For instant updates, follow FCI Markets on Twitter
Intermarket:
• SP Futures 4213 (+0.34%)
• EUSTXX 4051 (+0.32%)
• Crude Oil 67.18 (+0.49%)
• US 10YR 1.61% (+2.29%)
• EurUsd 1.2186 (-0.07%)
• UsdJpy 109.87 (+0.10%)
• DAX 15467 (+0.30%)
Equities are poised for a positive open into Friday’s European session after President Biden’s announcement of the 2022 spending plans. Yields and inflation expectations were higher, with the US 10YR back at 1.61%, driving strength into the greenback. US data was also encouraging with Jobless Claims dropping, suggesting potentially better Non-Farm Payrolls next week. Meanwhile, FED’s Kaplan was more vocal about the need to taper, which also aided the US Dollar. Gold is slightly down. Crude is up.
Elsewhere, the Pound gained on Thursday as BoE’s Vlieghe said the central bank could raise interest rates as soon as the first half of next year, even though it is more likely to wait until later in 2022.
Looking ahead: focus today is on personal consumption and income data, with the Fed’s inflation benchmark, core PCE, keenly awaited after last month’s CPI spike. The holiday weekend will likely see price action taper off in the afternoon.
Matters that Matter:
• FED reverse repo volume hits record high despite negative yields
• Fed’s Kaplan – Labor market tightening, taper talk appropriate
• US Senate advances sweeping tech bill taking aim at China
• BOJ eyes extension to pandemic-aid scheme by 6 months as COVID curbs persist
• Japan’s jobless rate rises, prices fall as pandemic pain persists
• RBNZ Orr: We see improving conditions; not concerned about generalized wage inflation; core inflation expectations are well anchored
• Reuters News: Irish government set to consider easing international travel restrictions from July 19
Majors 1-Day View:
USDJPY
Prices posted the 2nd higher daily high & low in a row on Thursday, with gains of almost 1 Big Fig, closing above the May 13th high at 109.78. Alongside the clear expansion in ranges, this suggests a resumption of the broader uptrend, with the next key resistance at 110.55. The April 9th top is a minor resistance and dips should be contained. There are some offers pre-110.00, some option-related, exporters and profit-takes too. 2 bln in option expiries today at 110.00, 950 at 110.50.
EURUSD
After Wednesday’s corrective decline, prices posted a range contraction on Thursday with a little changed close. As such the risks remain to the downside, with the potential for range expansion today. The move remains corrective until prices post a daily close below the near-term support zone at 1.2160/78. Option expiries may be a factor today, with 1.2100-95 total 2 bln, 1.4 bln 1.2145-95 along, 1.2200-25 2.6 bln.
AUDUSD
AUDUSD remains in a rangebound market type between .7674 and .7890. Attention should be paid to the contraction in ranges over the past 4 sessions, which suggests a potential range expansion in the coming sessions. As such, signals for Friday are mixed and we prefer a neutral stance until either .7706 or .7796 are breached.
GBPUSD
Prices posted a bullish engulfing on Thursday, accompanied by a range expansion, with gains of over 1 Big Fig. However, prices remain contained within the broad 1.4100-1.4210s range, with key resistance at 1.4235. Only a daily close above 1.4235 would suggest further upside. For today, cautious longs may be considered around Thursday’s Marabuzo at 1.4159 but better demand resides back at 1.4110s. USD & month end flows to lead prices today.
USDCAD
Prices have formed a range between 1.2140s and 1.2040s, and downwards momentum has been stalling. After the 2-day recovery, prices attracted resistance near prior highs at 1.2144 on Thursday, prices declining almost 1 Big Fig. However, prices were unable to break Wednesday’s higher low, and prices posted the 2nd higher daily low in a row. As such, caution is advised and only a cautions bearish stance is advocated for today, with a preference to sell into rallies towards 1.2140s.
FX Relative ATR Grid
Comment: volatility levels improved yesterday, with outright expansions in GBP and JPY pairs. Caution on NZD: volatility declined, with some outright contractions, so in the coming sessions we should expect expansion. Same goes for select EUR and USD pairs.
FX Relative Strength Grid
Comment: the strongest trends are currently JPY (bearish), NZD (bullish), AUD (bearish). The strongest momentum was seen yesterday in JPY (bearish), NZD (bullish), CHF (bullish).