Big Picture 28th November 2021

OANDA:EURUSD   Euro / U.S. Dollar
Last week’s Forex market moved in line with the long-term bullish USD trend until the end of the week, when news of the spread of the new omicron variant of the coronavirus and the prospect of the world closing its borders again sent stocks and several commodities tumbling and caused strong movements in currencies which were changes from prevailing trends.

In the Forex market, the Japanese yen and the euro ended the week as the strongest major currencies week while the Canadian, Australian, and New Zealand dollars were the weakest. If the impact of the omicron variant is as bad as feared, which may be born out by testing over the coming days, this situation is likely to persist.

I wrote in my previous piece two weeks ago that the best trades for the week were likely to be short EUR/USD, and long USD/TRY and wheat. This was a great and exceptionally profitable call as the EUR/USD currency pair fell by 2.08%, USD/TRY rose by 12.35%, while wheat rose slightly by 0.88%. This produced an average profit of 5.10%.

Fundamental Analysis & Market Sentiment
The headline takeaways from last week were:

A coronavirus variant of concern, named the omicron variant, was identified in South Africa and has also been confirmed to be present in some other countries. The variant is heavily mutated, and it is believed that it may have a strong capacity to evade current vaccines. Some countries have already begin closing their borders to non-nationals and enforcing isolation on all new arrivals. As the import of this news broke on Friday, markets made some sharp turns.

U.S. FOMC Meeting Minutes revealed little except that some members wanted to taper faster, but had little effect upon the market, as did Preliminary GDP data which showed the US economy growing at an annualized rate of 2.1%, very slightly below expectations.

The Reserve Bank of New Zealand hiked rates by 0.25% to a rate of 0.75%, but the market saw this as a “dovish hike” because some analysts had expected a 0.50% hike.

WTI Crude Oil fell to a near 3-month low price, dropping by more than 12% on Friday alone.

The South African rand has fallen to 1-year lows, with the already bearish trend accelerating as countries closed their border to South Africa due to the omicron coronavirus variant.

The US stock market made its largest 1-day fall in many months last Friday.

The coming week is likely to see a lot of volatility, with direction likely to be determined mostly by how dangerous the omicron variant is believed to be as more tests are performed on it. Apart from that, the coming week’s major scheduled economic releases will be:

US Non-Farm Payrolls data.

Australian and Canadian GDP data.

British CPI (inflation).

US services and manufacturing data.

Last week saw the global number of confirmed new coronavirus cases rise for the fifth consecutive week after having fallen for two months before that. The situation was already not looking good in Europe before the omicron variant was discovered a few days ago. Approximately 54% of the global population has now received at least one vaccination. Pharmaceutical industry analysts now expect a large majority of the world’s population will receive a vaccine by mid-2022.

The omicron variant has been confirmed as present in South Africa, the UK, Israel, the Czech Republic, the Netherlands, Italy, and Germany.

The strongest growths in new confirmed coronavirus cases overall right now are happening in Andorra, Austria, Belgium, Bolivia, Czech Republic, Denmark, France, Germany, Hungary, Italy, Jordan, South Korea, Laos, Mauritius, Malta, Monaco, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Switzerland, Slovenia, Trinidad, the UK, and Vietnam.

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