Daily Market Outlook, June 15, 2021
Overnight Headlines
- U.S. Senate Republicans to discuss details of new infrastructure plan • Biden turns to EU for renewal of transatlantic ties • Outgoing U.N. aid chief slams G7 for failing on vaccine plan • BOJ likely to extend pandemic-aid scheme this week – ex-c.banker Sakurai • Australia's central bank says too early to end bond buying programme – meeting minutes • Australia's top exporting state calls for reset in China ties • U.S. Navy says carrier group operating in S.China Sea • China urges NATO to stop exaggerating 'China threat theory' • China c.bank rolls over 200 bln yuan in maturing medium-term loans, holds rate steady • New Zealand house prices rise in May, spurred by supply shortage
- Looking Ahead – (GMT) • 10:00 BOE's Saporta speaks on COVID-19 implications for regulating banks in London • 10:00 ECB's Enria speaks at European Financial Integration Virtual Conference • 10:30 Bank of Spain's governor, de Cos, speaks at virtual conference • 11:00 ECB's at the 11th ECB Conference on Forecasting Techniques in Frankfurt • 12:00 BOE's Sheren participates virtually in Asian Clean Energy Forum 2021 • 12:15 BOE's Bailey speaks at TheCityUK conference in London • 13:50 ECB's Panetta at Bundesbank's conference in Frankfurt • 14:00 BOE's Sweeney speaks at JP Morgan insurance event in London • 15:00 ECB's Holzmann in news conference with IMF on Fund’s latest findings on Austria
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: Consolidates in narrow range as market awaits FOMC • EUR/USD opened 0.10% higher at 1.2120 after EUR/JPY buying underpinned • In a very quiet Asian session the EUR/USD traded in a 1.2114/25 range • It was near session high into the afternoon on talk of more EUR/JPY demand • EUR/USD buyers are tipped at 1.2090/95 with support at 55-day MA at 1.2072 • A break below 1.2070 targets the 38.2 of 1.1704/1.2266 at 1.2051 • Resistance is at the 10-day MA at 1.2157 and break eases downward pressure • EUR/USD likely to remain in range ahead of key FOMC meeting Wednesday
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: fenced in as bears lean on FOMC for advantage • GBP/USD blips up tiny to 1.4112 from Mon close 1.4105 • Still flags bearish bias, capped by 1.4116 intraday resistance • Bollinger downtrend channel affirmed on Tues close below that • Bears wield slight advantage amid pre-FOMC market jitters • Non-negligble chance that Fed considers QE tapering conditions • That may spook complacent USD shorts, tank GBP/USD below 1.4000
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: Holds gains as traders bet on less dovish Fed • USD/JPY consolidates in Asia after 0.4% Mon rise, trades 110.03-110.15 range • Supported by recovery in U.S. yields as Fed vigil commences; 10-year @ 1.49% • U.S. consumers expect near-term boost in inflation, labor mkt -NY Fed survey • JPY weak on perception BOJ to lag peers in dialing back crisis-mode policies • Option expiries slow USD rise,$1 bln 110.00 strikes on Tuesday • Resistance 110.15, 110.30-35, support 109.80-85, 109.60; cautiously bullish
Flow reports topside offers through to the 110.00 level with light congestion through the figure level and weak stops possibly limited and stronger offers likely increasing on a move higher towards the 111.00.
AUDUSD Bias: Bearish below .7790 bullish above
Overnight trade: Steadies around 0.7700 after dovish RBA minutes • AUD/USD opened 0.06% higher at 0.7712 after strong rise in AUD/JPY • It traded to 0.7716 early and was just above 0.7710 before the RBA minutes • RBA said it was too early to cease bond buying • Tone of minutes was dovish and AUD/USD eased to 0.7696 • Buyers between 0.7685/95 underpinned and it settled around 0.7700 • Resistance is at 0.7725/30 where the 10 and 100-day MAs converge • Support si at the June 3 low at 0.7646 with buyers 0.7685/95 AUD turns heavy as RBA minutes suggest no rush to taper The Reserve Bank of Australia's June meeting minutes suggest the bank is in no hurry to withdraw the monetary stimulus needed to achieve its goals of full employment and higher inflation. While the AUD/USD dip was short-lived, it may remain vulnerable if there is a dovish shift in RBA expectations. The minutes lauded the role of its bond buying programme in underpinning the economic recovery and emphasized it was "premature" to consider ceasing the programme. Board members discussed various options for the future of the programme that will likely be decided at their highly anticipated July meeting. While reducing the amount bought each month from A$100 billion is one option put forward, it is more likely the RBA will retain a dovish bias by being data-dependent and reviewing the pace of purchases more frequently. RBA Governor Lowe will deliver a speech on Thursday titled "From Recovery to Expansion", which may provide more insight on what to expect at the July meeting. If Lowe's tone is dovish, it will contrast with the relatively hawkish RBNZ outlook. The speech will also closely follow Wednesday's Federal Reserve decision, which could prove less dovish than the April FOMC event. AUD/USD support at the June 3 low at 0.7646 is the first target for bears after Friday's bearish outside day reversal.
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!