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Monday’s Bullseye: 23 November 2020

Fawad Razaqzada Fawad Razaqzada 20/11/2020 Linkedin Twitter
Monday’s Bullseye: 23 November 2020 Monday’s Bullseye: 23 November 2020
Monday’s Bullseye: 23 November 2020 Fawad Razaqzada Fawad Razaqzada Linkedin Fawad Razaqzada Twitter
It has been a choppy week for the major indices, although that’s not to say it has been quiet elsewhere. We have seen sharp moves in things like Bitcoin, Turkish Lira and some individual stocks such Tesla. But insofar as the wider markets are concerned, the week’s action – or lack thereof – can be attributed to two opposing forces cancelling each other out, as optimism over the developments of effective vaccines from Moderna, Pfizer-BioNTech and Oxford-AstraZeneca has been somewhat overshadowed by concerns over surging virus cases and the resulting lockdowns. Overall, though, the bullish trend has remained intact for most risk assets, and the consolidation after a big two-week rally is never a bad thing from a bullish point of view anyway. So, while it may feel like equity investors are more concerned about the new lockdown measures to stop the spread of the coronavirus than they are hopeful about the prospects for a vaccine, the underlying bullish trend still remains intact.

Heading into the new week, news of vaccines will likely dominate the agenda, although prepare to hear more about Brexit as well, as we enter a crucial stage for the trade talks between the UK and EU.

Vaccine news likely to dominate agenda again

On the Vaccine front, Pfizer has already confirmed that it will be applying for emergency-use approval from the Food and Drug Administration (FDA) of its on Friday. The FDA has scheduled a meeting for review for December 8, 9 and 10. Pfizer’s CEO, Albert Bourla, has said that the first doses of the vaccine could be shipped out within hours of the FDA approval, should it pass. As the vaccine race continues, the need to develop and approve one cannot come soon enough, with the hospitalizations in the US continuing to rise along with infections and deaths. In Europe, new cases have started to level off in some nations and the infection rate – the R – has started to fall back in the UK, albeit it still remains above 1.

In the coming weeks, more companies are expected to announce hopefully positive news regarding the development of their own vaccines and other treatments for COVID. This could provide bouts of buying momentum and keep the bears at bay.

As the vaccine race continues, the need to develop and approve one cannot come soon enough, with the hospitalizations in the US continuing to rise along with infections. It could be months before a vaccine is widely available. To bridge that gap, more government and central bank support is needed. EU leaders have so far struggled to approve a $2 trillion stimulus package for the single currency bloc, while in the US, Trump’s refusal to accept losing the election to Biden has raised uncertainty over the timing of the much-needed stimulus there.

Still, the markets remain convinced that sooner or later, more stimulus will be provided and with renewed hopes that things might turn back to normal in the not-too-distant future, thanks to the developments of vaccines, the downside for risk assets look to be limited.
 
Brexit deal close to being finalised

Meanwhile, on the Brexit front, investors are becoming increasingly convinced that a deal could be around the corner. After months of futile talks, it looks like the two sides are finally getting close to agreeing on trade and security. According to some media reports in the UK, quoting European commission’s most senior official, Ilze Juhansone, gaps on these issues are “slowly shrinking,” and that the majority of the 11 key negotiation issues now had “joint legal texts with fewer and fewer outstanding points.” Adding to the optimism, the European commission president, Ursula von der Leyen, said that after “difficult weeks with very, very slow progress now we have seen in the last days better progress, more movement on important files. There are still quite some metres to the finish line, so there’s still a lot of work to do.”

So, it is worth keeping a close eye on the GBP/USD and other GBP crosses in the days ahead, as a potential agreement could send the currency sharply higher:
 
GBP/USD
Source: ThinkMarkets and TradingView.com

The Cable has been putting in higher highs and higher lows for months and in recent weeks the periods where it has come under selling pressure have been progressively shallower. This points to increased buying pressure. With rates being not too far off the peaks from this year and last year, around the 1.35 handle, I feel like the pressure is building for a bullish breakout above this level over the coming days and weeks. Could the break happen in the week ahead? I wouldn’t rule it out.

Bitcoin heading to $20K?

Bitcoin has been surging higher over the past few weeks, rising towards levels not seen since 2017. Investors have been piling into Bitcoin as it continues to become increasingly popular as an alternative to fait currencies. Some even regard it as a better store of value than gold because, unlike the precious metal, the supply of the digital currency is known and running short as more and more investors get their hands on it. At just under $19K, Bitcoin was on course to reach its 2017 record peak of just under $20K, but will it get there and if so, can it then reach for $25K or even higher over time?

Bitcoin
Source: ThinkMarkets and TradingView.com
 
It is worth pointing out that the rally is looking significantly overstretched, so watch out for a potential pullback in the coming days. What you want to see from a bullish point of view is a period of consolidation for price to work off its overbought conditions through time than price, before potentially expanding further higher.
 
Quiet week for data

Meanwhile, everyone is expecting economic data to deteriorate in the coming weeks due to the impact of the latest lockdowns. So, don’t be surprised if the markets show little or no reaction to potentially weak data.

Among the key highlights will be Monday’s release of the Eurozone manufacturing and services PMIs, which will reveal the extent of the damage the latest lockdowns have caused. But if the data turns out to be surprisingly better than expected, then this could lead to a short squeeze rally on the euro, with many people expecting the single currency to fall because of the upcoming expansion of QE by the European Central Bank in December. In other words, there is a risk that sellers who have been too early in the EUR/USD, might be forced to liquidate their positions.

Also on Monday, we will have NZ retail sales as well as UK and US PMIs.

With Thursday being Thanksgiving in the US, there will be a mini data dump on Wednesday from the world’s largest economy: Prelim GDP (second estimate), unemployment claims and FOMC minutes will all be released on the day. The last two days of the week will be very quiet for data.  
 
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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By Fawad Razaqzada

27/11/2020

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Mohammed Zidan
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Mohamed Zidan
Chief Market Strategist, Dubai

Mohamed Zidan is a chief market strategist in Dubai and CFA Level III candidate. He reports to London office and has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis. worked as FX Analyst, and Strategist in several different organizations and for various departments. He holds a bachelor’s degree from Cairo University in Egypt. Mohamed Zidan is a regular guest on several major TV networks such as; CNBC Arabia, Fran24 Arabic, Alarabiya , Dubai TV, Sama Dubai, Skynews Arabia, Saudi National News, and Egypt National news.

Zidan presents insight to the markets movements, holds open discussions and relays possibilities related to the world’s financial market and economies.

Mohamed Zidan has been invited as a guest speaker for several international seminars. Zidan provides daily and weekly outlook for the markets. His experience ranges from currencies, commodities, stocks and options. he applies a top-down, global macro approach combined with price action to generate trade ideas and anticipate the next move.

Victor Golovtchenko
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Victor Golovtchenko
Global Macro Analyst, Sofia

Victor Golovtchenko has been analysing and trading foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet was followed with a breakthrough into the financial news space with the brand new TradeStar website.

As an affectionate macro-focused analyst, he has an integrated framework to look at financial markets as a whole, identifying gaps between currencies, stocks, bonds, and other asset classes to get a core complete picture of the macroeconomic environment.

Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Mohammed Zidan
Mohamed Zidan
He has more than eight years of experience focusing on Forex, Commodities, Indices and global economic developments as well as central bank policies and intermarket analysis.
Victor Golovtchenko
Victor Golovtchenko
Victor Golovtchenko has been trading on the foreign exchange markets since 2004, and is actively involved in the online media space since 2014. His tenure as a Senior Editor at a major brokerage industry news outlet is followed with a breakthrough into the financial news space with the brand new TradeStar website.
Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.

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