For instant updates, follow FCI Markets on Twitter
Intermarket:
• SP Futures 4161 (-0.07%)
• EUSTXX 3951 (+0.51%)
• Crude Oil 61.15 (-0.33%)
• US 10YR 1.56% (+0.13%)
• EurUsd 1.2033 (-0.01%)
• UsdJpy 107.97 (-0.05%)
• DAX 15277 (+0.44%)
Risk appetite is sturdier ahead of today’s European Open, after the SP500 rebound by almost 1% after two days of losses. The VIX also fell to 17.50. The US 10yr remains steady around 1.56% amid a healthy 20-year bond auction. USD is trading near flat ahead of today’s ECB’s meeting, with EURUSD posting 2 consecutive little changed closes. Markets will scrutinize any references to the low levels of PEPP purchases, or signs of disagreement over tapering amongst council members. To note, the DE-US 10yr spread has supported the April rally in EurUsd but may now need a hawkish tilt to continue. US bond auctions are seeing decent demand, keeping yields contained – another component of the EUR resilience.
A hawkish steer from the BOC sent the Loonie soaring, but a greater than 2% drop in WTI after a surprise build in inventories curtailed the rise. Elsewhere, France, Greece and Italy prepare to ease some restrictions, while a controversial lockdown law just got backing in the lower house of Germany’s parliament.
Looking Ahead: beyond the ECB meeting, today we get U.S. jobless claims.
Matters that Matter:
• ECB expected to dismiss any taper talk.
• U.S. lawmakers intensify bipartisan efforts to counter China
• U.S. adds 116 countries to its ‘Do Not Travel’ advisory list
• Recession risk looms as Japan eyes 3rd state of emergency to contain pandemic
• Australia states investigate COVID-19 spread in quarantine hotels
• European Regulators to probe crypto exchange Binance’s foray into equities – FT
Majors 1-Day View:
USDJPY
- Prices posted the 2nd little changed close on Wednesday, with support materialising around the 108.00 level. There is no bullish signal as of yet, but the slowdown in bearish momentum alongside bullish divergences on the large hourly charts suggests caution. We prefer to sell on a rally towards 108.30-40.
- Prices supported by bounce in risk, but yields still soggy.
- Option expiries to anchor prices around 108.00, more at 108.30-40.
- Reportedly, short-term players are holding longs from above current prices.
EURUSD
• A failed rally on Tuesday and a failed decline on Wednesday leave priced neutral ahead of key event risk today. As such, signals are neutral unless we break 1.1985-1.2080.
• Rangebound trading ahead of ECB.
• DE-US yield divergence still supportive. • EURJPY buying supportive.
AUDUSD
• With short-term momentum shifting each day, prices have formed a range and as such, we prefer to buy on dips towards .770s or sell on a rally towards .7800.
• AUD rebounds on rally in risk assets.
• BOC move raises hopes that RBA may follow suit.
• Support .7700/10, resistance .7820s.
GBPUSD
• Prices posted a lower daily high & low yesterday, but initial losses towards 1.3900 were recovered and the day closed little changed. The bounce is positive but short-term momentum still favours the downside. As such, we prefer to sell into any rally towards 1.4000 today.
• Reopenings and vaccine progress positive background for Pound
• Prices firmer as risk sentiment returns, USD strength dissipates.
• Resistance 1.4000, stops above to 1.4025.
FX Relative ATR Grid
Comment: Volatility levels remain elevated going into Thursday, which suggests good trading conditions remain across the board.
FX Relative Strength Grid
Comment: the strongest trends are currently NZD (bullish), USD (bearish). The strongest momentum was seen yesterday in JPY (bearish), CAD (bullish), GBP (bearish).