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Intermarket:
- SP Futures 3893 (+0.50%)
- EUSTXX 3705 (+0.14%)
- Crude Oil 62.73 (+1.66%)
- US 10YR 1.37% (+1.86%)
- EurUsd 1.2170 (+0.13%)
- UsdJpy 105.06 (+0.00%)
- DAX 13993 (+0.24%)
Risk appetite seems firmer going into Tuesday although Tech remains pressured after Nasdaq’s sell-off amid surging bond yields. Tokyo was closed for public holiday. Miners underpinned ASX’s outperformance with commodities at multi-year highs. USD remains offered, while Crude Oil, Gold, Copper are bid. Bitcoin is losing ground after Elon Musk tweet.
Focus remains on recent bond yields and potential risks to stocks given concerns about stretched valuations and bubble-like conditions in some pockets of the market. For now though, improving coronavirus trends/positive vaccine developments continue to underpin risk sentiment.
Some focus on remarks Monday by ECB’s Lagarde who said the bank is closely monitoring the evolution of long-term nominal bond yields. Eurozone sovereign bond yields moved lower in response to her remarks. In US stimulus news, the Democrats are reportedly plotting a backup plan that could save minimum wage hike from getting tossed out of Biden’s $1.9T package.
Looking ahead: we get UK employment data soon, and then the main market mover for the day will be Fed Chair Powell’s testimony before the Senate banking Committee. Inflation expectations and yields are rising, but Powell has recently been adamant with his dovish stance, so no hawkish remarks are expected today.
Matters that Matter:
• Bitcoin falls as much as 6% after Elon Musk tweet
• U.S. House budget panel approves $1.9 trillion COVID-19 aid bill
• Fed’s Kaplan sees U.S. economy growing at least 5% this year
• China calls for a reset, but U.S. says Beijing trying to ‘avert blame’
• Australia says Facebook to restore pages after changes to landmark legislation
• Australia to ramp up COVID-19 vaccination drive as more doses arrive
• NZ Q4 Retail sales excl. inflation -2.7% q/q (expected -0.5%)
Majors 1-Day View:
USDJPY
- A bearish outside day on Monday posted the 3rd lower daily low in a row. As such, the outlook for Tuesday is bearish.
- Risk on, but crosses holding up better than USDJPY.
- Powell testimony key for Yields today.
- Bearish outside day posted on Monday.
EURUSD
• Prices posted the 2nd higher daily high & low in a row on Monday, with gains of over ½. Big Fig. Signals are overbought at the daily level, so the call is cautiously bullish for Tuesday.
• Prices posted fresh 1-month high at 1.2177
• Focus on Powell today.
• Resistance at 1.2200
AUDUSD
• Prices posted the 3rd higher daily high & low in a row on Monday, with gains of over ½ Big Fig. Signals are now stretched at the weekly and daily basis, so the call is still bullish but caution is advised.
• Risk on tone and strong commodities support Aud.
• Key Resistance .8000, support at .7820
• Powell testimony key today.
GBPUSD
• Prices posted the 3rd higher daily high & low in a row on Monday, with gains of over ¾ Big Fig. Signals are now stretched at the weekly and daily basis, so the call is still bullish but caution is advised.
• Uptrend is strong, supported by USD weakness.
• Powell testimony key today.
FX Relative ATR Grid
Comment: Volatility is expanding across the board, and trading conditions are once again extremely favourable.
Relative Strength Grid
Comment: The main trending currencies are AUD (long), CHF (short), JPY (short), GBP (long), NZD (long). The strongest momentum was seen yesterday in CAD (weakness), USD (weakness), AUD (strength), NZD (Strength).