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Intermarket:
• SP Futures 3960 (+0.05%)
• EUSTXX 3837 (+0.21%)
• Crude Oil 64.80 (-0.92%)
• US 10YR 1.61% (-0.85%)
• EurUsd 1.1935 (+0.09%)
• UsdJpy 109.18 (+0.05%)
• DAX 14499 (+0.23%)
Risk appetite remains buoyant into today’s European open after US equity markets posted fresh record highs yesterday as investors expect central banks to downplay concerns about yields/inflation, alongside the better Empire State numbers. However, the Biden administration is already planning the first major federal tax hike since 1993 to pay for the stimulus. The US 10-year yield remains firm around 1.60%. USD firm but FX largely rangebound ahead of FOMC. Bitcoin posted a false breakout of prior highs on news of a ban in India.
On the vaccine front: Germany, Italy, Spain, Portugal and France have suspended the use of AstraZeneca’s Covid vaccine on blood clotting concerns. With Germany announcing a 3rd coronavirus wave, and Italy enhancing restrictions ahead of Easter, the Euro could maintain a downwards bias. Eyes on ZEW today, which could come in stronger.
Focus today will be on the German ZEW, then US Retail Sales. Stronger spending at restaurants and higher gas prices should be supportive.
Matters that Matter:
• Consolidation main theme ahead of FOMC.
• EU launches legal case against Britain over Northern Ireland
• RBA not concerned about inflation, says commodity price boom unlikely to boost inflation, interest rates
• AU Q4 Home Price Index, 3.0%, 2.0% f’cast, 0.8% prev
• Australia to continue using AstraZeneca COVID-19 vaccine despite Europe pause
• Bitcoin falls after weekend record high as India considers a ban
• BOJ’s Kuroda says BOJ must prepare for possible future need for CBDC
•BOJ’s Kuroda on the wires today at 5AM GMT. Traders will look for hints on JGB target band and ETF target amt ahead of Friday’s decision.
Majors 1-Day View:
USDJPY
- Prices posted the 3rd higher daily high & low in a row on Monday, despite signal being overstretched at multiple levels. However, with the day closing little changed, momentum has weakened. As such, we suggest remaining square and buying a dip towards 108.85.
- Consolidation the name of the game ahead of FOMC, BOJ.
- Offers & large barrier options reported at 110.00
- US yields still supportive.
EURUSD
• Despite a marginally lower close, prices posted an “inside day” on Monday, trading contained within Friday’s range. As such, momentum is weak but on balance we prefer to sell rallies towards 1.1960 today.
• Even as IMM Net-Spec positioning remains long, Eur under pressure as yields drive inflows into USD.
• Support at 1.1910, then 1.1830
AUDUSD
• Prices posted a lower daily high & low yesterday, interrupting the trend of higher daily lows. This is negative, but with prices posting a little changed close, signals are more mixed. As such we suggest remaining square between .7800 and .7700.
• RBA reiterates dovish stance.
• Buoyant equity markets keep Aud supported.
• Range trading expected ahead of FOMC.
GBPUSD
• Prices posted the 2nd lower daily high & low in a row on Monday, with losses of over ¾ Big Fig. Sellers returned in Asia trade with prices pressuring 1.3860 support. As such, signals for today remain bearish.
• 1.3800-1.4000 the range ahead of FOMC.
• GBP weakness perhaps on EU-Northern Ireland issue.
• USD flows key to direction
FX Relative ATR Grid
Comment: Volatility declined on Monday as traders await the FOMC decision (Wed). In these conditions expect rangebound trading, with little/no followthrough.
Relative Strength Grid
Comment: The strongest trends are in JPY (bearish), CHF (bearish), EUR (bearish), CAD (bullish). The strongest momentum was seen yesterday in JPY (bearish), CHF (bullish), GBP (bearish), NZD (bullish).