EURUSD Plummets to Lowest Point in 16 months

23 Nov 2021

Bears continue to dominate the EURUSD as it created a fresh 16-month low. The weakness in the pair could be attributed to a series of upbeat expectations on the US economy, paired with some discouraging developments from the European region. The US Dollar Index (DXY) that gauges the strength of the greenback against a basket of rival currencies closed above the 96 mark for the first time since July 2020 and is currently hovering around 96.5.

Jerome Powell’s reappointment as Fed chair

On Monday evening, US President Joe Biden announced that he is nominating Jerome Powell for a second term as chairman of the Federal Reserve. The announcement has spurred demand for the greenback and saw the EURUSD plummet to new low at 1.1230. Another Fed chair contender, Lael Brainard was appointed as Vice-Chairwoman, replacing current Vice-Chair Richard Clarida. Lael Brainard is viewed by analysts as more dovish on inflation compared to Jerome Powell. The re-nomination of the Fed chair provides stability and the market would expect the hawkish stance to remain. The Fed has begun tapering its monthly bond purchase by $15 billion per month while many expect the central bank to raise interest rates in 2022 to curb the high inflation.

Consumer spending remains strong in the US

For the month of October, the US Census Bureau reported that Retail sales over-performed market expectations by jumping 1.7%, up from the 0.8% growth in September. The upbeat data was a third consecutive monthly advance and it beat the market consensus of a 1.4% increase. Retail sales figure is a leading indicator that tells important information about consumer spending. Despite the high inflation figures, the report suggested that spending has yet to dampen. This is generally a bullish signal that has helped the US dollar advance.

Covid woes in the EU

As the US Dollar strengthens, the resurgence of Covid-19 cases in Europe has helped send the pair lower. On Monday, Austria has entered into a nationwide lockdown in response to the largest Covid-19 wave the country has seen. In this drastic restriction, Austria’s 8.9 million people will not be allowed to leave home except for work, shop for essentials and exercise. In addition, tighter curbs are also set to be imposed in Germany as its Covid-19 situation has worsened, unlike anything the country has seen so far, said German Chancellor Angela Merkel on Monday. Fear of further lockdowns in cities across Europe has dampened the economic recovery outlook for the region, favouring the bears of the EURUSD.

Dovish ECB

Against the backdrop of a tapering in the US, European Central Bank President Christine Lagarde reiterated her dovish stance, warning that the ECB “must not rush into a premature tightening” of monetary policy. Speaking at the Frankfurt European Banking Congress last Friday, she also mentioned that “conditions to raise rates are very unlikely to be satisfied next year”. A combination of Covid woes in Europe and a dovish ECB pushed the Euro weaker against the strengthening greenback.

Key events to watch in the coming week:

Tuesday, November 23

EUR – German Markit Manufacturing PMI (Nov), German Markit PMI Composite (Nov), EU Markit PMI Composite (Nov)

USD – Markit Services PMI (Nov), Markit PMI Composite (Nov)

Wednesday, November 24

USD – President Biden speech, Durable Goods Orders (Oct), Nondefense Capital Goods Orders ex Aircraft (Oct), Gross Domestic Product Annualized (Q3), Core Personal Consumption Expenditures – Price Index (MoM)(Oct), Michigan Consumer Sentiment Index (Nov), Personal Income (MoM)(Nov), New Home Sales (MoM)(Oct), Core Personal Consumption Expenditures – Price Index (YoY)(Oct)

EUR – ECB’s De Guindos speech, German IFO – Business Climate (Nov), ECB’s Panetta speech

Thursday, November 25

EUR – ECB’s Schnabel speech, German Gfk Consumer Confidence Survey (Dec), ECB’s Elderson speech, ECB Monetary Policy Meeting Accounts, ECB’s President Lagarde speech

USD – FOMC Minutes

Friday, November 26

EUR – ECB’s President Lagarde speech, ECB’s Schnabel speech, ECB’s Panetta speech


Trade Forex on Phillip MetaTrader 5 (MT5).

Trade Forex at zero commission on Phillip MetaTrader 5, a dynamic platform that offers low spreads. Integrated with Acuity’s Signal Centre and Trading Central Indicators, and available on mobile and desktop app, you will never miss a trading opportunity with Phillip MT5.

Download Trading Central’s Market Buzz for updates on more topics.

What’s more? Phillip MT5 is now supported on Mac OS! To install, simply download the file below and complete a simple installation process.

An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

Why should I trade in ETF CFDs?

  • ETFs have been growing in popularity over the years. 2020 was the best year for ETFs yet, with global equity ETFs seeing more than $1T in inflows within a 12-month period. Using CFDs to gain exposure to ETFs allows for greater capital efficiency because only a portion of the contract value is required as margin to establish a position.
  • ETFs are particularly popular with investors seeking a relatively hassle-free investing experience, while desiring exposure to a range of specific and relatively understandable securities. Trading ETF CFDs brings greater convenience by eliminating the need for traders to hold multiple currencies in order to access global ETFs.
  • An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

CFD is available for trading on Phillip MetaTrader 5 (MT5).

Features of trading CFD:

  • Trade in both the bull and the bear markets
    The ability to enter a long and/or short position allow traders to take advantage of both rising and falling markets.
  • Smaller barrier to entry
    Flexible and smaller contract sizes. This means that traders will be able to enter into a contract with a modest amount of capital.
  • No expiration date or risk of delivery
    Unlike futures which commonly have a fixed expiration date, CFD allows traders to perpetually hold the position(s). CFD is cash settled, no need to worry about the delivery of the underlying asset.

 

Benefits of using Phillip MT5:

Trade at zero commission on a dynamic platform that offers low spreads. Integrated with Autochartist and Trading Central Indicators, and available on mobile, web and desktop app, you will never miss a trading opportunity with Phillip MT5.

Register for a FREE 30-day Phillip MetaTrader 5 Demo Account

More Market Trends

Strategic Futures Trading During US Election Week

Read More >

Stock Market Trends and Election Outcomes: Getting Prepared for the 2024 US Elections with the Phillip Nova 2.0!

Read More >

Stock Market Trends and Election Outcomes: Getting Prepared for the 2024 US Elections with the Phillip Nova 2.0!

Read More >