Easing fear of omicron variant favors greenback

USD trades high against the Japanese Yen. The reason behind this move can be linked to recovery in the US treasury yields and reducing fear of omicron coronavirus variant.

Further mixed Japanese data underpinned the bullish move of the pair. Japan’s Preliminary Industrial Production for October fell below 1.8% market consensus but recovered from -5.4% prior to +1.1% MoM level. On the other hand, the Unemployment Rate eased to 2.7% from 2.8% forecast and prior whereas the Jobs/Applicants ratio dropped below 1.17 expectations and 1.16 previous readouts to 1.15 in October.

Further, US data favors the greenback; the US Pending Home Sales jumped 7.5% MoM in October versus 1.0% forecast and -2.45 prior reading.

Adding to it, Japan’s ban on the international flights from South Africa and surrounding countries further favored the USD/JPY bullish move.

Whereas, Fed Chair Jerome Powell and Treasury Secretary Janet Yellen showed readiness to discuss the economic recovery from the COVID-19 pandemic. They will also appear before the House of Representatives Financial Services Committee on Wednesday.

Both released their prepared testimony late Monday, with Powell projecting 5% growth this year but noting the new variant poses downside risks to economic activity and jobs and raises uncertainty around inflation.

USD/JPY 4 Hour Chart:

Support: 113.02 (S1), 112.52 (S2), 112.05 (S3).

Resistance: 113.98 (R1), 114.45 (R2), 114.95 (R3).

Amidst all the catalysts favoring the greenback against the Japanese yen, we expect a bullish trend for USD/JPY.

Covid woes in Eurozone weighs on Euro

Euro is trading lower against the greenback as a reverse of Friday’s virus-led rebound during early European morning on Monday.

The rationale behind this move can be related to the upbeat comment of the US and covid fears in Eurozone. The new variant of covid – The omicron virus had not yet been detected in the US. National Institutes of Health (NIH) officials renewed hopes that the virus vaccines, as well as the booster doses, can help overcome the latest challenge to the global economy.

Additionally, Israeli Professor Dror Mevorach termed ‘Omicron’ as less severe than the ‘Delta’ version of the coronavirus. But on the other hand,  Dr Anthony Fauci, the nation’s top infectious disease doctor and the president’s chief medical adviser, said  “it was inevitable that the variant would appear in the US.” However, as of now, the Postive comments favors the greenback.

ECB latest comment on the new variant further weighs the Euro and favors the greenback. European Central Bank President Christine Lagarde said ” The euro zone is better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant.”

“There is an obvious concern about the economic recovery [of the euro zone] in 2022, but I believe we have learnt a lot. We now know our enemy and what measures to take. We are all better equipped to respond to a risk of a fifth wave or the Omicron variant”, Lagarde further added that “The crisis taught us this virus knows no boundaries. Therefore we will not be protected until we are all vaccinated”

Moreover, the central bank’s Executive Board member Fabio Panetta said over the weekend said that The European Central Bank (ECB) doesn’t need to intervene in order to tighten the monetary policy now, as inflation is driven by temporary factors.

The pair traders will now await for preliminary reading of the German Harmonized Index of Consumer Prices (HICP) for November, expected 5.4% YoY versus 4.6% prior, Speeches from European Central Bank (ECB) President Christine Lagarde, Federal Reserve Chairman Jerome Powell and US President Joe Biden which will be crucial to direct the pair further.

EUR/USD 4 Hour Chart:

Support: 1.1237 (S1), 1.1159 (S2), 1.1113 (S3).

Resistance: 1.1361 (R1), 1.1406 (R2), 1.1485 (R3).

As of now, the prevailing fears of economic recovery in the Eurozone weighs on Euro , we expect a bearish trend for EUR/USD.

BTC/USD Weekly Forecast (29th November 2021 – 03rd December 2021)

Fundamental view:

Bitcoin traded lower against the greenback in this week. Some recent news underpin the bearish sentiment for the King Crypto. Hillary Clinton, former Democratic presidential candidate, talked about cryptocurrency Tuesday. She elaborated on her crypto statement last week and warned that the technology may be manipulated by countries like China and Russia to undermine the United States.

She said “We are looking at not only states, such as China or Russia or others, manipulating technology of all kinds to their advantage; we are looking at nonstate actors, either in concert with states or on their own, destabilizing countries, destabilizing the dollar as the reserve currency.”

Moreover, The government of India has listed a cryptocurrency bill to be taken up in the upcoming session of parliament that starts next week. The bill seeks to prohibit cryptocurrencies with some exceptions. According to the government’s description, the bill aims “To create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India. The bill also seeks to prohibit all private cryptocurrencies in India, however, it allows for certain exceptions to promote the underlying technology of cryptocurrency and its uses.”

Elsewhere, Kazakhstan is considering moving to nuclear energy sources to mine BTC due to the power crunch. The country’s Ministry of Energy revealed that it saw an 8% increase in domestic electricity consumption in 2021 due to Bitcoin miners. This sudden spike in electricity consumption comes after China banned digital currency mining in 2021. This news somewhat favored the Bitcoin but overall bearish sentiment gripped BTC this week.

The major economic events deciding the movement of the pair in the next week are Fed Chair Powell Speech at Nov 29, CB Consumer Confidence Index at Nov 30, ADP Nonfarm Employment Change, ISM Manufacturing PMI, EIA Crude Oil Stocks Change at Dec 01 and Nonfarm Payrolls at Dec 03 for US.

BTC/USD Weekly outlook:

Technical View:

Last week’s high was 11.44% lower than the previous week. Maintaining high at 59522.7 and low at 53513.9 showed a movement of 6009 pips.

In the upcoming week we expect BTC/USD to show a bearish trend. The Instrument is trading below the 200 Simple Moving Average and the MACD trades to the downside. A firm breakout below 51816.3 may make a fall to 49660.7 and then may take a way down to 45807.5. Should 57825.1 prove to be unreliable resistance, the BTCUSD may raise upwards to 61678.3 and 63833.9 respectively. In H4 chart bearish butterfly pattern favors prospects of a bearish trend. Dark cloud cover pattern also constructs a bearish outlook for the pair in the upcoming week.

Preference
Sell: 54566.7 target at 49661.5 and stop loss at 57830.2

 

Alternate Scenario
Buy: 57830.2 target at 63832.9 and stop loss at 54566.7

XAU/USD Weekly Forecast (29th November 2021 – 03rd December 2021)

Fundamental view:

Gold traded low and dipped to its lowest level since early November $1778 on Wednesday But showed a rebound on the second half of the week and closed on the negative territory by reaching $1849. The major reason behind the strength of the US dollar was a sharp upsurge in US Treasury bond yields. US President Joe Biden nominated Jerome Powell for a second four-year term as the Fed chair and cemented the view that the Fed could go for a rate hike by June 2022. This also turned to be favorable for the greenback.

Moreover, San Francisco Federal Reserve Bank President Mary Daly said on Wednesday she would be open to accelerating the pace of the central bank’s tapering of asset purchases if inflation remained elevated and jobs growth stayed strong. Daly said “If things continue to do what they’ve been doing, then I would completely support an accelerated pace of tapering.”

On Friday, Traders started shifting their focus to the corona virus headlines. Reports suggested that current vaccines might not be effective against the highly-mutated COVID variant which was detected in South Africa triggered a risk aversion sentiment in the market. Many countries decided to temporarily suspend flights from several African countries and Pfizer said that it will take them around 100 days to produce an adjusted vaccine. This news weighed on the greenback favoring the yellow metal by which it could erase some of its weekly loss.         

The major economic events deciding the movement of the pair in the next week are Fed Chair Powell Speech at Nov 29, CB Consumer Confidence Index at Nov 30, ADP Nonfarm Employment Change, ISM Manufacturing PMI, EIA Crude Oil Stocks Change at Dec 01 and Nonfarm Payrolls at Dec 03 for US.

XAU/USD Weekly outlook:

Technical View:

Last week’s high was 1.51% lower than the previous week. Maintaining high at 1849.1 and low at 1778.4 showed a movement of 707 pips.

In the upcoming week we expect XAU/USD to show a bearish trend.  The Instrument is trading below the 200 Simple Moving Average and the MACD trades to the downside. A firm breakout below 1762.8 may make a fall to 1735.2 and then may take a way down to 1692.1. Should 1833.5 prove to be unreliable resistance, the XAUUSD may raise upwards to 1876.6 and 1904.2 respectively. In H4 chart bearish bat pattern favors prospects of a bearish trend. Bearish harami formation further exerts the expectation of downtrend for the pair.

Preference
Sell: 1791.3 target at 1723.7 and stop loss at 1838.5

 

Alternate Scenario
Buy: 1838.5 target at 1903.2 and stop loss at 1791.3