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Intermarket:
• SP Futures 4135 (+0.19%)
• EUSTXX 3957 (-0.28%)
• Crude Oil 61.95 (+0.85%)
• US 10YR 1.55% (-0.64%)
• EurUsd 1.2028 (+0.11%)
• UsdJpy 107.90 (-0.05%)
• DAX 15272 (-0.40%)
Risk appetite is soft going into Friday after Biden’s plans to hike U.S. capital gains tax sent both equities and cryptocurrencies tumbling. The proposal would raise top marginal income tax rate to 39.6% from 37%, and double taxes on capital gains to 39.6% for people earning more than $1 million. Vix is above 20.00; USD in consolidation; Oil is up.
To note, more clarity on Biden’s American Families Plan might be unveiled next week at his April 28 appearance in Congress.
USD is now consolidating after the ECB dismissed PEPP tapering and jobless claims confirmed the US recovery is progressing. GBP is softer as Indian “double mutation” Covid variant spotted in the UK.
Looking ahead: focus will be entirely on EU PMIs today, which will likely be impacted by lockdowns.
Matters that Matter:
• Biden to float historic tax increase on investment gains for the rich, sends cryptocurrencies tumbling; stocks soft.
• Tech and growth stocks to take hardest hit from Biden’s tax overhaul.
• Japan to issue ‘short, powerful’ state of emergency for Tokyo, elsewhere
• UK parliament declares genocide in China’s Xinjiang; Beijing condemns move
• NZ to tighten border controls from 4 high-risk nations
• Canada to ban incoming flights from India due to Covid
Majors 1-Day View:
USDJPY
- Prices posted the 3rd little changed close on Thursday, 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 again today.
- Prices still hovering around 108.00
- Reportedly, algos and exporters still selling on rallies.
- US yields weigh on prices.
EURUSD
• Prices posted the 3rd little changed close in a row on Thursday, highlighting rangebound conditions. As such, signals are neutral unless we break 1.1985-1.2080.
• No PEPP taper weighs on EUR.
• Biden tax plans, risk off initially supported USD.
• Offers reported at 1.2070/80.
AUDUSD
• With short-term momentum shifting each day, prices have formed a range which was respected on Thursday as well. As such, we prefer to buy on dips towards .7700s or sell on a rally towards .7800.
• AUD rebounds after NY decline.
• PMIs were higher overnight, lending support.
• Support .7690, resistance .7760/65.
GBPUSD
• Prices posted the 2nd lower daily high & low yesterday, with losses of over 1 Big Fig. As such, signals for Friday remain bearish and we prefer to sell into any rally towards 1.3900.
• Indian “double mutation” Covid variant weighing on Pound.
• UK Retail sales & PMIs key this morning.
• Resistance 1.3900, 1.4000; support 1.3810s, 1.3700.
FX Relative ATR Grid
Comment: Volatility levels have remained high all week, keeping trading conditions favourable.
FX Relative Strength Grid
Comment: the strongest trends are currently NZD (bullish), USD (bearish). The strongest momentum was seen yesterday in CHF (bullish), GBP (bearish), USD (bullish), AUD (bearish).