For instant updates, follow FCI Markets on Twitter
Intermarket:
• SP Futures 4158 (-0.05%)
• EUSTXX 3969 (-0.03%)
• Crude Oil 65.70 (+0.08%)
• US 10YR 1.58% (-0.50%)
• EurUsd 1.2004 (+0.00%)
• UsdJpy 109.38 (+0.17%)
• DAX 15168 (+0.02%)
Risk appetite is buoyant into the European Open, after gains in Asia. Equities are attempting to reverse Tuesday’s slide, although SP500 and Nasdaq remain subdued. USD slightly stronger. Yields little changed.
Aud weaker as National Development and Reform Commission halted activities under China-Australia economic dialogue. G7+ called out China over human rights abuses, vowing united front to counter Beijing’s coercive economic policies.
Weekly jobless claims will be watched today ahead of Friday’s NFP report, as policy makers point to employment as key indicator. The Pound remains resilient into today’s BOE meeting and elections in Scotland. Though the BOE is expected to maintain current policy, GBP could benefit from any indication of QE tapering to come.
Bitcoin erased Tuesday’s drop and rebounding with stocks, while Ethereum consolidated its extended string of record highs and remains the strongest coin for the moment.
Looking ahead: Norges Bank and Bank of England rates decisions, then US Jobless Claims are the main data prints.
Matters that Matter:
• U.S. backs giving poorer countries access to COVID-19 vaccine patents, reversing stance
• Fed’s Mester says labour market still not strong enough to justify taper talk.
• G7 scolds China and Russia over threats, bullying, rights abuses
• China suspends economic dialogue mechanism with Australia as relations curdle
• UK construction reports biggest rise in workload since 2016
• COVID restrictions reinstated in Sydney as Australian officials trace mystery case
Majors 1-Day View:
USDJPY
- Prices posted a 2nd “inside day” in a row on Wednesday, highlighting indecision. Trend signals are thus weak and we suggest a neutral stance between 108.90 and 109.70.
- Range trading ahead of tomorrow’s NFP report.
- Big option expiries between 109 and 110 may contain prices.
- Setup still broadly supportive.
EURUSD
• Prices posted the 4th lower daily high & low in a row yesterday, confirming the bearish bias. However, buyers returned to the market from close to 1.2000, slowing the downwards move. As such, we prefer a more cautious stance today and would prefer selling into rallies towards 1.2020.
• USD bid in Asia on China/Australia tensions.
• Movement may be limited ahead of NFP.
• Yields starting to favor USD.
AUDUSD
• After breaching the .7700 level on Tuesday, buyers returned to the market, prices rallying by 1 Big Fig. As such, a tighter trading range has formed between .7760s and .7690s. We prefer to play the range for the moment, selling near the top and buying near the bottom.
• China/Australia tensions weigh on prices.
• China suspended economic dialogue mechanism with Australia.
Close below .7705 would complete a bearish outside day.
GBPUSD
• After Tuesday’s “inside day”, Wednesday’s net movement was also very limited ahead of key event risk today. As such, directional signals are weak. In the absence of event risk, we would still suggest a cautious bullish stance buying dips towards 1.3830s but the next move in the Pound is entirely dependant on today’s events.
• Scottish elections and BOE key. Markets expecting upgraded forecasts and perhaps taper talk from BOE; SNP to win elections but not with 65 seat majority.
• GBP resilient against USD strength ahead of data.
FX Relative ATR Grid
Comment: Volatility decreased substantially on Wednesday as markets await key event risk. Only NZD was an outperformer, and could be the place to look for continuation today.
FX Relative Strength Grid