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Intermarket:
- SP Futures 3705 (+0.30%)
- EUSTXX 3553 (+0.31%)
- Crude Oil 48.35 (+1.09%)
- US 10YR 0.92 (-0.03%)
- EurUsd 1.2226 (+0.24%)
- UsdJpy 103.31 (-0.12%)
- DAX 13616 (+0.41%)
The Fed delivered a moderately bullish statement yesterday, by promising to do more in the event of slower economic growth but refraining from any twist to the asset purchase maturity, which was a slight surprise. The result was further USD selling, and a slight uptick in yields. Signs that fiscal stimulus talks made some progress boosted sentiment too. A deal involving a package of almost USD900bn (which may include individual checks of USD600-700 each) is reportedly in sight.
The Bank of England is the main focus today and no changes are expected, given that it acted last month by adding an extra £150bn of QE and EU/UK trade negotiations are still ongoing. While the markets are expecting negative rates at some point in 2021, today will likely not see any mention of them. Beyond that, traders will also watch US Jobless claims in order to ascertain whether the recent uptick last week was a temporary event or just the start of worsening employment conditions.
Matters that Matter:
• $900Bln US fiscal package coming close to fruition
• Investors waiting for Fed long-end buying have to wait some more
• AU Nov Employment, 90k vs. 50k f’cast
• New Zealand economy bounces back with record growth as pandemic contained
• Bank of England set to wait for end to Brexit stand-off
• Bitcoin above $22K, Guggenheim says fundamental value approx.. $400K.
Majors 1-Day View:
USDJPY
- Prices posted a lower daily high & low on Wednesday and are now testing the November lows at 103.16. Signals are oversold so the potential for pullbacks is increasing, but the bias remains negative.
- Stops suggested sub-103.15/00, offers trail down.
- USD weakness the main play.
EURUSD
• Prices posted the 4th higher daily low in a row on Wednesday, maintaining the upwards bias despite signals being overbought. With caution, the call remains bullish for Thursday.
• EUR/GBP remains the focal point as Brexit talks continue
• Better EU data yesterday supporting the uptrend.
AUDUSD
• Despite the short-term bearish shooting stars from Friday & Monday, prices recovered and have since broken to fresh 2 ½ year highs at .7594. As such, the bias remains bullish for Thursday but with caution as signals are overbought.
• Employment data surprises to the upside.
• Opex today at .7550 for 600 Mln
GBPUSD
• Despite posting a little changed close on Wednesday, prices did reach fresh 2 ½ year highs at 1.3555 via a higher daily high & low. As such, the bias remains bullish for today although caution is warranted.
• Bookies still pricing in a deal despite Johnson’s negative tone.
• Market pricing in negative BOE rates by May.
FX Relative ATR Grid
Comment: Ranges generally increased on Wednesday, with trading conditions remaining favourable for Thursday.
FX Relative Strength Grid
Comment: The strongest signals going into Wednesday are CAD and JPY weakness.