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Intermarket:
- SP Futures 3894 (-0.21%)
- EUSTXX 3700 (-0.38%)
- Crude Oil 59.95 (+1.18%)
- US 10YR 1.35% (+0.15%)
- EurUsd 1.2119 (+0.04%)
- UsdJpy 105.67 (+0.26%)
- DAX 13949 (-0.39%)
Risk sentiment is weaker as we approach the London open, following signals from Friday. Treasury yields continue recent move higher, with the 10YR past 1.35% which is supporting the US dollar. Industrial metals remain firm, with copper surging to nine-year highs.
Stronger earnings, improving coronavirus trends, accelerated vaccine rollout, a faster-than-expected economic rebound, buoyant investor sentiment, ultra-accommodative monetary policy, and progress on US fiscal stimulus remain widely cited drivers of bullish narrative. However, stretched valuations, rising yields, and signs of froth in some pockets of the market remain concerns.
UK PM Johnson is set to unveil roadmap out of lockdown today (3.30 BST in Parliament, then at 7PM BST with a press conference), which will be the main event for the Pound. Australia is the latest country to kick off its vaccination drive. Asian hotspots including Japan and South Korea also seeing moderation in new cases.
Geopolitical tensions are rising after Taiwan scrambled air force in response to China jets conducting drills in South China Sea.
Looking ahead: we get GER IFO this morning (expected higher), then ECB’s Lagarde speaking at 15.30 CET and finally UK PM Johnson’s plans to exit Lockdown mode.
Matters that Matter:
• China calls for reset in relations with US.
• Britain to challenge China at U.N. over access to Xinjiang
• BoE faces tension over stimulus options if recovery disappoints - FT
• Bitcoin hits fresh high
• S&P raises New Zealand ratings on COVID success; kiwi rises
• Australian won’t change planned content laws despite Facebook block - lawmaker
• Australia begins mass COVID-19 vaccination programme
• Myanmar gripped by strike as anti-coup protests build
• UK’s Johnson to plot path out of lockdown
Majors Weekly View:
USDJPY
- Prices posted a 4 month high last week at 106.22, although sellers returned at the highs, prices closing the week with just modest gains. As such, the outlook for this week is just cautiously bullish.
- Risk on ahead of Biden’s coming stimulus.
- US Yields firm, USD up.
EURUSD
• Despite posting a slightly higher high & low last week, prices closed little changed. As such, signals are not strong and our main view is to sell a rally towards 1.2150, or sell a break through 1.2020.
• Sellers defend 2140 during Asia trade.
• Short-term support at 1.2090/00.
AUDUSD
• Prices posted the 2nd higher weekly high & low last week with gains of 1 ¼ Big Figs. As such, despite extended signals at the daily level, the bias remains bullish.
• Risk on matched by USD bid tone.
• Key Resistance .8000, offers reported at .7900
• AU yields rising in sync with US yields.
GBPUSD
• Prices posted the 2nd higher weekly high & low last week with gains of 2 Big Figs. As such, despite extended signal at the daily level, the bias remain bullish and we prefer to buy into dips.
• Exit from lockdowns the main event risk for the Pound this morning.
• Support 1.3940s.
FX Weekly ATR Grid
Comment: Volatility returned last week with expansions seen on multiple currencies. Trading conditions are more favourable going into this week with continuation expected in CHF, AUD, NZD, JPY.
Initial Indications Going into the Week
Going into the week we are observing USD strength as well as EUR strength, vs. JPY, CHF, GBP weakness