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Intermarket:
• SP Futures 4169 (+0.29%)
• EUSTXX 4026 (+0.65%)
• Crude Oil 66.43 (+0.23%)
• US 10YR 1.64% (+0.23%)
• EurUsd 1.2165 (+0.14%)
• UsdJpy 109.19 (+0.02%)
• DAX 15488 (+0.56%)
Global equities are poised for a positive start in Europe today, after a strong recovery in late NorAm trade yesterday, which continued overnight. This despite Empire State prices paid index hit a record high, indicating inflationary pressures and FED’s Kaplan hitting a hawkish note. Still, bonds are steady and the 10-year yield is steady at 1.64%. Gold is up; USD is weak; Oil is up. Markets are likely waiting for Wednesday’s FOMC minutes, Thursday jobless claims and Friday’s PMIs.
The RBA minutes showed it believed wages (currently at 1.4%) would likely need to expand “sustainably above 3%” to generate inflation, underscoring how long rates could remain near zero. AUD remains supported into Tuesday, especially on the recovery in Iron Ore prices.
Looking Ahead: today we get UK’s jobless claims and ILO unemployment rate, Eurozone’s 1Q21 GDP growth. Fed’s Kaplan, ECB’s Lagarde, BOE’s Bailey, Broadbent and Ramsden are also speaking.
Matters that Matter:
• Fed’s Kaplan: Inflation readings could remain elevated at year end, first rate hike maybe in 2022
• U.S. Senate Republicans readying new infrastructure proposal
• Tokyo doctors call for cancellation of Olympic Games due to COVID-19
• In big ask, Australia’s central bank aims for wages to grow “sustainably” above 3%
• China says Australia should stop interfering in trade and investment
• Israel-Gaza violence shows few signs of slowing as global diplomacy ramps up
Majors 1-Day View:
USDJPY
Prices posted the 2nd lower daily high & low in a row on Monday, although net movement was limited. As such signals are not strong, but on balance, a slight negative bias remains in the short-term at least until the trend of lower daily highs remains intact. However, caution is advised as support is expected in the cluster of moving averages/109.00 handle.
EURUSD
Prices posted the 2nd higher daily high & low in a row on Monday, with gains of almost ½ Big Fig. However, a divergence in momentum is appearing at the hourly level from close to prior resistance levels around 1.2170 and suggests caution. Buying on dips towards 1.2130 might be a better stance today.
AUDUSD
Prices posted the 3rd lower daily high & low in a row on Thursday, but buyers returned from close to key supports at .7674-.7700, and initial losses of over ½ Big Fig were recovered. As such, immediate signals have improved, but until the trend of lower daily highs is broken, caution is advised. As such, cautious longs around .7705 are possible, but the 13/21 SMAs at .7760/70 should attract sellers. Risk appetite, USD dynamics and commodities are key drivers.
GBPUSD
Prices posted the 2nd higher daily high & low in a row on Monday, with gains of almost ¾ Big Fig, and surpassing prior week highs. As such, signals remain bullish but with caution as there are signs of divergence in momentum at the hourly level from fresh intraday highs. Buying on dips towards 1.4130 and 1.4100 may be a better strategy today.
USDCAD
After the intraweek pullback last Wednesday/Thursday, prices resumed the downwards bias and posted the 2nd lower daily & low in a row on Monday with losses of ¾ Big Fig which took prices below prior week lows. As such, the bias remains bearish for Tuesday but with some caution as there is a divergence in momentum appearing on the hourly charts. As such, selling into rallies towards 1.2077 or 1.2110s may be a better play.
FX Relative ATR Grid
Comment: volatility declined slightly on Monday, with the exception of NZD which posted volatility expansions across the board. Caution on USD pairs which were rather dull and are poised for some expansion.
FX Relative Strength Grid
Comment: the strongest trends are currently GBP (bullish), CAD (bullish), JPY (bearish). The strongest momentum was seen yesterday in NZD (bearish), JPY (bearish), GBP (bullish).