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Intermarket:
- SP Futures 3811 (-0.16%)
- EUSTXX 3616 (-0.17%)
- Crude Oil 52.80 (+1.05%)
- US 10YR 1.09 (-1.54%)
- EurUsd 1.2152 (-0.55%)
- UsdJpy 104.01 (+0.06%)
- DAX 13986 (-0.16%)
Markets continue to trade based on the expectations for Biden’s fiscal stimulus plan and the Fed’s tapering stance. Yields are moving higher again today as CNN reported that Biden is planning a USD 2Trl package, which is in line with expectations. However, whether he will gain the required 60 Senate votes is yet to be seen.
Meanwhile, FOMC members are rather divided on the tapering narrative. Clarida and Brainard pushed the idea that the Fed is going to tighten prematurely, while Harker and Rosengren were more dovish. Today we will hear from Powell amongst other speakers at 17.30 GMT.
The Euro may remain slightly sluggish as the Italian coalition government is near collapse after Matteo Renzi pulled his ministers in a rift over how the EU recovery fund proceeds should be used. PM Conte may request a vote of confidence, which may lead to new elections. This comes amidst the already harsh Covid-19 case numbers in Europe.
Looking Ahead: Fed’s Powell is speaking at 1730 GMT but we also hear from Rosengren, Bostic and Kaplan. The main focus will be Biden’s fiscal stimulus speech.
Matters that Matter:
• Biden aides told congressional allies to expect COVID-19 relief package of roughly $2 trln- CNN
• Fed policymakers push back on QE taper talk
• U.S. economy growing modestly but virus tempers optimism - Fed Beige Book
• Trump administration shelves planned investment ban on Alibaba, Tencent, Baidu -sources
• China COVID-19 cases surge to high in over 10 months; WHO team arrives
• UK housing market boom starts to fade, survey shows
Majors 1-Day View:
USDJPY
- Wednesday’s failed sell-off alongside continued buying in Asia trade have stalled downside momentum and signals have slightly improved. However, until the current week highs at 104.40 are broken, signals remains mixed.
- Spike above 104.00 due to low liquidity, potentially CTA buyers and short covering.
- US yields rising, supportive.
EURUSD
• Sellers dominated sentiment on Wednesday, with prices pressuring 4-wk lows at 1.2130s. As such, signals are cautiously bearish for Thursday.
• US Yields up on Biden 2 Trl stimulus
• USD stronger, break of 1.2130 key.
AUDUSD
• Prices pulled back on Wednesday after Tuesday’s bullish engulfing. While the trend of higher daily lows remains intact, momentum is weak and signals are more mixed. As such, we suggest remaining square in between .7783 and .7686.
• AUD caught between Biden fiscal stimulus (positive for risk) and USD strength.
• Offers reported ahead of .7800, support at .7660
GBPUSD
• After rallying from Monday’s low at 1.3450 to 1.3700, prices attracted sellers and signals deteriorated into the close. Despite the sequence of higher daily lows remaining intact, short-term momentum is currently bearish and as such out call is just cautiously bearish today.
• 1.3700 still intact as resistance
• Stronger USD and US Yields weigh on prices
FX Relative ATR Grid
Comment: Volatility continues to decline across the board, which suggests markets are awaiting news/drivers. This means that being selective and more cautious remains key.
FX Relative Strength Grid
Comment: the main signals going into Thursday are CAD and CHF strength vs. NZD and JPY weakness.