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Intermarket:
• SP Futures 3969 (+0.06%)
• EUSTXX 3872 (+0.16%)
• Crude Oil 59.55 (+0.68%)
• US 10YR 1.73% (-1.10%)
• EurUsd 1.1717 (-0.11%)
• UsdJpy 110.74 (+0.06%)
• DAX 15038 (+0.06%)
Welcome to Q2 2021. Risk appetite is mixed going into today’s European open, even after Biden’s $2.25tn infrastructure package, which will be delivered over 8 years. Passing this bill will be a challenge due to proposed corporate tax hikes from 21% to 28% and 21% minimum global corporate earnings tax. Overnight, highlight was unexpected decline in China Caixin manufacturing PMI. USD is up, especially against comm-dolls. US10yr has eased a tad. Gold is up.
Trading may be light today ahead of the long holiday weekend and as investors await tomorrow’s US labour market report (where NFP, unemployment rate and earnings are tipped to come in +650k, 6.0% and 4.5% YoY respectively).
OPEC+ ministers are meeting today, with markets expecting the group to keep oil output curbs in place for at least another month.
Beyond OPEC, today’s calendar hosts US manufacturing ISM and initial jobless claims. Fed’s Harker is also speaking today.
Matters that Matter:
•Mixed response to Biden’s 2Trl infrastructure plan; Biden to impose 28% corporate tax rate.
• Battle expected in Congress over Biden’s plan.
•AU Manuf. PMI stronger at 59.9
•Caixin Manuf. PMI 50.6 vs 51.4 exp
•Quebec and Ontario locked down
•OPEC+ meeting today
• U.S. dollar to remain strong for at least another month – Reuters poll
• Deutsche Bank avoids Archegos-linked losses after private sale of $4Bln in holdings.
Majors 1-Day View:
USDJPY
- Prices posted the 6th higher daily low in a row on Wednesday, but signs of divergence in momentum are appearing. In the context of an extended market, this calls for caution and we prefer to sell into rallies today.
- Test of 111.00 with option KOs imminent
- 112.00 also holds barriers
- Support at 110.00.
EURUSD
• Pries posted a fresh 5-month low on Wednesday, and alongside the failed intraday rally, signals remain bearish into Thursday.
• USD strength weighs
• Divergence in COVID-19 handling between EU and US/UK still weighing on EUR.
• Lagarde reiterates accommodative stance, will give “plenty of warning” ahead of taper.
AUDUSD
• After Tuesday’s bearish outside day, prices posted a failed rally on Wednesday, with fresh 4-day lows posted during Asia trade. As such, signals remain bearish for Thursday.
• Prices heavy on USD strength.
• Broad weakness seen in Comm-Dolls today.
GBPUSD
• Range trading continues on Cable and as such, we prefer buying any dip to 1.3720s or selling any rally to 1.3820s today.
• GBP rather resilient.
• Range trading conditions prevail.
FX Relative ATR Grid
Comment: Volatility accelerated on Wednesday, with CAD and JPY posting expansions. As such, that’s where trading conditions should be more favourable as we enter the last full trading day of the week.
Relative Strength Grid
Comment: The strongest trends are in USD (bullish), JPY (bearish), EUR (bearish). The strongest momentum was seen yesterday in JPY (bearish), CAD (bullish), GBP (bullish).