Primus Weekly - 23th November

FXP_2020

Fxprimus Representative
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It’s a short week as the U.S. is celebrating Thanksgiving on Thursday. A number of retailers, such as Walmart and Target, have chosen to close their stores during the holidays due to continuously high COVID-19 cases in the U.S.

New daily cases in the States have now peaked at 195,000, doubling in less than three weeks. A number of states have imposed restrictions on movement to contain the spread. For instance, California will establish a night-time curfew this week and is potentially going into a strict lockdown. These restrictions increase the likelihood of double dip recession in the U.S. after a historic GDP growth of 33.1% in Q3 that was supported by the monetary and fiscal stimulus. Without the support real GDP would have contracted at 6% annual rate in Q3, as per Rosenberg Research. A number of data points will be published this week in the U.S. – including durable goods orders and new home sales. Both of these help to gauge the sentiment of U.S. consumers and businesses. Residential housing market has been booming supported by all-time low mortgage rates. Existing home sales have ballooned from -26.6% in March to a stunning +26.6% in October which is the hottest growth since September 2009.

Initial jobless claims have started creeping up again as they rose from 711,000 two weeks ago to 742,000 last week. These levels are way above the circa 500,000 that may be considered as the end of recession. Also, the percentage of permanent job losers as a share of all unemployed as currently 35% which is below 2010 peak of 45%. The critical difference between 2008 and 2020 crisis is that the former resulted in slow increase in unemployment over 2 years, whilst this year we experienced a sudden shock of large-scale bankruptcies and redundancies. Also, we are likely to see structural changes which are disproportionally impacting lower income jobs. For instance, leisure and hospitality workers make up roughly 25% of the unemployed private sector pool. Unemployment rate has come down from 14% to 7% but a large chunk of people are not counted in that statistic as they have given up looking for a job. This impacts the supply side of the economy and is expected to shed 1% from GDP growth, as Rosenberg Research model indicates.

Markets have been muted after post-election euphoria – S&P500 was down 1.5% last week, while Nasdaq100 ended the week flat. Gold lost 7 basis points and USD, measured by DXY, shed 7 basis points.

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*In USD millions
  • US GDP growth
GDP data shows the monetary value of all the goods and services produced in the US. A negative number indicates a contraction of

economic activity while a positive number shows an expansion. A better than expected growth is generally positive for USD, whilst a print below expectations tends to be negative.

  • Initial Jobless Claims
Initial Jobless Claims have started to increase again, failing to meet the consensus expectations. Lower than expected claims are generally bullish for USD, while higher than expected are bearish.

Market Sentiment

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EURUSD

The pair has been trending higher last week, nearing 1.1877 levels. Short- and long-term momentum is bullish as Moving Averages are stacked (8 > 21 > 34 > 50 > 100 > 200). Also, Moving Averages are trending higher, indicating that the bullish movement is expected to continue. 8-day Moving Average has been offering support near 1.1850. Stochastic is currently 83.4 which signals overbought levels. RSI, however, is neutral near 58 levels. DMI+ of 20.4 and DMI- of 16.2 support the bullish momentum but ADX of 13 signals that the trend is potentially weakening. EURUSD is still range-bound since June.

Support: 1.1850
Resistance: 1.2000


GBPUSD
The pair has broken resistance levels and climbed to 1.3360 levels which were last seen in September. Bullish momentum is strong as Moving Averages are stacked in a bullish manner (8 > 21 > 34 > 50 > 100 > 200) and 8-day Moving Average has been offering support at 1.3260 levels. Stochastic of 84 indicates an overbought level but RSI of 66.6 is neutral. The pair is trading near upper Bollinger Band level of 1.3365 which may signal that a pullback is potentially due.

Support: 1.3287
Resistance: 1.3500


USDJPY
The pair is testing 103.00 levels as bearish momentum continues. Stacked Moving Averages support the downward trend while Stochastic of 6.2 signal that the pair may be oversold. RSI of 39 is neutral. DMI+ is currently 18.1 and DMI- is 25.2, while ADX of 21 shows that there may be some strength left in the momentum.

Support: 103.15
Resistance: 104.00


USDCHF
The price has been consolidating and trading near 21-day Moving Average of 0.9115. Moving Averages are stacked in a bearish manner but there’s little air between the short-term indicators. USDCHF is in daily Squeeze as measured by Kelter and Bollinger Bands. Stochastic is currently at 14.1 level and RSI 44.5.

Support: 0.9119
Resistance: 0.9115
 
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