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Intermarket:
Risk appetite is one again firmer going into Europe, although directional signals are weak. Tech stocks led the S&P 500 lower. The US 10-year yield is on hold around 1.40%, while Fedspeakers continue to perpetuate the dovish commentary. Brainard acknowledged that moves in bond yields could impact the recovery and stressed that it will take “some time” to achieve substantial further progress” before any taper plans. Oil up on a large US inventory build. Gold slightly lower.
Recent rate stabilization still seems to be the main theme and the Street is divided between practitioners being cautious, suspecting a top may be in place, while strategists continue to forecast higher prices yet, on fiscal stimulus, monetary policy, vaccines, earnings.
On stimulus front, US Senate majority leader Shumer expressed confidence it has enough votes for full $1.9T stimulus package to pass.
Many participants also talking about China’s NPC (commencing 5-Mar).
Looking ahead: today we get US services ISM (could show improvement after the surprising manufacturing print), ADP employment change (influential ahead of NFP). Speakers scheduled today include Fed’s Hawker, Bostic and Evans, and ECB’s Panetta. UK Budget will be key for Pound.
Matters that Matter:
• Fed officials say “patience required” still
• Biden: US should have enough vaccines for every US adult by May (previously it was July)
• Dovish BOJ policymaker calls for new strategy to beat price stagnation
• China’s services sector slowest in 10 months: Caixin PMI 51.5, 52 prev
• Australian economy recovers nicely with GDP QQ SA, 3.1%, 2.5% f’cast
• Australia’s Treasurer warns global stimulus threatens financial stability – FT
• UK’s Sunak to promise ‘whatever it takes’ in new COVID budget plan, will also extend furlough scheme until end of September.
Majors 1-Day View:
USDJPY
- Prices posted the 5th higher daily high & low in a row, but sellers returned to the market ahead of 107.00 yesterday, prices closing the day little changed. As such, caution is advised and we prefer to sell on rallies towards 107.00 today.
- Risk mood improving, helping JPY pairs.
- Offers reported at 107.00
- Barrier options reported at 107.00
EURUSD
• Despite posting the 3rd lower daily high & low in a row on Tuesday, buyers returned to the market from close to 1.2000, prices rallying over 1 Big Fig into the close. As such, signals have switched to temporarily bullish today.
• Quiet Asia session, consolidation expected now ahead of NFP.
• Offers reported at 1.2100, support at 1.1950.
AUDUSD
• Prices posted the 2nd higher daily low in a row on Tuesday, but trading is still contained within Friday’s .7874-.7692 range. With signs of bearish divergence emerging, we prefer a sell-rally stance today.
• Regains ground after good GDP print, but still distant from last week’s top.
• Resistance at .7850, support .7700.
GBPUSD
• Prices posted the 4th lower daily high in a row on Tuesday, but buyers returned from close to 1.3850, prices rallying by 1 Big Fig to close little changed. Signals are subsequently weak, but on balance we prefer to buy any dip towards 1.3880 today.
• Budget statement key event for Pound today.
• Offers reported at 1.4000, bids 1.3870s.
FX Relative ATR Grid
Comment: Volatility remains healthy in FX, so trading conditions remain healthy.
Relative Strength Grid
The strongest trends are in AUD (bullish), NZD (bullish), CHF (bearish), JPY (bearish). The strongest momentum was seen yesterday in JPY (bearish).