Daily Market Outlook, June 17, 2021
Overnight Headlines
- Fed signals higher rates in 2023, bond-buying taper talks as virus fades • Fed gives money funds relief with short-term rate adjustments • Earlier Fed rate hikes will not jack up low projected borrowing costs -White House • Bipartisan U.S. Senate group backs infrastructure framework • Far apart at first summit, Biden and Putin agree to steps on cybersecurity, arms control • Pushing against China, U.S. lawmakers plan pro-Taiwan bill • BOJ may kick off debate around 2023 on ending negative rates – ex-BOJ Maeda • Japanese buy net Y105.3 bln foreign stocks, Y410.6 bln bonds, Y32.2 bln bills June 12 week • Foreign investors sell net Y33.2 bln Japanese stocks, buy Y1.3123 trln JGBs, Y877.0 bln bills June 12 week • Japan seeks quasi-emergency measures for seven prefectures until July 11 • RBA Governor Lowe – Australian economy still in recovery phase, needs stimulus • Australian regulator warns big banks to control risky lending • AU May Employment, 115.2k, 30.0k f'cast, -30.6k prev • AU May Full Time Employment,97.5k, 33.8k prev; Unemployment Rate, 5.1%, 5.5% f'cast, 5.5% prev • NZ economy surges as housing, retail drive post-COVID recovery • NZ Q1 GDP Prod Based QQ SA, 1.6%, 0.5% f'cast, -1.0% prev; YY SA, 2.4%, 0.9% f'cast, -0.9% prev • China's new home price growth stabilises in May amid raft of cooling measures, YY, 4.9%, 4.8% prev • UK inflation expectations well-anchored – Sunak • Britain's Treasury gets 1 bln stg windfall from repaid furlough cash -FT • BOC Gov Macklem – Complete recovery will take time, CAD rise could weigh on growth, signs of cooling in hot housing market
- Looking Ahead – Events, Other Releases (GMT) • 09:00 EZ May HICP Final MM, 0.3% f'cast, 0.6% prev; YY, 2% f'cast, 2% prev
- Looking Ahead – Economic Data (GMT) • N/A ECB Lagarde, Panetta to attend Luxembourg ECOFIN, Eurogroup meeting • 07:30 SNB monetary policy announcement, news conference to follow • 08:00 Norges Bank monetary policy announcement, press conference to follow • 10:00 Italy online economic conference on pandemic recovery, debt and financial regulations • 11:00 BoE Cleland participates in 2021 Financial Inclusion Global Initiative (FIGI) Symposium • 12:30 ECB Lane takes part in the Barcelona GSE Summer Forum • 13:00 BoE Mutton update on central bank digital currencies • 13:00 BoE Sheren participates in Greentech Festival Conference • 13:05 BoE Begum speaks at the A-Team Group Virtual RegTech Summit • 14:00 ECB Elderson speaks at 2021 IIF G20 Conference • 14:30 BoE Breeden participates in Assn of Corporate Treasurers Annual Conference
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD: 1.1985-1.2000 (1.7BLN), 1.2045-50 (1.2BLN), 1.2085-1.2100 (1.3BLN)
AUD/USD: 0.7580 (300M), 0.7615-25 (400M), 0.7640-50 (480M), 0.7700 (411M)
NZD/USD: 0.7250 (919M). AUD/NZD: 1.0740-50 (353M), 1.0805 (200M)
USD/CAD: 1.2065-70 (1BLN). EUR/NOK: 10.2885 (434M)
USD/JPY: 110.20-25 (1.4BLN), 110.50 (1BLN), 110.75 (370M), 111.00 (500M)
Technical & Trade Views
EURUSD Bias: Bearish below 1.2150 bullish above
Overnight trade: Recovers from early dip as key support grimly holds • EUR/USD opened 1.08% lower at 1.1995 after hawkish Fed sent US yields higher • It dipped to 1.1985 before USD eased – led by bounces in AUD/USD and NZD/USD • Sellers capped at 1.2004 and it is trading around 1.2000 into the afternoon • EUR/USD traded below the 200-day MA (1.1995) for first time since mid-April • It held 1.1985 where the May 5 low converges with a 50% retracement • A break below 1.1980 targets the 61.8 of the 1.1704/1.2266 move at 1.1918 • Resistance is at 100-day MA at 1.1939 and break would ease downward pressure • Trend has turned lower after the FOMC and rallies will likely be sold
GBPUSD Bias: Bullish above 1.41 bearish below.
Overnight trade: Bid at oversold levels, but the trend is lower • +0.1% towards the top of a 1.3974-1.4005 range – plenty of early interest • N.Ireland parties agree on new First Minister, avoiding crisis • Delta variant fuelled 50% rise in English COVID spread • Charts; daily momentum studies 5, 10 & 21 daily moving averages slide • 21 day Bollinger bands expand – signals suggest a strong trending setup • 1.4019 lower 21 day Bolli band indicates cable is oversold short term • Oversold signals suggest sell sterling strength not breaks • 1.3959, 50% April-June rise and 1.4105 10 DMA are first support resistance
USDJPY Bias: Bullish above 108 targeting 112
Overnight trade: USD/JPY to 110.82 in Asia, 110.97, 111.00 test soon? • USD/JPY back up to 110.97 March 31 spike high, 111.00, test soon? • Asia 110.63 to 110.82 EBS before ease back to 110.61, high o/n 110.72 • Surge in US yields after FOMC catalyst for USD/JPY move up, Tsy 10s @1.570% • Yield on Treasury 10s to 1.594% earlier in Asia before easing back • Most eyes again on moves in US yields, Japan-US interest rate differentials • Support eyed on dips towards 110.50, massive option strikes there, below • Today 110.50 $1.1 bln, 110.00-25 total $2.1 bln, $970 mln 110.75-111.00 too • JPY crosses mostly heavy, helps keep USD/JPY capped for now
AUDUSD Bias: Bearish below .7790 bullish above
Overnight trade: Settles around 0.7625 after whippy Asian session • AUD/USD opened 1.0% lower at 0.7609 after US yields soared on hawkish FOMC • It traded above 0.7620 after NZD/USD gapped higher on strong NZ GDP • AUD/USD dipped to 0.7597 after RBA Governor Lowe speech • More NZD/USD gains underpinned AUD/USD at low and was 0.7625 into Aus jobs • Aus jobs data was much better than expected and AUD/USD popped to 0.7647 • Sellers ahead of 0.7650 capped and it settled at 0.7625 into the afternoon • Resistance is at former support @ June 3 low at 0.7646 with sellers @ 0.7650 • Major support is at the 200-day MA (0.7551) which has held for 12 months • Sentiment has turned bearish on diverging central bank expectations
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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!