Daily Market Outlook, June 2, 2021
Asian equities were mixed overnight with stocks slipping across China and Hong Kong, while Japanese and Australian shares outperformed, the latter driven by a better-than-expected Q1 GDP report. Australia’s economy was reported to have expanded by 1.8% in the first quarter helped by strong spending by households, pushing it back above its pre-pandemic level. However, the recent re-imposition of lockdown restrictions across some cities, in response to renewed outbreaks of the virus, is likely to have constrained activity in Q2. Meanwhile, yesterday the UK reported no new Covid-19 cases for the first time since the pandemic began.
Today’s Bank of England lending data for April is expected to show a resurgence in the number of UK mortgage approvals, largely in response to Chancellor Sunak’s decision to extend the stamp duty holiday. Having spiked around the turn of the year, the number of mortgages being approved had gradually eased back, hitting an 8-month low in March, as the window for homebuyers to complete and take advantage of the temporary stamp duty ‘holiday’ began to close. However, the Chancellor’s decision at the March Budget to extend the current scheme up until the end of June, with a gradual return to its original form between July and end-September, is expected to see an upturn in mortgage activity over the next few months. Expect 92.0k mortgages to have been approved in April, up from 82.7k in March.
Meanwhile, the consumer credit numbers are expected to provide further evidence of the wider upturn in UK activity that is taking place, particularly with non-essential retail shops reopening from April. On an aggregate basis, households have made a net repayment of unsecured credit in each of the seven months between last August and March 2021. Expect an overall repayment in April net consumer credit, with some spending funded from the stock of built-up savings, the fall in unsecured borrowing is expected to be the smallest since last summer.
Elsewhere, the calendar is exceptionally light with no major data releases due out of the US or Eurozone. A number of Fed officials are due to speak at a Fed forum on Racism and the Economy, including Evans, Bostic and Kaplan. Meanwhile, the Fed will also release its latest Beige Book. Across the Eurozone, a number of ECB officials are set to speak at a climate change conference, while ECB President Lagarde is due to talk at a prize ceremony.
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD: 1.2100-05 (685M), 1.2140 (370M), 1.2200 (368M), 1.2220-25 (400M)
USD/CHF: 0.9150-60 (676M). EUR/CHF: 1.0800 (530M)
GBP/USD: 1.4150 (473M), 1.4200 (443M)
AUD/USD: 0.7700-15 (865M), 0.7740-50 (1.3BLN)
NZD/USD: 0.7200-20 (1.5BLN)
USD/CAD: 1.2100 (300M) . AUD/JPY: 83.15 (942M)
USD/JPY: 108.50-60 (370M), 109.00-10 (370M), 111.25 (500M)
Technical & Trade Views
EURUSD Bias: Bearish below 1.2150 bullish above
EURUSD From a technical and trading perspective, the close through 1.2120 is constructive but bulls must defend 1.21 to set up a test of 1.2270/80. A close through 1.2150 would suggest a corrective phase developing.
Flow reports suggest topside offers congested through 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 1.4150 bearish below
GBPUSD From a technical and trading perspective, as 1.3960 now acts as support, bulls will target a retest of 1.4230’s. Only a close back below 1.4150 would concern the bullish thesis opening the window for a corrective cycle.
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 the 1.4150 area and into 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
USDJPY From a technical and trading perspective, as 108.30 supports bulls will target 110.70’s, a closing breach of 108.30 would suggest a corrective move to test 106.30
Flow reports suggest downside light through the 108.50 before opening the market to a new test of the 108.00 level, stronger bids into the 107.80 however, a break through the level is likely to see weak stops and breakout stops appearing and the market free to quickly test 107.50 and an old trendline then nothing until closer to the 107.00 area where stronger bids start to appear but the downside opening to Feb levels, 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
AUDUSD From a technical and trading perspective, the breach of .7790 refocuses attention on the downside as .7820 contains upside attempts, look for a test of .7680.
Flow reports suggest 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 light through the 0.7750 area and stronger bids likely continue through to the 0.7700 area before weak stops appear below the 0.7680 and a stronger 0.7650 area then holds the downside
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. 73% 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!