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Intermarket:
Risk appetite is weaker into Friday after a mixed session in Asia. S&P 500 futures are flat while Nasdaq futures are down slightly. Treasury yields are edging higher, driving strength into the USD. Oil and gold are giving up gains from the previous sessions.
ECB announced Thursday PEPP purchases will be conducted at a significantly faster pace. Press previews noted BOJ is preparing for a rate cut at next week’s meeting, while exempting a larger portion of reserves from negative interest rates, and plans to scrap annual ETF purchase target to provide more flexibility. BOC’s Schembri slight hawkish comments.
In coronavirus news, positive news regarding efficacy of PFE and NVAX, while several European countries paused AZN use to investigate reported cases of blood clots. Lots of US-China headlines with first face-to-face meeting of Biden and Beijing officials next week, tensions over Beijing’s influence in Hong Kong and its Xinjiang crackdown. Quad meeting expected today to focus on China and countering Beijing’s aggression in the Asia-Pacific
Matters that Matter:
• WH: Direct deposits from Biden’s stimulus bill to reach households this weekend
• BOJ may exempt more funds from negative rates at March review – sources
• IMF: NZ property risks sharp correction, urges action
• UK ChancExch Sunak – Concerned over risk of rising interest rates - FT
• BoC Schembri – To reassess outlook in April, sees signs of exuberance in house prices, rates hikes could come sooner
• Canadian Health Min: Canada aware of adverse events in Europe to AstraZeneca Covid-19 vaccine but benefits outweigh; none of the batches under investigation in Europe have been shipped to Canada.
Majors 1-Day View:
USDJPY
- Prices posted an inside day on Thursday with the 2nd little changed close in a row. As such, signals are not strong but with buyers returning in Asia trade, the call for today is marginally bullish.
- JPY pairs bid, JPY weakest currency this week
- Offers & large barrier options reported at 110.00
- Decent demand reported in GBPJPY
EURUSD
• Prices posted the 2nd higher daily high & low yesterday, but sellers returned ahead of key psychological level 1.2000. As such, caution is advised and we prefer selling into rallies today until this level is clearly broken.
• Even as IMM Net-Spec positioning remains long, Eur under pressure as yields drive inflows into USD.
• Offers noted ahead of 1.2000, perhaps due to options: EUR1.9bn at 1.2000 and EUR700mio of puts at 1.1995-99. On the downside, EUR1bn at 1.1930.
• Support 1.1960 then 1.1830
AUDUSD
• Prices posted the 3rd higher daily high on Thursday, with gains of over ½ Big Fig. However, sellers have returned in Asia trade, accompanied by signs of divergence in momentum. As such, with caution, we suggest selling into rallies today.
• Prices softer on USD strength despite risk-on
• AU-CN relations continue to deteriorate
• AU Put strikes a factor today: AUD550mio at 0.7760, AUD1bn at 0.7720, AUD520mio at 0.7690.
GBPUSD
• Prices posted the 4th higher daily low on Thursday, prices testing key psychological level 1.4000. However, sellers returned to the market accompanied by signs of divergence in momentum. As such, the call for Friday is to sell into rallies.
• 1.4000 defended once more, support 1.3860, 1.3800
• Data dump today
• USD key to direction
FX Relative ATR Grid
Comment: Volatility is still uneven in FX, with expansions in JPY and USD, with contractions in other pairs. Betting where the volatility levels are high remains the better play into Friday.
Relative Strength Grid
Comment: The strongest trends are in GBP (bullish), CAD (bullish), CHF (bearish), JPY (bearish). The strongest momentum was seen yesterday in JPY (bearish), USD (bearish).