EUR/USD Weekly Forecast (17th January 2022 – 21st January 2022)

Fundamental view:

The Euro rose against the greenback this week after a fall of last week. The Consumer Price Index was confirmed at 7% YoY in December, its highest since 1982. The high inflation due to disruptions in supply chain as pandemic blew in the year beginning caused the inflation to rise which in turn forces the Central bankers to tighten their monetary policies, despite the progress in the economic recovery was away from being complete. European policymakers maintain their wait-and-see stance. President of European Central Bank Christine Lagarde said they understand that rising prices are a concern for many people and noted that they take this concern very seriously, She said “people can trust that our commitment to price stability is unwavering, which is critical for the firm anchoring of inflation expectations and for confidence in the currency.” The Inflation along with the other catalyst underpinned bullish trend for the quote.

In this week, US Federal Budget Balance on 12th January and Eurozone Trade Balance on 14th January favored downtrend whereas Eurozone Unemployment Rate on 10th January, US CPI monthly report on 12th January and US PPI monthly report on 13th January favored uptrend for the pair.

The major economic events deciding the movement of the pair in the next week are Eurozone ZEW Economic Sentiment Indicator, US TIC Net Long-Term Transactions at Jan 18, US Building Permits at Jan 19, ECB Monetary Policy Meeting Accounts, Initial Jobless Claims, EIA Crude Oil Stocks Change at Jan 20 and Baker Hughes US Oil Rig Count at Jan 21.

EUR/USD Weekly outlook:

Technical View:

Last week’s high was 0.91% higher than the previous week. Maintaining high at 1.1482 and low at 1.1284 showed a movement of 198 pips.

In the upcoming week we expect EUR/USD to show a bullish trend. The currency pair is trading above the 200 Simple Moving Average and the MACD trades to the upside. A solid breakout above 1.1499 may open a clean path towards 1.1589 and may take a way up to 1.1697. Should 1.1301 prove to be unreliable support, the EURUSD may sink downwards 1.1193 and 1.1103 respectively. Chart formation of a Semi-w pattern breakout in H4 chart sets prospects for a bullish trend. Three outside down formation in H4 chart escalates the expectation for a bullish trend.

Preference
Buy: 1.1408 target at 1.1585 and stop loss at 1.1296

 

Alternate Scenario
Sell: 1.1296 target at 1.1105 and stop loss at 1.1408

Merits and demerits of Stock trading

Have you heard from a friend or relatives or office colleagues that they have earned good amount of money in trading stocks then you also take it as good idea to explore. But step back due to the risk associated with it.

However diversifying your financial portfolio beyond fixed deposits, gold, and mutual funds is necessary and there are great benefits attached to it. Historically, the stock market has delivered generous returns to investors over time thus becoming a good choice.

Now you can easily trade stocks to reap the benefits of investing in stocks. 

Merits of stock trading:

The stock market provides the trader with several merits and helps them with the easy handling of their money. We have listed few important ones below :

1. Advantage of the Booming Economy

Merits and demerits - 2

The stock market is an important element in growing economy and tends to react to all the economic growth indicators like GDP, inflation, corporate earnings, and so on. Stock market gives the opportunity to take direct advantage of a booming economy and the value of the investment in stock market grows in proportion to economic growth.

As the economy grows, corporate earnings are boosted. That’s because economic growth creates jobs, which creates income, which creates sales as a result of which the average income of an individual increases. This in turn, affects consumer demand, leading to an uptick in sales. Hence, the value of the investment in a particular company increases i.e the share price increases.

2. Helps to stay ahead of inflation

Stocks have averaged an annualized return of 10% historically. This is better than the average annualized inflation rate which usually tends to be 3-4%. This means that long term investment is better in stocks.

3. Benefit of Dividend

A dividend is an extra income for investors, which is paid annually by most companies. Dividend payments arrive even if the stock has lost value and thus give additional income on top of any profits with trading stocks.

These dividend incomes too have a lot of benefits. They can fund a retirement, Help you grow your investment portfolio etc.  

4. Easy to buy

Stock trading makes buying stocks of the companies, easy. You can purchase them through a broker like Winstone Prime. After Account setup, you can buy stocks in minutes. Few online brokers like Winstone Prime, let you buy and sell stocks with low commission.

5. Make money in two ways

Most of the traders intend to buy low and then sell high. They choose fast-growing companies that appreciate in value. Both day traders and long term investors get attracted by this.

Day traders hope to take advantage of short-term trends, whereas the long term traders expect to see the company’s earnings and stock price grow over time. Both of them trust that their stock-picking skills will lead them to make success in the market.

The rest traders prefer a regular stream of cash. They deal with stocks of companies that pay dividends. Those companies grow at a moderate rate.

Demerits:

That said, every coin has two sides, even Stock trading has few demerits:

1. Risk associated with trading

You could lose your entire investment in stock trading. Suppose a company performs low, investors will sell which will send the stock price plummeting. Thus when you sell you might lose your initial investment too.

2. Time required

Researching a company is very important before you buy stocks of that company. You must research each company to determine how profitable you think it will be before you buy its stock. You must learn how to read financial statements and annual reports and follow your company’s developments in the news. Also you should keep a track of the company’s performance which needs time.

3. Getting Emotional

Stock prices fluctuate second to second. Usually traders tend to buy high due to greed and sell at low price due to fear.  It is always advisable to keep emotions aside and look at the price fluctuations of stocks, and just check in on a regular basis.

4. Professional competition

Institutional investors and professional traders have ample of time and knowledge to invest in trading. They make use of sophisticated trading tools, financial models and advanced computer systems and take advantage over a retail investor.

Diversification is main in stock market:

1. Diversification of investment 

A diversified portfolio helps you in getting more advantages and fewer disadvantages than involving in stock market alone. A mix of stocks, bonds, commodities, currencies and cryptos will help you to gain high returns with manageable risk.

2. All Company sizes

A mix up of  different-sized companies (large-cap, mid-cap, and small-cap companies) is better while choosing the stocks as they perform differently in each phase of the business cycle.

3. Geographic location

Choose companies located in the United States, Europe, Japan, and emerging markets. With Diversifying the stocks, you can reap the advantage of of growth without being vulnerable to any single stock.

Final words

Stock market helps in diversification of your financial portfolio and allows you to stay ahead of inflation. Stock market has many benefits that you can take advantage of, however be aware of the risk associated with that. Open account now and start trading stocks.

Happy trading !!!

UK economic data favors the Sterling

  • Upbeat UK manufacturing data which is much higher than expectation favors the British pound.
  • Brexit referendum vote supports the pound to edge higher against the greenback.
  • US dollar is under pressure due to some of the less hawkish by Fed Powell.

 

Sterling traded high against the greenback on Friday after robust UK economic data and the day after Brexit referendum vote.

The industrial sector of UK witnessed a solid recovery in November, which is evident from the the latest UK industrial and manufacturing production data published by Office for National Statistics (ONS) on Friday.

Manufacturing output arrived at 1.1% MoM in November versus 0.2% expectations and much higher than 0.1% recorded in October while total industrial output came in at 0.7% vs. 0.2% expected and -0.5%.

On a annual basis, the UK manufacturing production reading came in at 0.4% in November, beating expectations of -0.3%. Total industrial output rose by 0.1% in November month against a 0.5% reading expected and the previous 0.2% print.

Elsewhere, the UK goods trade balance numbers were published, which arrived at GBP-11.337 billion in November versus GBP-14.20 billion expectations and GBP-13.93 billion last. 

As per the Statistca Research Department, “As of January 2022, 49 percent of people in Great Britain thought that it was wrong to leave the European Union, compared with 38 percent who thought it was the right decision. During this time period, the share of people who regret Brexit has been slightly higher than those who support it, except for some polls in Spring 2021, which showed higher levels of support for Brexit. The share of people who don’t know whether Brexit was the right or wrong decision has generally been consistent and usually ranged between 11 and 13 percent.”

The pound has also being supported by by expectations of rate hikes by the Bank of England this year.

Meanwhile, the US dollar is under pressure due to some of the less hawkish comments of late, including both the Federal Reserve chair, Jerome Powell, and Philly Fed President Patrick Harker.

On Thursday, Harker said “he sees the Fed starting to shrink its balance sheet “in late 2022 or early 2023” after the central bank has raised its target rate sufficiently, to around 1 per cent from near zero.” ”We’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year,” Powell said on Tuesday at his confirmation hearing before the Senate Banking Committee.

GPB/USD 4 Hour Chart:

Support: 1.3684 (S1), 1.3665 (S2), 1.3633 (S3).

Resistance: 1.3734 (R1), 1.3766 (R2), 1.3784 (R3).

Amidst all the catalysts favoring the British pound, we expect a bullish trend for GBP/USD.

US dollar is down despite high inflation data

  • Greenback showed a surprise fall despite a four-decade high inflation data.
  • Fed policymakers’ speeches are largely eyed for fresh impulse.
  • Omicron fear amid Experts warning “Dark Days Ahead for Hospitals.” weigh on the yellow metal.

 

Gold is flat against the greenback during the Thursday Asian session after refreshing multiday high on Wednesday, The rationale behind the yesterday’s move can be related to the fall of the US Treasury yields despite a four-decade high inflation data.

US CPI had a jump and matched YoY forecast of 7.0% and is high than 6.8% previous reading. Elsewhere, the monthly figure had a rise of 0.5% versus 0.4% expected but less than 0.8% prior readout.

Despite CPI being the highest since 1982, traders don’t see it urgently shifting an already hawkish Fed too much. With at least three rate hikes already in the market price, few investors pared bets on further dollar gains.

After the US inflation data release, Federal Reserve Bank of St. Louis President James Bullard said, “Four rate hikes in 2022 now appear to be on the table and, in the face of high inflation; a rate hike in March seems likely.”

Fed Board of Governors’ member and incoming Vice Chairman of the FOMC Lael Brainard said, “Returning inflation to the 2% target is the ‘most important task’ facing the US central bank.” The FOMC member said in remarks prepared for delivery on Thursday to a Senate panel considering her for promotion to the vice-chair position.

Talking on the virus woes, Rising cases of Covid recent variant Omicron and Experts warning weigh on the market sentiment and the yellow metal. Experts warn “Replaces Delta, ‘Dark Days Ahead for Hospitals.”

As per a recent news, “The most recent CDC Nowcast data predict that omicron is dominating caseloads in US.”

“The omicron variant represents about 98% of cases, Centers for Disease Control and Prevention Director Rochelle Walensky said Tuesday. That number is based on data for the week ending Jan. 8 and is a significant increase from just two weeks prior, when omicron accounted for 71.3% of cases.”

XAU/USD 4 Hour Chart:

Support: 1817.6 (S1), 1809.4 (S2), 1804.1 (S3).

Resistance: 1831.0 (R1), 1836.3 (R2), 1844.5 (R3).

The yellow is trading flat, the fed policy maker’s speech ahead and the initial jobless claims will be largely eyed for fresh impulse. We expect a short term bullish trend for XAU/USD.