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Intermarket:
Risk appetite is weaker as we approach today’s European open, after declines both in Asia and yesterday’s NY session. The rise in yields is once again pressuring asset prices with the US 10-Year back up to 1.47% ahead of Fed Chair Powell’s interview today. Many Fed officials have downplayed the rapid rise in yields, but analysts feel Powell may be forced to act sooner rather than later. Oil prices rose on speculation that OPEC+ producers might not increase output today, alongside a drop in U.S. fuel inventories. USD is firmer, metals a softer.
Elsewhere, in the US there was the first real concession from President Biden, who agreed to narrow eligibility for stimulus checks in exchange for raising supplemental unemployment checks by $100/week to $400/week. Going forward, the stimulus narrative will most likely be challenged by the recovery/inflation narrative.
Looking ahead: the main event today is Fed Chair Powell’s interview. We also get US initial jobless claims ahead of tomorrow’s NFP report. OPEC+ meets today to decide whether to start normalising oil production.
Matters that Matter:
• Senate Democrats delay Biden’s fiscal package.
• Fed’s Evans says bond yields reflect expectations for rebound
• Texas lifts mask mandate, Biden says ‘big mistake’
• AU Jan retail sales MM, s/adj +0.5%, f’cast & prev +0.6
f’cast A$6.5 bln, prev A$6.785 bln
• RBNZ Gov Orr – Stimulatory monetary conditions needed to meet targets
• EU-UK ties sour as UK moves unilaterally on N.Ireland
• Germany eases COVID-19 curbs, Italy goes the opposite direction.
Majors 1-Day View:
USDJPY
- Prices posted the 6th higher daily high & low in a row yesterday, and signals are now overbought at multiple levels. As such, caution is advised and we prefer to buy dips towards 106.80s.
- Yields help prices maintain 107.00 handle
- Lack of movement ahead of Powell today, NFP tomorrow.
- Risk off in equity markets, risk FX holding up.
EURUSD
• Tuesday’s rebound and Wednesday’s failed rally leave signals rather neutral as prices remain in the middle of this week’s range. As such, we prefer to sell rallies towards 1.2090 or buy on a dip towards 1.2000.
• Under modest pressure on higher US Yields, stronger USD, risk-off
• Offers reported at 1.2100, support at 1.1950.
AUDUSD
• Trading has remained contained within Friday’s .7692-.7874 range for the past 4 sessions. As such, trend signals are weak. Sellers have managed to interrupt the sequence of higher daily lows during Asia trade and as such we prefer to sell rallies towards .7810s today.
• Resilient despite sell-off in equities.
• Key for direction will be Powell today, NFP tomorrow.
GBPUSD
• Prices have remained rangebound in the past 3 sessions, with limited net movement. As such, trend signals are weak and we prefer to sell on rallies towards 1.3990 or buy on a dip towards 1.3880.
• Prices in limbo ahead of Powell/NFP.
• Offers reported at 1.4000, bids 1.3870s.
FX Relative ATR Grid
Comment: Volatility has declined as markets slow down ahead of Friday’s NFP report. Less directional movement is expected ahead of the number.
Relative Strength Grid
The strongest trends are in JPY (bearish), GBP (bullish), CHF (bearish), AUD (bullis). The strongest momentum was seen yesterday in NZD (bearish) and GBP (bullish).