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Intermarket:
• SP Futures 4104 (-0.45%)
• EUSTXX 3962 (-1.07%)
• Crude Oil 64.68 (-1.26%)
• US 10YR 1.64% (+0.12%)
• EurUsd 1.2233 (+0.09%)
• UsdJpy 108.95 (+0.06%)
• DAX 15244 (-1.05%)
Global equities are weak as we approach today’s European Open following losses in NorAm on Tuesday amid the resurgence of Covid cases globally, slowing growth prospects and rising inflation. The SP500 retreated 0.85%, while VIX rose to 21.34. The 10-year bond yield is little changed at 1.64%. Cryptocurrencies were also lower as China moved to ban financial institutions from using cryptocurrencies. Meanwhile, Fed’s Clarida opined that the weak labour market report suggests that the US economy doesn’t warrant a taper.
The USD slipped to near four-month lows as yields remain largely unchanged and poor US data weighed. Markets are likely waiting for Wednesday’s FOMC minutes, Thursday jobless claims and Friday’s PMIs.
Looking Ahead: today we get UK’s CPI/PPI/RPI, Eurozone’s CPI, then ECB’s Panetta, Rehn and Lane, as well as Fed’s Bullard, Quarles and Bostic are speaking. The April FOMC minutes are also due and may reiterate the Fed’s belief that inflation pressures are largely transitory.
Matters that Matter:
• Fed’s Quarles says strong economic recovery underway, but not yet complete
• BOJ to consider extending pandemic-relief programme as needed, says Kuroda
• China bans financial, payment institutions from cryptocurrency business
• Bitcoin extends losses to 8%, falls below $40,000; Ether falls 12.6% to below $3,000
• Australian PM says trade volumes show China values bilateral relationship
• Australia Q1 wage growth dragged by public sector
Majors 1-Day View:
USDJPY
Prices posted the 3rd lower daily high & low in a row on Tuesday, with losses of almost ½ Big Fig. The move down from last week’s high is still seen as corrective and only a break of 108.30s would shift that stance. Immediate signals remain bearish and selling into rallies remains the favoured stance for Wednesday. Supports are at 108.70, then 108.33/35.
EURUSD
Prices posted the 3rd higher daily high & low in a row on Tuesday, with gains of over 3/4 Big Fig, reaching new highs in May. As such, signals remain bullish for Wednesday and buying pullbacks towards 1.2200 remains the favoured stance.
AUDUSD
Prices posted the 3rd higher daily high & low in a row Tuesday, but buyers returned from just above .7800, prices declining to close little changed. The broader picture remains range-bound on AUDUSD between .7680s-.7880s. Immediate signals have weakened into Wednesday and we prefer selling on rallies today towards .7800/10. Supports are found at .7731, .7701, .7675/88.
GBPUSD
Prices posted the 3rd higher daily high & low in a row on Tuesday, with gains of almost ¾ Big Fig. As such, signals remain bullish but with caution as prices are reaching extended levels. We prefer to buy on dips towards 1.4160s today. Resistance is at this year’s highs at 1.4238 then 1.4250s from April 2018 and the 2018 high at 1.4375.
USDCAD
After the intraweek pullback last Wednesday/Thursday, prices resumed the downwards bias and posted the 3nd lower daily & low in a row on Tuesday. However, buyers returned from close to 1.2000, prices recovering to close little changed. The gains are seen as corrective until 1.2200 is broken but may extend. The higher close has also setup a potential bullish divergence in momentum at the daily level, indicating that the correction may extend. As such, with some caution, we suggest buying into dips towards 1.2030 today.
FX Relative ATR Grid
Comment: volatility declined further on Tuesday, with GBP pairs entering into outright contractions (and are hence poised for a range expansion now) while only select USD pairs performed well ahead of key risk event today.
FX Relative Strength Grid
Comment: the strongest trends are currently GBP (bullish), EUR (bullish), USD (bearish), JPY (bearish). The strongest momentum was seen yesterday in JPY (bearish), CHF (bullish), USD (bearish).