Primus Weekly - 9th November

FXP_2020

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Joe Biden has won the U.S. Presidential election and is set to become POTUS 46 in January 2021. His elect-Vice President Kamala Harris has made history by becoming the first woman of color and South-Asian woman to hold the number 2 position. Equity markets had changed their sentiment to risk on late last week when S&P500 was gained 6.5% and Nasdaq100 8.4%.

After long and gruesome 5 weeks we have reached the finish line of U.S. Presidential elections. The counting process took longer than expected as a record number of mail-in ballots were submitted this year. The results were announced only on Saturday, 4 days after the Election Day. Whilst there are still a number of states that have not completed the counting process, Joe Biden has 290 electoral votes. A candidate needs 270 electoral votes in order to win the elections. As expected, President Trump has not conceded and refuses to accept the loss by filing a number of lawsuits to dispute the outcome. The Republican party seems divided as a number of senior party members have shown support to Trump, whilst others have chosen to remain silent over the weekend. This week is expected to bring more clarity on the actions that President Trump and the G.O.P. decides to take but knowing the style of the current leadership team we can expect Twitter and Fox News to be the best source of information.

The results of U.S. Congressional elections have not been finalized yet but at the time of writing this report the Democratic Party seems to have maintained control of the House, albeit losing a few seats. The Republican Party is set to control the Senate which means elect-President Joe Biden will face a pushback when it comes to implementing his policies. We can expect continuous use of executive orders and a congressional stagnation, along with concessions on both sides.

Non-farm payroll report offered a positive surprise when 638,000 jobs were added, versus the expectation of 600,000. Unemployment rate fell from 7.9% to 6.9%, showing a strong improvement compared to April’s peak unemployment rate of 14.7%. Whilst the recovery has been strong, the data still suggests a loss in momentum as the pace of jobs added has decreased in the last 4 months. Given that there were 22.2 million jobs lost in Q1 and Q2, and that 12 million jobs have been recovered, there is still a hole of 10 million jobs. Assuming October pace of jobs added, it would still take at least 17 months to get back to the previous employment peak. October showed a strong recovery in retail and leisure/hospitality sector with 375,000 jobs added. Heavily cyclical transportation sector showed a decline of 8,000 jobs which indicates that non-consumer driven part of the economy is still struggling to pick up the pace.

Markets have shifted to risk on mode last week when equity turned positive – S&P500 was up 6.5%, Nasdaq100 8.4% and DJIA 5.4%. Gold futures broke the resistance of 1,920 and closed 1,951.5 having gained 4.3%. US dollar, measured by DXY index, was down 1.7%. Oil futures were up 6.4% but the bullish case for oil remains weak.

In The Spotlight

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  • China Consumer Price Index
Inflation measures the rise in consumer prices in an economy over a certain period of time. Higher inflation means that consumer

prices have grown compared to the previous period. Higher than expected rate may be both positive or negative for CNY as the

market does not like inflation expectations too far off from consensus. Generally, both high and negative inflation are bearish for currency, while positive and low inflation, in line with expectations, is bullish.

  • UK GDP growth
GDP data shows the monetary value of all the goods and services produced in the UK. 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 GBP, whilst a print below expectations tends to be negative.

Market Sentiment

EURUSD
EURUSD pair gained 1.9% last week, breaking the resistance of 1.18. Short-term Moving Averages are indicating a bullish trend while RSI of 96 and Stochastic of 75.9 would signal overbought levels. Price continues to trade in the range of 1.1940 and 1.1600 since late July with 21-day Moving Average currently at 1.7775 levels. EURUSD is currently trading near upper Bollinger Band. DMI signals a positive trend as DMI+ is currently 24.6 and DMI- 18.9 but the momentum of the trend is weaking with ADX at 15.4. Support level might potentially develop near previous resistance of 1.1800, whilst 8-day Moving Average is supporting the price near 1.1795. 50-day Moving Average has stopped dropping and offering support at 1.1777. Swing high 1.2000 can be expected to offer a strong resistance level.

Support: 1.1800
Resistance: 1.2000

“Any opinions, news, research, analyses, prices or other information contained here are provided as general market commentary and do not constitute investment advice. FXPRIMUS does not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.”
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NZDUSD
NZDUSD has broken out from consolidation, reaching 0.6800 level last week. Stacked Moving Averages are indicating a continuous bullish trend both short and long-term. RSI of 96 and Stochastic of 93.5 signal overbought levels. Price has also broken upper Bollinger Band at 0.6786, potentially indicating that a pullback is due. ADX is currently near 11, while DMI+ sits at 29.6 and DMI- 14.1.

Support: 0.6917

Resistance: 0.6683

USDJPY
This pair continues marching lower as both stacked short-term and long-term Moving Averages are pointing to strong downtrend (200 > 100 > 50 > 34 > 21 > 8). RSI of 29 is currently neutral but Stochastic of 8.9 indicates an oversold level. The support of 104.00 was broken last week and the price has fallen to 103.49. DMI indicates a strong negative momentum with DMI- currently at 32.8 and DMI+ at 13.8. ADX is 32.8. Swing low in March is expected to be the next support level while 8-day Moving Average is proven to be offer resistance.

Support: 101.18

Resistance: 104.00

USDCHF
This pair has crashed to 0.8989 which the lowest seen since 2015. RSI and Stochastic are both indicating oversold levels, respectively at 1.6 and 19.5. The price is currently at lower Bollinger Band level, while 21-day Moving Average is at 0.9097. Moving Averages are stacked in a bearish fashion, indicating a strong downwards trend in the near-term as well as long-term.

Support: 0.8593
Resistance: 0.9065
 
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