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Intermarket:
- SP Futures 3876 (+0.32%)
- EUSTXX 3648 (+0.41%)
- Crude Oil 56.70 (+0.48%)
- US 10YR 1.14 (+0.71%)
- EurUsd 1.1962 (+0.01%)
- UsdJpy 105.51 (+0.02%)
- DAX 14083 (-0.01%)
Global risk sentiment was lifted by economic optimism following stimulus hopes and better than expected US initial jobless claims data which fell to its lowest since end-November. The Bank of boosted the Pound by dismissing negative rates and reporting upbeat economic forecasts. GBPAUD and GBPNZD are on the radar of a variety of players apparently. The S&P 500 closed up for a fourth session by 1.09% led by banks and tech shares (including EBay and PayPal, whereas GameStop tumbled 42% again). Yields steepened further.
Today is all about Non-Farm Payrolls. Leading indicators suggest a stronger print: jobless claims showed the 4 week moving average dropping to its lowest level in 2 months; continuing claims were the fewest since March. The employment component of the manufacturing and service sector ISMs returned to expansionary mode and ADP reported a sharp rise in private payrolls.
The Canadian dollar is also in focus with employment and manufacturing data scheduled for release. However, the outlook for the Canadian job market is not as rosy. We suspect a divergence in news prints may open up an opportunity in USDCAD today.
Looking Ahead: US non-farm payrolls are expected to increase around 100k. Although, recent indicators would suggest a better print. Cad employment could be soft still. German factory orders could very well see the first decline in seven months after the drop in the Ifo business confidence in the past months.
Matters that Matter:
• U.S. Senate Democrats push ahead on road to new COVID-19 relief
• US President Biden: To deliver remarks on stimulus at 11.45 am Friday
• GameStop, ‘Reddit rally’ stocks slide more, Yellen vows scrutiny
• U.S. Treasury, regulators hail resilience of market infrastructure; reviews under way
• Australia will need ‘very significant’ monetary support for some time -RBA
• RBA: Bitcoin is not a payment instrument, its not money; Bitcoin volatility not a financial stability risk, it’s a risk to investors; very engaged with overseas regulators on blockchain payment systems
• AU Dec Retail Sales MM Final -4.1%, -4.2% f’cast
• Italy’s Draghi starts govt talks, gets PD backing and softer stance from 5-Star4
Majors 1-Day View:
USDJPY
- Ahead of key event risk, prices are trading at the 200 DMA which may offer resistance. Prices are overbought at multiple levels and have posted a sequence of 6 consecutive higher daily lows. As such, caution is warranted and we prefer to buy a dip towards 105.20s.
- Offers being eaten up, support at 105.10-20
- US yields supportive.
EURUSD
• Prices remain soft as we approach key risk event today. A trend of 4 lower daily highs has taken prices through 1.2000 round number with losses of almost 1 Big Fig yesterday. As such, signals remain negative but we prefer to sell rallies today.
• Prices under pressure in part on vaccine delays vs. speedy rollout in US, UK.
• Bids are reported at 1.1950.
AUDUSD
• A failed rally keeps the bias pointing lower today but with caution. Prices are still trading within Tuesday’s range and as such signals are not strong.
• Retail sales ignored.
• Prices driven by USD moves and risk-on.
GBPUSD
• An initial ¾ Big Fig decline was reversed on Thursday, with prices posting a dragonfly doji at the daily level. This suggests strength in the near-term, although the outlook is dampened by key risk event today.
• BOE supportive.
• USD moves key for direction.
FX Relative ATR Grid
Comment: Volatility has expanded after yesterday’s contraction. Especially in GBP, USD and NZD. Not much movement is expected ahead of NFP however.
FX Relative Strength Grid
Comment: going into Friday, USD and GBP strength stand out vs. EUR, CHF weakness.