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Intermarket:
• SP Futures 4088 (+0.45%)
• EUSTXX 3923 (+0.36%)
• Crude Oil 59.48 (-0.50%)
• US 10YR 1.66% (+0.78%)
• EurUsd 1.1875 (+0.11%)
• UsdJpy 109.68 (-0.14%)
• DAX 15250 (+0.34%)
Risk appetite remains firm ahead of today’s European open after a positive US close. US futures firmer, US 10-year yield up 1 bp. Dollar slightly softer. Gold down.
Focus today may initially be on FOMC minutes, which “it will be some time” before tapering can be considered. Traders are also watching Biden’s infrastructure plan closely, particularly in terms of taxes (25% corporate tax is being discussed). US earnings season approaches. Consensus is for 25% growth in Q1 S&P earnings.
On the vaccine front, European regulators established link between AstraZeneca jab and blood clots but benefits outweigh risks. However, UK’s MHRA recommended use of alternative vaccine for adults under the age of 30. Elsewhere, German officials in Merkel’s CDU/CSU discussing harder lockdowns as health system is again under intense pressure.
Looking ahead: ECB minutes to be scrutinized related to decision to increase pace of bond-buying in March. On data front, early attention on German factory orders.
Matters that Matter:
• Fed: stimulus still required ‘for some time’
• Biden willing to negotiate on corporate taxes, but ‘sick and tired’ of non-payers; 25% tax rate being considered.
• Fed Gov Brainard – Forward guidance premised on outcomes, not outlook
• Even as it tapers, BoJ invents new weapon to stimulate growth
• Hitachi in talks with Bain-led group to sell metals unit - Nikkei
• Berkshire Hathaway prices 3-part Y160 bln ($1.46 bln) global yen bonds
• Prosus sells 2% of Tencent for $14.7 bln in world’s largest block trade
Majors 1-Day View:
USDJPY
- Wednesday posted the 3rd lower daily high & low in a row, but with a little changed close, directional signals are stalling. As such, caution is advised, but with the trend of lower daily highs still intact, we prefer to sell rallies today.
- Resistance and offers reported at 110.00
- Support & option related defence at 109.00
- Hitachi, Toshiba, Berkshire deals represent inbound flows.
EURUSD
• Prices posted the 3rd higher daily low in a row on Wednesday, with gains of over ½ Big Fig. However, sellers returned at the highs with prices declining to post a gravestone doji at the daily level. This suggests weakness in the short-term and we like selling on rallies towards 1.1900 today.
• EUR strength noted across the board on lower US yields and ECB’s Knot suggesting PEPP reduction from Q3.
• Bid tone in risk assets also supportive.
• Support 1.1850, resistance 1.1900-10.
AUDUSD
• Prices have remained contained within a broad .7580-.7660 range for the past 10 sessions. As such, directional signals are weak. Posted a bearish engulfing on Wednesday, so with caution we prefer to sell into rallies today.
• Bids reported at .7600 with support .7530s.
• Risk assets and US yields key to direction.
GBPUSD
• After Tuesday’s bearish engulfing, Wednesday posted a lower daily high & low with losses of over 1 Big Fig. As such, signals for Thursday remain bearish and we prefer to sell rallies towards 1.3800.
• Modest bearish setup for the Pound.
• Key levels: 1.3671 and 1.3955.
FX Relative ATR Grid
Comment: Volatility remained elevated on Wednesday, highlighting decent trading conditions across the board.
FX Relative Strength Grid
Comment: the strongest trends are currently EUR (bullish), JPY (bearish). The strongest momentum was seen yesterday in GBP (bearish), NZD (bearish), CHF (bullish).