Forex Daily Market Analysis from ForexMart

Is the pound sterling the restless hostage of Omicron?

The British currency has temporarily gone into the shadow of the aggressive US dollar and the volatile euro. At the same time, the pound is trying to assert itself, while resisting pressure from the new mutation of the Omicron coronavirus.

Before Omicron's appearance on the scene, the key drivers of the global market were traders' expectations about the early curtailment of incentives and a rise in rates. These sentiments have now intensified as the new strain has made its own adjustments. Jerome Powell, chairman of the Fed, announced his readiness to accelerate these processes amid off-scale inflation and general instability. He believes that the new COVID-19 mutation provokes prolonged inflationary pressure.

Earlier, the Fed's head agreed that the strongest growth in consumer prices was recorded in the United States, which could push the national economy into the pit of stagflation. Against the background of extremely high inflation in the US, the yield spread between ten-year and two-year Treasury bonds has sharply declined. This indicator turned out to be at a minimum over the past 10 months, which indicates a further downward trend in the GBP/USD pair.

In the current situation, the British currency is experiencing serious overloads. Some restlessness of the pound, bordering on confusion, destabilizes the market. According to analysts, it risks becoming a hostage of Omicron. Despite the current difficulties, the pound is trying to cope with the situation.

The danger of a new strain of coronavirus for the British economy was noted by one of the representatives of the Bank of England. According to the official, Omicron has called into question the further growth of consumer confidence in the country. Economists fear that the new COVID-19 mutation will provoke a drop in demand for consumer services and logistics problems. At the same time, experts believe that Omicron should not affect the Bank of England's plans for a possible tightening of the PEPP.

On Wednesday, global markets and risky assets remained stable. The British currency added 0.17%, reaching the level of 1.3318. However, the triumph was temporary: the pound remained near a one-year low against the US dollar, and then sharply fell to 1.3195. The reason for this fall was the market's doubts about the Bank of England's early interest rate hike. On Thursday morning, the GBP/USD pair was trading at the level of 1.3291. There is currently no clear trend in the pair, and the support level of 1.3263 restrains the bears' dominance.

Many market participants are quite optimistic. Investors believe that the new strain of coronavirus will not affect the further recovery of the global economy. The pound is trying to consolidate in this trend and strengthen its current positions. According to UOB Group analysts, the pound may decline to 1.3260 in the coming weeks, although this scenario is unlikely.

"A further drawdown of the GBP is possible, but a strong support level near 1.3195 will be a tough nut to crack," the UOB Group believes. According to analysts, the pound is not in danger of serious weakening in the short term.

 

Is USD dependent on stock market?

The US dollar is again undergoing a period of volatility, with rare periods of stability, as USD traders await the US labor market report.

Early on Friday, December 3, EUR/USD was trading at 1.1289, below the previous closing price of 1.1299. The US currency edged up slightly before the release of non-farm payrolls, fuelled by concerns over the new Omicron strain, which have now eased.

As markets remain relatively calm, the US dollar has strengthened its position in the run-up to the non-farm payroll release. Strong US labor market data would clear the way for the Federal Reserve to raise interest rates early, analysts say.

Recently, the US dollar has been moving largely under the influence of key interest rate changes, with safe-haven investment demand affecting it only negligibly. The American currency rate has been highly dependent on the global stock market - a new norm, according to some experts.

At this moment, the USD cash flow is determined by equity volatility, as well as risk hedging related to it. Earlier, the inverse correlation was in effect. The Fed's key interest rate is crucial for the market. The yield of US 2-year treasury bonds, which is closely connected with the Deutsche Bank volatility index, is used to determine the future rate. Amid spiraling inflation, investors expect an early rate hike, which would push up the bond yield and the US dollar.

The US non-farm payrolls are in focus at the end of the week. The unemployment rate is expected to go down to 4.5%, with non-farm employment projected to increase by 550,000. The amount of jobless claims fell below 2 million for the first time since the pandemic began.

Strong US labor market data are unlikely to propel the dollar upward, but it could limit the pessimistic sentiment over the spread of Omicron variant, and allow the Fed to go through with the plan to wind down QE and hike the rates in 2022.

While the markets remain somewhat volatile, with strong NFP expectations stabilizing it slightly, the greenback is likely to maintain upside potential. Satisfactory payroll data and the possibility of an earlier end of QE would push the dollar up.

According to an outlook by Goldman Sachs, the Fed is expected to raise interest rates by 25 basis points three times - in June, September, and December, followed by further monetary tightening. Downside risks for the global economy caused by Omicron would boost demand for USD as a safe-haven, giving it support, Goldman Sachs analysts note.

 

Forecast for EUR/USD on December 6, 2021

Over the last trading day, on Friday, the technical picture for the euro has slightly shifted towards growth. The daily rally was small, only 16 points, but the Marlin Oscillator started advancing, indicating an intention to exit the zone of negative values. This advanced growth is shown in the daily chart with gray rectangles.

The probability of price growth, that is, overcoming the signal level of 1.1375 (November 18 high), increases to 60%. Then the 1.1448 target will open. Overcoming it and, accordingly, the MACD line, will become an almost confirmed sign of further medium-term growth.

On the four-hour chart, since the opening of the session, the price has gone down, which still creates the risk of a deeper decline. This risk is realized when the price moves below the MACD indicator line, below 1.1254, the target will open at 1.1170. Continued growth is likely to resume with the price breaking Friday's high of 1.1334.

Forecast for USD/JPY on December 6, 2021

Last Friday, the USD/JPY pair tried to break above the resistance of the MACD indicator line and the daily price channel line (green) for the third time in three days. It failed once again and ended the day with a decline of 29 points.

Now we see that with the support of the declining Marlin Oscillator in the negative zone, the price is trying to overcome the signal support at 112.54. If this happens, then with the greatest probability, the price will go further down to the target of 110.77 - to the lower embedded line of the price channel.

The technical picture is more complex on the H4 chart. The signal line of the Marlin Oscillator turned upward from the lower border of its own channel, and the line itself is already in the positive area. This is a sign of price growth towards overcoming resistance at 113.20, which corresponds to the MACD line on the daily chart. This will be another exit above this line, and it may no longer be false - the 114.05 target level will be overcome.

A decline below 112.54 will automatically mean that the oscillator will exit from its ascending channel to the downside. We are waiting for the development of events.

 

Forecast for GBP/USD on December 7, 2021

The outlook for the British pound's growth looks optimistic. The convergence with the Marlin Oscillator is strengthening, the target of 1.3410 - Fibonacci level of 123.6% is slightly opening. But in order for it to become fully open, the price needs to overcome the immediate resistance of the 138.2% Fibonacci level at 1.3315. Failure could push the price down to the 161.8% Fibonacci level (1.3160).

The price convergence with Marlin is formed on the four-hour chart. At the moment, the signal line of the oscillator is crossing the border with the territory of growth. The price goes to attack the 138.2% Fibonacci level and the MACD line. Success will open the specified target of 1.3410.

Forecast for AUD/USD on December 7, 2021

In yesterday's review, we identified the Australian dollar's 0.7007/65 range as free roaming territory. At the moment, the price is approaching the upper level of this range, but the price does not show a clear intention to overcome it - the Marlin Oscillator is weakening and shows a sign of a downward reversal. Success, however, will allow the price to hit the 0.7107 target level, which is the Aug 20 low.

The price is still in a downward trend on the four-hour chart. Even the leading oscillator Marlin has not yet left the negative zone. It will probably do this when the price moves above the 0.7065 level.

But the MACD indicator line is next to the 0.7107 target level, which can slow down the upward movement. Therefore, it will only be possible to count on a medium-term price growth after the price breaks above 0.7107. Overcoming the support at 0.7007 will open the bearish target level of 0.6950.

Today, the Reserve Bank of Australia is publishing a decision on monetary policy, so a strong momentum in any direction is possible.

 

Hot forecast for EUR/USD on 12/8/2021

If anyone needed proof that the market was completely disoriented and in complete prostration, the reaction to the data on GDP in the euro area was incredibly clear. The third assessment was in sharp contrast to the previous two, which showed a slowdown in economic growth from 14.4% to 3.7%. So, judging by the latest data, the rate of economic growth has slowed down to 3.9%. In other words, the eurozone economy is doing a little better than it was anticipated over the past few weeks, when they began to publish first the first and then the second GDP estimates. Undoubtedly, this is an extremely positive moment, which should have led to a noticeable strengthening of the single European currency. However, instead, it began to decline actively. Which is absurd in itself. Apparently realizing this fact, a rebound began a few hours later. Yes, such that in the end everything returned to its original values.

GDP change (Europe):

Today, the picture of the day will be largely similar, due to the release of data on open vacancies in the United States. And it is these data that will become an excellent reason not only for speculation, but also for a noticeable weakening of the dollar. The fact is that until now no one has deigned to revise the official forecast of 10,400,000 open vacancies. In the previous month, there were 10,438,000 of them. But the content of the report of the Ministry of Labor clearly indicates that these very vacancies will be noticeably less. That is, we can talk about a noticeable reduction in the number of open vacancies, which will be interpreted as a deterioration in the situation on the labor market. This is quite enough for a sharp weakening of the dollar. Nevertheless, the very fact of a decrease in the number of open vacancies does not contradict the logic of a strong decrease in the unemployment rate. On the contrary, it is a reflection of a significant improvement in the situation on the labor market. So after the initial outburst, which will be largely emotional in nature, the situation will quickly return to normal. That is, to the starting positions.

Job Openings (United States):

The EURUSD pair has slowed down the recovery cycle relative to the correctional movement in the area of the value of 1.1227. This led to a stop and, as a result, a reverse movement towards the level of 1.1300.

The technical instrument RSI in the hourly period first gave a signal that the euro was oversold at the moment when the 30 line was crossed. After that, a buy signal was received, which was confirmed when the 50 line was crossed from the bottom up.

On the daily chart, a downward trend remains, in the structure of which a correction cycle has emerged.

Expectations and prospects:

Speculative excitement has led to the formation of a V-shaped formation in the market, where the 1.1300 level serves as a resistance. So, in order for the subsequent growth in the volume of long positions to occur, the quote must stay above the value of 1.1310. Otherwise, stagnation may occur.

Comprehensive indicator analysis provides a buy signal based on short-term and intraday periods due to the recent bounce in price. In the medium term, technical instruments are oriented towards a downward trend, signaling a sell.

 

Gold falls while waiting for a strong impulse

Gold is stuck again in a narrow price range. On Wednesday, the level of $1,780 seemed to magnetize gold quotes to itself. They were brought into a state of stupor by comprehensive uncertainty.

The precious metal ended yesterday's session with a very modest increase. It rose by less than 0.1% or 80 cents. The final price was $1,785.50, although its price reached the high ($1,794. 30) since December 1.

Gold failed to gain a foothold at a level close to the key one due to the lack of convincing impulses. At the moment, all the factors that one way or another may affect the pricing of the yellow asset look vague.

This concerns the situation with a new strain of coronavirus, the future course of the US Federal Reserve, as well as the risk of a military conflict in Ukraine. Now, the market expects certainty on all these issues.

Omicron can still help

The panic over the new COVID-19 strain, which has been observed over the past almost 2 weeks, is gradually fading. Investors are again showing interest in risky assets such as stocks. On Wednesday, US stock markets closed in a positive zone after receiving good news from Pfizer.

The pharmaceutical company reported that during laboratory tests, 3 doses of its vaccine managed to neutralize the "Omicron" strain. In addition, Pfizer CEO Albert Bourla said that a new vaccine, which, if necessary, will be developed specifically for this COVID-19 mutation, may be ready by March next year.

As concerns about Omicron weaken, traders' appetite for a safe haven asset decreases. However, experts believe that now is not the right time to part with gold.

According to analyst Ross Norman, the value of the yellow asset may still find support from coronavirus risks in the near future, since investors will focus at the end of the year on the prospect of introducing more serious lockdowns due to the active spread of Omicron.

Is the Fed's strategy a real threat?

The next meeting of the US central bank on monetary policy will be held on December 14-15. Many analysts are confident that the easing of concerns about the new COVID-19 strain, which is observed this week, actually frees the hands of the US Federal Reserve.

Now, all the attention of the regulator is focused on accelerating the pace of curtailing the asset purchase program, which was launched at the beginning of the pandemic. Fed Chairman Jerome Powell said that it would be advisable not to delay this issue and consider it at the next meeting.

Such a rush is due to the fact that the central bank is striving to start raising interest rates as soon as possible and increased inflation no longer seems to the regulator to be a temporary phenomenon.

Some experts believe that the trigger may be tomorrow's publication of the consumer price index in the United States. Economists expect annual inflation to rise to the highest level in recent decades.

Before the release of important statistics, the yield on US Treasury bonds rose above 1.5%, which put pressure on gold. However, the metal managed to resist a sharp decline and even closed in a positive zone, as the dollar index turned out to be weaker than the euro and fell by 0.5% on Wednesday.

Meanwhile, market strategist Ricardo Evangelista predicts that the US currency will appreciate in the coming days. He said that this currency will find support as soon as the Fed's hawkish stance becomes more evident. This will deal a devastating blow to gold.

Gold loves geopolitical risks

Another important factor in the gold market, which has been closely watched by investors in recent days, is the escalation of the military conflict on the Russian-Ukrainian border.

Gold, which loves geopolitical risks, has responded to the long-awaited negotiations with small growth. During the day, it rose by 0.3%. However, there is no significant increase in the demand for a safe shelter in the market now, because "nothing has changed" after the negotiations and there is still great uncertainty around this situation, analyst Jeff Wright said.

Meanwhile, Market strategist Jim Vykoff believes gold will ultimately benefit from the meeting's failure to de-escalate Russia's intentions to invade Ukraine.

According to him, the situation will become even tenser. This means that safe-haven assets (gold and silver) are likely to be more in demand in the near future.

 

American stock indices rose 0.6-1%

As a result of the entire last week, it increased by 3.8%, the Nasdaq Composite rose by 3.6%, which was the most significant rise since February. The Dow Jones Industrial Average added 4%. This is the most significant increase since March.

Fresh inflation data was released on Friday, pointing to the fastest rise in consumer prices in the country since June 1982. However, investors hope that the rate of growth in prices has reached or very close to the peak values. Consumer prices (CPI) in the US in November soared 6.8% compared to the same month last year. Inflation accelerated from 6.2% a month earlier and was in line with analysts' forecasts. Thus, the indicator remained above the Federal Reserve System (FRS) target of 2% for the ninth consecutive month.

Consumer and tech sectors on Friday posted the strongest gains in share prices among the S&P 500 industry sub-indices.

Consumer confidence in the US in December rose to 70.4 points from 67.4 points in November, which was the lowest in 10 years, according to preliminary data from the University of Michigan, which calculates this figure. Analysts on average had expected a decline to 67.1 points, Trading Economics reported. At the same time, inflationary expectations for the medium term (next year) remained at the level of 4.9% in the current month, for the long term (5 years) - at the level of 3%.

The Dow Jones Industrial Average on Friday increased by 216.3 points (0.6%) and reached 35970.99 points.

The value of Standard & Poor's 500 for the day increased by 44.57 (0.95%) - up to 4712.02 points.

The Nasdaq Composite rose by 113.23 points (0.73%), amounting to 15,630.6 points.

Costco Wholesale, the operator of the largest network of club stores in the United States, in the first financial quarter, which ended on November 21, increased its net profit by 13% and revenue by 19%, which was better than experts' expectations. The company's shares rose 6.6% on Friday.

One of the world's largest manufacturers of semiconductor products Broadcom in the fourth financial quarter (August-October) received financial results above the consensus forecast. The company also announced a massive share buyback program and a quarterly dividend hike. The price of its shares soared by 8.3%.

Oracle Corp., one of the world's leading software developers, posted a net loss in its second financial quarter, but adjusted earnings and revenues rose above analysts' expectations. The company's shares jumped 15.6%.

Among the leaders of the rise in value among the components of the Dow Jones were Cisco Systems Inc., which rose 3%, Microsoft Corp., which rose 2.8% and Apple Inc., which also rose 2.8%.

Meanwhile, Chewy Inc.'s share price fell more than 8% despite strong reporting. The online pet store reported 24% revenue growth in the third financial quarter. The company's net loss in the quarter ended October 31 was $ 32.2 million against a loss of $ 32.8 million in the same period a year earlier.

Peloton Interactive fell 5.4% after Credit Suisse downgraded its recommendation to neutral from above the market.

 

European equities closed lower

Britain's FTSE 100 shed 0.8%, Germany's DAX shed 0.01%, France's CAC 40 shed 0.7%, Spain's IBEX 35 shed 0.5% and Italy's FTSE MIB shed 0.6%.

Air France-KLM shares lost 3.4%. The airline said it had paid the French authorities € 500 million in debt repayment totaling € 4 billion. In addition, Air France-KLM agreed with the country's authorities to change the debt repayment schedule: if earlier it had to pay off the debt in full in May 2023, now it will be able to pay it off until May 2025.

Germany's Daimler Truck Holding AG, a truck maker, rose 10.7% in its second trading session after divesting from Daimler. JPMorgan analysts have set the target price for the company's shares at 48 euros per share, while Bank of America has set a different price, 40 euros. At the same time, Daimler AG's value fell 0.3% yesterday.

The capitalization of the German software developer SAP AG increased by 2.6% after analysts at UBS improved the recommendation on the stock of the company from neutral to buy.

Australian biopharmaceutical company CSL has confirmed that it is in talks to buy the Swiss drug manufacturer Vifor Pharma. Vifor Pharma shares jumped 18.5%.

Credit Suisse Group AG on Monday announced a structural reorganization and appointed new chief executives for its core divisions. The structure of the bank from next year will consist of 4 main business divisions and 4 regional divisions. Credit Suisse lost 1.8%.

Shares in British mining company Rio Tinto fell 0.1%. The company will write off $ 2.3 billion in debt from the Mongolian government to finally move forward with the expansion of the Oyu Tolgoi gold-copper project.

The market is awaiting meetings of the world's largest central banks scheduled for this week.

The Federal Reserve System (FRS) is holding a two-day meeting on December 14-15, the European Central Bank (ECB) and the Bank of England will release their decisions on December 16, the Bank of Japan will hold a meeting on December 17.

The ECB is expected to discuss at the upcoming meeting the future prospects for its asset repurchase programs, while the Fed may decide to step up the pace of its quantitative easing (QE) program, which it launched in November.

The Bank of England is likely to keep monetary policy parameters unchanged, as the latest GDP data proved disappointing, and in addition, the country's authorities are introducing new restrictions to contain the spread of COVID-19.

The UK National Statistical Office (ONS) on Friday reported a slowdown in the country's GDP growth in October to 4.6% on an annualized basis from 5.3% a month earlier.

The statistics released on Monday showed an acceleration in the growth of wholesale prices in Germany in November to a record 16.6% in annual terms. As noted by the Federal Statistical Office of Germany (Destatis), the growth of wholesale prices accelerated compared to 15.2% in October against the background of higher prices for raw materials and intermediate goods.

 

EUR/USD: Widening gap between the US dollar and Euro

Analysts said that serious problems in the EUR/USD pair are caused by an imbalance between both currencies. Bank of America experts point to the excessive overvaluation of the US dollar and the lack of attention to the euro.

Before the Fed meeting, the issue of a fair assessment of the euro and the US dollar is extremely relevant. According to Bank of America reports, the US currency turned out to be overvalued by investors this month, while the euro is undervalued. Analysts believe that this upsets the balance in the EUR/USD pair.

The calculations by Bank of America's currency strategists demonstrate that the current greenback estimate is 0.7 points higher than the long-term average, while the euro is 1.1 points lower. These indicators are negatively affected by rising inflation expectations in the United States (up to 6%) and extremely high inflation, which has reached peak values for the last almost 40 years. The current situation increases the degree of tension between the US dollar and the euro. On Wednesday morning, the EUR/USD pair experienced noticeable volatility, trading around the level of 1.1270.

By the middle of this week, the US dollar maintained its growth, unlike the euro amid expectations of the most important Fed meeting. Despite the growing tension, the dynamics of the American currency are almost unchanged in relation to other key currencies. The euro, on the contrary, has to make a lot of efforts to stay afloat. Experts are afraid of increasing dissonance in the EUR/ USD pair, although there are no serious prerequisites for this.

In anticipation of the Fed meeting, many analysts turned to the Fed's updated dot forecast, the so-called dot plot. Experts carefully analyze the data presented in order to predict the rate of increase in the key rate in 2022. According to the previous dot plot published in September 2021, the federal funds rate should be increased once (until December 2022). However, a lot has changed now, so the markets are confident that in the coming year the rate will be raised twice (25 bp at each meeting).

Bank of America experts believe that the regulator is able to surprise the markets and raise rates following the meeting on Wednesday, December 15. The implementation of such a scenario will lead to a shock and force you to radically rebuild. On the contrary, if the completion of the asset purchase program goes twice as fast, that is, it will be completely curtailed in March 2022, then the markets will remain calm. It can be recalled that this option is the most expected.

At the same time, there is a possibility of another scenario: if the regulator does not raise rates at the current meeting, then it will have to be done twice (by 0.50%) in March next year. The reason for this decision is the overheating of the US labor market. Therefore, most market participants expect the regulator to raise rates in the second half of 2022. At the same time, many investors do not rule out a weakening of inflation next year, despite the persistence of price pressure.

A surprise for the market may be the updated December "dot" forecasts of the Fed (dot plot), which allow for the probability of a threefold rate hike in 2022. The implementation of such a scenario will help the US dollar strengthen its position, but stock markets will be under pressure.

 

US dollar continues its growth

The US dollar celebrates the victory after the meeting of the Fed, which the markets were looking forward to. It managed to rise and continue the upward trend, despite a temporary decline.

The growth of this currency accelerated after the decision of the regulator, which announced the preservation of the interest rate and the completion of incentive programs. It can be recalled that the Fed expected to leave the key rate at 0-0.25% per annum and announced its readiness to double the pace of curtailing the asset repurchase program (from the previous $15 billion to $ 30 billion per month). The implementation of these measures is planned from January next year. According to preliminary calculations, such rates of QE reduction will allow the central bank to fully complete the program by March 2022.

According to Fed chairman Jerome Powell, the early elimination of stimulus programs is necessary because of extremely high inflation. Fed representatives believe that the acceleration of inflation in the United States and the strengthening of inflationary pressure amid a prolonged labor shortage significantly affect economic forecasts and the current monetary policy. It is worth noting that the regulator kept rates near zero until the situation in the US labor market improved.

Representatives of the Open Market Committee (FOMC) presented an updated forecast on the trajectory of rates, which implies their threefold increase in 2022-2023. Along with this, the authorities expect a gradual decrease in inflation.

Experts emphasize that the regulator's forecasts on rates are not a pre-approved plan. This process is determined by the current economic situation, according to which it is adjusted. Against this background, Fed officials came to the conclusion that the most appropriate is a gradual increase in rates.

According to experts, the rapid growth of the USD after the Fed meeting occurred against the backdrop of a pronounced "hawkish" position of the regulator. Representatives of the Federal Reserve predict a sharper increase in rates than the market expected. In view of this, US assets rose significantly: the US dollar continued its upward trend, and the leading S&P 500 index interrupted a two-day decline.

The current situation favourably affected the EUR/USD pair, which was trading at the level of 1.1284 on Thursday morning. Like the American one, the European currency also felt confident, gradually gaining momentum. It tried to consolidate in the current positions, but to no avail. As a result, the single currency fell to low values.

The near-term prospects of the US dollar are quite optimistic. Many experts agree that the Fed helped the US dollar to rise, due to which it received a growth impulse. Analysts said that this trend will continue, since it has enough resources to withstand the difficulties that arise.

 

Forecast for AUD/USD on December 17, 2021

Yesterday, the Australian dollar traded in a range of 80 points, it closed the day by gaining 15 points, which is not very impressive with the fall of the US dollar index by 0.36%. At the moment, the price is between two levels: 0.7171 and 0.7227. Now the breakthrough above the upper level of the 0.7227 range will open the target along the MACD line at 0.7285, consolidating below 0.7171 can send the price to the 0.7065 level, which was not reached at the beginning of the week.

On the 4-hour chart, the Marlin Oscillator formed a divergence with the price. At the moment, the price is staying above the balance indicator line (red moving one), which retains the bulls' advantage. The situation turns out to be twofold, therefore the technical signal levels 0.7171 and 0.7227 acquire the main attention and the main role. The bears' first target at 0.7130 is the MACD line on H4.

US indices closed lower

The Dow Jones Industrial Average fell 1.48% on Friday and ended trading at 35365.44 points.

Standard & Poor's 500 dropped 1.03% to 4620.64 points.

Meanwhile, the Nasdaq Composite lost less than 0.1% to 15169.68 points.

By the end of the week, the Dow fell 1.7%, the S&P 500 fell 1.9%, and the Nasdaq Composite fell 3%.

Earlier this week, the Federal Reserve System (FRS) decided to accelerate the pace of winding down its asset-buying program and signaled its readiness to raise rates several times next year. In addition, the Bank of England was the first among the world's leading central banks to raise its key rate to 0.25% from 0.1%.

Meanwhile, Andrew Brenner of NatAlliance Securities believes that the sharp decline in the US stock market was caused rather not by fears of tightening monetary policy, but by other reasons. In particular, he points out that Friday was the so-called Quadruple Witching Day, when index and stock futures and options expire. On this day, there is often increased volatility in the market.

A strong decline on Friday was demonstrated by securities of financial companies. Quotes from Goldman Sachs Group Inc. fell 3.9%, while JPMorgan Chase & Co. fell 2.3%, quotations of the payment system American Express Co. fell 1.8%, quotations of Visa Inc. dropped by 1.2%.

General Motors shares tumbled 5.5% on news of the unexpected resignation of Dan Amman, head of the self-driving car business.

American chain restaurant operator Darden Restaurants fell 5%. The company released strong quarterly earnings, but gave a weak annual forecast and said its CEO, Eugene Lee, will step down next May.

Johnson & Johnson's capitalization fell 2.8% after the US Centers for Disease Control and Prevention (CDC) recommended that citizens get vaccinated with Pfizer or Moderna coronavirus vaccines instead of J&J vaccines because of the risk of blood clots.

Meanwhile, FedEx Corp. jumped 5% in trading after one of the world's largest transportation and logistics companies beat market expectations in adjusted earnings and revenues and improved its full-year forecast.

 

Forecast for GBP/USD on December 21, 2021

The pound approached the first target level of 1.3160 by 34 points by the end of Monday. The success of the bears, that is, overcoming this support, will open the second target at 1.3012 - the October 2019 high. The Marlin Oscillator is declining in the negative area. The general trend is downward.

On yesterday's four-hour chart, the strength of the resistance of the MACD indicator line was confirmed - the price turned down from it (arrow). The Marlin Oscillator is developing in the negative area. We look forward to further declines.

Forecast for USD/JPY on December 21, 2021

At the end of yesterday, the situation with regard to the yen had practically not changed - the price continued to stay between the support of the trend line of the price channel at 113.22 and the MACD indicator line at 113.96. On December 15, the signal line of the Marlin Oscillator reversed from the zero line, now it moves horizontally below it - this is the market's preparation for a decline. Also, stock indices fell yesterday: S&P 500 -1.14%, Euro Stoxx 50 -1.30%, which helps the pair USD/JPY to develop a downward movement. The target of the decline at 110.80 is the price channel line of the higher timeframe.

On the four-hour scale, the price is strongly supported by the MACD indicator line. Accordingly, consolidating below it becomes the main condition for the formation of a medium-term fall. The direct signal will be the price crossing below the level of 113.22.

The Marlin Oscillator has crossed the border with the growth territory, but this may turn out to be a false signal.470

 

US shares higher at close of trade; Dow Jones up 1.60%

At the close in New York, the Dow Jones climbed 1.60%, the S&P 500 gained 1.78% and the NASDAQ Composite rose 2.40%.

In the leaders of growth among the components of the Dow Jones at the end of today's trading were shares of Nike Inc, which rose in price by 9.65 points (6.15%), to close at 166.63. Boeing Co rose 5.86% or 11.04 points to end at 199.52. American Express Company added 3.22% or 5.02 points to close at 160.91.

The biggest losers were Merck & Company Inc, which fell 1.14% or 0.87 points to end the session at 75.54. Verizon Communications Inc rose 0.58% or 0.31 points to end at 52.78, while Johnson & Johnson was down 0.32% or 0.54 points to 167. , 21.

The growth leaders among the S&P 500 index components at the end of today's trading were Citrix Systems Inc, which gained 13.63% to 95.05, Micron Technology Inc, which gained 10.54% to close at 90.68, and also Expedia Inc, which was up 9.14% to end at 177.27.

The biggest losers were General Mills Inc, which fell 4.03% to close at 65.06. The Kroger Company shed 3.60% to end the session at 43.87. Pfizer Inc was down 3.39% to 58.95.

The leaders of growth among the components of the NASDAQ Composite index at the end of today's trading were shares of Reliance Global Group Inc, which rose in price by 78.69% to the level of 5.450, Biofrontera Inc, which gained 44.75%, to close at 11.03, as well as shares IsoPlexis Corp rose 40.82% to end at 6.90.

On the New York Stock Exchange, the number of shares that went up (2,671) exceeded the number of those that closed in the red (604), while the quotes of 88 shares remained practically unchanged. On the NASDAQ stock exchange, 2889 companies rose in price, 880 declined, and 215 remained at the level of the previous close.

Aldeyra The shares fell to a 52-week low, shedding 50.91%, 3.63 points to trade at 3.50. Biofrontera Inc rose to an all-time high, gaining 44.75%, 3.41 points, to trade at 11.03. DBV Technologies shares fell to historic lows, down 48.52%, 1.310 points, and ended trading at 1.390. CytomX Therapeutics Inc fell to a 52-week low, down 40.00%, 2.580 points to trade at 3.870.

The CBOE Volatility Index, which measures the value of S&P 500 options trading, was down 8.13% to trade at 21.01.

Gold Futures for February delivery was down 0.28% or 5.05 to $ 1,789.55 a troy ounce. Elsewhere, WTI crude for February delivery rose 3.92%, or 2.69, to $ 71.30 a barrel. Futures contract for Brent oil for February delivery was flat 0.00%, or 0.00, to trade at $ 74.03 a barrel.

Meanwhile, on the Forex market, the EUR / USD pair was up 0.02% to hit 1.1286, while the USD / JPY was up 0.01% to hit 114.10.

The US Dollar Index Futures was down 0.10% at 96.445.

 

Forecast for EUR/USD on December 23, 2021

Yesterday, the euro decided to choose an upward direction, intending to complicate and lengthen the horizontal movement, which began on November 29-30. There are about 20 points until the resistance of the MACD line (1.1363), and without breaking the main scenario and its own sideways movement, it is likely that the price will turn down from this resistance. If it overcomes the 1.1363 level, the main scenario will change to a price reversal from the target level of 1.1415. But if the price settles above 1.1415, then an alternative scenario will take effect with the price rising to the target level of 1.1572 (the January 2019 high).

An interesting situation develops on the Marlin Oscillator. Yesterday's exit of the signal line from the rectangular area of consolidation, marked with a gray area, repeats the exit of the signal line from the same consolidation on October 28 - it is marked with a red oval. And, as you can see, after the signal line returned to the range, the price fell.

On the four-hour chart, the price settled above the MACD line, Marlin is confidently rising in the positive area - the situation is upward. Probably, the price will decide to test the strength of the resistance range of 1.1363-1.1415.

Forecast for AUD/USD on December 23, 2021

The Australian dollar approached the resistance of 0.7227 for the second time in the last five days. According to one of the scenarios we are considering, the price may turn down from the resistance today. A modified, but also a scenario for a reversal, assumes a price reversal from the MACD line in the area of 0.7275. Settling above 0.7275 reveals the growth scenario for the aussie to hit the first target at 0.7414. Returning to the area below 0.7171 will open the target at 0.7065.

On the four-hour chart, the price is in an upward position. The planned reversals of the price and the oscillator cannot yet clarify the situation of the higher scale, we are waiting for a signal from the target levels - which one the price could overcome.

 

Pound sterling reached the high and the small pullback was not critical

The British currency has confidently moved to the next peaks by the end of this week and successfully reached its high. A slight decline did not prevent it from enjoying the victory, which is not the last in the list of this currency.

Yesterday, it managed to rise to a one-month high against the US dollar amid improved risk appetite as concerns about the Omicron coronavirus strain eased. On this wave, the British currency reached the psychologically significant level of 1.3400 and further moved up. Such growth was recorded for the first time since November 23 of this year in view of the US dollar's temporary collapse. According to MUFG Bank analysts, the increased risk appetite negatively affected the American currency and gave a head start to the British one. However, they believe that the prospects for raising interest rates in the United States in 2022 will significantly support the USD.

The pound tried to rise previously, especially before the meeting of the Bank of England. Short bursts of growth did not make significant changes in the dynamics of the pound. However, the situation has now stabilized. On Friday morning, the GBP/USD pair was around the level of 1.3404, but could not hold its gained positions and remained in the range of 1.3392-1.3393.

Analysts said that the pound has risen to the upper border of the wide range, wherein it has been since this month started. Many experts believe that the current dynamics of this currency are caused by technical rather than macroeconomic factors. Analysts pay attention to the overbought GBP, the fact of which is putting pressure on buyers. The current situation forms the so-called "swing" between sellers and buyers. This contributes to the transition of the GBP/USD pair into a downward spiral, where the nearest target is the level of 1.3290.

Meanwhile, the UK's macroeconomic data did not affect the dynamics of the pound very much. Some of them, particularly the rates of economic growth, were revised upward (from the previous 23.6% to the current 24.2%). UK GDP data for the third quarter of 2021 turned out to be slightly worse than forecasted, but quite acceptable – economic growth slowed down by 6.8%. A relatively calm economic environment favorably influenced the dynamics of the pound. According to analysts, the closest prospects for the pound look positive. Based on January 2022 forecast, the British currency may rise.

 

Gold's price rises again amid the strengthening coronavirus risks

The new COVID-19 strain has left a negative imprint on Christmas this year, helping gold in post-holiday trading in Asia. On Monday morning, the metal started to rise.

Last week, which was shortened due to the celebration of Christmas, the precious metal closed with a rise of 0.4%. The quotes were mainly supported by the growing fears about the spread of the Omicron strain.

On Monday, investors remained concerned that a new variant of the coronavirus could slow the global economic recovery. The degree of panic in the market is raised by disappointing statistics.

It should be noted that the average number of new coronavirus patients in the US last week rose 45%, namely to 179,000 per day. In addition, the UK and France are reporting a new daily high of COVID-19 cases. In these countries, the figure exceeded 122 thousand and 94 thousand, respectively.

The surge in morbidity has led to additional restrictions on Christmas, when travel has traditionally been increasing. To reduce the spread of the virus, commercial airlines around the world canceled more than 4,500 flights over the holiday weekend.

In view of this, the US dollar and the yield on US Treasuries began the new trading week on a minor note. Earlier, the index of the US currency declined by 0.08%, reporting to 96.10 points. At the same time, the yield fell to 1.482%, retreating from the 2-week high reached the day before.

The weakening US dollar and falling yields allowed gold to rise to $1,812.

The tense geopolitical situation also contributed to the upward dynamics of precious metals on Monday morning.

On the other hand, analysts call optimistic data on US retail sales during the holiday shopping season as among the negative factors that are holding back gold's growth. According to the MasterCard report, the indicator increased by 8.5% from November 1 to December 24.

In addition, a current potential danger for the yellow asset is the prospect of adopting the plan of US President Joe Biden. According to experts, any comments on the approval of this bill may put downward pressure on gold quotes in the near future, while on the contrary, the demand for risky assets will grow.

In general, analysts are confident that this week's trading of gold will be weak and limited by a narrow price range because it is currently impossible to single out any particularly powerful trigger among the contradictory factors that are present in the precious metal market.

Experts suggest that a stronger price fluctuation on the current seven-day period is likely to be caused by the publication of the Federal Reserve Bank of Dallas production index for December. Economists expect an increase to 13.2 from the 11.8 achieved last month.

 

Trading plan for starters of EUR/USD and GBP/USD on December 28, 2021

Here are the details of the economic calendar for December 27, 2021:

The macroeconomic calendar was empty yesterday, and it was a non-working day in the UK. As a result, market activity was quite low – currencies mostly stood still.

Analysis of trading charts from December 27:

The EUR/USD pair is moving within the upper border of the side channel 1.1225/1.1355, where the wide amplitude has been replaced by a narrow one. This may signal the process of accumulation of trading forces before a new price increase.

The GBP/USD pair locally updated last week's high of 1.3436, but this did not lead to drastic changes. The quote remained in the same place. This confirms the formation of stagnation, which may become a catalyst for trade forces in the long term if new speculative surges are observed.

Despite a fairly strong price growth, there is still a downward trend relative to the daily period. The upward movement may be classified as a correction.

December 28 economic calendar:

Today is not much different from the past. It is still a non-working day in the UK due to the celebration of "Boxing Day". Among the statistical indicators, only the S&P/CaseShiller housing price index in the United States can be noted, which is expected to fall from 19.1% to 18.5%. It is unlikely that the data will affect anything in the market.

Trading plan for EUR/USD on December 28:

The stagnation within the upper border of the flat may be replaced by a decline if the rebound trading method is executed. A signal to sell the euro will appear in the market when the price is kept below the level of 1.1300. This step will lead to the quote's decrease towards the area of 1.1265 - 1.1225.

An alternative scenario of market development considers the tactics of breaking the upper border of the flat. In this case, the euro will receive a short-term signal towards the 1.1400 level. The main signal about the change of trading forces will appear in the market after the price holds above the level of 1.1400 in the daily period.

Trading plan for GBP/USD on December 28:

It is impossible to exclude price surges that will lead to the end of stagnation since there is a high speculative interest in the market. So, traders consider local buy positions above the level of 1.3450 in a four-hour period. This may lead to a prolongation of the correction course in the direction of 1.3510.

The downward trend scenario will become relevant when the price holds below the level of 1.3370. This will lead to a decline towards 1.3290.

A candlestick chart view is graphical rectangles of white and black light, with sticks on top and bottom. When analyzing each candle in detail, you will see its characteristics of a relative period: the opening price, closing price, and maximum and minimum prices.

Horizontal levels are price coordinates, relative to which a stop or a price reversal may occur. These levels are called support and resistance in the market.

Circles and rectangles are highlighted examples where the price of the story unfolded. This color selection indicates horizontal lines that may put pressure on the quote in the future.

The up/down arrows are the reference points of the possible price direction in the future.

 

Forecast for AUD/USD on December 29, 2021

Yesterday, the Australian dollar attempted to converge with the daily MACD line. The attempt failed and the price quickly returned below the balance indicator line. It ended the day below the balance line, which confirmed our position on the corrective nature of the aussie's entire growth since December 6th. At the moment, the price has gone below the target level 0.7272, closing the day below it will mean settling below the level and its further intention to overcome 0.7171 and head to 0.7065.

On the four-hour chart, the Marlin Oscillator has entered the negative zone - the territory of the downward trend. Confirmation and reinforcement of this signal will be the price drift under the MACD indicator line, below 0.7205.

Forecast for USD/JPY on December 29, 2021

As a result of yesterday, the USD/JPY pair dropped by 4 points, which can be taken as consolidation after the 50-point growth on Monday. This consolidation also suggests that the price is accumulating potential for further growth. The growth target is the 115.80-116.15 range. Returning under the MACD line (114.24) will reverse the downward trend, its nearest target is 113.25.

On the 4-hour chart, the signal line of the Marlin Oscillator is approaching the zero line, the crossing of which will be an early signal for a reversal. Most likely, this will happen when the price settles below yesterday's low of 114.72, that is, the pair should grow from the current levels in order not to give such an embarrassing signal. However, the correction may develop to the level of 114.24 already noted on the daily chart.

 

Bitcoin's indefinite direction this 2022

Bitcoin begins this year with cautious growth, wobbling on the edge of declining again. Nevertheless, many experts are optimistic about its prospects.

Most analysts are confident that the first cryptocurrency will rise this month. Crypto market experts agree that the first month of the new year will lay the foundation for Bitcoin's growth. According to preliminary calculations, it is likely to grow during the first quarter of 2022. This is facilitated by the activity on the part of institutional investors.

For the last seven years, the years 2020 and 2021 turned out to be the most favorable for the cryptocurrency industry. Bitcoin's price growth during the reporting period was 22%. It can be recalled that from 2015 to 2019, January was characterized by a decline for BTC. According to preliminary estimates, the average decline in digital assets over the years was 17%. At the same time, the average market rate of Bitcoin did not exceed $ 29,000 in early January 2021. The peak price of the leading crypto asset reached $69,000 in November 2021. Later, BTC collapsed by 53%, to $ 28,805. Fortunately, buyers regained their previous losses during the second quarter of the past year, although Bitcoin failed to retain its recovered positions after that. By the end of 2021, the yield of the first cryptocurrency was 72%.

The digital asset ended at around $47,500 during the previous year. On Monday, the BTC/USD pair was around the level of $46,921. It should be noted that at the end of December 2021, Bitcoin was trading at $ 46,300, unsuccessfully trying to rise. Over the past month, it decreased by 19%, which turned out to be one of the worst results since December 2011.

The first cryptocurrency started to fall when the Fed announced its decision to curtail the asset purchase program. The Fed's course of tightening monetary policy hit Bitcoin hard, which plunged noticeably and remained in a downward trend until the end of 2021.

It is usually cautious in the first month of the new year since traditionally, January is not considered a very positive month for this cryptocurrency. Many analysts fear the onset of the crypto winter, during which BTC will lose the major share of its value. In the event of a strong correction of risky assets, experts warn that it will decline to $ 10,000. Three factors can act as a catalyst for the crypto winter: a decrease in the activity of institutional investors, the introduction of national cryptocurrencies (CBDC) by many countries, and the struggle of regulators with the revolutionary blockchain technology sector – GameFi.

However, most experts expect an upward turn in the industry and believe in Bitcoin's prospects. This is facilitated by the high restorative power of Bitcoin and the belief in innovative means of payment as the money of the future. The short and medium-term planning horizon for Bitcoin is also encouraging. Under favorable circumstances, experts summarize that it may be in the range of $72,000 - $75,000 in the first half of 2022.

 

New year, same dilemma: which to choose between gold or stocks?

The beginning of the new year brought losses to the precious metal. Traders turned away from it, disappointed with how the year 2021 ended in the gold market. As a result, gold declined by 3.6%.

Last week, gold rose by 0.9%, which led to a monthly increase of almost 3% and a quarterly increase of about 4%.

However, the yellow asset ended the year with losses. It showed the sharpest annual drop in 6 years. It plunged by 3.6%, while it fell by more than 10% in 2015.

The results of 2021 disappointed investors. On Monday, the gold market was dominated by a bearish mood. During trading, the precious metal fell 1.6%, or $ 28.50, and fell to a 2-week low of $ 1,800.10.

The fading fears about a new strain of coronavirus were also a strong negative factor for gold. The low mortality rate and hospitalization of patients with Omicron give hope that COVID-19 will not paralyze the world economy in the coming year.

On the wave of optimism about the prospects for global economic growth in 2022, the US stock market was in an optimistic state on Monday. The main US indices rose – Dow Jones Industrial Average increased by 0.68%, and the S&P 500 also did so by 0.64%.

A good start to the year for the US dollar also contributed to the rise of indicators. The US currency strengthened by 0.3% due to the significant dynamics of the yield of 10-year US bonds, which reached the highest level yesterday since November.

Most likely, the US dollar and yields will continue their upward movement this week. They will be supported by the monthly report of the US Department of Labor for December.

Economists expect an increase in hourly wages by 0.4% compared to November when the indicator rose by 0.3%. The number of jobs in the non-agricultural sector of the country is also forecasted to rise by 400 thousand. This is almost twice the value recorded in the previous month.

According to strategist Chintan Karnani, it is imperative for gold to trade above the 200-day moving average of $ 1,806.40 right now in order to remain in the short-term bullish zone. Otherwise, we will see a sharper increase in market sales.

Meanwhile, most traders are cautiously optimistic about the future prospects of gold, despite the fact that historically, January is considered a seasonally favorable period for the yellow asset.

At this stage, investors prefer more risky financial instruments to the precious metal, i.e. stocks. However, experts warn that this year will be difficult for the stock market.

It is threatened by rising inflation, continued soft monetary policy by central banks, and a coronavirus that will not go away in the next 12 months. Against this background, gold will feel as comfortable as possible.

At the same time, geopolitical problems will help gold, which will become even more acute in 2022, analyst Jim Wyckoff believes. A bubble in the Chinese real estate market, which may burst, will facilitate this.