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Intermarket:
• SP Futures 4241 (+0.12%)
• EUSTXX 4109 (-0.05%)
• Crude Oil 73.20 (+0.48%)
• US 10YR 1.47% (+2.34%)
• EurUsd 1.1919 (-0.15%)
• UsdJpy 110.81 (+0.18%)
• DAX 15634 (+0.04%)
European equities are poised for a positive start on Wednesday after another strong close on Wall Street yesterday. Fed chair Powell noted the Bank is nowhere near hiking rates and reiterated that “we will wait for actual evidence of actual inflation or other imbalances” before tightening. Fed’s Williams said tightening is “still way off in the future” and the “attention is on the taper”, while Mester noted “we still have some time to go before we will think about interest rates” and Daly echoed that “we’re not there yet but it is appropriate to start preparing for the time” to taper. The US yield curve continued it’s bear steepening. US Dollar remains weak into European trade; Oil and Gold are firm.
Elsewhere, China plans to keep border restrictions for another year. Bitcoin also bounced back after testing below $30,000 for the first time since January.
Looking ahead: today we get Eurozone/UK/US’s PMIs. RBA’s Ellis, ECB’s Lagarde and Guindos, and Fed’s Bowman, Bostic and Rosengren are also speaking.
Matters that Matter:
• FED members downplay inflation concerns
• Sydney seeing acceleration of COVID cases – further restrictions likely
• CBA sees RBA to hike in Nov 2022.
Majors 1-Day View:
Comment: the US Dollar remains on the back foot as Fed centrists’ views, including Chair Jerome Powell, curbed taper expectations. The focus is back on inflation pressures and just how transitory they will be
USDJPY
Monday’s bullish hammer signal gained traction on Tuesday, with prices posting a higher daily high & low and testing the Mar/Apr closing highs at 110.72. Buyers maintained the upwards pressure in Asia trade, posting fresh highs for June at 110.85. As such, signals remain bullish for today but with some caution as momentum readings are extended at the daily and hourly levels. Pullbacks to today’s open at 110.66 are favoured.
EURUSD
Friday’s decline and Monday’s rally left signals neutral for Tuesday. Buyers did return to market on Tuesday, prices posting a higher daily high & low, testing the Marabuzo at 1.1957. While signals have marginally improved, a divergence in momentum on the large hourly charts suggests some caution and perhaps marginal downside into Wednesday. As such, we suggest a cautious bearish stance today.
AUDUSD
Friday’s decline, alongside Monday’s rally, suggested a neutral stance for Tuesday. However, buyers returned to market, posting a higher daily high & low and momentum remains rather strong on the hourlies as we enter Wednesday trade. As such, signals remain bullish for today.
GBPUSD
Friday’s decline alongside Monday’s recovery suggested a neutral stance for Tuesday. However, buyers returned to market, prices posting a higher daily high & low. With no sign that demand is ending, signals suggest a bullish stance for today.
USDCAD
Friday’s ascent alongside Monday’s decline left signals rather neutral for Tuesday. However, prices posted a lower daily high & low, prices reaching the Marabuzo at 1.2312. Hence, while some caution is advised, signals remain bearish for Wednesday.
FX Relative ATR Grid
Comment: volatility levels have been returning to normal after the recent expansion, but trading conditions are still favourable as ranges remain rather elevated, especially on USD, JPY and CHF.
FX Relative Strength Grid
Comment: the strongest trends are currently USD (bullish), GBP (bullish), CHF (bearish), AUD (bearish). The strongest momentum was seen yesterday in JPY (bearish), CAD (bullish), NZD (bullish).