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Intermarket:
- SP Futures 3694 (+0.07%)
- EUSTXX 3543 (-0.23%)
- Crude Oil 47.35 (-0.58%)
- US 10YR 0.923 (+0.68%)
- EurUsd 1.2269 (+0.18%)
- UsdJpy 102.94 (-0.17%)
- DAX 13697 (-0.18%)
The month of January usually sees massive yearly inflows as a result of 401k and asset allocation rebalancing. The question is: where are the flows? Are they waiting for the Georgia results? Yesterday’s equity performance suggests caution and some analysts are now expecting a correction. Potential catalysts could include: GA Senate seat run-off election; softer-than-expected guidance during 4Q earnings calls; some kind of intervention by regulators to curb the exuberance in crypto-currencies.
Sentiment in Europe remains negative into Tuesday on coronavirus concerns. UK PM Johnson announced the third national lockdown late Monday, which will last until the middle of February. Germany is also expected to extend lockdowns until 31-Jan today. In addition to worries over near-term impact from lockdowns, speed of coronavirus vaccine rollout in mainland Europe is also another worry for investors.
Georgia runoffs in focus: Democratic momentum in the polls puts focus back on tax/regulatory risk, while stimulus odds would go higher. Congress will count electoral votes and declare the winner of the presidential election Wednesday.
Looking ahead: beyond the Georgia run-offs, today the market will watch the US ISM print. Lower numbers are expected after poor Empire State and Philly Fed numbers.
Matters that Matter:
• In Georgia, Trump pressures Pence, Biden promises ‘new day’ with Senate runoffs
• Fed’s Mester says policy will stay accommodative for ‘quite some time’
• NYSE says no longer intends to delist three Chinese telecom firms
• China lifts yuan midpoint by most since revaluation in 2005
• England goes into new lockdown as COVID-19 variant rampages
• OPEC+ deadlocked over raising oil output, to resume talks Tuesday
• Most active Dalian iron ore contract up more than 3%
• Italy extends and expands coronavirus restrictions to Mid-Jan
Majors 1-Day View:
USDJPY
- After breaching the December lows at 102.87, buyers returned to the market on Monday, the day ending little changed. The downside rejection would normally be positive but losses in Asia trade leave a more mixed feeling for today.
- Markets cautious on Georgia vote & lockdowns.
- Monday lows at 102.70 next support, then 101.20.
EURUSD
• After posting a shooting star at the weekly level, prices yesterday rallied towards 1.2300 but sellers returned to the market, prices ending the day little changed. The topside rejection maintains a bearish bias for today.
• Markets still positioned long EURUSD. Usd strength unexpected.
• Rangebound trading likely ahead of Georgia run-offs.
AUDUSD
• After posting fresh 2 ½ year highs at .7743, prices posted a bearish engulfing at the daily level on Monday. As such, the bias shifts to temporarily bearish for today.
• AudUsd recovered much of Monday’s drop supported by Iron Ore, but offers are reported ahead of 7750.
• Rangebound trading likely ahead of Georgia run-offs.
GBPUSD
• Prices posted a fresh 2 ½ year high last week at 1.3687, but sellers returned to the market on Monday, prices posting a bearish engulfing at the daily level. As such, the bias shifts to bearish for today.
• Stricter lockdowns weigh on sentiment.
• USD moves key.
FX Relative ATR Grid
Comment: Ranges picked up substantially yesterday, implying some decent intraday trading conditions.