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Intermarket:
- SP Futures 3799 (-0.47%)
- EUSTXX 3598 (-0.66%)
- Crude Oil 53.80 (+2.97%)
- US 10YR 1.14 (+2.99%)
- EurUsd 1.2214 (-0.04%)
- UsdJpy 103.68 (-0.26%)
- DAX 13915 (-0.67%)
Markets remain swayed by the US10YR. Last week, hardly anyone was talking about it. Now, everyone is talking about the 10YR, just as we approach the big resistance at 1.2% and prices posted a Shooting Star formation, suggesting a (temporary?) pullback. Analysts at JPM also note the 10YR dollar-weighted Put/Call ratio z-score sits in extreme oversold territory, near 2.5 standard deviation. Biden’s fiscal stimulus plans (tomorrow) will likely be key to further upside in yields in the short-term. Apparently Biden is seeking a deal with Republicans, which could mean his fiscal stimulus could come in stages and be smaller than expected.
Markets are also listening to Fed Speakers, which are rather hawkish but there are no clear taper plans at this point. Bullard said that “we want to get through the pandemic, then we will be able to think about where to go with balance-sheet policy”, with George and Mester echoing the same stance.
The House voted overnight to demand that VP Pence invoke the Constitution’s 25th Amendment to remove Donald Trump from office.
Looking Ahead: ECB’s Lagarde and Villeroy are speaking. Then we get Fed Vice Chair Clarida, Fed’s Bullard, Brainard and Harker.
Matters that Matter:
• Several House Republicans join impeachment push; Pence says he will not move to expel Trump
• Fed’s Rosengren says U.S. economy could see robust recovery in H2 2021, could be a while before asset buys tapered
• U.S. health officials hope new COVID vaccine rules can ease latest surge
• ANZ: Sees RBNZ cutting interest rates once more to 0.1% in May 2021
• Japan set to expand state of emergency, public cools to Olympics
• China sees biggest daily COVID-19 case jump in over 5 months
• Australia job vacancies recover from pandemic shock to hit record
Majors 1-Day View:
USDJPY
- Prices posted a bearish engulfing at the daily level on Tuesday, shifting the immediate bias to short for Wednesday.
- Shooting Star on 10YR Yields, USD pulling back.
- Bids reported at 103.00
EURUSD
• Buyers returned to the market on Tuesday, prices positing gains of over ½ big fig. We prefer to buy dips into Wednesday.
• US Yields retreat, USD offered
• Bids reported at 1.2130, resistance 1.2220/30.
AUDUSD
• Prices posted a bullish engulfing on Tuesday, interrupting the sequence of lower daily highs and flipping the bias to a long stance into Wednesday.
• Robust equity markets and lower US yields supports AUD
• Offers reported ahead of .7800, support at .7740, .7660
GBPUSD
• Gains of over 1 ¾ Big Figs Tuesday have flipped the bias to a long stance for Wednesday. However, with prices approaching key resistance at 1.3700, we prefer to buy dips.
• 1.3700 key resistance area, with 1.3540 main support
• Bailey dismissing negative rates boosted the Pound.
FX Relative ATR Grid
Comment: USD continues to drive prices in FX, although ranges have been curtailed. Volatility contracted on Tuesday, as the markets were indecisive. Being more selective is key.
FX Relative Strength Grid
Comment: the main signals going into Wednesday are GBP strength vs. USD, JPY weakness.