4.3%, from the previous gauge of 8%. The forecast for the euro-area economy has been raised from -10.2% to -8.3%. According to the IMF, the global GDP will contract this year not by 5.2%, projected in June, but by 4.4%. The recession has been mitigated by huge stimulus packages provided by the world’s central banks and governments and the rebound of China’s economy. According to the IMF, China’s economy has already reached the level of 2019 and will exceed it by 1.9 at the end of 2020. In 2021, the Chinese GDP should reach 8.2%.
Investors also doubt that the Fed’s monetary expansion is more aggressive than that of the ECB. According to Bloomberg's research, the European Central Bank is buying more assets within the QE than needed to cover the euro-area budget deficit. So, the ECB monetary expansion seems to be more aggressive than the Fed’s.
So, the bet on the divergence in the economic expansion and monetary policy may not work after the US presidential election. Speculators are exiting the euro longs, and the EURUSD is going down towards 1.1715 and 1.1625. Hold down short trades entered at level 1.178.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-is-getting-high-on-politics-forecast-as-of-14102020/?uid=285861726&cid=79634
GDP forecasts
LiteFinance
Aussie is a new victim of China. Forecast as of 13.10.2020
Monthly Australian dollar fundamental analysis
Sometimes, the Predator turns into the Prey, and the Prey, on the contrary, becomes the Predator. During the time of the US-China trade wars, the US looked as an aggressor attacking a victim, which was China. China couldn't adequately retaliate. US import tariffs pressed down China’s exports while selling off China’s Treasury stocks would hardly have been that effective. China was afraid of capital outflows, so it had to make concessions. Now, the victim has recovered and is looking for prey among weaker countries.
Financial Times, referring to the sources familiar with the matter, reports that Chinese power stations and steel mills have been verbally told to immediately stop using Australian coal. Coal is one of the primary components of Australia’s exports. China seems to be a vindictive country. It hasn’t forgiven Australia for the allegations to the COVID-19 laboratory origins, expressed a few months ago. The prey turned out into a predator. Will China continue retaliatory measures against Australia?
This time, Canberra has nothing to respond with. The share of Australia’s exports to China is about 40%, China’s exports to Australia are less than 2%. The trade war hasn’t yet started, but there is already the winner. The problems with the Australian coal exports and the yuan’s drop started an AUDUSD correction down. The AUD bulls used to seem invincible before. Australia’s economy was supported by several factors. The iron ore prices rose. China’s economy, being one of the key trade partners of Australia, was recovering rapidly. The AUDUSD rose by 31% from the low hit in March.
The AUD rise resulted from the rapidly growing US stock indexes and the global economic recovery in the third quarter. However, the AUDUSD rally will continue so fast in the next six-nine months. China’s PMI slows down, the US epidemiological situation is still difficult, the euro area faces the second wave of the COVID-19 pandemic. Furthermore, China attacks Australia, so it is natural that Aussie buyers are discouraged. The median gauge of Bloomberg’s experts for the AUD is $0.72, which corresponds to the current levels.
Nonetheless, there are always two currencies in a currency pair. According to Goldman Sachs, a ‘blue wave’ in the USA (Democrats take control of both the White House and the Congress after the election on November 3) and positive news about the coronavirus vaccines should send the USD down to the lows recorded in 2018. UBS and Invesco share a similar opinion. They recommend their clients to sell the dollar as Joe Biden’s rating grows. Hedge funds seem to follows such ideas.
Monthly AUDUSD trading plan
I believe Beijing and Canberra will solve political problems, the yuan will resume its rally, and the Democrats will win in the elections. In this scenario, it is still relevant to buy the AUDUSD on the corrections down. The medium-term targets are at 0.745 and 0.762.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/aussie-is-a-new-victim-of-china-forecast-as-of-13102020/?uid=285861726&cid=79634
Dynamics of USD and US dollar speculative positions
Monthly Australian dollar fundamental analysis
Sometimes, the Predator turns into the Prey, and the Prey, on the contrary, becomes the Predator. During the time of the US-China trade wars, the US looked as an aggressor attacking a victim, which was China. China couldn't adequately retaliate. US import tariffs pressed down China’s exports while selling off China’s Treasury stocks would hardly have been that effective. China was afraid of capital outflows, so it had to make concessions. Now, the victim has recovered and is looking for prey among weaker countries.
Financial Times, referring to the sources familiar with the matter, reports that Chinese power stations and steel mills have been verbally told to immediately stop using Australian coal. Coal is one of the primary components of Australia’s exports. China seems to be a vindictive country. It hasn’t forgiven Australia for the allegations to the COVID-19 laboratory origins, expressed a few months ago. The prey turned out into a predator. Will China continue retaliatory measures against Australia?
This time, Canberra has nothing to respond with. The share of Australia’s exports to China is about 40%, China’s exports to Australia are less than 2%. The trade war hasn’t yet started, but there is already the winner. The problems with the Australian coal exports and the yuan’s drop started an AUDUSD correction down. The AUD bulls used to seem invincible before. Australia’s economy was supported by several factors. The iron ore prices rose. China’s economy, being one of the key trade partners of Australia, was recovering rapidly. The AUDUSD rose by 31% from the low hit in March.
The AUD rise resulted from the rapidly growing US stock indexes and the global economic recovery in the third quarter. However, the AUDUSD rally will continue so fast in the next six-nine months. China’s PMI slows down, the US epidemiological situation is still difficult, the euro area faces the second wave of the COVID-19 pandemic. Furthermore, China attacks Australia, so it is natural that Aussie buyers are discouraged. The median gauge of Bloomberg’s experts for the AUD is $0.72, which corresponds to the current levels.
Nonetheless, there are always two currencies in a currency pair. According to Goldman Sachs, a ‘blue wave’ in the USA (Democrats take control of both the White House and the Congress after the election on November 3) and positive news about the coronavirus vaccines should send the USD down to the lows recorded in 2018. UBS and Invesco share a similar opinion. They recommend their clients to sell the dollar as Joe Biden’s rating grows. Hedge funds seem to follows such ideas.
Monthly AUDUSD trading plan
I believe Beijing and Canberra will solve political problems, the yuan will resume its rally, and the Democrats will win in the elections. In this scenario, it is still relevant to buy the AUDUSD on the corrections down. The medium-term targets are at 0.745 and 0.762.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/aussie-is-a-new-victim-of-china-forecast-as-of-13102020/?uid=285861726&cid=79634
Dynamics of USD and US dollar speculative positions
· 1
LiteFinance
Dollar follows the stock market. Forecast as of 12.10.2020
Weekly US dollar fundamental forecast
The ECB attempts to weaken the euro fail. Philip Lane says the ECB already pursues an inflation strategy similar to the Fed. The European Central Bank is unwilling to tighten monetary policy until the inflation growth is reflected in the economic data. Nonetheless, the EURUSD doesn’t react to the ECB’s chief economist's speech and consolidates above figure 18 bottom. According to the HSBC, fiscal policy is currently the main factor in the financial markets, and central banks must admit that they have lost some power.
Although the United States has invested in its economy more money than most other countries in the world and significantly more than during the previous economic crisis, the fiscal stimulus tends to exhaust quickly. The euro-area governments continue to support small businesses and individuals, while the US policymakers can’t reach an agreement on its extension. The new $1.8 trillion stimulus plan offered by the Republicans is the largest in scale and contrasts with Donald Trump's recent announcement to end negotiations with Democrats. However, House Speaker Nancy Pelosi rejects it, calling the plan insufficient.
Some analysts suggested the new Republican proposal fueled the rally of the US stock indexes. The S&P 500 was 3.8% up in the week through October 9, having featured the best performance since July. I believe the US stock market is rising as the uncertainty around the US presidential election is lowering. Joe Biden’s chance to win is rising, and his victory shouldn't be such a disaster for the US stock indexes as expected earlier.
According to RealClearPolitics, the gap between Biden and Trump is 9.6 percentage points. For comparison, in 2016, Hillary Clinton was 5.8 pp ahead of Donald Trump three weeks before the vote. JP Morgan suggests the corporate tax hike in the case of Joe Biden's victory will temporarily hinder the US stock market. The higher tax rate will take effect on January 1, 2022, and the S&P 500 is likely to face a storm in the fourth quarter of 2021. However, as the experience of 1987 and 2013 shows, when taxes were also increased, the storm would not last long. After the correction, the bulls should resume the uptrend.
I believe the US stock market trend is a significant driver for the EURUSD. Ahead of the US presidential election, the pair follows the US stock indexes, mostly ignoring the ECB verbal interventions, the second COVID-19 wave, and the euro-area economic data.
Weekly EURUSD trading plan
The US dollar is a more significant Forex currency than the euro, so the ECB willingness to weaken the euro alone is not enough to discourage the EURUSD bulls. Amid the growth of Joe Biden's approval rating, the EURUSD should continue rallying up to 1.1865-1.188. However, Donald Trump is not giving up yet, so one could sell on the price rise.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-follows-the-stock-market-forecast-as-of-12102020/?uid=285861726&cid=79634
Weekly US dollar fundamental forecast
The ECB attempts to weaken the euro fail. Philip Lane says the ECB already pursues an inflation strategy similar to the Fed. The European Central Bank is unwilling to tighten monetary policy until the inflation growth is reflected in the economic data. Nonetheless, the EURUSD doesn’t react to the ECB’s chief economist's speech and consolidates above figure 18 bottom. According to the HSBC, fiscal policy is currently the main factor in the financial markets, and central banks must admit that they have lost some power.
Although the United States has invested in its economy more money than most other countries in the world and significantly more than during the previous economic crisis, the fiscal stimulus tends to exhaust quickly. The euro-area governments continue to support small businesses and individuals, while the US policymakers can’t reach an agreement on its extension. The new $1.8 trillion stimulus plan offered by the Republicans is the largest in scale and contrasts with Donald Trump's recent announcement to end negotiations with Democrats. However, House Speaker Nancy Pelosi rejects it, calling the plan insufficient.
Some analysts suggested the new Republican proposal fueled the rally of the US stock indexes. The S&P 500 was 3.8% up in the week through October 9, having featured the best performance since July. I believe the US stock market is rising as the uncertainty around the US presidential election is lowering. Joe Biden’s chance to win is rising, and his victory shouldn't be such a disaster for the US stock indexes as expected earlier.
According to RealClearPolitics, the gap between Biden and Trump is 9.6 percentage points. For comparison, in 2016, Hillary Clinton was 5.8 pp ahead of Donald Trump three weeks before the vote. JP Morgan suggests the corporate tax hike in the case of Joe Biden's victory will temporarily hinder the US stock market. The higher tax rate will take effect on January 1, 2022, and the S&P 500 is likely to face a storm in the fourth quarter of 2021. However, as the experience of 1987 and 2013 shows, when taxes were also increased, the storm would not last long. After the correction, the bulls should resume the uptrend.
I believe the US stock market trend is a significant driver for the EURUSD. Ahead of the US presidential election, the pair follows the US stock indexes, mostly ignoring the ECB verbal interventions, the second COVID-19 wave, and the euro-area economic data.
Weekly EURUSD trading plan
The US dollar is a more significant Forex currency than the euro, so the ECB willingness to weaken the euro alone is not enough to discourage the EURUSD bulls. Amid the growth of Joe Biden's approval rating, the EURUSD should continue rallying up to 1.1865-1.188. However, Donald Trump is not giving up yet, so one could sell on the price rise.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-follows-the-stock-market-forecast-as-of-12102020/?uid=285861726&cid=79634
LiteFinance
Euro uncovered the ECB tricks. Forecast as of 09.10.2020
Weekly euro fundamental forecast
Looking at minutes of the ECB September meeting, I see the central banks’ officials as magicians able to shock the markets with verbal interventions, boosting QE, or an interest-rate cut. According to Christine Lagarde, the regulator can do anything amid the pandemic to set the EURUSD bulls back. The euro crashed following the minute's release, but it rapidly went up. The market is not impressed by the ECB’s tricks; investors consider other matters.
The Governing Council noted that considering the euro-area economy's openness, the further strengthening of the euro would hinder the GDP recovery and inflation growth. The ECB is concerned by the speed of the euro's growth rather than its current exchange rate. The euro’s rally partially weakened the effect of the monetary stimulus, which significantly affect consumer-price pressures. The euro-area inflation expectations are very low and could further decline.
The ECB position is clear, and the central bank must be aiming at sending the EURUSD down. However, the market is focused on the US presidential election. The major currency pair is following the S&P 500. The stock market is rising amid the growing rating of Joe Biden, I believe, rather than with the hope for a fresh fiscal stimulus before November 3.
Donald Trump has again changed his mind. He says he shut down the talks two days ago because they weren’t working out, and now, they are starting to work out. They are discussing airlines and some other issues. It is about a bigger deal than airlines. If the US president hadn’t made a step forward, the House speaker Nancy Pelosi would have ruled out the possibility of moving forward in helping the aviation industry without broad agreement between Republicans and Democrats.
Investors are still focused on the fiscal stimulus, and it is natural. The Fed’s tools are limited. According to Dallas Federal Reserve President Robert Kaplan, Long-term interest rates are already low. Trying to push them down further by adding to the $120 billion in bonds, the Fed is already purchasing each month, would do little to help the real economy. The primary dealers in Wall Street have the same opinion. According to a Reuters survey, they forecast a decline in bond purchases monthly pace to $84 billion and $25 in the second half of 2021 and 2022, respectively.
Weekly EURUSD trading plan
In theory, the Fed should start monetary normalization, which will support the US dollar. Nonetheless, the share of Wall Street Journal experts who expect t that the US labor market will not return to full employment before 2023 increased to 57%. It suggests the Fed will hold ultra-low interest rates for a long time, being a bearish factor for the greenback. In the short run, if the EURUSD breaks out the resistance zone of 1.178-1.179, it could rise up to 1.1865 and 1.188.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-uncovered-the-ecb-tricks-forecast-as-of-09102020/?uid=285861726&cid=79634
Weekly euro fundamental forecast
Looking at minutes of the ECB September meeting, I see the central banks’ officials as magicians able to shock the markets with verbal interventions, boosting QE, or an interest-rate cut. According to Christine Lagarde, the regulator can do anything amid the pandemic to set the EURUSD bulls back. The euro crashed following the minute's release, but it rapidly went up. The market is not impressed by the ECB’s tricks; investors consider other matters.
The Governing Council noted that considering the euro-area economy's openness, the further strengthening of the euro would hinder the GDP recovery and inflation growth. The ECB is concerned by the speed of the euro's growth rather than its current exchange rate. The euro’s rally partially weakened the effect of the monetary stimulus, which significantly affect consumer-price pressures. The euro-area inflation expectations are very low and could further decline.
The ECB position is clear, and the central bank must be aiming at sending the EURUSD down. However, the market is focused on the US presidential election. The major currency pair is following the S&P 500. The stock market is rising amid the growing rating of Joe Biden, I believe, rather than with the hope for a fresh fiscal stimulus before November 3.
Donald Trump has again changed his mind. He says he shut down the talks two days ago because they weren’t working out, and now, they are starting to work out. They are discussing airlines and some other issues. It is about a bigger deal than airlines. If the US president hadn’t made a step forward, the House speaker Nancy Pelosi would have ruled out the possibility of moving forward in helping the aviation industry without broad agreement between Republicans and Democrats.
Investors are still focused on the fiscal stimulus, and it is natural. The Fed’s tools are limited. According to Dallas Federal Reserve President Robert Kaplan, Long-term interest rates are already low. Trying to push them down further by adding to the $120 billion in bonds, the Fed is already purchasing each month, would do little to help the real economy. The primary dealers in Wall Street have the same opinion. According to a Reuters survey, they forecast a decline in bond purchases monthly pace to $84 billion and $25 in the second half of 2021 and 2022, respectively.
Weekly EURUSD trading plan
In theory, the Fed should start monetary normalization, which will support the US dollar. Nonetheless, the share of Wall Street Journal experts who expect t that the US labor market will not return to full employment before 2023 increased to 57%. It suggests the Fed will hold ultra-low interest rates for a long time, being a bearish factor for the greenback. In the short run, if the EURUSD breaks out the resistance zone of 1.178-1.179, it could rise up to 1.1865 and 1.188.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/euro-uncovered-the-ecb-tricks-forecast-as-of-09102020/?uid=285861726&cid=79634
LiteFinance
Aussie goes against the wind. Forecast as of 05.10.2020
Monthly Australian dollar fundamental analysis
Hope for the best but do the rest. Although the major drivers of the AUDUSD 30% rally up from the March low have been the rapid recovery of China’s economy and the increase in the global risk appetite, the Australian dollar has domestic drivers as well. Australia efficiently manages the pandemic, and the government is willing to expand the fiscal stimulus. Australia’s Treasurer Josh Frydenberg is willing to provide money until the labor market returns to the full employment state. It is about the unemployment rate of 5%. The current unemployment rate is 6.8%, and it may grow to 8%-10%. It will hardly drop back to 5% before 2022.
Investors expect the Treasury to boost the fiscal stimulus. As a result, the net debt burden will increase to AU$712 billion or to 38% of the GDP. At the same time, the national debt ceiling will be increased above AU$1.1 trillion, and the income tax hike, planned for 2022, will be delayed. In the USA, the national debt exceeds 100% of GDP, in the euro-area, it is close to 100%, the Japanese government debt is more than 200%. Canberra can afford additional stimulus. Besides, the expansion of government bonds issue will support the capital inflow in Australia and strengthen the Aussie. Australia’s government bond rates are the highest among the countries issuing the G10 currencies.
Carry trades and high investment rating of Australia’s securities support and will support the AUDUSD bulls amid the high risk appetite and low volatility. That is the reason for the AUD correlation with the US stock indices. The turmoil in the S&P 500 market ahead of the US presidential election will suggest the AUDUSD consolidation.
In addition to the size of the additional fiscal stimulus, investors are focused on the RBA's willingness to expand the volume of monetary support. In September, the RBA officials discussed such measures as the interest-rate cut down to 0.1%, purchasing bonds with longer maturities than currently under QE, negative borrowing costs, and even FX interventions. The latter two options are aggressive, and the regulator will hardly resort to such measures. But it is likely to cut the interest rate by 12 basis points. The derivatives market suggests it will happen already this year.
Monthly AUDUSD trading plan
Expectations of monetary expansion is a bearish factor for the AUD. However, I don’t think the RBA will do it in October. It is likely to leave the door open for the interest rate cut in the future and set the Aussie bulls back using verbal interventions. The RBA will hardly turn the uptrend down, so, its dovish stance will give a chance to buy the pair of the price fall. Following ht consolidation in the range of 0.695-0.735, the AUDUSD is likely to continue its rally up to 0.76 and 0.79.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/aussie-goes-against-the-wind-forecast-as-of-05102020/?uid=285861726&cid=79634
Monthly Australian dollar fundamental analysis
Hope for the best but do the rest. Although the major drivers of the AUDUSD 30% rally up from the March low have been the rapid recovery of China’s economy and the increase in the global risk appetite, the Australian dollar has domestic drivers as well. Australia efficiently manages the pandemic, and the government is willing to expand the fiscal stimulus. Australia’s Treasurer Josh Frydenberg is willing to provide money until the labor market returns to the full employment state. It is about the unemployment rate of 5%. The current unemployment rate is 6.8%, and it may grow to 8%-10%. It will hardly drop back to 5% before 2022.
Investors expect the Treasury to boost the fiscal stimulus. As a result, the net debt burden will increase to AU$712 billion or to 38% of the GDP. At the same time, the national debt ceiling will be increased above AU$1.1 trillion, and the income tax hike, planned for 2022, will be delayed. In the USA, the national debt exceeds 100% of GDP, in the euro-area, it is close to 100%, the Japanese government debt is more than 200%. Canberra can afford additional stimulus. Besides, the expansion of government bonds issue will support the capital inflow in Australia and strengthen the Aussie. Australia’s government bond rates are the highest among the countries issuing the G10 currencies.
Carry trades and high investment rating of Australia’s securities support and will support the AUDUSD bulls amid the high risk appetite and low volatility. That is the reason for the AUD correlation with the US stock indices. The turmoil in the S&P 500 market ahead of the US presidential election will suggest the AUDUSD consolidation.
In addition to the size of the additional fiscal stimulus, investors are focused on the RBA's willingness to expand the volume of monetary support. In September, the RBA officials discussed such measures as the interest-rate cut down to 0.1%, purchasing bonds with longer maturities than currently under QE, negative borrowing costs, and even FX interventions. The latter two options are aggressive, and the regulator will hardly resort to such measures. But it is likely to cut the interest rate by 12 basis points. The derivatives market suggests it will happen already this year.
Monthly AUDUSD trading plan
Expectations of monetary expansion is a bearish factor for the AUD. However, I don’t think the RBA will do it in October. It is likely to leave the door open for the interest rate cut in the future and set the Aussie bulls back using verbal interventions. The RBA will hardly turn the uptrend down, so, its dovish stance will give a chance to buy the pair of the price fall. Following ht consolidation in the range of 0.695-0.735, the AUDUSD is likely to continue its rally up to 0.76 and 0.79.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/aussie-goes-against-the-wind-forecast-as-of-05102020/?uid=285861726&cid=79634
LiteFinance
A guiding light for dollar. Forecast as of 01.10.2020
Fundamental US dollar forecast for half a year
Markets need guides. At the end of the twentieth century, investors were following the yen to anticipate the dollar rates versus the Deutsche mark, the British pound, or the Swiss franc. Nowadays, the yuan is going to play the role of the Japanese yen. The third quarter has been the best for the USDCNH bears since 2008, while the USD index has had the worst results since September 2017. The correlation between these two assets should strengthen in the next few years, and there are several reasons for this.
In the 1980s and 1990s, Japan was the second-largest economy in the world, and the US had the largest deficit in trade with Japan. If the USDJPY was falling, investors understood that the US trade deficit couldn’t be funded at the exchange rate prevailing at the time. It caused the greenback to weaken, making US assets more attractive for foreign investors. If so, the greenback should have been falling not only versus the yen but also versus other world’s major currencies. The importance of the Japanese yen proves that the interventions after signing the Plaza Accord agreement were carried out in the USDJPY pair.
At present, the second-largest economy in the world is China. The US has the biggest trade deficit with China. The past mechanisms could have worked out earlier but for the strict yuan fixing by the PBOC. In 2015 the restriction was eased and the result was immediate. The trade war and the USDCNH sent the EURUSD down in 2018-2019.
I am sure the yuan will continue rising. Some of my previous trading recommendations in the Forex blog worked out. Divergence in economic expansion and monetary policy are the key drivers for the Forex rates. The pandemic only increased their influence on the foreign exchange market. The recent data on China’s PMI signal that the Chinese economy is strong, unlike the US growth.
The exhaustion of the US fiscal stimulus and the inability of the Congress to provide a new financial aid package (the project of $2.2 trillion is not likely to be accepted by the Senate), the difficult epidemiological situation in the US, and the Fed’s ultra-easy monetary policy suggest a bearish outlook for the greenback. The USD bulls are now going ahead amid the uncertainty resulting from the upcoming US presidential election. However, the rally of the US stock indexes suggests that the EURUSD bears are weak. Even Christine Lagarde’s words that the ECB is to follow the Fed’s example do not support the euro bears. The European Central Bank is to consider the possibility of average inflation targeting.
EURUSD trading plan for half a year
I do not think the euro bears can break the uptrend. They may succeed if the second COVID-19 wave is more severe and the euro-area economies are locked down again. Unless it is so, the EURUSD price could reach 1.21 and 1.23 in three and six months. The long-term trading idea is to buy the euro.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/a-guiding-light-for-dollar-forecast-as-of-01102020/?uid=285861726&cid=79634
Fundamental US dollar forecast for half a year
Markets need guides. At the end of the twentieth century, investors were following the yen to anticipate the dollar rates versus the Deutsche mark, the British pound, or the Swiss franc. Nowadays, the yuan is going to play the role of the Japanese yen. The third quarter has been the best for the USDCNH bears since 2008, while the USD index has had the worst results since September 2017. The correlation between these two assets should strengthen in the next few years, and there are several reasons for this.
In the 1980s and 1990s, Japan was the second-largest economy in the world, and the US had the largest deficit in trade with Japan. If the USDJPY was falling, investors understood that the US trade deficit couldn’t be funded at the exchange rate prevailing at the time. It caused the greenback to weaken, making US assets more attractive for foreign investors. If so, the greenback should have been falling not only versus the yen but also versus other world’s major currencies. The importance of the Japanese yen proves that the interventions after signing the Plaza Accord agreement were carried out in the USDJPY pair.
At present, the second-largest economy in the world is China. The US has the biggest trade deficit with China. The past mechanisms could have worked out earlier but for the strict yuan fixing by the PBOC. In 2015 the restriction was eased and the result was immediate. The trade war and the USDCNH sent the EURUSD down in 2018-2019.
I am sure the yuan will continue rising. Some of my previous trading recommendations in the Forex blog worked out. Divergence in economic expansion and monetary policy are the key drivers for the Forex rates. The pandemic only increased their influence on the foreign exchange market. The recent data on China’s PMI signal that the Chinese economy is strong, unlike the US growth.
The exhaustion of the US fiscal stimulus and the inability of the Congress to provide a new financial aid package (the project of $2.2 trillion is not likely to be accepted by the Senate), the difficult epidemiological situation in the US, and the Fed’s ultra-easy monetary policy suggest a bearish outlook for the greenback. The USD bulls are now going ahead amid the uncertainty resulting from the upcoming US presidential election. However, the rally of the US stock indexes suggests that the EURUSD bears are weak. Even Christine Lagarde’s words that the ECB is to follow the Fed’s example do not support the euro bears. The European Central Bank is to consider the possibility of average inflation targeting.
EURUSD trading plan for half a year
I do not think the euro bears can break the uptrend. They may succeed if the second COVID-19 wave is more severe and the euro-area economies are locked down again. Unless it is so, the EURUSD price could reach 1.21 and 1.23 in three and six months. The long-term trading idea is to buy the euro.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/a-guiding-light-for-dollar-forecast-as-of-01102020/?uid=285861726&cid=79634
LiteFinance
Dollar goes up amid the troubles. Forecast as of 30.09.2020
Weekly fundamental US dollar forecast
Money rules the world. In summer, big traders were selling off the dollar. In autumn, they are eagerly buying it again. If we answer the question “Why?”, we can understand what will be next. The world is going to change after the pandemic and the US presidential election. The clue could be given by the assets crashed in September. It is not enough just to sell the greenback, one should buy something instead. Emerging markets’ currencies have significantly weakened in September, and the bet on carry trades hasn’t worked out. Carry traders were closing positions, going back to the US dollar, which has become one of its major growth drivers.
In 2015-2019, amid the Fed monetary normalization, the greenback lost its appeal as a funding currency, giving the way to the euro and the yen. 2020 should have begun the golden age for carry traders. The federal funds rate crashed to a zero level, Treasury yield rolled down to all-time lows, and the rise of the US stock indexes up from the March lows reassured investors pressing down the volatility. Furthermore, most analysts suggested a grim outlook for the dollar, and speculators increased the USD shorts to a two-year high. The situation was perfect for carry traders!
Remarkably, this perfect world has crashed because of the Fed. The Fed, by its vague explanation of the new average inflation targeting policy, has triggered the volatility rise, which pressed down the global risk appetite and supported the greenback strengthening. The situation has also been fueled by the disputes among the Republicans and the Democrats about the new fiscal stimulus package. But the responsibility of the central bank is clear. The US presidential election is another factor, which increases the FX volatility, discourages carry traders, and drives the USD index up. The presidential election is going to be the most important topic for financial markets in October.
Ahead of the debates, the EURUSD rates were rising amid the concerns that Joe Biden could beat Donald Trump, which would send the dollar down. In fact, there wasn’t a constructive talk. The opponents frequently interrupted each other and even resorted to verbal insults, which emphasized their disrespect for each other. Based on the approval ratings, no one won. The major currency pair is unlikely to rally up. Uncertainty will drive Forex through November 4, and the greenback as a rule benefits form the uncertainty. Another matter is a new world. The world after the pandemic and the election. The world of carry trades and emerging markets’ currencies. After all, it too early to speculate about this.
Weekly trading plan for EURUSD
In the short run, the inability of the EURUSD bulls to drive the rates back above 1.18 will signal their weakness, increasing the risk of the consolidation in the range of 1.161-1.177. Especially since investors would rather wait and see ahead of the US jobs report. It makes sense to avoid trading or trade intraday.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-goes-up-amid-the-troubles-forecast-as-of-30092020/?uid=285861726&cid=79634
Weekly fundamental US dollar forecast
Money rules the world. In summer, big traders were selling off the dollar. In autumn, they are eagerly buying it again. If we answer the question “Why?”, we can understand what will be next. The world is going to change after the pandemic and the US presidential election. The clue could be given by the assets crashed in September. It is not enough just to sell the greenback, one should buy something instead. Emerging markets’ currencies have significantly weakened in September, and the bet on carry trades hasn’t worked out. Carry traders were closing positions, going back to the US dollar, which has become one of its major growth drivers.
In 2015-2019, amid the Fed monetary normalization, the greenback lost its appeal as a funding currency, giving the way to the euro and the yen. 2020 should have begun the golden age for carry traders. The federal funds rate crashed to a zero level, Treasury yield rolled down to all-time lows, and the rise of the US stock indexes up from the March lows reassured investors pressing down the volatility. Furthermore, most analysts suggested a grim outlook for the dollar, and speculators increased the USD shorts to a two-year high. The situation was perfect for carry traders!
Remarkably, this perfect world has crashed because of the Fed. The Fed, by its vague explanation of the new average inflation targeting policy, has triggered the volatility rise, which pressed down the global risk appetite and supported the greenback strengthening. The situation has also been fueled by the disputes among the Republicans and the Democrats about the new fiscal stimulus package. But the responsibility of the central bank is clear. The US presidential election is another factor, which increases the FX volatility, discourages carry traders, and drives the USD index up. The presidential election is going to be the most important topic for financial markets in October.
Ahead of the debates, the EURUSD rates were rising amid the concerns that Joe Biden could beat Donald Trump, which would send the dollar down. In fact, there wasn’t a constructive talk. The opponents frequently interrupted each other and even resorted to verbal insults, which emphasized their disrespect for each other. Based on the approval ratings, no one won. The major currency pair is unlikely to rally up. Uncertainty will drive Forex through November 4, and the greenback as a rule benefits form the uncertainty. Another matter is a new world. The world after the pandemic and the election. The world of carry trades and emerging markets’ currencies. After all, it too early to speculate about this.
Weekly trading plan for EURUSD
In the short run, the inability of the EURUSD bulls to drive the rates back above 1.18 will signal their weakness, increasing the risk of the consolidation in the range of 1.161-1.177. Especially since investors would rather wait and see ahead of the US jobs report. It makes sense to avoid trading or trade intraday.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/dollar-goes-up-amid-the-troubles-forecast-as-of-30092020/?uid=285861726&cid=79634
LiteFinance
Pound escaped from the scaffold. Forecast as of 29.09.2020
It seemed that Boris Johnson should have crashed the sterling by the domestic market bill. But it was only a part of the plan. Let us discuss the pound prospects and make a GBPUSD trading plan.
Fundamental Pound forecast for this week
How to make a nation happy? Ruin the hopes for the bright future and bring them back. The UK domestic market bill, which allows canceling some paragraphs of the EU-UK deal signed last year, could have ruined the last hopes for a Brexit deal. The UK has created problems itself and was going to face new tariffs after December 31, which would hit the UK economy, already weak. Fortunately, the chance to sign the EU-UK trade deal has increased, and the pound is strengthening.
All or nothing. The final round of the EU-UK talks should clarify the situation, also for the sterling future trend. The progress suggests moving into the next stage of the “tunnel” negotiations to allow both sides to discuss detail and present the draft deal at the EU summit in mid-October. Otherwise, if the negotiations fail, the chance of a no-deal Brexit will surge. The pound traders are preparing for the market turmoil, as the GBP will be somewhat responsive to any news about Brexit talks. The EU’s chief negotiator, Michel Barnier, told there was “a more open atmosphere at the negotiating table.” Moreover, Bloomberg’s source familiar with the matter suggests that the EU will demand the withdrawal of specific provisions on the UK internal market bill in exchange for concessions. The GBPUSD bulls went ahead and sent the rate above the top of figure 29 for a while.
If the Brexit deal is signed, Boris Jonson’s game will be useful. The UK often exaggerates the crisis scale to fuel the positive news after the problem is solved. If so, the BoE will have no reasons to cut the interest rates below zero. Expectations for the BoE rate cut were one of the drivers for the sterling’s drop in September. Some BoE officials, including Andrew Bailey and the deputy Governor Dave Ramsden, say there is no need for negative rates. Their opponents, including Silvana Tenreyro, note that in other countries, the banking system has adapted to similar monetary policy.
We shouldn’t deceive ourselves about the positive influence of the UK fiscal stimulus on the pound rate. According to Goldman Sachs, the new financial aid package won’t save the UK labor market form either the loss of another 2.2 million jobs or the unemployment growth to 9%, which is two times more than the current level.
GBPUSD trading plan for the week
Brexit and nothing else will determine the sterling trends for the near future. The progress in the Brexit talks encourages the GBPUSD bulls. Pound volatility should be very high during the week through October 2. If the UK-EU talks succeed, the price could hit 1.33. If the pound buyers break out the resistance at $1.2925-$1.293, it may be a signal to buy the GBPUSD. There must be a stop loss, as the lack of progress could send the pair towards 1.2.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pound-escaped-from-the-scaffold-forecast-as-of-29092020/?uid=285861726&cid=79634
It seemed that Boris Johnson should have crashed the sterling by the domestic market bill. But it was only a part of the plan. Let us discuss the pound prospects and make a GBPUSD trading plan.
Fundamental Pound forecast for this week
How to make a nation happy? Ruin the hopes for the bright future and bring them back. The UK domestic market bill, which allows canceling some paragraphs of the EU-UK deal signed last year, could have ruined the last hopes for a Brexit deal. The UK has created problems itself and was going to face new tariffs after December 31, which would hit the UK economy, already weak. Fortunately, the chance to sign the EU-UK trade deal has increased, and the pound is strengthening.
All or nothing. The final round of the EU-UK talks should clarify the situation, also for the sterling future trend. The progress suggests moving into the next stage of the “tunnel” negotiations to allow both sides to discuss detail and present the draft deal at the EU summit in mid-October. Otherwise, if the negotiations fail, the chance of a no-deal Brexit will surge. The pound traders are preparing for the market turmoil, as the GBP will be somewhat responsive to any news about Brexit talks. The EU’s chief negotiator, Michel Barnier, told there was “a more open atmosphere at the negotiating table.” Moreover, Bloomberg’s source familiar with the matter suggests that the EU will demand the withdrawal of specific provisions on the UK internal market bill in exchange for concessions. The GBPUSD bulls went ahead and sent the rate above the top of figure 29 for a while.
If the Brexit deal is signed, Boris Jonson’s game will be useful. The UK often exaggerates the crisis scale to fuel the positive news after the problem is solved. If so, the BoE will have no reasons to cut the interest rates below zero. Expectations for the BoE rate cut were one of the drivers for the sterling’s drop in September. Some BoE officials, including Andrew Bailey and the deputy Governor Dave Ramsden, say there is no need for negative rates. Their opponents, including Silvana Tenreyro, note that in other countries, the banking system has adapted to similar monetary policy.
We shouldn’t deceive ourselves about the positive influence of the UK fiscal stimulus on the pound rate. According to Goldman Sachs, the new financial aid package won’t save the UK labor market form either the loss of another 2.2 million jobs or the unemployment growth to 9%, which is two times more than the current level.
GBPUSD trading plan for the week
Brexit and nothing else will determine the sterling trends for the near future. The progress in the Brexit talks encourages the GBPUSD bulls. Pound volatility should be very high during the week through October 2. If the UK-EU talks succeed, the price could hit 1.33. If the pound buyers break out the resistance at $1.2925-$1.293, it may be a signal to buy the GBPUSD. There must be a stop loss, as the lack of progress could send the pair towards 1.2.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/pound-escaped-from-the-scaffold-forecast-as-of-29092020/?uid=285861726&cid=79634
LiteFinance
Gold could break the bottom. Forecast as of 28.09.2020
It seems that the gold price has reached its bottom; however, it may continue declining. Will the gold fall deeper? We shall discuss the gold outlook and make a XAUUSD trading plan.
Weekly fundamental gold price forecast
Investors again buy the US dollar; the inflation expectations go down, the ETF traders stay passive, investors are disappointed with the gold performance in the risk hedging area. These reasons sent the XAUUSD to its two-month low. The winner has turned into a loser. It is a common situation in the financial markets. As I expected in early September, the gold price dropped to $1865 per ounce. However, should we enter longs right now?
If you consider buying gold now, you should take into account four factors: the US dollar, the Treasury real yield, the ETF holdings, and the global risk appetite. The precious metal is considered to be a safe-haven asset, so the rise in the FX volatility used to support the XAUUSD growth in the past. The situation is different in 2020. According to JP Morgan, purchases of gold and yen against the greenback, as well as buying the franc against the euro, amid a drop in the global risk appetite, are now yielding the least return over the past decade. It is better to buy the yen versus a basket of currencies and (or) enter the US longs versus emerging markets’ currencies.
In my opinion, the US dollar outperforms gold as a safe haven, also because of the sharp cut in the federal funds rate that has driven the investment world into the era of the ultra-low bond yields. The stability of real yields in the US bond market has discouraged the XAUUSD bulls. The real yields will continue falling if the inflation expectations increase. The inflation expectations, however, are down to the lowest level since early August.
According to Commerzbank, a sharper drop in the gold price in late September than previously expected results from the Forex trends. In late spring and early summer, the market was enthusiastic about US dollar selloffs. However, the second COVID-19 wave in Europe, the ECB verbal interventions, and the S&P 500 correction encouraged investors to exit the USD shorts. So, the USD has been up to the two-month high.
Initially, buying gold in the zone of $1850-$1865 looked wise amid the most significant daily capital inflow into gold ETFs on September 21. However, the indicator resented mixed dynamics later. According to Amro Bank, traders took a break. However, if the XAUUSD continues falling, the gold ETF should reduce their holdings.
I believe the XAUUSD bulls will be held back until the US dollar shows weakness, and the inflation expectations start rising. Uncertainty around the upcoming US presidential election supports the dollar; it could continue after the elections. Therefore, the gold price could drop to $1815-$1820or even to $1770. In the meanwhile, we shall wait and see. It will be relevant to consider entering gold longs when the price goes back above $1875.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/gold-could-break-the-bottom-forecast-as-of-28092020/?uid=285861726&cid=79634
Dynamics of capital inflows in gold ETFs
It seems that the gold price has reached its bottom; however, it may continue declining. Will the gold fall deeper? We shall discuss the gold outlook and make a XAUUSD trading plan.
Weekly fundamental gold price forecast
Investors again buy the US dollar; the inflation expectations go down, the ETF traders stay passive, investors are disappointed with the gold performance in the risk hedging area. These reasons sent the XAUUSD to its two-month low. The winner has turned into a loser. It is a common situation in the financial markets. As I expected in early September, the gold price dropped to $1865 per ounce. However, should we enter longs right now?
If you consider buying gold now, you should take into account four factors: the US dollar, the Treasury real yield, the ETF holdings, and the global risk appetite. The precious metal is considered to be a safe-haven asset, so the rise in the FX volatility used to support the XAUUSD growth in the past. The situation is different in 2020. According to JP Morgan, purchases of gold and yen against the greenback, as well as buying the franc against the euro, amid a drop in the global risk appetite, are now yielding the least return over the past decade. It is better to buy the yen versus a basket of currencies and (or) enter the US longs versus emerging markets’ currencies.
In my opinion, the US dollar outperforms gold as a safe haven, also because of the sharp cut in the federal funds rate that has driven the investment world into the era of the ultra-low bond yields. The stability of real yields in the US bond market has discouraged the XAUUSD bulls. The real yields will continue falling if the inflation expectations increase. The inflation expectations, however, are down to the lowest level since early August.
According to Commerzbank, a sharper drop in the gold price in late September than previously expected results from the Forex trends. In late spring and early summer, the market was enthusiastic about US dollar selloffs. However, the second COVID-19 wave in Europe, the ECB verbal interventions, and the S&P 500 correction encouraged investors to exit the USD shorts. So, the USD has been up to the two-month high.
Initially, buying gold in the zone of $1850-$1865 looked wise amid the most significant daily capital inflow into gold ETFs on September 21. However, the indicator resented mixed dynamics later. According to Amro Bank, traders took a break. However, if the XAUUSD continues falling, the gold ETF should reduce their holdings.
I believe the XAUUSD bulls will be held back until the US dollar shows weakness, and the inflation expectations start rising. Uncertainty around the upcoming US presidential election supports the dollar; it could continue after the elections. Therefore, the gold price could drop to $1815-$1820or even to $1770. In the meanwhile, we shall wait and see. It will be relevant to consider entering gold longs when the price goes back above $1875.
For more information follow the link to the website of the LiteForex
https://www.liteforex.com/blog/analysts-opinions/gold-could-break-the-bottom-forecast-as-of-28092020/?uid=285861726&cid=79634
Dynamics of capital inflows in gold ETFs