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Intermarket:
• SP Futures 4071 (+0.31%)
• EUSTXX 3910 (-0.66%)
• Crude Oil 65.38 (-1.06%)
• US 10YR 1.70% (+4.37%)
• EurUsd 1.2078 (+0.08%)
• UsdJpy 109.68 (+0.06%)
• DAX 15085 (-0.47%)
Risk assets remain under pressure into Thursday’s European Open after the largest rise in US inflation since 2008 suggests the FED might have to taper sooner rather than later with vice-chair Clarida “surprised” at the jump. S&P500 posted the worst day since February, US 10-year yields closed at a six-week high, Gold prices are lower, US dollar posted the best day in a month.
Concerns that the US economy is overheating may continue today as traders expect an equally strong PPI print due to rising commodity prices and strong demand. The recent ISM surveys have shown manufacturers and services providers are seeing higher pass-through costs.
Ether continues to lead the way in crypto space, while Elon Musk sent Bitcoin tumbling 17% saying that Tesla will no longer accept payments in the cryptocurrency.
Looking Ahead: US PPI will be key, as well as the weekly initial jobless claims. We also hear from BoE’s Bailey and Cunliffe, Fed’s Barkin, Waller and Bullard, ECB’s Centeno and BoC Governor Macklem.
Matters that Matter:
• Eurodollar futures price in Fed hike by December 2022 after inflation spike
• Biden sees infrastructure compromise, despite Republican ‘red line’ on taxes
• Tesla’s Musk halts use of bitcoin for car purchases
• Digital coin ether hits record high as 2021 gains near 500%
• Facebook-backed crypto project Diem to launch U.S. stablecoin in major shift
• BOJ to extend pandemic-relief scheme beyond September, says official
• BOE’s Haldane says UK growth could be in double-digits a year from now - Daily Mail
Majors 1-Day View:
USDJPY
After attracting support in the 108.40 area, prices posted gains of over 1 Big Fig on Wednesday, reaching the May top at 109.70. Marabuzo support has formed at 109.18, with the moving average cluster just below. As such, signals are bullish for today and buying into pullbacks towards the Asia low is favoured. Resistance is at 110.00, 110.72. USD dynamics and risk appetite are the key drivers alongside US PPI today.
EURUSD
After attracting sellers from close to 1.2178, prices declined by almost 1 Big Fig on Wednesday, testing the 13 and 21 SMA. As such, the bias has shifted to a short stance today, and Marabuzo resistance has formed at 1.2107. Selling into pullbacks remains the favoured stance today. Supports are at 1.2050, 1.2005 and 1.1986. USD dynamics remain the key driver alongside US PPI today.
AUDUSD
Prices posted the 2nd lower daily high & low in a row on Wednsday, with losses of over 1 ¼ Big Fig. The 13 and 21 SMAs now act as resistance. Selling into pullbacks towards the Asia top remaisn the favoured play today. Supports are at .7701, .7674, .7642. Risk appetite, USD dynamics and PPI are the key drivers today.
GBPUSD
Prices interrupted the trend of higher daily lows on Wednesday, with losses of 1 Big Fig. The decline as seen as corrective, but may extend. As such, signals for today are cautiously bearish and selling into 1.4080/90 is favoured, but we also expect buyers to return at 1.4000/20 area. Hawkish BOE tilt supports the Pound but USD dynamics are the key drivers in the short-term.
USDCAD
Prices posted a Spring Hammer on Wednesday, interrupting the trend of lower daily highs and stalling the decline, switching the short-term bias to a long stance for Thursday. Any upwards move is currently seen as corrective, but may extend. As such, we prefer to buy intraday but we also expect to encounter resistance at 1.2170/90. Hawkish BOC and USD dynamics are the key drivers.
FX Relative ATR Grid
Comment: after Tuesday’s contraction, volatility expanded on Wednesday across the board, suggesting good trading conditions and continuation moves for Thursday.
FX Relative Strength Grid
Comment: the strongest trends are currently GBP (bullish), JPY (bearish), NZD (bearish). The strongest momentum was seen yesterday in USD (bullish), NZD (bearish), GBP (bullish).