For instant updates, follow FCI Markets on Twitter
Intermarket:
• SP Futures 4185 (-0.18%)
• EUSTXX 4030 (+0.05%)
• Crude Oil 65.88 (-0.49%)
• US 10YR 1.57% (+0.64%)
• EurUsd 1.2191 (-0.01%)
• UsdJpy 109.12 (-0.01%)
• DAX 15452(+0.04%)
*The next few Morning Calls will be slightly different than usual, as I am away from my usual office setup.
European equity markets set for a mixed open after a positive close on Wall Street yesterday. This comes as Fed’s Quarles opined that “if my expectations for growth, employment and inflation over the coming months are borne out, it will become important for the FOMC to begin discussing tapering”. US equity futures are softer; USD is retreating slightly after a strong performance yesterday. US 10YR slightly higher at 1.57%. Oil softer. Gold softer.
Market narrative unchanged: investors maintain focus on inflationary pressures and taper talk. ECB officials have been the most vocal in pushing back taper-talk in the near-term. Vice-versa, Bank of Canada and RBNZ seem to be at the more hawkish side of the taper spectrum. The FED is starting to show internal division amongst members.
Elsewhere, Australia’s state of Victoria enters fourth lockdown. Taiwan to extend Covid alert for Taipei and several Japanese prefectures have requested state of emergency.
Looking Ahead: we get US Jobless Claims, then ECB’s Guindos, Hernandes de Cos, Weidmann and Schnabel, as well as BOE’s Vlieghe are also speaking.
Matters that Matter:
• Fed’s Quarles ready to discuss tapering.
• Chinese embassy in U.S. says politicising COVID-19 origins hampers investigations
• China’s crackdown on crypto mining shifts to central Asia, North America
• RBNZ’s Orr: monetary conditions could normalise next year
• Australia’s Victoria state to enter COVID-19 lockdown after fresh outbreak
• World stocks to rise modestly, correction unlikely – poll
Majors 1-Day View:
USDJPY
For the past 5 sessions, trading has been contained within the May 19th 108.56-109.33 range. As such, conditions remain rangebound and yesterday’s gains are seen as a recovery. However, with prices interrupting prior day highs, signals have improved, so today’s call is cautiously bullish and we prefer to buy dips towards 108.87.
EURUSD
After posting a fresh cycle high at 1.2267 sellers returned to the market, prices declining by over ¾ Big Fig to post a bearish engulfing at the daily level. The losses are seen as corrective, but may extend. As such, we prefer selling into rallies towards 1.2220 today, targeting 1.2178 initially. To note, leveraged and IMM names are long EURUSD. A Break below 1.2160 could trigger some weak stops.
AUDUSD
Broad conditions remain rangebound. After attracting support from close to the 55 DMA, prices posted the 2nd higher daily high & low in a row on Wednesday. However, sellers returned from close to prior resistance at .7800, prices declining almost ¾ Big Fig, reversing initial gains and closing little changed. As such, signals are switching to a cautious bearish stance for Thursday. Initial target is .7706.
GBPUSD
After last Friday’s retest of the current range top, sellers returned to the market, prices declining towards the bottom of the recent range at 1.4100. Only a close below 1.4100 or a close above 1.4210 would substantially change this picture. With prices testing the lower boundary today, signals remain cautiously bearish but we prefer to sell rallies towards Wednesday’s open at 1.4140s. Initial target are the Asia lows at 1.4090.
USDCAD
From extended readings at 3 year lows, prices posted a recovery of almost 1 Big Fig on Wednesday after 3 consecutive little changed closes. The recovery is seen as a correction, but it may extend. As such, we suggest buying into dips towards 1.2077 today, targeting prior highs at 1.2144 initially.
BITCOIN
After finding support from close to 30770, prices rallied over 30% to 40650 via 3 consecutive higher daily lows. However, 2 consecutive little changed closes highlight a slowing in positive momentum and with sellers returning in Asia trade, prices interrupting the trend of higher daily lows, signals are less positive for Thursday. Selling intraday rallies towards 39000 may be viable, but buyers may return from close to 36000 (50% retracement of the recovery).