For instant updates, follow FCI Markets on Twitter
Intermarket:
• SP Futures 4164 (+0.16%)
• EUSTXX 3920 (+0.90%)
• Crude Oil 66.15 (+0.68%)
• US 10YR 1.59% (+0.14%)
• EurUsd 1.2019 (+0.05%)
• UsdJpy 109.33 (+0.03%)
• DAX 14979 (+0.83%)
Risk appetite is attempting a recovery into Europe after strong declines in NorAm trade following Yellen’s rate-hike talk. China, South Korea and Japan still shut for public holidays. US and EU bonds little changed. USD slightly stronger.
Trading is still influenced by TSC Yellen comments that rates may have to rise to keep economy from overheating. All eyes are now on today’s ADP and ISM Services prints, ahead of Friday’s NFP report.
Geopolitical tensions remain elevated: Blinken rejected claims of US-China cold war though stressed need for united front against Beijing. US reportedly proposing G7 coordination mechanism to counter China’s economic coercion.
Ethereum longs have reason to be cautious: a large daily Spinning Top candle formed, with daily oscillator divergence at the all-time highs. The potential of a correction is high – buyer be warned.
Looking ahead: today we hear from ECB’s Lane, then Fed’s Evans, Mester and Rosengren. ISM services and ADP are the data highlights.
Matters that Matter:
• Yellen says she sees no inflation problem after rate hike comments sent jitters through markets on Tuesday
• U.S. trade chief Tai says recovery depends on vaccine deployment
• Japan faces longer state of emergency, casting doubt on Olympics
• Australia’s largest state reports first COVID-19 case in more than a month
• NZ employment data surprisingly upbeat in Q1
• NZ central bank says vulnerabilities remain in financial system, monitoring housing
Majors 1-Day View:
USDJPY
- Prices posted an “inside day” on Tuesday, with trading contained within Monday’s range. As such, signals remain neutral within 108.88/109.69, but the marginal upwards bias remains.
- USD & Yen both bid as safe havens.
- ADP and ISM services in focus today.
- Vols, risk-reversals suggest range trading above 109.00 with bids just below.
EURUSD
• Prices posted a “bearish engulfing” on Tuesday, with losses of ¾ Big Fig. As such, signals remain bearish for Wednesday.
• Equities & yields weigh on EURUSD after Yellen’s comments.
• Doji and divergence in momentum suggest caution.
• Yields starting to favor USD.
AUDUSD
• Prices breached the .7700/.7800 range to the downside on Tuesday, prices reaching .7275 after a decline of almost 1 Big Fig. Buyers returned to the market at the lows, prices recovering ½ Big Fig into Asia trade. However, the bias is now marginally bearish for Wednesday.
• Yellen rate hike sours risk appetite, weighs on sentiment.
• Commodities also feeling the impact.
• USD moves key.
GBPUSD
• Prices posted an “inside day” on Tuesday, with trading entirely contained within Monday’s range. As such, signals are not strong, but yesterday’s recovery in NorAm trade leaves a slight bullish bias on balance, and we prefer to buy into dips towards 1.3860-80.
• Scottish elections and BOE key this week. Markets expecting upgraded forecasts and perhaps taper talk from BOE; SNP victory but without majority.
• GBP resilient against USD strength, bulls hope for hawkish hold tomorrow and APP taper talk.
FX Relative ATR Grid
Comment: Volatility increased on Tuesday, with trading conditions favourable across the board, with the exception of selected CAD pairs.
FX Relative Strength Grid
Comment: the strongest trends are currently, CAD (bullish), CHF (bullish). The strongest momentum was seen yesterday in NZD (bearish), CHF (bullish), CHF (bullish), USD (bullish).