Daily Market Outlook, April 01, 2021

Asian equity markets are mostly up this morning despite a modest decline on Wall Street yesterday. On Wednesday, President Biden announced the details of his $2trn plan to boost US infrastructure spending. It will be at least partially paid for through tax increases. The Democrats hope to get a bill through Congress before the summer recess but passage may prove difficult. Meanwhile, France has announced new restrictions to combat the recent rise in Covid-19 cases.

Today’s data calendar is dominated by manufacturing updates for March, although the PMI releases in the UK and the Eurozone are second estimates. The first print for the UK showed a big rise from February as the headline index moved to its highest since November 2017, look for a modest further upward revision. That rise reflected significant increases in output and new orders as both moved to three-month highs. The moves suggest that the build-up in stocks in case of near-term disruption around the Brexit leaving date has now run its course. The first estimate also showed continued evidence of supply chain difficulties and rising costs. More positively, businesses remain very optimistic about prospects for later this year.

The Eurozone first reading for March manufacturing PMI posted a sharp rise to in output to a record high. The report noted that the surge in production has stretched supply chains “to an unprecedented extent”. The recent tightening in lockdown restrictions in some Eurozone countries points to a possible downward revision. However, as manufacturing is less directly impacted by restrictions than other sectors, this is probably more of a risk for next week’s services update, so expect today’s update to be unchanged.

In the US, the ISM index has been suggesting for some time that manufacturing activity is buoyant. In February, it reached its joint highest level since the early 1980s, and the preliminary findings from the separate PMI survey points to a further rise for March. Stretched supply chains putting upward pressure on prices is also a significant factor in the US.

Recent data have suggested that, after slowing sharply at the end of 2020, the US labour market is now picking up once again. Today’s weekly unemployment benefit claims and tomorrow’s monthly labour market report for March are both expected to provide further evidence of this. March employment is forecast to post a rise of 630k, while the unemployment rate may edge down to almost 6.0%.

G10 FX Options Expiries for 10AM New York Cut

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

Larger Option Pipeline

EUR/USD: 1.1850(E1.1bln-EUR puts)

USD/JPY: 106.80-85($1.6bln-USD puts)

USD/CAD: Apr01 C$1.2450($1.5bln), C$1.2600-10($1.25bln-USD puts), C$1.2660-75($1.2bln)

USD/CNY: Apr02 Cny6.58($1.2bln)

USD/TRY: Apr06 Try6.60($916mln)

Technical & Trade Views

EURUSD Bias: Bullish above 1.18 bearish below

EURUSD From a technical and trading perspective, the failure to recapture 1.20 on the upside leaves the 1.1830 lows exposed, through here bears will press for a test of the yearly pivot at 1.1720. UPDATE interim downside objective achieved anticipate profit taking to retest of pivotal 1.1760 from below as this contains corrective upside bears will focus on a 1.16 test. A close through 1.18 would be a bullish development

Flow reports suggest light offers through the 1.1800 area with weak stops on a move through the 1.1820 area with limit with light offers then running through the 1.1840-60 area before stronger offers start to appear on a test through the 1.1880 level and stronger through the 1.1900 area. Downside bids into the 1.1700-1.1680 area with weak stops on a move through and then congestive bids into the 1.1650 area and continuing through to the 1.1600 where better bids are likely to be seen with weak stops through the level opening a deeper move as a possibility.

GBPUSD Bias: Bullish above 1.3750 bearish below

GBPUSD From a technical and trading perspective, the loss of 1.3750 is a significant development opening a move to test a corrective equality objective 1.3550, only a close back through 1.39 would suggest the correction lower is complete.

Flow reports suggest downside congestion around the 1.3660-40 area with stronger bids on any push towards the 1.3600 level and weak stops likely on a dip through opening to a deeper move, Topside offers through light through to the 1.3800 level with congestion through to the 1.3850 area before opening up to light offers and weak stops through the 1.3900 level and then stronger congestion.

USDJPY Bias: Bullish above 110 targeting 112

USDJPY From a technical and trading perspective, as 108.30 continues to attract demand bulls will target a test of pivotal 109.85 ahead of the yearly R1 pivot at 110. UPDATE...upside objective achieved look for any initial foray through 110 to prompt a profit taking pullback to retest bids to 108.50...UPDATE upside extension through 110.50 may prove exhaustive opening a profit taking pullback to test demand at 110.

Flow reports suggest topside light congestion through to the 111.80 level before stronger offers are likely matching the highs from the beginning of the previous two years at the same period of time, a break of the 112.30 area is likely to see strong stops appearing and the market opening for further push beyond the last couple of years highs. Before running through to the 112.50 area and another set of stronger offers appearing continuing through to the 112.80 level and likely continue seeing strong offers, downside bids light back through the 110 level and likely to continue to 109.80 with weak stops likely through the level and weak through to the 109.00 area.

AUDUSD Bias: Bullish above .7560 bullish targeting .8200

AUDUSD From a technical and trading perspective, as .7820 contains upside attempts there is potential for a head & shoulders pattern to develop, a loss of pivotal .7560 would open a move to test trend support at .7400 next

Flow reports suggest stronger offers through to the 0.7840-60 area and then increasing offers onwards through 0.7900, with the offers likely to continue through to the 0.7950 area and likely increasing resistance through to the 0.8000 levels, downside bids into the 76 cents level with strong bids likely through to the 0.7580 area, weak stops are likely to be few and far between with stronger bids likely into the 0.7550 level and likely stronger congestion through to the 0.7500 area.

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