For instant updates, follow FCI Markets on Twitter
Intermarket:
- SP Futures 3611 (-0.71%)
- EUSTXX 3497 (-1.00%)
- Crude Oil 44.75 (-1.73%)
- US 10YR 0.84 (-0.75%)
- EurUsd 1.1963 (+0.01%)
- UsdJpy 103.98 (-0.06%)
- DAX 13294 (-0.88%)
Risk assets are under pressure into London, perhaps on heightened US-China tensions over a proposed list of 89 companies to be included in the US defense blacklist of companies with military ties. Month end rebalancing may also be contributing to the rotation out of equities this morning. However, broadly speaking this should be a temporary pullback as central bank liquidity, optimism around vaccines, reduced US political risk , global second wave Covid-19 curves starting to peak all suggest the equity rally can continue. In fact, US Senate Majority Leader McConnell has agreed to restart talks with Democrats over a new Covid-19 bill.
Separately, there is a risk of OPEC+ ministers not reaching an agreement on whether to delay output hikes, on reported disagreements from UAE and Kazakhstan. Watch Crude Oil today/tomorrow.
Looking ahead: we get both Germany CPI and a speech by ECB’s Lagarde; market will also watch for Brexit developments following constructive weekend headlines, as well as a speech by BoE’s Tenreyro.
Matters that Matter:
• Biden identifies more administration officials, Trump vows continued election fight
• China’s factory activity expands at fastest pace in over 3 years; NBS Manufacturing PMI, 52.1, 51.5 f’cast, 51.4 prev
• PBOC offers salve to jittery markets with surprise MLF injection
• Britain expects ‘very significant’ week for Brexit talks as clock ticks down
• EC Gentiloni – EU budget rules need adjustment but no debt cancellation
• Australia set to rebound from economic recession as it gets COVID under control
• OPEC+ yet to find compromise on oil policy for 2021, say sources
Majors Weekly View:
USDJPY
- Prices posted the 2nd inside week in row, showing indecision and volatility contraction. As such, the call is to trade a break of 103.60/105.15.
- Risk off into London, US Yields also lower
- Opex may help cap prices: 1.3 Bln 104.25-80 today.
EURUSD
• Prices posted a bullish outside week, posting gains of over 1 ½ Big Figs. As such, signals remain bullish but with caution as prices are extended at the daily level.
• Sentiment remains bullish on USD weakness
• 1.2000 next resistance
AUDUSD
• Prices posted the 3rd higher weekly high & low in a row, with gains of over 1 Big Fig last week. As such, signals remain bullish but with caution, as prices are extended at the daily level.
• Prices declined into London, weighed by risk sentiment.
• Trend and bias remain positive on commodities, while AU/China trade tensions cap.
GBPUSD
• Prices posted a little changed close las week, but with the trend of higher weekly lows still intact, the outlook still remains cautiously bullish this week and we favour buying dips.
• Prices still discounting Brexit deal despite lack of positive news; endgame draws near.
• Covid-19 infections drop 30% during lockdodwn
FX Weekly Relative ATR Grid
Comment: Ranges remained rather tight last week, with markets generally showing little movement. Some pairs remained in a volatility contraction as well. As such, we would remain selective and cautious, but expect range expansions are just around the corner.