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Intermarket:
• SP Futures 4201 (+0.19%)
• EUSTXX 4047 (+0.10%)
• Crude Oil 66.15 (+0.15%)
• US 10YR 1.61% (-1.47%)
• EurUsd 1.2230 (+0.13%)
• UsdJpy 108.74 (0.01%)
• DAX 15552 (-0.05%)
*The next few Morning Calls will be slightly different than usual, as I am away from my usual office setup.
Risk appetite remains buoyant into Tuesday after tech stocks rebounded yesterday as comforting Fed rhetoric eased inflation concerns. Fed’s Brainard, Bostic and Bullard reiterated their belief that inflation pressures should prove temporary. VIX fell to 18.40 as Amazon and Alphabet led gains, and the USD softened. The 10-year yield remains soft at 1.61%. Separately, Bitcoin also made a comeback after Elon Musk tweeted about his call with major North American miners to discuss energy usage transparency.
The US Dollar remains soft as falling Treasury yields and rebounding risk appetite sapped demand for the haven currency, while markets awaited the Fed’s favored gauge of price growth later in the week to shape the inflation debate.
Looking ahead: today we get GER IFO. Then, Fed’s Barkin, Evans and Quarles, ECB’s Villeroy and Lane, and BOE’s Tenreyro are speaking today.
Matters that Matter:
• Fed’s George says doesn’t dismiss risk of inflation surge, will come a time when taper discussion important
• U.S. Treasury deputy chief sees G7 backing for 15%-plus global minimum tax
• China to strengthen commodity price controls in next five years
• Turkey removes one of four deputy central bank governors
• NZ central bank to be patient on policy in quest for maximum employment - poll
• Masks, social restrictions return to Australia’s Melbourne after fresh outbreak
• Belarus faces new sanctions over jetliner ‘state piracy,’ arrest of journalist
• Italian lender Aigis Bank collapsed on exposure to Greensill and GFG.
Majors 1-Day View:
USDJPY
Prices posted the 2nd “inside week” in a row into Friday’s close, highlighting rather indecisive signals. On a weekly basis, directional momentum picks up on a break of the 108.35-109.75 range. Similarly, Monday posted an “inside day” with a little changed close. As such, we prefer a neutral stance within the 109.00-108.61 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 5 sessions. As such, despite Monday’s positive close, trend signals are not strong. We prefer to trade the 1.2160-1.2245 range until prices close outside of the range. Good resistance is reported near 1.2250, with option expiries on both sides: 1.2200-25 total E865 mln, 1.2250-75 total E1.3 bln.
AUDUSD
AUDUSD remains in a rangebound market type between .7670 and .7890. With daily signals switching in each of the past 4 sessions, trend signals are extremely weak. We prefer to sell into rallies towards .7770s today.
GBPUSD
Prices remain within the broad 1.4100-1.4210 range. After an initial ½ Big Fig decline yesterday, buyers returned from close to the 13 SMA at 1.4110, prices closing little changed. As such, we prefer to buy into dips towards 1.4130s as sellers may return from close to 1.4200 today
USDCAD
Signals on USDCAD remain extended with prices at 3 year lows, and bullish divergence in momentum at the daily level suggests caution as bearish signals are weakening. However, Monday posted losses of almost ½ Big Fig and as such, signals remain cautiously bearish for Tuesday with a preference for selling into rallies towards 1.2080.
BITCOIN
After posting a bullish divergence in momentum intraday, prices rallied 28% from 31073 to 39952. The failure to close below prior week lows at 30770 is a sign of strength. As such, signals for today remain positive and the next resistance areas are 42300 and 47200. A daily close below 30770 would invalidate the signal and challenge the bull trend.
Initial Directional Indications
Into Tuesday we are still seeing USD weakness, CHF weakness vs. NZD and EUR strength.