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Intermarket:
• SP Futures 4162 (+0.26%)
• EUSTXX 4025 (+0.20%)
• Crude Oil 63.95 (+0.69%)
• US 10YR 1.63% (-0.74%)
• EurUsd 1.2186 (+0.04%)
• UsdJpy 108.81 (-0.09%)
• DAX 15462 (+0.20%)
*The next few Morning Calls will be slightly different than usual, as I am away from my usual office setup.
Risk appetite is firm into Monday’s European trade, despite bank holidays in several countries. US futures firmer. US 10YR soft. US Dollar softer. Oil up and gold firmer. Bitcoin also volatile losing more ground over weekend, with only modest strength seen into today.
Inflation concerns are the main theme, on shortages, supply chain pressures, labour market tightness. Recent softening in economic data, alongside the pullback in commodities and easing in bond yields have supported the Fed’s more patient stance. However, FED’s Kaplan, Barkin and Bostic said they see economic crisis entering later stages, setting the stage for eventual scaling back of stimulus.
Elsewhere, REINZ shadow MPC sees a stronger case for RBNZ tightening given the strengthening economic outlook and higher inflation pressures.
This week, focus will be on inflation pressures and comments by policymakers for indications of any shift in outlook following Friday’s strong PMIs. We also get the FED’s favourite inflation gauge, the core PCE price index. In Europe, the German Ifo, euro zone sentiment indices and final consumer confidence are the main releases.
Matters that Matter:
• Fedspeakers alongside incoming data suggest May employment conditions less favourable.
• Glut of cash in U.S. financial system pressures Fed policy rate - FT
• Crypto miners halt China business after Beijing’s crackdown, bitcoin dives
• Chinese regulators warn metal firms to maintain good market order
• RBA seen lagging global peers on rate rises
• NZ Q1 Retail Sales QQ SA, 2.5%, -2.7% prev
• No one’s safe anymore: Japan’s Osaka city crumples under COVID-19 onslaught
• G7 is close to deal on taxation of world’s largest companies - FT
Majors 1-Day View:
USDJPY
Prices posted the 2nd “inside week” in a row into Friday’s close, highlighting rather indecisive signals. Directional momentum picks up on a break of the 108.35-109.75 range. US yields continue to weigh on prices, and offers trail to 109.00.
EURUSD
Sellers have returned from Feb’s 1.2243 top, and signals have been switching in each of the past 4 sessions. As such, trend signals are not strong. The topside rejection is moderately negative, but until prior day lows are broken, the outlook remains rather neutral in the short-term. Prices may remain rangebound today due to massive option expiries between 1.2145-60 and also 1.2200.
AUDUSD
AUDUSD remains in a rangebound market type between .7670 and .7890. With daily signals switching in each of the past 3 sessions, trend signals are extremely weak. We would remain neutral for today.
GBPUSD
The recent rally in Pound has attracted sellers from close to February’s top at 1.4238, prices declining to end the week little changed. There is no outright bearish reversal pattern but a bearish divergence in momentum suggests some caution. We would sell into rallies towards 1.4200 today.
USDCAD
Signals on USDCAD remain extended with prices at 3 year lows, but a bullish divergence in momentum suggests caution as bearish signals are weakening. As such, the outlook remains just cautiously bearish for Monday.
BITCOIN
Prices continue to challenge last week’s low and key support at 30770s. The earliest form of potential support will come in the form of a divergence in momentum near the lows. Current resistance is 41900. Momentum remains to the downside into the week. A daily close below 30770 would seriously challenge the bull trend.
Initial Directional Indications
Going into the week, we are seeing further USD weakness, a tad of CAD weakness, strength in NZD.