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Intermarket:
• SP Futures 4200 (+0.05%)
• EUSTXX 4075 (+0.12%)
• Crude Oil 68.05 (+0.48%)
• US 10YR 1.60% (-1.44%)
• EurUsd 1.2219 (+0.05%)
• UsdJpy 109.68 (+0.19%)
• DAX 15579 (+0.08%)
Risk appetite remains steady into Wednesday’s European Open, despite the volatile session seen in US indices yesterday, with outperformance of European equities despite strong EU CPI. US ISM was strong on the headline, but employment was soft, supply side issues were evident, and there was a slight drop in prices paid. USD remains strong this morning; Gold is down; Oil is up; yields steady.
Oil was a big mover yesterday despite OPEC+ maintained plans to increase production in July.
Generally speaking, markets seem to be awaiting Friday’s Non-Farm Payrolls before making the next decisive move. The COVID situation in AsiaPac is being dismissed at the moment.
Looking ahead: today we get Germany and UK’s CPI. Fed’s Harker, Evans, Bostic and Kaplan, ECB’s Villeroy, Elderson, Weidman and Lagarde are also speaking.
Matters that Matter:
• Dip in Fed funds rate not expected to spur action yet
• AU Q1 Real GDP QQ SA, 1.8%, 1.6% f’cast
• RBA’s Jones - Australia’s economic recovery seen stronger than past comebacks
• Australia’s Victoria extends Melbourne COVID-19 lockdown for 2nd week
• Russia c.bank governor says digital currencies are future of financial system
• OPEC+ sticks to plan to ease supply cuts through July
Majors 1-Day View:
Comment: US Dollar continues to switch signals, leading to rangebound trading in major pairs.
USDJPY
The decline from May highs at 110.20s was halted on Tuesday as a bullish divergence in momentum at the hourly level was posted from close to Thursday’s Marabuzo line at 109.49/50% retracement of last week’s gains. Buying continued during Asia trade, prices posting a higher daily high at 109.72. As such signals have improved for Wednesday and the preferred bias is to buy into dips towards 109.60 or 109.46, targeting 109.80 (Friday’s low) and 110.00 (round number) resistance levels.
EURUSD
Prices posted the 2nd higher daily high in a row on Monday, reaching 1.2255. However, sellers returned to the market, prices declining nearly ½ Big Fig. As such, prices remain within the broad 1.2160/1.2260 range and a daily close outside of the range is required to establish a fresh directional bias. Selling into the 62% retracement of yesterday’s drop at 1.2238 is today’s preferred bias, with support expected at 1.2193 (Friday’s close) and 1.2157/May 17th close.
AUDUSD
AUDUSD remains in a rangebound market type between .7674 and .7890. Inner boundaries are .7700/.7800. Attention should be paid to the contraction in ranges over the past 7 sessions, which suggests a potential range expansion in the coming sessions. As such, signals for Wednesday are mixed. Short-term resistance remains at .7772, with short-term support expected at .7710. A Daily close beyond the range boundaries will establish directionality.
GBPUSD
Monday’s close at 1.4227 suggested a break of the broad 1.4100/1.4200 range and continuation of bullish signals. Instead, sellers returned from close to the Feb 24 top once more, prices declining by 1 Big Fig, posting a bearish Engulfing at the daily level. As such, signals switch to a cautious bearish stance for Wednesday and the call is to sell on pullbacks towards 1.4170 (23.6% retracement) or 1.4191 (Marabuzo). Support is expected at 1.4115 (May 27th Open) and 1.4061 (May 13 Open).
USDCAD
Downwards momentum has been stalling over the past 3 sessions, with consecutive little changed closes and buyers returning from close to 1.2000. Despite prices posting a fresh cycle low on Monday at 1.2006, buyers returned again to post a Daily Hammer. As such, signals have improved, but just slightly. Only a close beyond 1.2142/last weeks top would suggest a decisive bullish shift. The preferred bias for today is a cautious bullish stance, buying into dips towards last week’s low at 1.2030. Resistance is found at 1.2116/May 28th high zone and 1.2170 (May 14th Open).
FX Relative ATR Grid
Comment: weekly volatility levels dropped and posted outright contractions; at the daily level, volatility levels remain uneven, with expansions in GBP and CHF, but with outright contractions in USD pairs and select JPY and NZD pairs. This suggests that trading GBP and CHF pairs is best today.
FX Relative Strength Grid
Comment: the strongest trends are currently NZD (bullish), CHF (bullish), JPY (bearish). The strongest momentum was seen yesterday on GBP (bearish), CHF (bullish).