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Intermarket:
Risk appetite is weaker as we approach the European open following weakness in Asia’s main equity indices, possibly on China banking regulator discussing asset bubbles (this comes ahead of this week’s NPC meeting). US 10YR off a tad. USDollar firmer after great ISM reading yesterday. Broad-based declines in commodity markets including oil, gold and copper.
Central bank talk actively opposing bond market volatility: Fed speakers remain dovish, RBA actively buying more bonds, RBNZ’s Hawkesby hit a dovish tone, ECB’s Villeroy said deposit rate could still be cut. Watch Fed’s Powell on Thursday.
On Covid front: Novovax expects FDA emergency use authorization for its vaccine as early as May. Italy starting to adopt Russian Sputnik vaccine also. US health officials concerned over New York variant and its ability to evade antibodies. WHO noted coronavirus infections rising for first time in weeks.
Looking ahead: of interest today will only be Fed speakers in the US session.
Matters that Matter:
• Senate to debate COVID-19 bill this week
• RBA to keep 3-year yields low to curb bond volatility
RBA maintains rates and QE
• As economy rebounds, China parliament to address long-term pitfalls
• RBNZ’s Hawkesby rolls maintains dovish tone: no quick end in sight to stimulus
• Oil futures down ahead of Mar 4 OPEC+ meeting, expectations that the group may agree to increase supply.
• Xi tells China to ready itself for a tech revolution to lower dependency on the west - BBG
• China expected to favour green technology over coal in upcoming five-year plan - RTRS
• Inflation not a risk now, but some see danger ahead - WSJ
• ECB’s Villeroy says can and must react to any undue tightening – BBG
Majors 1-Day View:
USDJPY
- Prices posted the 4th higher daily high & low in a row, but with prices showing signs of a bearish divergence in momentum at the hourly level, caution is warranted. We prefer to buy dips towards 106.50 today.
- Massive opex this week between 106.20-45 supportive, also today between 105.78 and 106.10.
- JPY pairs buoyant on bargain hunting in risk assets, yields steady.
EURUSD
• Prices posted the 2nd lower daily high & low in a row on Monday, interrupting the trend of higher weekly lows. As such, the bias for Tuesday remains bearish.
• Strong ISM keeping USD bid
• Offers reported at 1.2100.
AUDUSD
• Despite the weekly bearish engulfing, buyers returned to the market yesterday from close to .7700, prices posting an inside day. As such, the bias remains bearish but patience is required. The call is to either sell into a rally towards .7820s or sell down through .7700.
• Regains ground post-RBA, but still distant from last week’s top.
• Resistance at .7830, support .7700
• RBA buying more bonds to contain yields, policy to remain accommodative.
GBPUSD
• Prices posted the 3rd lower daily high in a row on Monday, with losses of 1 Big Fig. Sellers maintained the upper hand during Asia trade, ending the sequence of higher weekly lows. As such, the bias remains bearish into Tuesday.
• GBP pressured on USD strength.
• Offers reported at 1.4000
• Expectations of rising inflation and hawkish BOE support.
FX Relative ATR Grid
Comment: Volatility has expanded across the board which suggests continuation of these moves today as well.
Relative Strength Grid
The strongest trends are in AUD (bullish), NZD (bullish), CHF (bearish), JPY (bearish). The strongest momentum was seen yesterday in CAD (bullish), CHF (bearish), JPY (bearish).