Daily Market Outlook, August 13th, 2021

Overnight Headlines

  • Poll Finds Fed Unveils Bond-Buying Taper Plan Next Month
  • Trump Hires Iowa Political Veterans, Signal Interest In 2024
  • CIA Considers ‘Special China Unit’ In Bid To Out-Spy Beijing
  • China US Envoy Stress Importance Of Taiwan In First Meet
  • China’s Port Shutdown Raises Fear Of Worldwide Closures
  • Sydney Readies For Military Support As Delta Sweeps City
  • Canada’s Trudeau Calls Election Sunday, Seeks Third Term
  • UK Wages Rise To Post-Lockdown Staff Scramble, Poll Say
  • Disney Defies Streaming Sceptics, Jump In New Customers
  • Vectura Bows To Sweetened GBP1.1Bln Philip Morris Offer

The Day Ahead

  • Asia-Pac stocks traded mostly lower as the region largely shrugged off the mild positive lead from Wall Street, which saw the SPX notch new ATHs above the 4,450 mark (Russell 2000 closed with modest losses). The index was bolstered by the tech and growth sectors, while energy, industrials, and materials were the worst performers. US equity futures resumed overnight trade flat and then experienced a dip in tandem with losses in China, but futures remained well within recent ranges.
  • China will submit a draft law on protecting personal information to the NPC Standing Committee. "The law will standardize phenomenon such as apps' collection of personal information and price discrimination", according to an NPC spokesperson.
  • The head of the WHO's investigation says that a Chinese Scientist might have started the pandemic after being infected with the coronavirus while collecting bat samples.
  • A large-scale joint military drill between China and Russia will kick off Friday at a training base in China. This drill will focus on counterterrorism and security training, and more than 10,000 troops will participate.
  • The Federal Reserve will announce a plan to taper its asset purchases in September, according to a solid majority of economists polled by Reuters who also said the US jobless rate would remain above its pre-pandemic level for at least a year.Since the release last week of a strong US jobs report, which showed an unexpectedly sharp drop in the unemployment rate to 5.4% in July, a flurry of Fed officials have suggested the US central bank might start reducing its $120 billion in monthly purchases of Treasuries and mortgage-backed securities (MBS) sooner rather than later. Nearly two-thirds of respondents, 28 of 43, said the Fed is likely to announce a taper of its asset purchases - currently set at $80 billion of Treasuries and $40 billion of MBS per month - at its September meeting
  • Looking ahead, highlights include US Export/Import Prices & University of Michigan Sentiment (Prelim.)

G10 FX Options Expiries for 10AM New York Cut

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

  • USDJPY - 111.20/30 872m. 110.40/50 2.00bn (1.55bn C). 110.00 574m. 108.10 770m.
  • EURUSD - 1.1940/50 437m. 1.1850/60 435m. 1.1820/30 948m. 1.1750/60 674m. 1.1700/20 688m. 1.1650 420m.
  • AUDUSD - 0.7600 759m.
  • USDCAD - 1.2680/1.2700 1.02bn ( 900m C). 1.2650/60 1.38bn (1.24bn C). 1.2600/10 1.17bn (645m P). 1.2550/60 487m. 1.2530/40 402m. 1.2490/1.2500 600m. 1.2470 624m. 1.2340/50 495m.
  • EURGBP - 0.8500/10 491m.
  • USDCNH - 6.60 650m - Source: CT News

Technical & Trade Views

EURUSD Bias: Bearish below 1.1920 Bullish above

  • EUR/USD opened 1.1732 and traded in a 1.1730/42 range
  • It is trading around 1.1740 heading into the afternoon session
  • There is talk of sellers around 1.1750 that is capping price action
  • Key support is around 1.1700 and bids are tipped to be just in front
  • EUR/USD trending lower with the 5. 10 and 21-day MAs in bearish alignment
  • A break above the 10-day MA at 1.1783 would put the trend in doubt
  • Key fibo support is at the 38.2 of the 1.0636/1.2349 move at 1.1694

GBPUSD Bias: Bearish below 1.40 Bullish above.

  • Flat in a very tight 1.3808-1.3816 range with flow in the late morning
  • Soft Asian risk - E-mini S&P and Nikkei flat, Brent -0.6%, AsiaxJP -0.9%,
  • Charts; momentum studies flat line, 5, 10 & 21c daily moving averages slip
  • Bearish cross of 5 and 10 DMA, plus six days of lower daily lows weighs
  • Fall targets likely resilient 1.3776-78, 200 DMA and 50% July bounce
  • Break above 1.3897 August daily trend line needed to end the downside bias
  • NY 1.3794 low and early London 1.3877 high are initial support resistance

USDJPY Bias: Bullish above 109 Bearish below

  • Little action in USD/JPY, JPY crosses on Friday the 13th
  • USD/JPY in tight 110.37-46 EBS range, holding under 110.51 Ichi cloud top
  • Offers trail up from @110.50, bids eyed from @110.30-35, trail down
  • Massive, $2 bln or so 110.45-50 option expiries provide gravitational pull
  • Steady US yields also supportive, Treasury 10s @1.350%
  • Risk mood neutral, Nikkei +0.1% @28,043, AXJ mixed, E-Minis near par @4453

AUDUSD Bias: Bearish below 0.75 Bullish above

  • AUD/USD opened -0.47% at 0.7337 after USD gained on hot US PPI...
  • After trading at 0.7330 the AUD/USD tracked higher through the morning
  • It traded as high as 0.7347 before settling around 0.7340
  • USD was broadly offered in Asia due to position adjustments, not news
  • AUD/USD forming a pennant with the top at 0.7373 and bottom at 0.7321
  • Resistance is at 0.7360/65 where the 10 & 21-day MAs converge
  • Support is at a double-bottom at 0.7315/20
  • AUD likely to weighed down by Australia lockdown and weak China demand