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Intermarket:
- SP Futures 3660 (-0.10%)
- EUSTXX 3525 (-0.20%)
- Crude Oil 45.63 (+0.22%)
- US 10YR 0.94 (+0.28%)
- EurUsd 1.2092 (+0.12%)
- UsdJpy 104.43 (+0.23%)
- DAX 13326 (-0.21%)
Risk appetite was mixed yesterday, as early optimism over a US fiscal deal gave way to jitters over tech equities. The traded up 0.3% in early US trading session, but news of US antitrust officials proposing to break up Facebook led tech shares down.
Brexit developments faded further into the background, with the dinner meeting between Johnson and von der Leyen yielding little except extending the deadline for an agreement, yet again, to Sunday. Large gaps remain and GBPUSD declined from 1.3411 to 1.3311. Liquidity is generally poor at the moment.
The ECB’s meeting will be the key meeting today, with the benchmark rates likely to be kept static but an addition of EUR500bn and six months extension to the PEPP is expected. Some analysts also expect additional actions like cut in the TLTRO rate. There probably won’t be an explicit talking down of the Euro, but expect Lagarde to mention the central bank is keenly monitoring the currency strength.
Matters that Matter:
• ECB expected to extend stimulus package
• US House approves stopgap funding bill as haggling continues over coronavirus aid
• UK PM Johnson warns EU over Brexit trade talks: back down or it’s no-deal; negotiations continue into weekend.
• UK issues anaphylaxis warning on Pfizer vaccine after adverse reactions
• Iron ore futures climbed to $150 per tonne as China demand fuels surge
• S&P DJI to remove 10 Chinese firms from equities indices, more from bond indices
• China to impose temporary anti-subsidy charges on Australian wine imports
• Some Asia flows related to Sony purchase of ATT’s Crunchyroll
Majors 1-Day View:
USDJPY
- After multiple inside days, prices on Wednesday posted a higher high & higher low, and with buyers returning to the market in Asia trade, signals are improving. The call for today is cautiously bullish.
- Sony/Crunchyroll deal affecting flows in Asia.
- Sizeable option expiries from 104.50 and above.
EURUSD
• Prices posted the 4th little changed close in a sequence on Wednesday after a failed rally. As such, signals remain marginally weak on balance and the call is to sell rallies today.
• Brexit, ECB easing, US fiscal relief bill doubts pulling sentiment lower ahead of key event today.
• Prices also lower as risk appetite less buoyant.
AUDUSD
• Despite prices being overbought at multiple levels, prices continue to post gains and the outlook remains positive for Thursday.
• Strong data releases continue, after Covid-19 restrictions eased, supporting AUD.
• Economic recovery in 2021 should be positive for AUD.
GBPUSD
• With prices swayed by headline risk, the immediate direction is unclear. As such,
• No breakthrough in Brexit – deadline pushed to Sunday.
• Neutral signals expected until Sunday, although GBP rather resilient despite tone of talks.
FX Relative ATR Grid
Comment: Ranges remain rather dull with the exception of USD. As such, being more selective is the better play.
FX Relative Strength Grid
Comment: The strongest signals going into Thursday are NZD, JPY and EUR weakness vs. CHF strength.