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Intermarket:
- SP Futures 3841 (+0.85%)
- EUSTXX 3657 (+0.83%)
- Crude Oil 62.68 (+1.91%)
- US 10YR 1.40% (-3.60%)
- EurUsd 1.2090 (+0.17%)
- UsdJpy 106.53 (+0.02%)
- DAX 13871 (+0.81%)
Risk appetite has stabilised into European trade. Tech names are recovering ground and helped to drive gains in Asia despite a softer PMI. This was due especially to central banks pushing back against the spike in yields. The RBA increased bond purchases today, buying up A$4Bln. Yields are softer, Treasury yields lower, with the 10yr down 3.5% to 1.40. The USD is softer, while GBP and AUD are outperforming.
Traders will be paying attention to remarks from Fed Chair Powell and other officials this week regarding the yield surge. ECB bond-buying figures today will also provide insight into seriousness about limiting the rise in yields.
The US FDA issued EUA for J&J vaccine while CDC paved the way for distribution. AstraZeneca vaccine arrived in Australia. Mixed coronavirus trends with new US cases appearing to level off and beginning to rise in a number of states. New Zealand put Auckland back into one-week lockdown after discovery of a case with an unknown source.
Regarding Biden’s fiscal package, it has reached the Senate, where goal is for passage by mid-March. OPEC+ increasingly expected to relax some output cuts at this week’s meeting. In geopolitical news, Iran rejected offer from EU and US to hold direct nuclear talks.
Matters that Matter:
• CN Feb Caixin Mfg PMI Final, 50.9, 51.5 f’cast, 51.5 prev
• China investors turn away from Australia after Canberra crackdown - FT
• Japan govt officials debate fresh cash payouts to help the poor cope with pandemic -sources
• Australia home prices, job ads surge as recovery blitzes expectations
• Biden scores legislative win as House passes $1.9 trillion COVID relief plan
• U.S. authorizes J&J’s COVID-19 vaccine, making it third available
• UK’s Sunak will set out plans to raise income tax by 6 bln stg - The Times
• Auckland coronavirus lockdown tests New Zealanders’ patience
Majors Weekly View:
USDJPY
- Prices posted healthy gains last week, but have reached the 50% retracement of the Covid sell-off at 106.70. So the bias remains bullish for this week, but with caution.
- Speculation BOJ may want to control yields more.
- Massive opex this week between 106.20-45 supportive.
- JPY pairs buoyant on bargain hunting in risk assets.
EURUSD
• Prices posted the 3rd higher weekly high & low last week, but sellers returned to the market, prices declining 2 Big Figs and closing negative. As such, the bias for this week is cautiously bearish.
• USD weaker into Europe.
• Offers reported at 1.2100. Support seen at 1.2060.
AUDUSD
• Prices posted a bearish engulfing at the weekly level, which leaves signals bearish for this week.
• Recovery in risk assets and lower USD aiding AUD.
• Resistance at .7830, support .7700
• RBA buying more bonds to contain yields.
GBPUSD
• Prices posted a bearish shooting start at the weekly level into Friday’s close. The topside rejection switches the bias to short for this week.
• Prices higher into the week on lower USD.
• Offers reported at 1.4000
• Expectations of rising inflation and hawkish BOE support.
FX Weekly ATR Grid
Comment: Volatility has expanded across the board which suggests continuation this week.
Early Indications going into the Week
As the week starts, we’re seeing weakness in USD and JPY, with strength seen in AUD and GBP especially.