Daily Market Outlook, February 11, 2021
Asian equity markets are mostly higher this morning although some markets are closed for the lunar new year. The UK RICS house price balance fell to 50% in January from 63%.
Reports suggest the European Commission has ruled out considering flexibility in the Brexit's Northern Ireland protocol unless the UK first meets its obligations under the deal in full. The UK Transport Secretary said British people should not book holidays yet as he did not know "where we'll be" by the summer. A survey from the British Chamber of Commerce noted that around half of exporters to the EU are seeing border disruptions post the trade deal.
Today’s economic data calendar is light with nothing of note in the UK or the Eurozone. In the US, weekly initial jobless claims will provide a timely update on the strength of the labour market.
The January US employment report disappointed for the second month in a row. It did at least post a modest rise after December’s decline, which was the first monthly fall since April. However, the overall message still seemed to be that the rebound in employment has stalled principally due to issues in hospitality and other sectors most impacted by Covid-19. In contrast, the last couple of weekly claims reports data have surprised on the downside after picking up around Christmas. A further fall in the latest report, for the week including 6th February, would be an indication that the labour market is starting to pick up again, particularly as US Covid-19 cases now seem to be on a declining trend.
The European Commission will release forecast updates today. Given the weak start to the year it may find it difficult to avoid downgrading economic growth forecasts for 2021. Nevertheless, it is likely to sound more upbeat about prospects. A number of European Central Bank policymakers are scheduled to speak but their topic will be climate change rather than near-term monetary policy prospects.
December UK GDP data will be released early Friday morning. They are expected to post a rebound after November’s 2.0% decline due to the temporary lifting of restrictions. Look for a monthly rise of 1.0% led by a pickup in services. In the absence of revisions to previous months’ data, that would mean GDP rose 0.6% in Q4.
GDP will probably have turned down again in January due to the latest lockdowns. As these seem likely to remain in place for most of Q1 most forecasters are expecting a decline in output for the quarter as a whole. However, a Q4 increase would at least mean that the UK would likely avoid another ‘technical’ recession (two consecutive quarters or more of falling output). Moreover, hopes remain high for a rebound in activity from the spring.
G10 FX Options Expiries for 10AM New York Cut
EUR/USD: $1.1955-65(E517mln), $1.1985-95(E800mln), $1.2100(E459mln)$1.2280(E607mln)
USD/JPY: Y105.00-05($1.1bln), Y105.75($2.1bln), Y106.05-10($600mln)
EUR/GBP: Gbp0.8765-80(E886mln)
AUD/JPY: Y79.00(A$659mln), Y80.73-75(A$1.0bln)
AUD/USD: $0.7650-60(A$591mln), $0.7675(A$558mln)
USD/MXN: Mxn20.88($700mln)
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Larger Option Pipeline
EUR/USD: Feb12 $1.2000-05(E1.0bln), $1.2110-25(E1.1bln), $1.2170-85(E1.7bln); Feb16 $1.1940-50(E1.2bln), $1.2000(E1.25bln), $1.2200-05(E1bln); Feb17 $1.2120-35(E1.5bln); Feb18 $1.2000-10(E1.7bln), $1.2200(E1.3bln)
USD/JPY: Feb12 Y103.50-60($1.3bln), Y104.00-20($1.5bln), Y104.95-105.00($3.2bln), Y106.00-10($2.1bln), Y106.30-35($1.0bln)
GBP/USD: Feb12 $1.3850(Gbp974mln-GBP puts)
AUD/USD: Feb12 $0.7620-30(A$1.1bln), $0.7720-35(A$1.3bln); Feb17 $0.7615-25(A$1.2bln); Feb18 $0.7400(A$1.2bln)
USD/CNY: Feb18 Cny6.35($1.8bln), Cny6.45($1.1bln), Cny6.50($1.2bln); Feb19 Cny6.37($1.3bln), Cny6.45($1.9bln)
USD/MXN: Feb12 Mxn20.00($1.1bln)
Technical & Trade Views
EURUSD Bias: Bullish above 1.2050 targeting 1.2350
EURUSD From a technical and trading perspective, the closing breach of 1.21 and the descending trendline is a bullish development opening a retest of prior highs at 1.2350, only a move back through 1.2040 would suggest further consolidation
Flow reports suggest topside offers into the 1.2150 area and then after a brief weak period increasing into the 1.2180-1.2220 level with weak stops above the level and increasing on any push above the 1.2250 level with possible strong offers into the 1.2300 level Downside bids light through to the 1.2080 area and possible weak stops appearing through the level and opening the chance of a test to the 1.2000 level in the short term with stronger bids into the 1.1950.
GBPUSD Bias: Bullish above 1.35 targeting 1.3830/60
GBPUSD From a technical and trading perspective, as 1.35 supports then prices can extend higher to test interim wave 5 upside objectives to 1.3830/60 area. UPDATE Target achieved look for profit taking pullback to test 1.3750 as support as this level attracts fresh demand bulls will target 1.40 next
Flow reports suggest topside offers increasing through into the 1.3900 with increasing offers through any move higher weak stops likely on a break through the figure level and opening up a repeat of this week's movements. Downside bids light through the 1.3800 level and weak stops now moved up closer to the market and the downside limited in support through to the 1.3700 areas before stronger bids appearing through and into the 1.3650 area to increase further into the 1.3600 level.
USDJPY Bias: Bullish above 104.50 targeting 107
USDJPY From a technical and trading perspective, 105.50 target achieved anticipate a profit taking pullback to develop ahead of 106 to retest bids back to 104.50. As 104.50 supports there is potential for a further squeeze higher to test offers towards 107. A loss of 103.50 would negate further upside and suggest a resumption of trend
Flow reports suggest downside bids through to the 104.40 level before some lighter bids appear, stronger bids through the 104.20-103.80 area will likely see weak stops however, strong bids are likely to appear on any test of the 103.50 area and continuing through to the 103.00 level, Topside offers light through the 105.00 level and increasing into the 105.40-60 area however, strong resistance remains in the 105.80-106.00 level with congestion likely to continue through the 106.70-107.00 areas.
AUDUSD Bias: Bullish above .7560 bullish targeting .8000
AUDUSD From a technical and trading perspective, as the major trendline support at .7560 now acts as support, look for target wave 5 upside objective towards .8000. A closing breach of .7730 of the internal descending trendline will encourage the bullish thesis.
Flow reports suggest offers through the 0.7750 area and then likely to see increasing offers through to the 0.7820 area before congestive offers then start kicking in on any move through the area into the 0.7850-60 areas. Downside bids light back through the 77 cents level and weak stops on a dip through the 0.7680 area and limited bids through to the 0.7620 level and increasing through to the 0.7580 level before stops appear.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!