For instant updates, follow FCI Markets on Twitter
Intermarket:
- SP Futures 3946 (+0.38%)
- EUSTXX 3711 (+0.60%)
- Crude Oil 60.75 (+2.14%)
- US 10YR 1.21 (+0.82%)
- EurUsd 1.2135 (+0.13%)
- UsdJpy 105.13 (+0.21%)
- DAX 14141 (+0.76%)
Risk appetite remains strong into the week, amidst low liquidity conditions: Wall Street is closed today for Presidents’ Day while China remains offline for Lunar New Year. US yields are steady, GBP and AUD outperform in FX, Crude Oil reached the highest price since January 2020.
On the Covid-19 front, the US reported the lowest number of cases and hospitalizations since November. The UK hit its initial vaccination target amid reports lockdowns could ease in March. New Zealand locked down Auckland for three days after discovering community cases. Australia’s second-biggest state of Victoria remains in lockdown despite no worsening of recent outbreak.
Sterling’s uptrend continues towards as the UK outperformed Europe and US in terms of vaccine rollout. More than 15 million people in the UK have received a first dose of a coronavirus vaccine, according to PM Johnson. Buyers will be met near 1.3800, offers ahead of 1.4000.
Looking ahead: it is expected to be a dull day, so perhaps it’s best to review the key themes and drivers in our Weekly Call.
Matters that Matter:
• Quiet trading conditions expected today with the US on holiday, as well as China.
•Japan extends economic recovery as exports, capex shake off COVID hit
• NZ PM Ardern: First vaccine batch arrived in New Zealand this morning
• Japan PM Suga – Sees currencies among most vital economic indicators
• Elon Musk becoming active tweeter on Crypto – says Dogecoin too concentrated.
• Japan’s SBI in talks to set up cryptocurrency JV with foreign financial firms
• Biden to discuss pandemic, economy and China in Friday G7 meeting
• CDC chief warns it’s too soon in U.S. to lift COVID-19 mask mandates
• Bitcoin pulls back from brink of $50,000
• Brexit causing supply problems for small UK manufacturers - survey
• New Zealand in coronavirus lockdown as U.K. variant cases reported
Majors Weekly View:
USDJPY
- Signals are less clear this week. Prices interrupted the sequence of higher weekly lows, but buyers returned to the market to post a little changed close. As such, our approach is to sell the first return towards 105.60/70, but flipping to a bullish stance on a daily close above.
- Risk-on and Nikkei surge supportive
- Higher yields also supportive in holiday-thinned trade
EURUSD
• Prices posted gains of 1 Big Fig last week, despite remaining within the context of lower weekly highs. As such, signals are just cautiously bullish for this week.
• Prices higher on risk-on mood
• Trading to be quiet as the day continues, with US on holiday.
AUDUSD
• Prices posted gains of over 1 Big Fig last week, ending a sequence of lower weekly highs & lows. As such, the outlook for this week has switched to bullish.
• Prices supported by risk-on tone in holiday thinned trade.
• Commodities and metals also supportive.
GBPUSD
• Prices are overbought at the daily and weekly levels, but buyers maintain the upper hand and after gaining 1 ½ Big Figs last week, the Pound has reached fresh trend highs in Asia trade. As such, the call remains bullish but with caution.
• Pound reaches new trend highs in light trading conditions.
• Significant option defence reported ahead of 1.4000 Barriers.
FX Weekly ATR Grid
Comment: Despite some signs of life last week, volatility remains largely compressed, even on a weekly basis. As such, on GBP, EUR, AUD, CAD, we would expect volatility expansions soon because low-vol regimes typically aren’t sustainable.
Relative Strength Indications
Going into the week we are seeing strength in GBP and AUD vs. weakness in JPY an USD mostly.