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Intermarket:
- SP Futures 3896 (+0.43%)
- EUSTXX 3677 (+0.82%)
- Crude Oil 57.38 (+0.92%)
- US 10YR 1.17 (+0.71%)
- EurUsd 1.2035 (-0.12%)
- UsdJpy 105.51 (+0.18%)
- DAX 14150 (+0.78%)
Global risk sentiment remains buoyant despite a lackluster US labour market report: higher yields as seen this morning, stocks, and oil prices, plus larger than expected fiscal spending points to higher asset prices and growth. The S&P 500 posted its biggest one-week gain since early November, as the House of Representatives voted 219-209 to adopt the budget resolution that had cleared the Senate earlier, paving the way to advance President Biden’s $1.9tn stimulus package, hopefully before the unemployment benefits expire on 14 March.
The reflation trade also contributed to further bear-steepening in the UST bond market, with the 2-year yield at a record low of 0.1013% whereas the 10-year yield is up to 1.17%.
Combining the above intermarket views with cleaner USD positioning, key technical false breaks in major USD pairs (AUD, CAD, and EUR) and it would seem that weakness in the USD would fit the bill nicely. Looking Ahead: BOE governor Bailey and ECB’s Lagarde, Villeroy and Fed’s Mester are speaking today.
Matters that Matter:
• U.S. Treasury’s Yellen: Americans earning $60,000 should get stimulus checks
• Minneapolis Fed’s Kashkari – We need a long-haul stimulus – Washington Post
• US consumers sock away more cash, pay down card debt, in COVID-19 times
• Euro zone recovery delayed, to gather pace from mid-year - Lagarde
• BOJ surpasses GPIF as largest holder of Japanese equities – Nikkei Asian Review
• China reports no new local COVID-19 infection for first time in nearly 2 mth
Majors Weekly View:
USDJPY
- Signals in the past 2 weeks have pointed higher, with prices posting the 2nd higher weekly high & low in a row. Prices are now at overbought levels and pullbacks are to be expected. However, they should be temporary and as such the call is to buy on dips this week.
- Risk-on mood and Yields supportive.
- Good bids reported on dips.
EURUSD
• Prices posted fresh 8-wk lows last week, declining below 1.2000. However, buyers returned into the close, weakening the bearish signals. As such the call is just cautiously bearish this week.
• Prices under pressure in part on vaccine delays vs. speedy rollout in US, UK. Weakness on the crosses is more evident.
• Bids are reported at 1.1950-60.
AUDUSD
• Prices posted the 3rd lower weekly highs & low in a row last week, but buyers returned into the close, prices ending the week little changed. The downside rejection would suggest near-term strength and as such the outlook is just cautiously bullish this week.
• Higher iron ore prices supportive alongside risk appetite.
• Bullish outside day on Friday.
GBPUSD
• Prices initially pulled back last week, but losses of over 1 ½ Big Figs were reversed, prices closing in proximity to 2 ½ year highs at 1.3760. Signals are overbought, but with no sell signal the call remains bullish for this week.
• BOE outlook and Covid-19 vaccine deployment supportive.
• 1.3760 main hurdle.
FX Relative Weekly ATR Grid
Comment: Volatility improved just slightly last week but FX remains rather dull compared to the uptick in ranges in the equity space. Still, trading conditions are still decent across the board with the exception of GBP.
Initial Relative Strength Indications
Going into the week we are seeing some strength in USD and the comm-dolls vs. weakness in EUR and JPY.