Daily Market Outlook, September 2nd, 2021

Overnight Headlines

  • US Weighs Quota System In Bid To End EU Feud On Steel Tariffs
  • New York Region Faces Flash Flood Emergency, Tornado Watch
  • China Pres Xi To Talk On Services Trade As US Tensions Simmer
  • China Warns US Climate Assistance At Risk On Political Conflict
  • BoJ Kataoka Warn Of Heightening Risks To Economic Recovery
  • RBA To Announce Reduction Bond Purchases Delay, ANZ Finds
  • Delta Surge Sees Split In Australian States’ Covid-Zero Strategy
  • Europe Waning Crisis Triggers ECB Debate On Ending Stimulus
  • UK August Shopper Numbers Improve, Narrows Pre-Covid Gap
  • Oil Lower After OPEC+ Alliance Agrees To Return More Barrels
  • DOJ Readying Google Antitrust Lawsuit Over Ad-Tech Business
  • FTSE 100 Loses Tech Star As Just Eat Takeaway Gets The Boot

The Day Ahead

  • Financial markets will probably mark time ahead of tomorrow’s US labour market report. There is not a great deal in today’s calendar to ignite significant interest. The morning saw no major UK data releases. The only notable Eurozone release is producer price inflation which already reached 10.2%y/y in June, and a further rise is predicted for July.

  • The afternoon session sees the release of US July factory orders and trade balance, as well as the latest weekly jobless claims numbers. Expect factory orders to rise by 0.2% and the trade deficit to narrow to $69.0bn. Initial jobless claims edged higher last week but are forecast to resume their downtrend to 345k which would be a new low since the start of the pandemic, signalling further improvements in the labour market. However, as noted above, yesterday’s ADP report showed an increase in private sector jobs of 374k in August, which was somewhat less than forecast

  • Markets will be looking ahead to next week’s ECB policy meeting. In particular, they will be looking for indications that the pace of asset purchases under the Pandemic Emergency Purchase Programme (PEPP), which was stepped up since Q2, will be moderated in the final quarter. Such a move could be supported by upgrades to growth and inflation forecasts.

G10 FX Options Expiries for 10AM New York Cut

(Hedging effect can often draw spot toward strikes pre expiry if nearby)

  • EUR/USD: 1.1640 (EU494.8M), 1.2000 (EU405.8M), 1.1845 (EU402.7M)
  • USD/JPY: 112.75 ($500M), 111.50 ($500M), 108.00 ($500M)
  • USD/CAD: 1.2500 ($690M), 1.2600 ($640M), 1.2355 ($615M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.1850 Bullish above

  • Idles in tight range as Asia seeks fresh catalyst
  • EUR/USD opened +0.26% at 1.1840 after USD weakened on weaker ADP jobs.
  • In a quiet Asian session EUR/USD eked out a 1.1837/46 range
  • Resistance is at the 38.2 of 1.2266/1.1664 move at 1.1894
  • Sellers are tipped between 1.1860/70 to slow attempts higher
  • Support comes in at the 55-day MA at 1.1816 and 21-day MA at 1.1798
  • EUR/USD starting to trend higher again ahead of key US jobs on Friday

GBPUSD Bias: Bearish below 1.3830 Bullish above.

  • Firmer, but resistance above 1.3800 remains resilient
  • +0.05% in a quiet 1.3768-1.3780 range - GBP resilient as USD a touch firmer
  • No significant UK data or BoE events today, so the USD and risk to lead
  • Charts; 21 day Bollinger bands contract, 5, 10 & 21 DMAs conflict
  • Neutral daily momentum studies - bias lower while 1.3811 200 DMA caps
  • Sustained 1.3811 break would open the door to 1.3931 upper 21 day Bolli band
  • Wednesday's 1.3732 low then Friday's 1.3679 base first significant supports
  • NY 1.3799 high then 1.3811 200 daily moving average initial resistance

USDJPY Bias: Bullish above 109 Bearish below

  • Sideways ahead of more US jobs data, crosses bid
  • USD/JPY sideways in Asia after fall from 110.42 yesterday, 109.92-110.12 EBS
  • Weak US employment data yesterday... behind fall, Powell correct?
  • US yields also off highs yesterday, Treasury 10s @1.302%
  • USD/JPY back below 110.09-11 wafer-thin daily Ichi cloud, 110.14 55-DMA
  • Support/bids from area of 200-HMA at 109.92, 100-DMA 109.70 below
  • Option expiries both sides - 109.50-70 total $1.25 bln, 110.00-16 $589 mln
  • Massive $1.5 bln in expiries tomorrow at 110.00 strike
  • Risk in Asia more off than on, Nikkei +0.1% @28,476, E-Minis -0.1% @4517.75
  • EUR/JPY off 130.45 o/n high, Asia 130.19-36, hawkish ECB view
  • GBP/JPY 151.31-65, AUD/JPY 80.85-81.16, NZD/JPY 77.56-83.

AUDUSD Bias: Bearish below 0.7320 Bullish above

  • Eases slightly as risk assets in Asia lack momentum
  • AUD/USD opened +0.74% at 0.7368 after AUD outperformed when USD weakened...
  • It traded to 0.7374 early before drifting lower through the morning
  • The low was 0.7356 and it is just below 0.7360 into the afternoon
  • There was no reaction to better than expected Aus trade data for July...
  • Resistance is at the 55-day MA at 0.7392 with sellers tipped at 0.7385/90
  • Support at the 21-day MA at 0.7298 with bids ahead eyed at 0.7330/40
  • AUD strength on crosses surprising given weakness in some key commodities