KTM FX Weekly: The March continues
2020 has been a year quite like no other, for obvious and unexpected reasons. While the risk assets were at what seemed to be a downfall in March, no-one could have predicted what has happened to the financial assets since.
We will end this year in a more precarious position than we could’ve imagined a year ago, but in a far stronger place than many of us would’ve expected several months back.
FX:
Having been down 5% at one point, the common currency has rallied more than 15% and is more than 5% higher than where the EUR started this year. Forwarding to the current situation, COVID-19 daily infection cases are getting uglier by the week, especially in Europe and the US.
However, looking out a little further, the global economy is expected to gain momentum over the next two years.
Looking at the above table, the EUR is started to be outperforming against the commodity currencies (AUD, CAD, and NZD) but still laggard against the safe-haven Frank (CHF). Our longer-term bullish target remains against the USD for 1.2500+.
EUR posted a strong gain of 2.40% in November. If we look back to history, only five times the EURUSD posted strong gains mover 2% since 1996. This November 2020 move is resembling 2000 and 2017 moves. On both the occasions, the following month was produced a massive green candle. Now the price ran through our medium targets of 1.2090 and 1.2150.
Overnight risk sentiment soared on the latest European travel restrictions. USD stronger on Monday; as a result, EUR fell to 1.2130 before recovering to 1.2230. The market was largely ignored by the positive news of the US fiscal stimulus deal.
Macros: Flash PMI figures for EZ and US are released last week. Besides, sentiment among German managers has improved. As per the official release, companies were more satisfied with their current business situation. They were also less skeptical about the coming six months. While the lockdown is hitting certain sectors hard, overall, the German economy is showing resilience.
- In October 2020, the industrial production rose by 2.1% in the euro area compared with September 2020, according to estimates from Eurostat, the statistical office of the European Union.
- December Flash PMIs:
German Flash Manufacturing PMI 58.6 vs. 57.8-34 months high
German Flash Services PMI 47.7 vs. 46.0-2 month high
EZ Flash Manufacturing PMI 55.5 vs. 53.8-31 months high
EZ Flash Services PMI 47.3 vs. 41.7-3 month high
- The euro area annual inflation rate was -0.3% in November 2020, stable compared to October, according to Eurostat.
- The ifo Business Climate Index rose to 92.1 points in December from 90.9 points (seasonally adjusted) in November.
Looking ahead: Have a great holiday season, dear readers & followers! Best wishes for 2021!
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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