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Intermarket:
• SP Futures 4164 (+0.22%)
• EUSTXX 3970 (-0.18%)
• Crude Oil 64.10 (+1.54%)
• US 10YR 1.60% (+1.78%)
• EurUsd 1.2062 (+0.24%)
• UsdJpy 108.17 (+0.02%)
• DAX 15395 (-0.06%)
Risk appetite remains sluggish into Tuesday’s European Open after US equity markets traded lower yesterday, dragged down by Tesla (following a fatal weekend crash) whereas Coca-Cola and GameStop rose, while VIX rose to 17.29. Some analysts also suggest caution ahead of upcoming tech earnings and many countries are battling fresh resurgence of Covid cases. US Yields are slightly higher at 1.60%; USD remains under pressure as markets follow the FED’s dovish guidance despite inflation/growth acceleration; EUR consequently remains strong, with yields rising quicker ahead of the ECB this week; GBP gained over 1% yesterday on reopening and vaccination success, with markets pricing in less need for BOE accommodation.
Looking ahead: ahead of the ECB meeting, traders will keep an eye on the gross PEPP purchase data published by ECB this afternoon after net purchase data yesterday showed a surprisingly modest buying pace last week. Today we also get UK jobless claims and ILO unemployment rate. US earnings results from P&G, J&J, United Airlines are due today, and Apple is also unveiling its first product offering this year.
Matters that Matter:
• Biden ‘prepared to compromise’ on infrastructure, wants Republican proposal by May
• U.S. will boost ‘Do Not Travel’ advisories to 80% of world
• China’s Xi: China will develop friendship and cooperation with other countries, China will never seek hegemony, expansion, or a sphere of influence no matter how strong it may grow and will never engage in arms race.
• RBA sees faster economic recovery from pandemic, price pressures still elusive
• New Zealand expects Australia ‘travel bubble’ to stay open despite new virus case
• BOJ to mull slashing this year’s inflation forecast -Nikkei
• Canada rolls out post-pandemic spending plan ahead of likely election
Majors 1-Day View:
USDJPY
- Prices posted the 6th lower daily high in a row, with losses of ¾ Big Fig. Prices are extended and pullbacks are to be expected, but the bias remains bearish. We suggest selling into rallies today towards 108.50s.
- Offers reported at 108.50s and 109.00
- Good demand at 108.00
- Large option expiries today 108.50-65.
EURUSD
• Prices posted a bullish outside day on Monday, confirming the bullish bias, with gains of over 1 ¼ Big Fig. Prices are extended and pullbacks are to be expected, but the bias remains bullish for Tuesday.
• Bullish outside day on Monday.
• USD offered in Asia
• Support and bids reported at 1.2000
AUDUSD
• Prices posted a bullish engulfing on Monday, which keeps the bias positive into Tuesday. However, buying into pullbacks is potentially a better play, as prices are close to the .7800/15 resistance area.
• AUD higher on USD weakness, RBA minutes uninfluential.
• Resistance .7820s, support and bids reported at .7750.
GBPUSD
• Prices posted gains of over 1 ½ Big Figs yesterday and are testing March highs/1.4000. While momentum remains bullish, prices are extended and buying pullbacks remains a better play.
• Reopenings and vaccine progress supports Pound
• Offers at 1.4000 but stops layered to 1.4025.
FX Relative ATR Grid
Comment: Volatility expanded almost across the board yesterday, with GBP and USD the clear leaders. Trading conditions remain optimal into Tuesday.
FX Relative Strength Grid
Comment: the strongest trends are currently CHF (bullish), NZD (bullish), GBP (bullish), USD (bearish), CAD (bearish). The strongest momentum was seen yesterday in GBP (bullish), USD (bearish), CHF (bullish).