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Intermarket:
• SP Futures 4092 (+0.09%)
• EUSTXX 3928 (+0.08%)
• Crude Oil 59.63 (+0.04%)
• US 10YR 1.64% (+0.54%)
• EurUsd 1.1901 (-0.10%)
• UsdJpy 109.35 (+0.10%)
• DAX 15218 (+0.05%)
Despite a bullish close during NY yesterday, risk appetite is weaker going into today’s European open. This comes even after further dovish remarks from FED’s Powell, curbing any rake hike enthusiasm. Powell suggested the FED is looking for successive strong monthly jobs data before shifting bias (so employment data will become more influential now). This came amidst weaker jobless claims yesterday. US Yields soft, USD a tad stronger, Gold up, Oil up.
On the vaccine front, AstraZeneca is being used only for adults over 60 in most countries now. More pressure on Pfizer and Moderna deliveries, with Australia also pausing AZN jabs.
ECB minutes reiterated the need to keep financing conditions accommodative, with strong fiscal support. Also, comments in the press from ECB speakers suggest tolerance of inflation overshoot. Coupled with lockdowns, inefficient fiscal aid disbursement, there is still a bearish EUR theme developing.
Looking ahead: we get Canadian Employment data today, as well as speeches from ECB de Guindos and Dallas Fed President Kaplan.
Matters that Matter:
• Fed policymakers see risk from infections, not inflation
• BOJ wants to establish common rules on CBDCs with major central banks
• Options whale bets on VIX surge by mid-July.
• China factory gate prices rise by most in nearly 3 years as economic recovery quickens
• RBA warns of excessive lending risk as house prices surge
• Canada proposes tighter mortgage stress test as home prices surge
Majors 1-Day View:
USDJPY
- Prices posted the 5th lower daily high & low in a row on Thursday, with losses of almost 1 Big Fig. While this is negative, prices are also extended on the week. As such, we prefer a more cautious stance and would sell into rallies towards 109.50s, or buy a dip towards 109.00 today.
- Resistance and offers reported at 110.00 and now 109.50
- Support & option related defence at 109.00, stops below.
- US yields softer, risk also more off than on in Asia.
EURUSD
• Prices posted the 4th higher daily high & low on Thursday, but prices are now extended on the week and a divergence in momentum is appearing. As such, with caution, we suggest selling towards 1.1860s today.
• Dovish FED, lower yields push USD down, EUR up.
• Huge option expiries at 1.1915-30 Monday may cap.
• Support 1.1860s, resistance now 1.1920s.
AUDUSD
• Prices have remained contained within a broad .7580-.7660 range for the past 10 sessions. As such, directional signals are weak. Prices posted an inside day on Thursday, but sellers have returned in Asia trade, with short-term signals turning bearish for Friday.
• Bids reported at .7600 with further support .7530s.
• Offers at .7660s.
• Vaccine issues weigh: AZN linked to blood clots.
GBPUSD
• Prices posted the 2nd lower daily high & low in a row on Thursday, and a failed rally keeps signals pointing lower for Friday.
• EURGBP flows drove GBP this week; more USD strength into Friday.
• Key levels: 1.3671 and 1.3955.
FX Relative ATR Grid
Comment: Volatility retreated on Thursday, with decent levels only seen in CHF, GBP, JPY, AUD. Eyes on USDJPY and EURCAD also, which posted a contraction and will likely need to expand in the coming days.
FX Relative Strength Grid
Comment: the strongest trends are currently EUR (bullish), CHF (bullish), GBP (bearish). The strongest momentum was seen yesterday in GBP (bearish), JPY (bearish), CHF (bullish).