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Daily Market Outlook, June 14, 2021
Overnight Headlines
- G7 leaders vow to keep economic support for as long as needed • G7 chides China on rights, demands COVID origins investigation • Germany's Merkel hopes for G7 infrastructure plans in 2022 • EU and UK's 'sausage war' sizzles at G7 as Macron and Johnson spar • Pelosi says new Senate infrastructure plan could be a hard sell • Push to end pandemic benefits may not be panacea for U.S. labor shortage • Speculators’ bearish bets on USD rise, JPY shorts off, massive EUR longs still – CFTC/Reuters • White House says NATO will launch 'ambitious' security initiatives • IMF Georgieva – Warns of deepening divergence in pace of recovery • IMF eyes new trust to provide aid to broader group of countries-Georgieva • UK manufacturers report swift recovery, more investment • UK's Johnson set to announce delay to end of COVID restrictions • BOJ may extend pandemic-aid schemes to support fragile recovery • Musk says Tesla will accept bitcoins when miners use more clean energy • China's cryptocurrency-mining crackdown spreads to Yunnan in southwest – media • Erdogan says Turkey has raised FX swap deal with China to $6 bln
- Looking Ahead – Economic Data (GMT) • 09:00 EZ Industrial Production MM, 0.4% f'cast, 0.1% prev; YY, 37.4% f'cast, 10.9% prev Looking Ahead – Events, Other Releases (GMT) • 08:00 German FinMin Scholz speaks at Brandenburg business event • 13:00 Riksbank DepGovn Floden in a roundtable discussion on FSR • 13:00 BOE Gov Bailey in fireside chat • 13:00 ECB Schnabel at the online CEPR/EBRD/ECB Symposium • 13:30 BOE Sweeney speaks in UN SIF/IAIS/UN webinar
- Week Ahead-China data in focus, U.S. retail sales also eyed China's May activity data will dominate a relatively quiet global economic calendar this week, with U.S. retail sales and industrial production, Australian employment and New Zealand Q1 GDP the other releases of note. China's retail sales, industrial production and urban investment are all expected to be a bit weaker than April's strong readings. IP is forecast to rise 8.9% year-on-year (+9.8% April), retail sales +14.0% (+17.7% April) and Jan-May urban investment +16.8% (+19.9% Jan-April). Chinese May house prices are also due. In the U.S., retail sales, industrial production and PPI are the key events. Other data includes the Philly Fed index, housing starts and weekly jobless claims. It will be a quiet week for euro zone data with German and EZ final May inflation and EZ April IP the only data of note. The UK is a lot busier, with employment, CPI, PPI and RPI, as well as retail sales due. In Japan, machinery orders, trade and nationwide CPI are scheduled. Australia has May employment data and the market is expecting an increase of 30,000 jobs after a fall of that magnitude in April. Unemployment is expected to remain at 5.5%. The key event down under will be New Zealand Q1 GDP. A strong number may increase speculation the RBNZ will be among the first central banks to start normalizing policy. Canada has house starts and CPI data due.
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD: 1.2025 (382M), 1.2050 (283M), 1.2150 (1.3BLN)
1.2175 (279M), 1.2200 (1.26BLN)
USD/CHF: 0.8800 (600M), 0.9150 (400M)
AUD/USD: 0.7750-65 (933M)
USD/JPY: 109.15 (300M). AUD/JPY: 85.25 (445M)
Technical & Trade Views
EURUSD Bias: Bearish below 1.2150 bullish above
Overnight trade: heavy as rate differentials widen, on net longs • EUR/USD heavy in Asia, views reversing? Turning bearish? • Asia 1.2112 to 1.2096 EBS, holding just above 1.2093 low Friday • Massive spec EUR longs weigh, widening US-EZ rate differentials too • Stops eyed on break sub-1.2090, support below 1.2070-75, 1.2072 low May 14 • Push through 1.2070 projects tests towards 1.2050, 1.2051 spike low May 13 • Ascending 55-DMA at 1.2064 ahead, underlying support at 1.2042 100-DMA • Option expiries today – 1.2050-1.2100 total E950 mln, 1.2150 E1.7 bln • EUR/GBP, EUR/JPY heavy too, 0.8576-83, 132.79-86, just above Friday lows
Flow reports topside offers congested through to the 1.2220 area before weak stops appear and the market opens for a renewed push to the 1.2300 level with weak stops limited through the 1.2320 area and long term trend line around the 1.2345 area likely to see strong offers before weak stops opening the topside to further gains through the 1.2400 level. Downside bids into the 1.2140-60 level likely to be light and then increasing through the 1.2120 level to 1.2080 before weak stops appear and open up a deeper move through to the 1.2000 level with very little congestion until that point.
GBPUSD Bias: Bullish above 1.41 bearish below.
Overnight trade: tad heavy but essentially steady, in recent range • USD bid across board but GBP holding its own, cable 1.4096-1.4145 in Asia • At bottom end of 1.4074-1.4250 since mid-May (low June 11, high June 1) • Market net long GBP but amount not so large, contrasts to massive EUR longs • Ichi Daily kijun and tenkan converging, of interest, lower altitude flight? • Underlying support at 1.3988 55-DMA, 1.3928 100-DMA • Resistance from Ichi hourly tenkan at 1.4120, Ichi hourly cloud 1.4132-48 • Flows few and far between in Asia, especially so with Hong Kong, China out
Flow reports suggest topside offers light through the 1.4250 area with some congestion increasing on any move to the 1.4300 and stronger offers in the area, a break above the 1.4310 area will likely see weak stops and breakout stops coinciding and the topside open to a quick squeeze through the 1.4350 level and an attempt on the possibly weak 1.4400 area and stronger stops again through the level. Downside bids likely to increase on a move through to the 1.4100 with a couple of weeks of congestion building up in the area with weak stops on a break through the 1.4090-80 area and opening to the 1.4000 level with very little support other than limited sentimental bids, however, the move through will then start to see stronger bids into the 1.3950-1.3900 area limiting any further loses.
USDJPY Bias: Bullish above 108 targeting 112
Overnight trade: above 55-DMA despite USD remaining broadly offered • USD on back-foot on broad front, USD/JPY heavy, Asia 109.30-45 EBS • That said, support still from area of 55-DMA, today at 109.23 • 55-DMA support held throughout week, Ichi daily cloud 108.40-109.00 below • Though little action today, Japanese importer-investor bids still on dips • Japanese exporters, for their part, look to continue to sell rallies • Massive nearby option expiries today again help contain action • 108.90-109.10 total $2.3 bln, 109.75-80 $1.25 bln, 110.00 $1.7 bln • Expirations to drop off considerably next week though • Most US yields lowest since March, Treasury 10s @1.434%, a weight
Flow reports better bid, view Fed to lead BoJ on taper, exit • USD/JPY better bid in Asia despite still soggy US yields • Up marginally from 109.67 to 109.83 EBS, just shy of 109.84 high Friday • Japanese importers, investors on bid again, fewer JPY shorts too • View Fed to taper, exit well before BoJ, USD/JPY supportive • Reports a major New York city bank calling for earlier Fed hike • USD/JPY base of sorts around 55-DMA today at 109.23 • Japanese exporter offers still on rallies, from @109.85, trail up • Option expiries fewer today, more tom at 109.00-15, 110.00
AUDUSD Bias: Bearish below .7790 bullish above
Overnight trade: continues lower; markets pensive before FOMC meet • AUD/USD seeps lower with momentum from Fri slump, last 0.7699 • Nascent worries over possible talk of QE taper at FOMC this week • Watch for hints that Fed is considering conditions for tapering • Negative chart signals on daily chart serve warning to longs • Bollinger downtrend channel tentatively engaged
Flow reports topside offers into the 0.7800 area with weak stops through the 0.7820 before opening for a new run higher and strong offers likely through the 0.7840-60 area to build for the 79-cent level. Downside bids into the 0.7700 level with weak stops on a move through the 0.7680 area however, stronger bids then start to show through into the 0.7650 and ultimately the 0.7600 area and likely to continue in that fashion through to the 0.7550 area
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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!