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January's nominal personal income in the US rose by 10% m/m, while personal disposable income, adjusted for inflation, also did by 11% m/m. On the other hand, the December economic stimulus bill, which allocates $ 600 per person and increases unemployment insurance by $ 300, is bringing results.
The total income is expected to sharply rise in the first half of 2021, and with the next $ 1.9 trillion law coming into effect in April, personal disposable income is expected to rise by 22% in Q1 and 30% in Q2.
It is worth noting that not all of the received income will go to the consumer sector, but some will go to savings. However, the poll shows that many consumers assume that the stimulus flow will not stop, which means that the authorities will offer something else aside from Biden's $ 1.9 trillion aid package. In this case, there is a risk that there will be stronger inflationary pressures than Powell recently assured in his last speech in Congress.
There is only one reason for inflation to fairly rise – if a significant part of stimulus payments goes not to the consumer sector, but to investment assets. There is no doubt that the stock market will receive support, but it is already clearly overbought and is under the rising threat of a downward correction.
In such a case, we need a different investment instrument, not a traditional one, but one with a much greater potential for growth. Most likely, such a tool will be cryptocurrencies. The more funds allocated to support the economy will go to the crypto market, the further the threat of high inflation will be pushed away with an insufficiently recovered economy. This is a scenario that both the Treasury and the Fed will avoid by all available means.
It can be assumed that strong growth forecasts in disposable personal income in the first half of the year indicate that cryptocurrencies will have the opportunity to continue their radical growth.
In terms of CFTC's report last Friday, it indicates at least one trend – all commodity assets are bought, while all protective assets are sold. The Japanese yen's long position has significantly declined. The number of long contracts for gold has also fallen by 8%. In turn, the demand for CAD, AUD, NZD, MXN and the GBP, which also has a strong commodity component, is increasing.
It seems that the US dollar is weak, and the accumulated short position has stopped declining. This week, there is a high possibility that the dollar index will decline.
EUR/USD
Euro's net long position slightly plunged over the reporting week, but the advantage still amounts to $ 21.014 billion. The estimated price is higher than the long-term average, which may indicate that the downward correction stage is done and the Euro currency will approach the local high again.
The euro is likely to hold above the previous low of 1.2023, so it is advisable to buy in the support zone of 1.2020/40, provided that there are signs of a reversal. Stop below the level of 1.2023. The medium-term target is to update the high of 1.2043.
GBP/USD
The pound's net long position rose by 806 million during the reporting week and reached 2.732 billion. We have a clear trend. The target price is sharply rising, that is, investment flows show a strong demand for the pound. So, there is no reason to make a downturn.
The markets were optimistic about the possible lifting of restrictive measures. The British currency is also receiving strong support from fundamental factors. However, there is a risk of a technical correction, and a possible decline towards the zone of 1.3510/50. At the same time, it is necessary to assume that the downward movement is a correction, and not a trend. A breakout of the resistance level of 1.4370 remains relevant in the long-term.
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