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Intermarket:
Equities remain soft, US Dollar remains strong and the US 10-Year continues it’s ascent into today’s European Open, after Fed Chair Powell was decisively upbeat on US economic prospects, but added we “are a long way from our goals”. With no immediate intentions to “twist” bond purchases, traders had the green light to keep betting on higher rates and higher inflationary pressures. The S&P 500 slumped 1.34%, dragged down by tech stocks and at one stage briefly wiping out its 2021 gains.
Meanwhile, US President Biden has signed off on the fiscal aid package, with the debate likely to end this weekend with approval. Separately, oil prices also jumped after OPEC+ kept increased output lesser than expected.
The main focus today will be Non-farm Payrolls and after Powell’s upbeat view of the economy, traders will be positioned for a stronger print. Our expectation is also for a better print: employment components of Manufacturing surveys were broadly stronger in Feb vs Jan; employment in Services was just slightly weaker. ADP missed the mark but jobless claims were stronger.
Matters that Matter:
• Powell confirms wait & see stance, allows rates to soar, equities decline further.
• US 10-year Treasuries borrowing rate in repo market goes negative, indicating stress
• Senate delays Biden’s fiscal bill
• U.S. debt burden to reach 202% of GDP in 2051 – CBO projection
• China: targets only modest GDP, increases defence budget, ramps up tech commitment.
• Japan to extend Tokyo area state of emergency to March 21
Majors 1-Day View:
USDJPY
- Prices posted the 7th higher daily high & low in a row yesterday, and signals are overbought at multiple levels. As such, caution is advised and we prefer to buy dips towards 107.70s.
- JPY pairs bid despite sell-off in equities
- Large barrier options reported at 110.00
- JPY not acting as usual safe-haven.
EURUSD
• Prices declined by 1 Big Fig on Thursday, reaching 3 month lows. As such, signals are bearish into today.
• Under pressure on higher US Yields, stronger USD, risk-off
• Support at 1.1950 still intact.
• Focus on NFP today: good number could further support USD.
AUDUSD
• Prices interrupted the trend of higher daily lows on Thursday, with losses of ½ Big Fig. Selling continued during Asia trade, prices transacting last week’s low. As such, signals remain bearish into today.
• Under pressure as equities, commodities fall.
• Resistance at .7800, focus on NFP today.
GBPUSD
• Prices posted a bearish engulfing at the daily level on Thursday. As such, signals for Friday are bearish.
• Under pressure on stronger USD.
• NFP key to direction today.
FX Relative ATR Grid
Comment: Volatility has expanded once again, which would suggest more favourable trading conditions. However, ahead of Nonfarm Payrolls today, not much movement is to be expected.
Relative Strength Grid
Comment: The strongest trends are in USD (bullish), GBP (bullish), CHF (bearish), JPY (bearish). The strongest momentum was seen yesterday in USD (bullish), CAD (bullish) and CHF (bearish).