10-year US Yields are Breaking from the Triangle Pattern

It looks like the recent rally in the US yields might be over, which could imply further weakness for the USD and more gains for US stocks.

The 10-year yield seems to be breaking down from the recent triangle pattern. The support of the formation is currently near 1.075%, and if this level is taken out, bonds could rally further. The next target should be at the psychological level of 1.0%.

As the USD is usually correlated to the bond yield, should the yield continue lower, we might see another selling wave in the FX market.

That could bring the USDJPY pair back to the current cycle lows near 102.60 and the EURUSD pair back to its cycle highs above 1.23.

Additionally, weaker yields are usually a good sign for US stocks, although they have been rallying no matter what. Therefore, if yields start to decline again, stocks might be propelled even higher. 

It is also being said that a decline in yields should be positive for precious metals such as gold or silver. So far, that has not been the case as yields reached their swing high on January 12, but gold and silver continued to be under pressure. 

Our view is that the US government can’t afford higher yield due to extreme deficits and debts, and therefore the Federal Reserve (Fed) will step in every time yields rise. Therefore, the long-term trend for US (real) yields is to the downside, keeping the USD under pressure and increasing stock prices. 

The USD Rallies and Treasury Yields Rise Following Stimulus Promises

Since last Thursday, the USD has been rallying, and the EURUSD pair dropped from 1.2350 to 1.2150 on Monday. It looks like a stronger correction could be on the way.

Newly elected US president Joe Biden has promised trillions in new stimulus, starting with boosting the checks from 600 USD to 2,000 USD. As inflation expectations rose sharply, so did Treasury yields.

The 10-year yield rocketed 20% and settled at around 1.1%, which are levels last seen in March. 

As long as yields keep rising, the USD might strengthen further. However, many economists see yields topping near 1.2% as the US can’t afford higher yields due to extreme debt burden and massive debt refinancing this year.

Federal Reserve Vice Chair Richard Clarida said on Friday that the U.S. economy was headed for an “impressive” year as the impact of coronavirus vaccines takes hold and with the potential for larger government spending. His remarks also bolstered the US dollar slightly. 

The dollar index broke out from the two-month falling wedge pattern, which is a bullish reversal formation. As long as it stays above 90, the short-term outlook seems bullish.

The next target for bulls could be near 92, where previous lows are located. Should the index jump above this level, too, the medium-term outlook might change to bullish. We might see a few weeks of consolidation/ upside momentum in the long-term downtrend. 

Alternatively, if bears return, the support is at 90 and if not held, the USD might drop toward the current cycle lows at around 89.20. 

Precious Metals Rally into the New Year

The new year started in a bullish mood, and precious metals surged on Monday as it looks like bullish fundamentals are finally starting to matter again.

Gold rose 2%, and silver jumped 4% at the time of writing. Still, it seems like gold has finally managed to cancel the medium-term downtrend as the bullion jumped above the strong bearish trendline, which has been limiting its upward movement since August. 

Thus, the short-term outlook now seems bullish, and if the price closes above this trend line on a weekly basis, the medium-term trend could also change to bullish.

Additionally, many analysts and traders have observed the multi-year bearish trend in commodities, which is ending nearly everywhere. Thus, most of the major commodities might start building their respective long-term uptrends.

That theory should be supported not only technically but fundamentally as well. As long as central banks continue to print a lot of money into the financial system, currencies will weaken, and that is the time for precious metals to shine. Real yields are also falling across the globe, while on the other hand, the amount of negative yields debt is rising sharply, along with deficits. 

Therefore, we might argue that a new bullish leg has started in precious metals, and they could rise for 10 to 15 weeks before correcting.  Dips could be bought in this environment, and gold’s new target will probably be August highs above 2,000 USD, while silver should aim to reclaim the 30 USD threshold. 

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2020 A Year to Remember, A Year to Forget: The Monumental Events We Should Learn From

2020 was a rough year for everyone.  Forest fires, economic decline, diplomatic tensions, the infamous Covid-19 pandemic, global lockdowns, and a lot of suffering, despair, and lives lost. It’s not a stretch to call 2020 one of the worst years in our lifetime. 

Still, this year had some redeeming features. Sure it was bad, but it was not all bad, especially for traders who are prepped for the ups and downs of markets. As far as traders are concerned, there’s always an opportunity to be taken advantage of or a lesson to be learned, so let’s take a look at 5 lessons that 2020 gave us, and 5 events that would be best forgotten.

5 Things Traders Should Remember

  1. Elections can be a trader’s best friend

This year’s US election was one of 2020’s most anticipated events. Everyone was curious to see if Donald Trump will secure yet another shocking victory and traders geared up to take advantage of market volatility and trading opportunities.

With Trump up for re-election, anything could have happened, and that kept volatility high in the markets. Volatility continued to pick up as Joe Biden captured enough Electoral College votes to win the US Presidency while Trump challenged states to vote recounts, and has, to date, not yet conceded the election. 

Every trader looks for a rise in market volatility for potential opportunities. That’s why the 2020 US election was a welcome end to the year. 

Divisive elections are not an anomaly. So remembering how the markets performed, where the smart investments were, and the strategies that paid off will prepare you for the next round of elections in 4 years, that may give us a rerun of Trump Vs Biden.

2. Traders should always expect the unexpected

Having an open mind and a flexible trading plan really paid off this year. As the saying goes; “What doesn’t bend, breaks”. This year posed many unexpected market movements thanks to an unexpected pandemic and unprecedented lockdowns.   

While no trader can ever know 100% what’s ahead, part of a trading plan is having alternatives in the case of any unexpected changes. This helps you reduce emotional reactions to plunging and spiking markets.

So remember to be flexible and expect the unexpected because that’s what’s most exciting about the markets.

3. Gold is indeed golden

When the world went into a lockdown and indices began to fall, the whole market felt the tremors. As a result, investors turned to gold, and the yellow metal experienced record-setting highs. While currencies were declining, gold was shining. 

At a 7 year high, gold became the go-to safe haven for investors and traders who were searching for the right asset in this time of crisis. Use this example to remember why gold has always been viewed as one of the steadiest assets out there. 

In 2020, it definitely lived up to its title, performing exceptionally well in an extremely uncertain situation. That’s a good thing to remember when you’re making trading decisions in the future.

4. Patience is a gift to a trader

It’s probably safe to say everyone’s patience was really tested this year. Through lockdowns, on and off social measures, not seeing loved ones, and experiencing job loss, to name a few. This year was challenging, even for the most patient people. However, traders know very well that markets can be just as challenging on a regular basis, and it is in exactly these types of situations that it’s important to exercise your resources, flex your muscles, and develop your skills.  

As a trader, you can apply the same tactics you used to make it through the lockdowns, in your trading. Be steady, stay organized, construct routines, take time before making decisions, and assess situations as you go to deal with them properly.

Those with patience were rewarded this year. They were better equipped to handle the markets. It’s a good time to appreciate the gift of patience, and further develop it.

5. Look for the silver linings

No matter how dark 2020 was, and whether you’re a trader or not, it’s important to learn how to find the silver linings in any situation. 2020 propelled technical innovations, new online businesses, and more trading opportunities than the world had seen in a long time. 

The whole world adapted, quickly shifting to online, an environment traders are very much used to and prepared for. That’s why for millions of traders around the world, 2020 meant more free time to trade, more resources to level-up your skills, and more market volatility to take advantage of. Whatever challenges 2021 brings, remember to focus on the silver lining.

5 Things Traders Can Forget 

  1. Free time to trade during lockdowns

Who’s going to forget 2020’s global lockdowns? They were tedious, disruptive, and surreal. They were unlike anything the world has ever experienced collectively before. 

If you were a trader, however, it was a blessing in disguise, giving you more free time at home to focus on your trading account. This led to a noticeable spike in trading volumes worldwide. However, having the freedom and time to trade, while daytime jobs are shut down is a luxury that will probably never come around again.  

We may see smaller lockdowns over the next year, but major lockdowns may be a thing of the past, so feel free to erase their memory. It’s important for you to keep your pre-lockdown trading routine and schedule intact.

2. Unprecedented market behaviour and high volatility

The economy went through a topsy-turvy ride in 2020. These weren’t normal times, with unprecedented surplus programs and astounding amounts of money injected into the economy. The effect was massive, with many assets, especially stocks reacting abnormally and unusually to indicators.

It created a level of volatility that was almost entirely unprecedented in the financial markets, and those peaks and plummets, while they were sometimes great for traders, will not likely continue happening. 

So as you say goodbye to 2020, you may also want to put these economic conditions behind you and re-adjust to more normal markets. Now is the time to refine your strategies, and assess opportunities in less volatile times.

3. March 16th – the day the stock market stood still 

March 16 will forever go down as a black day in the history of the Dow Jones Industrial Average. 

As investors woke up to the massive impact of Covid on the economy, the markets collapsed. Selling was so extreme that trading on the New York Stock Exchange stopped for 15 minutes. It was the third time that a circuit breaker was triggered that week. On that day the Dow plunged 2,997 points amid Covid fears.  It was the worst single-day drop since 1987. 

It’s not a pretty thing to remember, and there’s really no need to. Analysts are predicting 2021 will signal a turn for the markets, with the vaccines now showing great promise and a new US president promising global economies more stability.

4. Oil’s biggest drop in history

On April 20, 2020 US oil prices turned negative for the first time in history. Lockdowns dramatically reduced traffic movements and travel bans almost eliminated airline’s oil purchases. The price of WTI crude oil was so severely affected by the lack of demand, that the barrel carrying the oil became more expensive than the oil itself. 

While we may still be shocked by the fact that oil dropped to negative territory, that was over 7 months ago, and the oil market has been recovering. It’s also showing signs that it will continue recovering well into the new year. 

Therefore we can put this massive drop behind us, as we look forward to a surge in oil prices as the world returns to driving cars and traveling more frequently. 

5. USD’s massive losses

The USD saw some dark days this year. In fact, it suffered its lowest point in history, dropping 11% by the end of the year from its 2020 peak. 

The accumulation of US debt during the pandemic combined with the overall uncertainty of the economy affected the dollar’s performance, which declined heavily against the EUR. 

There are several reasons for the USD’s decline, two significant being the Trump administration pouring the USD into the market to stimulate growth when the lockdown began in March and further pressure was piled on by the US Federal Reserve’s pledge to keep rates at their record low. Signs show that the USD will likely see more decline in the foreseeable future. 

However, assets have highs and lows, and as the new year progresses, the world’s biggest currency will most likely regain its strength. So, don’t depend on the USD’s weakness as a norm for the future. 

2020 was definitely not a smooth ride for anyone, and there was a lot to adjust to, especially for traders who have faced the personal effects of the lockdown as well as the challenges of the market. But seeing the silver lining and learning from market movements and mistakes, is the best way to come out of this year triumphant. 

Precious Metals Still Struggling, But are New Highs on the Horizon?

It looks like precious metals, such as gold and silver, have bottomed out in late November, and a new bull market is ready to begin. 

Firstly, the more volatile metal, silver, has already broken above the pre-vaccine highs of 26 USD. That might be a confirmation of a new uptrend. Additionally, the metal managed to jump above the bearish trend line from summer highs, which could also be interpreted as a bullish sign.

However, gold seems to be struggling. It’s still below the bearish trend line from summer highs and near 100 USD away from the pre-vaccine highs of 1,960 USD. 

Nevertheless, it still might indicate that precious metals have put the worst behind them and are ready to fly. There are many fundamental reasons for gold and silver to go higher.

Between 2008 and 2016, the Federal Reserve (Fed) printed around 3 trillion USD to combat the Great Financial Crisis and its aftermath. To combat the economic fallout from COVID-19, the Fed printed that same amount of money in just seven months

Other central banks are not falling behind, and the amount of money thrown at the financial markets is a big one. US real yields are deeply negative – meaning inflation is higher than the bond’s yields – but they can still fall further. 

All that money printing is debasing the greenback, which dropped to two and a half year lows recently, with the possibility of more downside movement ahead. 

Lastly, panic regarding the new strain of COVID and the economic damage from lockdowns should also be bullish for metals. For gold, the metal needs to rise above 1,960 USD to confirm the bullish bias, while silver should stay above 26 USD to attack summer highs. 

The EURUSD is climbing to 1.25. Will the ECB intervene?

The Euro has been on fire, and the EURUSD pair rose above 1.21 hitting May 2018 highs, mostly because of global USD weakness. 

Last week, the European Central Bank (ECB) increased its pandemic bond-buying program by 500 billion EUR, also extending its duration. Traders had been hoping for more, and as the ECB’s decision was not dovish enough, the EURUSD rose noticeably, while precious metals fell. 

The 1.25 level is now a major psychological level and the major resistance for the euro as 2018 highs are located. From a technical point of view, if bulls push the pair above 2018 highs, the single currency could shoot up toward the 1.30 threshold. The last time it was there was in 2014.

That will, of course, be a major problem for Germany and other European countries, as they are export-oriented and they require a weak currency. Therefore, if the euro continues to strengthen, the ECB should start intervening, but how?

The Federal Reserve (Fed) is expected to loosen monetary policy at this week’s meeting, potentially weakening the USD. 

It really looks like the only choice for the ECB to stop the euro from strengthening is helicopter money. As the European central bank is already monetizing a large portion of the government’s debts, the next step to helicopter money should not be that hard. It only needs to think about how to do it without raising unrest. 

Overall, we think that the 1.25 level might be acceptable for the ECB as it is only 2-3% higher from current levels – and what choice does it have anyway? – but if the euro shoots through it and moves toward 1.30, the ECB will most likely start to act. 

Will This Week’s ECB News Disappoint?

Later this week, the European Central Bank (ECB) will meet, and it is widely expected to deliver more easing.

As the ECB previously said, it is ready to unveil more stimulus. The stimulus has to be really big. The consensus looks for a 500 billion EUR addition to the PEPP Quantitative Easing (QE) program and a 6-month extension until December 2021. Some analysts and economists forecast a 6-month extension of the QE program. 

All rates should be left unchanged, while the fresh economic and inflation projections are expected to be lower than at the central bank’s latest meeting. 

However, since everything is already priced in and the EURUSD pair is rising anyway, the market could be headed toward a big disappointment. That happens when the central bank delivers only what is expected and does not surprise the markets with more dovishness.

Should that happen, the EURUSD pair could shoot toward the 1.25 level, which is a key resistance pivot. 

Additionally, everybody knows that a stronger euro is causing pain for German and other exporters, especially in times of a global crisis. The question then shifts to the following: what is the ECB going to do to stop the euro from appreciating further?

That is why the ECB should surprise the markets this week and either further enlarge the QE program, ease other monetary conditions, or basically start with the well-known helicopter money. 

Since the Federal Reserve (Fed) is forecast to announce more easing later in December, inflation is on the rise, and real yields are negative, the greenback has zero reasons to strengthen.

So far, the long-term trend for the EURUSD remains bullish, as long as it trades above 1,20/1.18 and the battle of central banks is only just beginning. We will see what central bank debases the currency more and wins this fight. 

The USD Drops to 30-Month Lows, What’s next?

The US dollar has been dropping nonstop since the election in early November, and it has declined to 30-month lows this week, with the dollar index trading at around 91.40.

Moreover, the index dropped to new lows from a technical analysis perspective, which confirmed the bearish bias. That has pushed the EURUSD above the important 1.20 level for the first time since the summer 2018.

As the new Biden administration leans toward socialism and wants to erase student debt, unleashing massive fiscal spending, combined with an even more massive monetary stimulus, investors have been dumping the greenback.

The Federal Reserve (Fed) is expected to unveil more stimulus at its December meeting, which might be another hit for the USD. 

That bearish impetus is there to stay for many months; therefore, the USD might fall further. Moreover, judging from rising equities, sentiment in the markets remains positive. 

Additionally, US inflation will probably noticeably rise, which is already being reflected by falling US (real) yields. In this kind of environment, the USD should remain under pressure. 

Regarding the EURUSD pair, as long as it trades above 1.20, which is the crucial support now, the short and medium-term outlook seems bullish. 

The next target for the pair should be at 2018 highs near 1.25. However, judging by the recent spike, we might see some days of consolidation soon. 

Markets React to the US Election and Potential Monetary Stimulus

It looks like Joe Biden will be the next US president, however it’s almost been a week since the election and the results haven’t been officially announced yet. The media has proclaimed Biden the winner, however, Biden’s opponent Donald Trump is suing many swing states for alleged vote fraud. Indeed, there are many suspicious occurrences such as dead people voting, more people voting than registered, kids voting and software glitches giving votes to Biden only. 

Whether you prefer Democrats or Republicans, the voting process must be clear and without any suspicious activity, so Trump has the right to investigate these suspicious occurrences. If the Supreme Court starts investigations in many states, it might take weeks before the official election results are announced. 

Nevertheless, one thing remains stable; we will get more fiscal and monetary stimulus, which effect the financial markets. It doesn’t really matter who wins the Presidency, but how much free money will be thrown at the markets

Since the European Central Bank (ECB) seems ready to do more in December, the Federal Reserve (Fed) will most likely follow, and more Quantitative Easing (QE) will be announced. The Bank of England and the Reserve Bank of Australia already announced new QEs. The inflationary spiral will be needed to depreciate all the debt, and investors will be hedging by buying stocks. The more inflation there will be, the higher the stock market goes, despite lockdowns and bankruptcies. 

Thus, stocks’ long-term bull market still seems valid, and any dips are expected to be bought. Until central banks change their monetary policies significantly, the best hedge against inflation and rising debts is stocks. 

The new administration in the US will make even more deficits and create more debts as much of its program is based on government funding schemes, which is, again, bullish for stocks. We can look forward to another interesting four years, that’s for sure. 

A New Dedicated News-Portal Has Arrived: Axiory Intelligence

Axiory has launched a new market news provider in the Fintech industry, Axiory Intelligence. The brain-child of global fintech company Axiory, it is an independent, dedicated, market news portal for traders, investors, and all financial enthusiast.

Axiory Intelligence serves as a reliable source for up-to-date, fast, and relevant content for traders to stay informed on the latest in global markets, especially news that can affect their trading. The website provides its users with various video updates, webinars, articles, technical analyses, chart analyses, general market information, NFP watch, and educational articles. 

The industry’s newest news provider was designed to fulfill an obvious need among traders; knowledge, and information. While there are many well-established news providers in the industry, Axiory Intelligence is based upon the principle of being built by traders. Axiory has years of experience in the industry with several fintech companies including its dedicated broker, Axiory Global. The interaction with the broker’s clients highlighted the fact that when it comes to making trading decisions, traders prefer information and news updates over any other trading tools. With a team of experts and analysts on hand, Axiory developed the independent, dedicated market news and analysis provider. 

Beyond news, the website will offer a plethora of educational pieces and webinars, which will only continue to grow over time. All this offering serves as part of Axiory’s mission to keep giving back to the trading community in an attempt to enhance traders’ knowledge, experience, and ultimately their success. The news provider is designed with the trader in mind, from the interface, viewer journey, type of information provided, and market alerts. Everything is designed to allow traders to swiftly find relevant information when they need it.

As mentioned above, the team behind Axiory Intelligence comes from a trading background; from its CEO and Director Tomasz Wisniewski to every analyst, market researcher, and educator. Simply put, Axiory Intelligence is by traders, for traders. 

Tomasz Wisniewski, CEO and Director of Axiory Intelligence

“Axiory Intelligence is more than just a news provider; it is a space created by traders for traders, and this entire initiative orbits around this principle. Our brokerage, Axiory Global has always been an integral part of the trading industry and we’ve boasted a fantastic team of specialists. Axiory Intelligence is an extension of our experience in the market and the ideal complement to the core values of Axiory: fairness, transparency, care for all stakeholders, traders being the most important. Hence the decision to create an independent, unbiased team of financial markets’ experts, which will operate in a fully dedicated environment, providing the general public with unique quality content and education. We truly believe that it is our duty as market practitioners to help the industry grow in a sustainable way, and independent research and quality education are key to achieve such a goal” Axiory CEO and Director Roberto d’Ambrosio commented about this new development.