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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 as the recovery theme remains top of mind. Biden’s $1.9 Trl relief bill seems to have been mostly priced in by the market, so the focus remains on the vaccine rollout, reopening, and yields after a decent NFP print on Friday. Markets are now discounting a full US rate hike by early 2023.
Elsewhere, both WTI and Brent oil prices reached the highest levels since 2018 after Saudi Arabia reported an attack on the world’s largest crude terminal although output seems to be unaffected. To note, oil prices were already in an established uptick on the recovery narrative.
Looking ahead: the only thing worth noting for today is BOE’s Bailey speaking on the economic outlook later on. For the rest of the themes and data due this week, please refer to our weekly call.
Matters that Matter:
• President Biden’s $1.9 trillion COVID-19 bill passes the Senate
• Yellen: higher yields signal recovery, not inflation
• China Feb exports post record surge
• China NDRC vice chair says basis of economic recovery not solid yet
• Crude and Brent jump after Saudi facilities attacked by Houthi rebels on Sunday.
Majors Weekly View:
USDJPY
- Prices posted gains 3rd higher weekly low last week, with gains of over 2 Big Figs. While signals remain overbought on multiple levels, there is no sign of weakness and as such we prefer to buy dips towards 108.00.
- JPY pairs bid despite weakness in equities
- Large barrier options reported at 110.00
- JPY not acting as usual safe-haven.
EURUSD
• Prices posted a 2 Big Fig decline last week, reaching levels not seen since November 2020. This keeps signals bearish for this week.
• Under pressure on higher US Yields, stronger USD, risk-off
• Resistance at 1.1950.
• ECB decisive for EUR this week.
AUDUSD
• Prices posted the 2nd lower weekly low in a row last week, with prices declining over 2 Big Figs. Despite buyers returning to the market on Friday, signals remain bearish and we prefer to sell on rallies towards .7700 or even .7810s.
• Under pressure as equities, commodities fall.
• Resistance at .7800, focus on NFP today.
• Large option expiries this week at .7600 for A$ 3Bln
• Break of .7580 might force longer-term longs to bail.
GBPUSD
• Prices interrupted the trend of higher weekly lows last week, with losses of over 1 ½ Big Figs. As such, signals remain bearish for this week, and we like to sell on rallies towards 1.3860 or even 1.4000.
• Under pressure on stronger USD.
• 1.3860/1.3900 resistance, 1.3750 support.
FX Weekly ATR Grid
Comment: Volatility expanded at the weekly level, which suggests good trading conditions and continuation of these moves in particular.
Early Directional Indications
As we enter the European morning, USD, AUD, CAD are outperforming while EUR, CHF, NZD are underperforming.