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Intermarket:
- SP Futures 3909 (+0.05%)
- EUSTXX 3666 (-0.05%)
- Crude Oil 58.55 (+1.04%)
- US 10YR 1.16 (+0.00%)
- EurUsd 1.2077 (+0.25%)
- UsdJpy 104.88 (-0.33%)
- DAX 14055 (-0.16%)
The equity risk rally continues on recovery and reflation hopes. The S&P 500 rose for the sixth day by 0.7% to yet another record high on hopes of an impending US fiscal stimulus. Tesla’s $1.5bn investments in Bitcoin also sent the latter past the $47,000 handle. Now Tesla and Paypal are two large mainstream names moving to accept Bitcoin payments.
USD softened against its G10 counterparts for the second day. UST bonds closed mixed after the 30-year bond yield failed to sustain the 2% breach. Metals were also higher.
However, the rally in risk assets may not extend too far ahead of the Chinese New Year. With more than 1.5 billion celebrants there could be less participation and possibly consolidation.
NZDUSD has been a strong performer this morning. 2-year inflation expectations rose in first quarter to 1.89% from previous 1.59%. First resistance is 0.7250 then 0.7315.
Looking ahead: ECB’s Visco and Lane, as well as Fed’s Bullard are speaking.
Matters that Matter:
• Bitcoin extends gains above $47,000 in Asia
• UK calls for reset with EU and ‘refinement’ of Brexit deal
• UK consumer spending plunges in Jan as new lockdown bites - Barclaycard
• Japan’s households, firms continue to hoard cash as pandemic pain persists
• RBNZ: Puts in place firmer LVR restrictions from March 1; will tighten LVR for investors further on May 1; evidence that speculative dynamic in housing market; evidence that many buyers becoming highly leveraged; expects banks to apply investor restrictions immediately
• AU Jan NAB Business Conditions, 7, 14 prev; Business Confidence, 10, 4 prev
• Oil climbs to 13-mth highs, as supply cuts, demand optimism support
• WHO team to brief media on Wuhan findings on Tuesday
Majors 1-Day View:
USDJPY
- A failed rally on Monday, alongside a decline below Friday’s low, have switched signals to bearish for Tuesday as the trend of higher daily lows has ended.
- USD weaker after Friday’s NFP report.
- US Yields ease from 1.20 to 1.16%.
EURUSD
• Initial losses on Monday were recovered, prices posting a little changed close. However, buyers returned in Asia trade, prices posting 4-day highs. As such, signals have switched to temporarily bullish.
• Expectations of US fiscal package helping risk assets and weighing on USD.
• Break of 1.2105 would suggest an end to the downwards correction.
AUDUSD
• Friday’s bullish outside day attracted buyers on Monday, prices posting the 2nd higher daily high in a row. As such, signals remain bullish into Tuesday.
• USD weakness, risk on, solid NAB survey aiding the recovery in price.
• .7764 next resistance.
GBPUSD
• An initial decline attracted buyers on Monday, prices recovering to close little changed. However, buying continued in Asia trade, prices posting fresh 2 ½ year highs. As such, signals are bullish for Tuesday but with caution as overbought readings continue.
• Range top broken on USD weakness.
• Next major resistance 1.4300.
FX Relative ATR Grid
Comment: Volatility dropped across the board on Monday, with contractions evident in GBP and CAD. As such, we would expect expansions on those two pairs especially.
Relative Strength Grid
Comment: Strength in Aud and NZD vs. Weakness in USD and EUR are the stronger signals going into Tuesday.