Forex FOREX PRO WEEKLY, January 04 - 08, 2021

Sive Morten

Special Consultant to the FPA
Messages
14,724
Fundamentals

Markets fall in silence these days as everybody needs the rest after the tough year. As a result we have fewer subjects to talk about in fundamental part of research, but, still, there is something. Mostly attention of investors in short term stands upon the US stimulus programme and how it will develop, vaccination performance and few other issues.
Also our political risk factor around US President elections is coming to the "moment of truth" as on 6th of January there will be Congress hearings and debates where election's results have to be confirmed officially and finally. D. Trump's team intends to provide massive facts of fraud there. Thus either J. Biden officially becomes the President or D. Trump calls for emergency regime. There is no other options exists. All attempts to contest elections' results in courts of different levels have failed. Law system doesn't work. So, keep a close eye on 6-7th of January as a lot of news could be released on this subject.

So, in the United States, Trump signed into law a $2.3 trillion pandemic aid and spending package last week, averting a partial federal government shutdown that would have started on Tuesday. The House of Representatives voted on Monday to more than triple stimulus payments to Americans to $2,000 from $600, sending the plan on to the Senate for a vote.

The euro and pound also strengthened as London reopened after its Christmas break. Traders were digesting the EU-UK Brexit trade agreement reached late last week and relieved a ‘no-deal’ had been avoided.

“Markets are likely to wait until next week though before buying (sterling) again, fearful of massive bottlenecks at the English Channel as the new rules take effect,” Jeffrey Haley, senior market analyst at OANDA told clients.

While the deal came as a relief to investors, the bare-bones nature of the pact leaves Britain far more detached from the EU, analysts say, suggesting any subsequent gains will be modest and the discount that has dogged UK assets since 2016 will not vanish soon. Brussels has made no decision yet on whether to grant Britain access to the bloc’s financial market.

Commonwealth Bank of Australia wrote in a note to clients that the lack of an equivalence framework for financial services in the deal and growing support for Scottish independence are new headwinds for the pound.

Fueled partly by Brexit which many Scots oppose and partly by the poor handling of COVID-19 by Johnson’s government, support for Scottish independence has risen, threatening the 300-year-old political union between England and Scotland. Sturgeon has said that if her Scottish National Party wins elections to Edinburgh’s semi-autonomous parliament scheduled for May, an independence referendum should take place quickly.

State Street’s Wakabayashi said, however, that “Nothing has really been agreed (between the EU and London) on financial markets, and that’s a big negative for the UK.”

Mitsuo Imaizumi, chief FX strategist at Daiwa Securities in Tokyo, expects the pound and euro to decline against the dollar, reaching $1.30 and $1.15 respectively by the end of the summer.


U.S. Senate Majority Leader Mitch McConnell on Tuesday blocked a vote on increasing COVID-19 relief payments to $2,000, adding another delay to fractious negotiations over fiscal stimulus. But market sentiment was upbeat as investors remained optimistic that a stimulus deal will be eventually reached and that COVID-19 vaccines will facilitate a global economic recovery, lessening demand for the safe-haven dollar.

The latest setback “doesn’t really matter too much for investors, as they have been over the moon on the back of news that there is still plenty of fiscal support for the U.S. economy,” Naeem Aslam, chief market analyst at Avatrade, said in a note.

There were some signs of increasing inflation expectations. Breakeven rates on 10-year TIPS, which measure expected annual inflation for the next decade, slipped to 1.962%.

“The rapid growth in U.S. money supply and rising commodity prices are stirring up fears about a return of inflation,” wrote Schroders analysts in a note. These concerns are reflected in inflation-linked securities, with the 10-year breakeven inflation rate in the U.S. having risen from 0.5% in March to just under 2% ,” they said.

The dollar was ending 2020 in a downward spiral on Thursday with investors wagering a global economic recovery will suck money into riskier assets even as the U.S. has to borrow ever more to fund its swelling twin deficits. The prospect of a brighter 2021 has lessened the need for the safe-haven dollar, while burnishing the attraction of riskier assets especially in emerging markets.

Bears have also resurrected the “twin deficits” excuse for shorting the dollar - that the explosion in the budget and trade deficits means more dollars being printed and moved abroad. From this perspective the new U.S. stimulus bill is dollar negative as it adds to the nation’s debt, and President-elect Joe Biden is promising a lot more next year.

The country is also hemorrhaging dollars on its trade account where the deficit on goods hit a record $84.8 billion in November as imports surged past pre-pandemic levels. Likewise, the current account deficit widened to a 12-year high in the third quarter and there was a large shortfall in net financial transactions as Americans borrowed more from abroad.

In contrast, the European Union runs a huge current account surplus, largely thanks to Germany, so there is a natural inflow to euros through trade.

“The U.S. dependence on foreign savings is increasing and at 3.4% of GDP, it is approaching a danger zone where it will become increasingly difficult to attract savings without further dollar weakness, or higher interest rates,” said Alan Ruskin, global head of G10 FX at Deutsche, in a note. The deterioration in the ‘twin deficits’ will do nothing to improve USD sentiment, even if it does not as yet justify extreme USD undershooting either.”

“I expect the dollar to depreciate further over the next few years as the Fed keeps rates at zero whilst maintaining its bloated balance sheet,” Kevin Boscher, chief investment officer at asset manager Ravenscroft, told clients. The magnitude of the twin deficits dwarfs any other major economy,” he said.


Inoculation performance

All hopes for next year - everything from stock market returns to restaurant bookings - are bound up with the view that vaccines will gradually restore normality to a pandemic-ravaged world. The end of the holiday season should lend momentum to vaccine rollouts. The United States, Russia, Britain and the European Union have started inoculations, while developing countries are testing storage and transport facilities.

But there could be more pain before the gains kick in.

As hospitals from London to Los Angeles overflow amid the emergence of a fast-spreading COVID-19 variant, tighter lockdowns, travel bans and remote schooling look inevitable, meaning the setbacks seen to economic growth at the end of the year could extend into January.

Vaccine trials and distribution gather momentum around the world as global COVID-19 cases here surpass 81 million and deaths approach 1.8 million. In the United States, there have been more than 19 million cumulative cases and nearly 335,000 deaths.

Lockdown measures in England will be extended, and U.S. President-elect Joe Biden warned that it could take years for most Americans to be vaccinated against COVID-19 at current rates.

BioNTech is working flat out with partner Pfizer to boost production of their COVID-19 vaccine, its founders said, warning there would be gaps in supply until other vaccines were rolled out.

The delays in rolling out the home-grown vaccine have caused consternation in Germany, where some regions had to halt vaccinations within days of starting an inoculation drive.

“At the moment it doesn’t look good - a hole is appearing because there’s a lack of other approved vaccines and we have to fill the gap with our own vaccine,” BioNTech CEO Ugur Sahin told news weekly Spiegel.

The United States ordered 600 million doses of the BioNTech/Pfizer shot in July, while the EU waited until November to place an order half that size.

“At some point it became clear that it would not be possible to deliver so quickly,” Tuereci told Spiegel. “By then it was already too late to place follow-on orders.”

BioNTech hopes to launch a new production line in Marburg, Germany, ahead of schedule in February, with the potential to produce 250 million doses in the first half of 2021, said Sahin. Another vaccine from Moderna is expected to be cleared by the European Medicines Agency (EMA) on Jan. 6. Spahn has also urged the EMA to quickly approve the Oxford University-AstraZeneca shot cleared by Britain. The EU timeline for that treatment remains uncertain.

Sahin also said BioNTech would make its vaccine, which requires storage at about minus 70 degrees Celsius (minus 94 Fahrenheit), easier to handle, adding that a next-generation vaccine could be ready by late summer.

China approved its first COVID-19 vaccine for general public use on Thursday, a shot developed by an affiliate of state-backed pharmaceutical giant Sinopharm, as it braces for greater transmission risks over the winter. No detailed efficacy data of the vaccine has been publicly released but its developer, Beijing Biological Products Institute, a unit of Sinopharm subsidiary China National Biotec Group (CNBG), said on Wednesday its vaccine was 79.34% effective in preventing people from developing the disease based on interim data.

The approval, announced by the National Medical Products Administration, comes after the United Arab Emirates this month became the first country to roll out the vaccine to the public, and as Pakistan announced a 1.2 million dose purchase deal with Sinopharm. While China has been slower than several other countries in approving COVID-19 vaccines, it has been inoculating some citizens for months with three different shots still undergoing late-stage trials.

The approval comes as Britain on Wednesday approved a second COVID-19 vaccine, a shot developed by Oxford University and AstraZeneca, as it battles a major winter surge driven by a new variant of the virus.

COT Report

Data released by the Commodity Futures Trading Commission on Monday showed traders increased bets against the greenback in the week ended Dec. 21 to $26.6 billion. That was the highest in three months, Reuters’ calculations found. Sterling long positions grew ahead of the trade deal, the figures also showed, though the next set of data will reveal whether speculators “sold the fact”. EUR data shows shy decrease in long positions but it doesn't make significant impact on sentiment:

1609577734924.png

Source: cftc.gov
Charting by Investing.com


Next week to watch

On Monday, Europe will see its biggest transfer of share trading in over two decades after Britain’s automatic access to the European Union’s financial markets ends on Dec. 31. While the Brexit trade deal agreed on Christmas Eve set rules for industries such as fishing and agriculture, it did not cover Britain’s finance sector, which will soon get its first taste of the new regime.

Years of preparations since the 2016 Brexit referendum mean the transition of euro-denominated shares and derivatives from Britain should go smoothly. Still, it will be a test for the interest rate derivatives market - the Bank of England has warned of disruptions to swaps trading worth $200 billion.

Regulators have mostly downplayed risks, but they will be on high alert nonetheless. Once the “big bang event”, as described by one industry executive, is out of the way, markets can focus on the longer-term implications for the City of London.

1609577107767.png



Investors are also watching runoff elections in Georgia for two Senate seats next Tuesday that will determine which party controls the Senate. If the Republicans win one or both of the Georgia seats, they will retain a slim majority in the chamber and can block Biden’s legislative goals and judicial nominees.

If Democrats sweep the dual runoffs, the chamber would be split 50-50 and the tie-breaking vote would go to Vice President-elect Kamala Harris, giving President-elect Joe Biden’s party full sway over Congress. That raises the possibility of tax-reform proposals that many investors fear would hurt stock prices.

Joe Biden won Georgia’s 16 Electoral College votes to cement his U.S. presidential election victory. Now his fellow Democrats Raphael Warnock and Jon Ossoff are hoping to win the two Senate seats up for grabs in the state on Jan. 5. If the Republicans win one or both seats, they will retain their Senate majority, enabling them to block Biden’s legislative goals.

Markets interpreted the Nov. 5 election outcome -- a Democrat presidency and Congress, or lower house, alongside a Republican Senate or upper house -- as the best of both worlds, allowing big-ticket stimulus while blocking tax hikes and tighter regulation. Many fret that a Democrat win in Georgia will disrupt that balance, threatening the Santa Claus rally. (The Santa rally -- equity moves in the last five trading days of December and the first two of January -- has lifted Wall Street in 55 of the past 74 years.) The rally hasn’t faltered yet. But as the Georgia vote nears, investors may judge it wise to take some chips off the table.

1609577292542.png

Vaccine optimism has propelled crude prices 6%-8% higher in December, in a positive end to a year that actually saw U.S. futures turn negative in April. Now the focus is on the (virtual) Jan. 4 meeting of OPEC+, the Organization of the Petroleum Exporting Countries and its allies. Having implemented a record 7.7 million barrels-per-day supply cut to stabilise prices, OPEC+ backed away in December from plans for a 2 million-bpd output boost. Instead, it upped production by 500,000 bpd and agreed that further monthly adjustments would not exceed that amount.

Russia has indicated that it will support another 500,000 bpd production increase from February, despite concerns from some other members in the alliance the move was premature. The latest pandemic wave has not hit oil prices significantly but expect the supply (and demand) issue to be hotly debated.

The first major U.S. data point of 2021 will be Friday’s jobs numbers, which could show a slowdown in the pace of hiring. November data already indicated the employment market was losing steam, with 245,000 new jobs added, the fewest in six months. For December, expectations are for an even smaller 159,000 gain.

As of November, the economy had recouped only 12.4 million of the 22.2 million jobs lost in March and April.

Bank of America analysts forecast non-farm payrolls growth of just 50,000, leaving unemployment unchanged at 6.7%. They note “concerning signs” in the labour market, attributing them to renewed pandemic-linked restrictions on businesses.

1609577415788.png



As you could see guys, although we do not have a lot of new driving factors - new details are important. First is concerning vaccination. Recent comments from respectable people above confirms our view that we already mentioned previously. Vaccination comes slowly and will be extended in time so that first results we will get by the end of 2021 at the best. Major reasons for that are threefold - not enough production capacity to produce necessary amount of doses in time, lower efficiency compares to laboratory tests and lower population agreement on vaccination. To get the effect, it is preferable to inoculate at least 65% of population, otherwise effect will be blur. But, according to polls, there is fewer amount of population agrees on vaccine shots, that stands around 40-45%.

Vaccination problems, in turn, makes direct impact on economy as recovery comes slower and Central Banks will have to spend more resources to stimulus. And here we come to very thin moment, a really special nuance of thin balance between amount of stimulus that is possible to provide before inflation starts to rise. Just think, that as longer we have no effect on virus struggle as more stimulus will be provided. This in turn means that inflation gets rising probability. Thus, common sense tells that pandemic has time limit until jump in inflation, right?

Have you thought why Daiwa Securities suggests drop in EUR and GBP by the summer (we've mentioned it above)? This is mostly by inflation expectations that put impact on Fed policy. This is the only reason why trend could turn in foreseeable future. It means that either vaccination should get first positive results to summer and Central Banks should start stimulus contraction, that also suggests US Dollar temporal strength, or - inflation starts to rise dramatically.

On GBP we have another hidden pit. Scotland May elections. This is another reason why Daiwa could suggests cable drop. I suppose that risks are very high that this will happen. Technically we have long-term bearish targets on cable around the parity, but till some moment driving factors stand unclear. Now we see potential ones that could trigger the collapse.

Finally, on short-term situation in the US. As we've said in
last report, we suggest that economy data will be poor in IQ of 2021. In 4th quarter GDP will be lower than expected, while 1Q 2021 GDP could be negative. With "Twin deficit" on board this makes unprecedented pressure on Fed and US government to provide more stimulus. This is the reason why we do not expect significant growth of US Dollar until the spring.


Technicals
Monthly

December month shows good performance with minor reaction on COP target and acceleration on CD leg. As 1.25 resistance has been tested already in the beginning of 2018, EUR has relatively free area till the previous top around 1.25-1.2550 level. Overbought area stands around 1.27 and doesn't prevent upward action at all. MACD trend stands bullish, so on monthly chart we do not see any technical barriers for further EUR appreciation. The next target above 1.25 stands around 1.2850-1.30, that is OP and extension of BC retracement swing.

Here we add new pivot levels for 2021, the fulcrum stands around 1.16 that in general agrees with Daiwa's view. Combination of technical and fundamental factors tells that EUR should try to reach 1.28-1.30 area by the end of the spring. Strong technical resistance started from 1.25 area that EUR tries to challenge and hints from ECB that they are worry on too fast EUR appreciation tells that it could intrude as EUR will come closer to 1.30 level. This increases risks of deep retracement on EUR in the II half of 2021. Potentially other factors could join and provide additional pressure, such as contraction of Fed stimulus for example, in a case of epidemic situation improvements.

Finally, drop could happen much sooner if some extraordinary events happen, although now they stand in theoretical rather than realistic group. First of all I hint on possible surprises around US elections debates in Congress. In this case collapse to 1.16 could start right on the next week.

eur_m_04_01_21.png


Weekly

Our next weekly target is XOP around 1.2450. It looks realistic as it stands in "performance envelope" compares to overbought range. So, gradually market could try to hit it within a few weeks. As major reaction on OP target is over, by market mechanics, price stands in extension mode as it is going to XOP. It means that any deep retracement here is irrational and only Fib levels of 1.16-1.22 swing are acceptable as pullback targets.

Last week we've taken detailed view on "bearish harami" pattern here. In general it is bearish and suggests downside reaction of different strength - sometimes major reversal, sometimes technical pullback, which is more probable in our case. It is not the hazard to our major tendency to XOP, but it just means that before upside continuation, EUR could show the pullback. For example, it could be re-testing of previous top around OP.

Now situation becomes more bearish as EUR has failed to out of the pattern and shows the W&R of its top. This increases chances on downside action on coming week.

eur_w_04_01_21.png



Daily

Daily picture suggests initial drop to 1.21 area on the next week. All our upside targets here are hit - XOP is done, minimum grabber's target is done as well, as price sets new top. At the same time, daily trend has turned bearish, market shows W&R of the top and formed bearish engulfing pattern with sharp downside reversal.

Potentially downside retracement could become more extended and re-testing of 1.20 area support seems very probable. Still, right now we consider only 1.21 level as a target because of daily oversold level that stands around it.

eur_d_04_01_21.png


Intraday

So, our 4H butterfly has been perfectly completed. As we do not have clear downside AB-CD's we consider few different targets. First is by the price shape - it might be H&S pattern with neckline around 1.2130-1.2150 that agrees with daily oversold and K-support here. This is our most probable and nearest downside target. Scenario is supported by MACD divergence as well.

Next targets are based on butterfly's ultimate extensions that it possible to use when reversal is forming. Thus, 1.27 extension points on 1.2080 target that agrees with next 1.2070-1.2115 support area, while 1.618 stands around 1.2015 and agrees with re-testing of previous 1.20 top.
eur_4h_04_01_21.png


Thus, for short-entry is possible to consider minor retracement to one of the Fib levels with stops against the top or far standing Fib levels. At first glance, 1.2245 K-area looks interesting:
eur_1h_04_01_21.png


That's being said, it seems that within 1-2 weeks EUR could show deeper retracement down as weekly/daily charts show bearish signs. Despite possible pullback we keep intact our medium term view by far, suggesting that EUR is possible to reach 1.28-1.30 target cluster, while major fundamental factors effect lasts.
 

RahmanSL

Major
Messages
2,822
Hi Sive...wishing you a Safe, Healthy, Happy, and prosperous New Year :D
Needless to say, a very well written & thought out report & analysis. which are full of very useful information.
Quite frankly, even though I have been trading almost exclusively on EUR/USD since later part of 2019, I am still baffled with some price movements and the mechanics that dove the price movements.
Whenever I trade, I have both CNBC & Bloomberg news running....read your daily & weekly reports & analysis as well as various forex articles... BUT still feel I must be missing something that caused price market to move the way they do without any apparent reason(s).

Anywhere, Sive, keep up the good work and all the best.
 

Sive Morten

Special Consultant to the FPA
Messages
14,724
Hi Sive...wishing you a Safe, Healthy, Happy, and prosperous New Year :D
Anywhere, Sive, keep up the good work and all the best.

Thanks a lot mate. This is the best fruit to me that my efforts and work is useful to somebody. Hopefully I could continue with the same efficiency.
I wish you all the best in new 2021 year as well, take care yourself.
 

chalo

Private, 1st Class
Messages
31
Hi Sive, there is so much to thank you for the great work you provide year after year, I feel grateful and blessed for your mentor ship and at the start of this new year I wish good health and safety to you and your family, of course a profitable year.
Also I would like to add my thanks to all the posters who contribute and add interesting aspects and views.

My learning increases every time I open your pages and analysis for Gold, Forex and Bitcoin and always look forward in topping up aspiring to one day think and approach the markets close to the way you do. It may take a bit long but I appreciate your time and effort.
 

tun13

Corporal
Messages
82
Fundamentals

Markets fall in silence these days as everybody needs the rest after the tough year. As a result we have fewer subjects to talk about in fundamental part of research, but, still, there is something. Mostly attention of investors in short term stands upon the US stimulus programme and how it will develop, vaccination performance and few other issues.
Also our political risk factor around US President elections is coming to the "moment of truth" as on 6th of January there will be Congress hearings and debates where election's results have to be confirmed officially and finally. D. Trump's team intends to provide massive facts of fraud there. Thus either J. Biden officially becomes the President or D. Trump calls for emergency regime. There is no other options exists. All attempts to contest elections' results in courts of different levels have failed. Law system doesn't work. So, keep a close eye on 6-7th of January as a lot of news could be released on this subject.

So, in the United States, Trump signed into law a $2.3 trillion pandemic aid and spending package last week, averting a partial federal government shutdown that would have started on Tuesday. The House of Representatives voted on Monday to more than triple stimulus payments to Americans to $2,000 from $600, sending the plan on to the Senate for a vote.

The euro and pound also strengthened as London reopened after its Christmas break. Traders were digesting the EU-UK Brexit trade agreement reached late last week and relieved a ‘no-deal’ had been avoided.

“Markets are likely to wait until next week though before buying (sterling) again, fearful of massive bottlenecks at the English Channel as the new rules take effect,” Jeffrey Haley, senior market analyst at OANDA told clients.

While the deal came as a relief to investors, the bare-bones nature of the pact leaves Britain far more detached from the EU, analysts say, suggesting any subsequent gains will be modest and the discount that has dogged UK assets since 2016 will not vanish soon. Brussels has made no decision yet on whether to grant Britain access to the bloc’s financial market.

Commonwealth Bank of Australia wrote in a note to clients that the lack of an equivalence framework for financial services in the deal and growing support for Scottish independence are new headwinds for the pound.

Fueled partly by Brexit which many Scots oppose and partly by the poor handling of COVID-19 by Johnson’s government, support for Scottish independence has risen, threatening the 300-year-old political union between England and Scotland. Sturgeon has said that if her Scottish National Party wins elections to Edinburgh’s semi-autonomous parliament scheduled for May, an independence referendum should take place quickly.

State Street’s Wakabayashi said, however, that “Nothing has really been agreed (between the EU and London) on financial markets, and that’s a big negative for the UK.”

Mitsuo Imaizumi, chief FX strategist at Daiwa Securities in Tokyo, expects the pound and euro to decline against the dollar, reaching $1.30 and $1.15 respectively by the end of the summer.


U.S. Senate Majority Leader Mitch McConnell on Tuesday blocked a vote on increasing COVID-19 relief payments to $2,000, adding another delay to fractious negotiations over fiscal stimulus. But market sentiment was upbeat as investors remained optimistic that a stimulus deal will be eventually reached and that COVID-19 vaccines will facilitate a global economic recovery, lessening demand for the safe-haven dollar.

The latest setback “doesn’t really matter too much for investors, as they have been over the moon on the back of news that there is still plenty of fiscal support for the U.S. economy,” Naeem Aslam, chief market analyst at Avatrade, said in a note.

There were some signs of increasing inflation expectations. Breakeven rates on 10-year TIPS, which measure expected annual inflation for the next decade, slipped to 1.962%.

“The rapid growth in U.S. money supply and rising commodity prices are stirring up fears about a return of inflation,” wrote Schroders analysts in a note. These concerns are reflected in inflation-linked securities, with the 10-year breakeven inflation rate in the U.S. having risen from 0.5% in March to just under 2% ,” they said.

The dollar was ending 2020 in a downward spiral on Thursday with investors wagering a global economic recovery will suck money into riskier assets even as the U.S. has to borrow ever more to fund its swelling twin deficits. The prospect of a brighter 2021 has lessened the need for the safe-haven dollar, while burnishing the attraction of riskier assets especially in emerging markets.

Bears have also resurrected the “twin deficits” excuse for shorting the dollar - that the explosion in the budget and trade deficits means more dollars being printed and moved abroad. From this perspective the new U.S. stimulus bill is dollar negative as it adds to the nation’s debt, and President-elect Joe Biden is promising a lot more next year.

The country is also hemorrhaging dollars on its trade account where the deficit on goods hit a record $84.8 billion in November as imports surged past pre-pandemic levels. Likewise, the current account deficit widened to a 12-year high in the third quarter and there was a large shortfall in net financial transactions as Americans borrowed more from abroad.

In contrast, the European Union runs a huge current account surplus, largely thanks to Germany, so there is a natural inflow to euros through trade.

“The U.S. dependence on foreign savings is increasing and at 3.4% of GDP, it is approaching a danger zone where it will become increasingly difficult to attract savings without further dollar weakness, or higher interest rates,” said Alan Ruskin, global head of G10 FX at Deutsche, in a note. The deterioration in the ‘twin deficits’ will do nothing to improve USD sentiment, even if it does not as yet justify extreme USD undershooting either.”

“I expect the dollar to depreciate further over the next few years as the Fed keeps rates at zero whilst maintaining its bloated balance sheet,” Kevin Boscher, chief investment officer at asset manager Ravenscroft, told clients. The magnitude of the twin deficits dwarfs any other major economy,” he said.


Inoculation performance

All hopes for next year - everything from stock market returns to restaurant bookings - are bound up with the view that vaccines will gradually restore normality to a pandemic-ravaged world. The end of the holiday season should lend momentum to vaccine rollouts. The United States, Russia, Britain and the European Union have started inoculations, while developing countries are testing storage and transport facilities.

But there could be more pain before the gains kick in.

As hospitals from London to Los Angeles overflow amid the emergence of a fast-spreading COVID-19 variant, tighter lockdowns, travel bans and remote schooling look inevitable, meaning the setbacks seen to economic growth at the end of the year could extend into January.

Vaccine trials and distribution gather momentum around the world as global COVID-19 cases here surpass 81 million and deaths approach 1.8 million. In the United States, there have been more than 19 million cumulative cases and nearly 335,000 deaths.

Lockdown measures in England will be extended, and U.S. President-elect Joe Biden warned that it could take years for most Americans to be vaccinated against COVID-19 at current rates.

BioNTech is working flat out with partner Pfizer to boost production of their COVID-19 vaccine, its founders said, warning there would be gaps in supply until other vaccines were rolled out.

The delays in rolling out the home-grown vaccine have caused consternation in Germany, where some regions had to halt vaccinations within days of starting an inoculation drive.

“At the moment it doesn’t look good - a hole is appearing because there’s a lack of other approved vaccines and we have to fill the gap with our own vaccine,” BioNTech CEO Ugur Sahin told news weekly Spiegel.

The United States ordered 600 million doses of the BioNTech/Pfizer shot in July, while the EU waited until November to place an order half that size.

“At some point it became clear that it would not be possible to deliver so quickly,” Tuereci told Spiegel. “By then it was already too late to place follow-on orders.”

BioNTech hopes to launch a new production line in Marburg, Germany, ahead of schedule in February, with the potential to produce 250 million doses in the first half of 2021, said Sahin. Another vaccine from Moderna is expected to be cleared by the European Medicines Agency (EMA) on Jan. 6. Spahn has also urged the EMA to quickly approve the Oxford University-AstraZeneca shot cleared by Britain. The EU timeline for that treatment remains uncertain.

Sahin also said BioNTech would make its vaccine, which requires storage at about minus 70 degrees Celsius (minus 94 Fahrenheit), easier to handle, adding that a next-generation vaccine could be ready by late summer.

China approved its first COVID-19 vaccine for general public use on Thursday, a shot developed by an affiliate of state-backed pharmaceutical giant Sinopharm, as it braces for greater transmission risks over the winter. No detailed efficacy data of the vaccine has been publicly released but its developer, Beijing Biological Products Institute, a unit of Sinopharm subsidiary China National Biotec Group (CNBG), said on Wednesday its vaccine was 79.34% effective in preventing people from developing the disease based on interim data.

The approval, announced by the National Medical Products Administration, comes after the United Arab Emirates this month became the first country to roll out the vaccine to the public, and as Pakistan announced a 1.2 million dose purchase deal with Sinopharm. While China has been slower than several other countries in approving COVID-19 vaccines, it has been inoculating some citizens for months with three different shots still undergoing late-stage trials.

The approval comes as Britain on Wednesday approved a second COVID-19 vaccine, a shot developed by Oxford University and AstraZeneca, as it battles a major winter surge driven by a new variant of the virus.

COT Report

Data released by the Commodity Futures Trading Commission on Monday showed traders increased bets against the greenback in the week ended Dec. 21 to $26.6 billion. That was the highest in three months, Reuters’ calculations found. Sterling long positions grew ahead of the trade deal, the figures also showed, though the next set of data will reveal whether speculators “sold the fact”. EUR data shows shy decrease in long positions but it doesn't make significant impact on sentiment:

View attachment 60728
Source: cftc.gov
Charting by Investing.com


Next week to watch

On Monday, Europe will see its biggest transfer of share trading in over two decades after Britain’s automatic access to the European Union’s financial markets ends on Dec. 31. While the Brexit trade deal agreed on Christmas Eve set rules for industries such as fishing and agriculture, it did not cover Britain’s finance sector, which will soon get its first taste of the new regime.

Years of preparations since the 2016 Brexit referendum mean the transition of euro-denominated shares and derivatives from Britain should go smoothly. Still, it will be a test for the interest rate derivatives market - the Bank of England has warned of disruptions to swaps trading worth $200 billion.

Regulators have mostly downplayed risks, but they will be on high alert nonetheless. Once the “big bang event”, as described by one industry executive, is out of the way, markets can focus on the longer-term implications for the City of London.

View attachment 60724


Investors are also watching runoff elections in Georgia for two Senate seats next Tuesday that will determine which party controls the Senate. If the Republicans win one or both of the Georgia seats, they will retain a slim majority in the chamber and can block Biden’s legislative goals and judicial nominees.

If Democrats sweep the dual runoffs, the chamber would be split 50-50 and the tie-breaking vote would go to Vice President-elect Kamala Harris, giving President-elect Joe Biden’s party full sway over Congress. That raises the possibility of tax-reform proposals that many investors fear would hurt stock prices.

Joe Biden won Georgia’s 16 Electoral College votes to cement his U.S. presidential election victory. Now his fellow Democrats Raphael Warnock and Jon Ossoff are hoping to win the two Senate seats up for grabs in the state on Jan. 5. If the Republicans win one or both seats, they will retain their Senate majority, enabling them to block Biden’s legislative goals.

Markets interpreted the Nov. 5 election outcome -- a Democrat presidency and Congress, or lower house, alongside a Republican Senate or upper house -- as the best of both worlds, allowing big-ticket stimulus while blocking tax hikes and tighter regulation. Many fret that a Democrat win in Georgia will disrupt that balance, threatening the Santa Claus rally. (The Santa rally -- equity moves in the last five trading days of December and the first two of January -- has lifted Wall Street in 55 of the past 74 years.) The rally hasn’t faltered yet. But as the Georgia vote nears, investors may judge it wise to take some chips off the table.

View attachment 60725
Vaccine optimism has propelled crude prices 6%-8% higher in December, in a positive end to a year that actually saw U.S. futures turn negative in April. Now the focus is on the (virtual) Jan. 4 meeting of OPEC+, the Organization of the Petroleum Exporting Countries and its allies. Having implemented a record 7.7 million barrels-per-day supply cut to stabilise prices, OPEC+ backed away in December from plans for a 2 million-bpd output boost. Instead, it upped production by 500,000 bpd and agreed that further monthly adjustments would not exceed that amount.

Russia has indicated that it will support another 500,000 bpd production increase from February, despite concerns from some other members in the alliance the move was premature. The latest pandemic wave has not hit oil prices significantly but expect the supply (and demand) issue to be hotly debated.

The first major U.S. data point of 2021 will be Friday’s jobs numbers, which could show a slowdown in the pace of hiring. November data already indicated the employment market was losing steam, with 245,000 new jobs added, the fewest in six months. For December, expectations are for an even smaller 159,000 gain.

As of November, the economy had recouped only 12.4 million of the 22.2 million jobs lost in March and April.

Bank of America analysts forecast non-farm payrolls growth of just 50,000, leaving unemployment unchanged at 6.7%. They note “concerning signs” in the labour market, attributing them to renewed pandemic-linked restrictions on businesses.

View attachment 60726


As you could see guys, although we do not have a lot of new driving factors - new details are important. First is concerning vaccination. Recent comments from respectable people above confirms our view that we already mentioned previously. Vaccination comes slowly and will be extended in time so that first results we will get by the end of 2021 at the best. Major reasons for that are threefold - not enough production capacity to produce necessary amount of doses in time, lower efficiency compares to laboratory tests and lower population agreement on vaccination. To get the effect, it is preferable to inoculate at least 65% of population, otherwise effect will be blur. But, according to polls, there is fewer amount of population agrees on vaccine shots, that stands around 40-45%.

Vaccination problems, in turn, makes direct impact on economy as recovery comes slower and Central Banks will have to spend more resources to stimulus. And here we come to very thin moment, a really special nuance of thin balance between amount of stimulus that is possible to provide before inflation starts to rise. Just think, that as longer we have no effect on virus struggle as more stimulus will be provided. This in turn means that inflation gets rising probability. Thus, common sense tells that pandemic has time limit until jump in inflation, right?

Have you thought why Daiwa Securities suggests drop in EUR and GBP by the summer (we've mentioned it above)? This is mostly by inflation expectations that put impact on Fed policy. This is the only reason why trend could turn in foreseeable future. It means that either vaccination should get first positive results to summer and Central Banks should start stimulus contraction, that also suggests US Dollar temporal strength, or - inflation starts to rise dramatically.

On GBP we have another hidden pit. Scotland May elections. This is another reason why Daiwa could suggests cable drop. I suppose that risks are very high that this will happen. Technically we have long-term bearish targets on cable around the parity, but till some moment driving factors stand unclear. Now we see potential ones that could trigger the collapse.

Finally, on short-term situation in the US. As we've said in
last report, we suggest that economy data will be poor in IQ of 2021. In 4th quarter GDP will be lower than expected, while 1Q 2021 GDP could be negative. With "Twin deficit" on board this makes unprecedented pressure on Fed and US government to provide more stimulus. This is the reason why we do not expect significant growth of US Dollar until the spring.


Technicals
Monthly

December month shows good performance with minor reaction on COP target and acceleration on CD leg. As 1.25 resistance has been tested already in the beginning of 2018, EUR has relatively free area till the previous top around 1.25-1.2550 level. Overbought area stands around 1.27 and doesn't prevent upward action at all. MACD trend stands bullish, so on monthly chart we do not see any technical barriers for further EUR appreciation. The next target above 1.25 stands around 1.2850-1.30, that is OP and extension of BC retracement swing.

Here we add new pivot levels for 2021, the fulcrum stands around 1.16 that in general agrees with Daiwa's view. Combination of technical and fundamental factors tells that EUR should try to reach 1.28-1.30 area by the end of the spring. Strong technical resistance started from 1.25 area that EUR tries to challenge and hints from ECB that they are worry on too fast EUR appreciation tells that it could intrude as EUR will come closer to 1.30 level. This increases risks of deep retracement on EUR in the II half of 2021. Potentially other factors could join and provide additional pressure, such as contraction of Fed stimulus for example, in a case of epidemic situation improvements.

Finally, drop could happen much sooner if some extraordinary events happen, although now they stand in theoretical rather than realistic group. First of all I hint on possible surprises around US elections debates in Congress. In this case collapse to 1.16 could start right on the next week.

View attachment 60729

Weekly

Our next weekly target is XOP around 1.2450. It looks realistic as it stands in "performance envelope" compares to overbought range. So, gradually market could try to hit it within a few weeks. As major reaction on OP target is over, by market mechanics, price stands in extension mode as it is going to XOP. It means that any deep retracement here is irrational and only Fib levels of 1.16-1.22 swing are acceptable as pullback targets.

Last week we've taken detailed view on "bearish harami" pattern here. In general it is bearish and suggests downside reaction of different strength - sometimes major reversal, sometimes technical pullback, which is more probable in our case. It is not the hazard to our major tendency to XOP, but it just means that before upside continuation, EUR could show the pullback. For example, it could be re-testing of previous top around OP.

Now situation becomes more bearish as EUR has failed to out of the pattern and shows the W&R of its top. This increases chances on downside action on coming week.

View attachment 60730


Daily

Daily picture suggests initial drop to 1.21 area on the next week. All our upside targets here are hit - XOP is done, minimum grabber's target is done as well, as price sets new top. At the same time, daily trend has turned bearish, market shows W&R of the top and formed bearish engulfing pattern with sharp downside reversal.

Potentially downside retracement could become more extended and re-testing of 1.20 area support seems very probable. Still, right now we consider only 1.21 level as a target because of daily oversold level that stands around it.

View attachment 60731

Intraday

So, our 4H butterfly has been perfectly completed. As we do not have clear downside AB-CD's we consider few different targets. First is by the price shape - it might be H&S pattern with neckline around 1.2130-1.2150 that agrees with daily oversold and K-support here. This is our most probable and nearest downside target. Scenario is supported by MACD divergence as well.

Next targets are based on butterfly's ultimate extensions that it possible to use when reversal is forming. Thus, 1.27 extension points on 1.2080 target that agrees with next 1.2070-1.2115 support area, while 1.618 stands around 1.2015 and agrees with re-testing of previous 1.20 top.
View attachment 60732

Thus, for short-entry is possible to consider minor retracement to one of the Fib levels with stops against the top or far standing Fib levels. At first glance, 1.2245 K-area looks interesting:
View attachment 60733

That's being said, it seems that within 1-2 weeks EUR could show deeper retracement down as weekly/daily charts show bearish signs. Despite possible pullback we keep intact our medium term view by far, suggesting that EUR is possible to reach 1.28-1.30 target cluster, while major fundamental factors effect lasts.
Sir Sive, wishing you and your family a happy and properous new year.
 

Sive Morten

Special Consultant to the FPA
Messages
14,724
Morning guys,

EUR actively has started the new year, but price has returned back by the end of first session of 2021. It means that short-term bearish context, suggesting a bit deeper retracement is still valid, at least until price stands below recent top.

Thus, those who would like to buy have two options - wait for proper Fib support to consider long entry and use Stop "Buy" order around the top if EUR starts breaking it. On daily chart we have bearish engulfing and grabber right at the top, that suggest at least another leg of retracement to 1.2115 support area:
eur_d_05_01_21.png


On 4H chart price has formed "Evening star" pattern which as a rule suggests the same type of action - AB-CD pattern:
eur_4h_05_01_21.png


On 1H chart we need to consider only recent swing and Fib levels where potentially market could turn down. Invalidation point is the top, as we've said already, but first warning sign happens if price breaks 5/8 Fib level. OP target stands around 1.2210:
eur_1h_05_01_21.png
 

knight270

Private
Messages
22
Morning guys,

EUR actively has started the new year, but price has returned back by the end of first session of 2021. It means that short-term bearish context, suggesting a bit deeper retracement is still valid, at least until price stands below recent top.

Thus, those who would like to buy have two options - wait for proper Fib support to consider long entry and use Stop "Buy" order around the top if EUR starts breaking it. On daily chart we have bearish engulfing and grabber right at the top, that suggest at least another leg of retracement to 1.2115 support area:
View attachment 60783

On 4H chart price has formed "Evening star" pattern which as a rule suggests the same type of action - AB-CD pattern:
View attachment 60784

On 1H chart we need to consider only recent swing and Fib levels where potentially market could turn down. Invalidation point is the top, as we've said already, but first warning sign happens if price breaks 5/8 Fib level. OP target stands around 1.2210:
View attachment 60786
Happy new year Sive, more power to your elbow
Hi Sive, there is so much to thank you for the great work you provide year after year, I feel grateful and blessed for your mentor ship and at the start of this new year I wish good health and safety to you and your family, of course a profitable year.
Also I would like to add my thanks to all the posters who contribute and add interesting aspects and views.

My learning increases every time I open your pages and analysis for Gold, Forex and Bitcoin and always look forward in topping up aspiring to one day think and approach the markets close to the way you do. It may take a bit long but I appreciate your time and effort.
You just spoke my mind really! I often wonder when I will become this good like Sive (my mentor) to develop detailed analysis for other currency pairs and trade with more confidence. I will get there someday as I continue to learn each day from his post. More power and grace to you Sive, now and always!
 

Sive Morten

Special Consultant to the FPA
Messages
14,724
Morning everybody,

So, as you could see EUR has erased short-term bearish context, climbing above daily top. Overall price action contradicts to normal price behavior in a case of bearish scenario. Actually it should accelerate lower that has not happened.

Thus, on daily we suggests upward continuation. Our nearest target is weekly XOP around 1.2440:
eur_d_06_01_21.png


The price action on 4H chart is not bearish any more as well, as EUR has climbed above "Evening star" and erased it. This fact also suggests upward continuation. As price stands in upward channel and already denies bearish context - it should not show deep pullbacks and stay inside the channel. It means that invalidation point for all this stuff is 1.2115-1.2120 lows. Price has to stay above it. Otherwise EUR forms bearish reversal swing here. 4H chart also shows additional two targets around 1.2335 and 1.2370
eur_4h_06_01_21.png


On 1H chart upside trend line even steeper, price already has tested K-support area and bouncing up now. For short-term trading K-area is suitable enough for stop hiding below it, aiming on higher targets.
eur_1h_06_01_21.png


Be aware guys political surprises today due Congress hearings in the US on Presidency.
 
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