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December 5, 2020

First, a review of last week’s events:

  • EUR/USD. The dollar continues to fall, the euro continues to rise. The pair has traveled from 1.1600 to 1.2175 since early November. The main reasons for the weakening of the US currency lie in the growing global risk appetite. Against the background of positive news about vaccines against coronavirus, the market has believed in the imminent recovery of the global economy. Moreover, not the US economy, but the economies of other countries, including developing. The situation in the United States itself is not encouraging: the main indicators, including business activity and employment of the population, turned red here last week. Suffice it to say that the number of new jobs created outside the agricultural sector (NFP) collapsed from 610K in October to 245K in November, due to new quarantine measures.
    Investments in the US economy are becoming unpopular, the S&P500 and Dow Jones stock indices have switched to a sideways trend, treasury (government debt) yields are not growing, but inflationary expectations, on the contrary, have soared to annual highs. Interest rates are minimal, which contributes to the departure of investors to other assets, overseas.
    The interesting thing is that Europe has enough problems as well. Based on the dynamics of purchasing managers' indices, it is the EU, not the United States, that is now the main brake on the world economy. Yes, Joe Biden has welcomed the compromise proposal for another $908 billion aid package for the US economy, adding that he would not be limited to it. But the ECB, according to the Bloomberg forecast, will expand the emergency asset purchase program by €500 billion at a meeting on December 10, extending its term from mid to late 2021. In addition, the European regulator will also increase the scale of LTRO, a program for long-term anti-crisis refinancing of banks. Added to this are concerns with the UK over the Brexit agreement, plus disagreements with Poland and Hungary over the COVID-19 Rescue Fund and interest rates in the EU are even lower than in the US.
    In general, there are enough problems on both sides of the Atlantic. But, nevertheless, as expected by most experts (60%), the EUR/USD pair continued its growth last week, ending the five-day period at 1.2120. And the point here is not so much in the strength of the euro, but in the weakness of the dollar, the DXY index of which fell to 90.5 for the first time in two years;
  • GBP/USD. The British currency has also grown against the dollar, having risen by 670 points since early November. And this despite the fact that London and Brussels cannot come to an agreement on the Brexit terms, and the tough position of France in general makes one doubt that such agreements are possible.
    The forecast, which was supported by 75% of analysts last week, was absolutely correct: the pair rose to the upper limit of the 1.3300-1.3400 channel. Then it was broken down and the pair moved further north to 1.3540 and finished the trading session at 1.3435.
    The pound, of course, was supported by the weakening dollar. In addition, the bulls were also helped by the announcement of the signing of a contract between the British government and Pfizer for the purchase of 40 million doses of COVID-19 vaccine, 10 million of which the UK will receive next week. The market was also pleased with the removal of a number of quarantine measures in the country, and the decision on partial admission of spectators to the national football league games;
  • USD/JPY. The forecast for this pair also turned out to be correct. Supported by graphical analysis on D1, 60% of experts had said that the pair would stop its decline and move east in the 103.70-105.30 range. In reality, this lateral channel turned out to be somewhat narrower, 103.66-104.75. And the reason for the emerging equilibrium between the dollar and the yen was the same rise in risk sentiment and a drop in interest in such protective assets as the Japanese currency. The final chord of the week sounded in the central zone of the specified channel at 104.15;

As for the forecast for the coming week, summarizing the views of a number of experts, as well as forecasts made on the basis of a variety of methods of technical and graphical analysis, we can say the following:

  • EUR/USD. The higher this pair rises, the more willingness of large speculators to start taking profit on it. Moreover, the end of the financial year is just around the corner, it's time to take stock. In order for the dollar to continue its fall, the risk sentiment needs constant recharging, but the market may lose it. US stock indexes have been holding sideways since November 09. But this stability is very relative and threatens with a sudden collapse, which will entail the withdrawal of investors from the stock market in favor of the dollar.
    For example, a reassessment of the optimistic expectations related to vaccination against the COVID-19 may lead them to this. And there are reasons for this. For example, the Pfizer has already reported problems with supplies, due to which the volume of vaccine production in 2020 will be halved, from 100 million to 50 million doses. A sharp rise in the yield of 10-year US government bonds could also strike the stock market. And you never know what else can happen this year rich in surprises!
    There will be a meeting of the European Council, the ECB's decision on the interest rate and a subsequent press conference by the bank's management on Thursday, December 10. But the meeting of the US Federal Reserve on December 16 seems to be more interesting.
    At the moment, graphical analysis on H4, 90% of trend indicators and 75% of oscillators on H4 and D1 are colored green. However, the remaining 25% of the oscillators are already giving active signals that the pair is overbought. The pair is expected to decline to the 1.1850-1.1950 zone by the majority (65%) of experts as well, supported by graphical analysis on D1. Immediate support is at 1.2000. Resistance levels are 1.2175, 1.2200, 1.2260 and 1.2320;

Forex and Cryptocurrency Forecast for December 07 - 11, 20201

  • GBP/USD. Significant for this pair is the level of 1.3500, which it reached at the end of last week. Graphical analysis, 100% of trend indicators and 85% of oscillators on H4 and D1 predict further movement to the north. Resistance levels are 1.3625 and 1.3725. However, only 40% of analysts agree with this scenario. The remaining 60% believe that this pair will also turn down, following the EUR/USD reversal. Moreover, if the negotiations on Brexit do not come out of the impasse, its fall may turn into a collapse. However, even if the agreement is concluded, it is likely to be formal and very limited, and is unlikely to please the fans of the British currency. Support levels are 1.3400, 1.3285, 1.3175. The ultimate goal of the bears in December is to return to the 1.3000 horizon;
  • USD/JPY. The dollar and the yen have reached a temporary truce due to rising risk sentiment, moving to a sideways trend. However, the pair never went beyond the medium-term channel, along which it smoothly slides south since the end of March. And the vast majority of experts (70%), supported by graphical analysis on D1, believe that this downtrend will continue. More precisely, it will be a lateral movement with a dominance of bearish sentiment. The main resistance will be the level of 104.50, fighting off from which, the pair will fall first by 100 points lower, and then reach the November 09 low in the zone of 103.15.
    An alternative point of view is held by 30% of analysts who expect that the pair will first reach the upper border of the two-week sideways channel 104.75, and then try to consolidate above the horizon of 105.00. The next target of the bulls is 105.65;

NordFX EU


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