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Intermarket:
• SP Futures 4170 (-0.14%)
• EUSTXX 3991 (+0.20%)
• Crude Oil 63.13 (-0.08%)
• US 10YR 1.57% (-0.12%)
• EurUsd 1.1965 (-0.14%)
• UsdJpy 108.58 (-0.14%)
• DAX 15491 (+0.09%)
Risk appetite was strong into Friday’s close, with the SP500 posting the 22nd record close this year amid the US crossing the 200 million vaccination target. The VIX dipped to 16.25, and complacency is kicking in. 10 YR yield is unchanged at 1.57%. USD mixed. Gold firmer.
The Euro is weaker today, perhaps on reports that Italy may miss the EU Recovery Fund deadline.
Elsewhere, Bitcoin plunged up to 15% in its biggest tumble since February. Hard to pin down the reason but analysts pointed to reports that US Treasury may crack down on money laundering carried out through digital assets. Insider selling post Coinbase IPO also flagged.
Today we get the Canadian budget. No wealth tax is planned. Analysts expect sales tax for online platforms and e-commerce warehouses; a digital services tax for Web giants; a tax on luxury goods.
Highlights this week will be US earnings, BOC rate decision (1Bln taper likely), ECB decision (any hints as to future asset purchase program intentions will be closely monitored).
Matters that Matter:
• USD net shorts fall to lowest since June 2018 – CFTC, Reuters
• Biden and Japan’s Suga project unity against China’s assertiveness
• Biden may accept a 25% corporate tax rate (not 28%)
• US Senate Republicans might want a smaller infrastructure bill
• BitCoin plunges over the weekend after reports that US Treasury may crack down on money laundering carried out through digital assets.
• Japan firms brace for further COVID hit
• China state planner expects CPI to grow mildly in 2021, remain within target
• Asking prices for UK houses hit new high after tax cut extended – Rightmove
• Italy risks missing Recovery Plan deadline due to EU concerns, sources say
• Australia-New Zealand ‘travel bubble’ begins
• Canada’s budget to include digital and luxury levies, but no wealth tax – sources
Majors Weekly View:
USDJPY
- Prices posted the 2nd lower weekly high & low last week, with losses of over 1 Big Fig. Although the pullback seems corrective, it may continue and as such the outlook for the week is cautiously bearish.
- Bids reports from 108.50s
- Large opex today/tom at 108.60-65
- US Yields still the main driver.
EURUSD
• Prices posted the snd higher weekly high & low in a row last week, with gains of 1 Big Fig. Prices are encountering resistance ahead of the 1.2000 level, so pullbacks are to be expected. But in the absence of any reversal signal, we prefer a buy on dips stance for this week.
• Offers still reported ahead of 1.2000 barrier.
• EURJPY sales send EURUSD lower
• Large opex today also a factor.
AUDUSD
• Prices posted the 2nd higher weekly high & low last week, with gains of over 1 ½ Big Figs. As such, the outlook for this week is bullish.
• Risk assets weigh on AUD into the week.
• Risk appetite mixed into the European Open.
GBPUSD
• Prices posted a bullish engulfing last week, reversing the previous week’s declines. As such, the outlook switched to a moderately bullish stance this week, since we still haven’t breached last week’s top.
• Pound dominated by USD moves and risk appetite.
• Support still 1.3670, resistance 1.3900.
Weekly Relative ATR Grid
Comment: Volatility levels were inconsistent last week, with expansions in AUD & NZD, but some outright contractions in selected JPY & CHF pairs where volatility expansions are expected this week.
Initial Directional Indications
Comment: heading into the week, we are seeing some strength in JPY, GBP and CAD vs. weakness in EUR, CHF, USD.