Daily Market Outlook, April 09, 2021

Equity markets across Asia are mixed, despite US stocks closing near record highs yesterday following dovish comments from Fed Chair Powell at the IMF Spring meeting. Mr Powel reiterated that aggressive monetary policy support is still needed for the US economy and that any rise in inflation this year was likely to prove temporary. Meanwhile, annual CPI inflation across China moved back into positive territory (+0.4%y/y) after having fallen for two consecutive months. A sharp acceleration in input prices suggests further increases in consumer prices are likely in the coming months. In Europe, this morning’s release of German and French industrial production data for February showed an unexpected decline, highlighting the impact that restrictions are having on activity.

Following the unexpected declines in French and German industrial production in February, attention shifts to today’s reports for some other EU economies including Spain. Notwithstanding the reported falls this morning, overall industrial production is expected to have held up reasonably well across the Eurozone (February figures due on Wednesday). The industrial sector is still expected to have been a bright spot for the Eurozone in Q1, as the sector is likely to have expanded over the quarter supported by the recovery in global demand. However, with activity in other areas of the economy impacted by social distancing restrictions, overall GDP is expected to have contracted across the bloc in Q1.

The challenges facing the Eurozone, particularly from the sluggish deployment of vaccines remains a concern, with major Eurozone nations having administered less than 20 doses per 100 of the total population, compared with around 50 in the UK and the US. Vaccine supplies and the rate of inoculations are expected to pick up across the bloc in Q2, paving the way for countries to reopen their economies. Yet, the latest news underlines the risk that the economic recovery may be delayed again. ECB Vice President Luis de Guindos is expected to highlight some of the challenges facing the Eurozone economy during a webinar event today, hosted by the AECEM.

In the US, producer prices are expected to have nudged higher across March, reflecting a combination of raw material shortages, elevated commodity prices and issues with transportation. These issues are likely to see further increases in the coming months, adding to the upward pressure on factory gate prices. Meanwhile, Fed member Kaplan is due to speak this afternoon on a couple of webinars. In a recent interview with the Wall Street Journal, Mr Kaplan signalled his support for an interest rate hike next year. Meanwhile, the latest Canadian labour market is forecast to show a second consecutive rise in employment and a further fall in the unemployment rate, to 8.0%.

G10 FX Options Expiries for 10AM New York Cut

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

Technical & Trade Views

EURUSD Bias: Bearish below 1.1880 bullish above

EURUSD From a technical and trading perspective, as 1.1880 contains upside corrective moves, bears target a test of 1.16. A close through 1.19 would relieve downside pressure opening a retest of 1.20 offers

Flow reports suggest 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. Topside offers into the 1.1880 level and then stronger offers likely through into the 1.1900 area with short term sellers likely to fade the move with weak stops likely to have stepped a little away from the usual 1.1920 area and then stronger offers again appearing on any push at the 1.1940-60 area and the congestion then increasing on any move through to the 1.2000 area.

GBPUSD Bias: Bullish above 1.3910 bearish below

GBPUSD From a technical and trading perspective, as 1.3910 contains upside attempts there is a window to test the downside equality objective at 1.3550. A close through 1.39 would suggest the current correction is complete opening a retest of 1.40 offers

Flow reports suggest topside offers congested light through the 1.3800 area before increasing through to the 1.3900 area, some weak stops likely to be absorbed by congestion that is likely to continue through to the 1.4000 area before stops increase. Downside bids through the 1.3720 level and any technical move from the H&S pattern likely to be done so likely to see congestion on any move through the 1.3700 level with weak stops likely through the 1.3680 area and then congestive just beyond the break and through to the 1.3650 where stiffer bids start to appear.

USDJPY Bias: Bullish above 109 targeting 112

USDJPY From a technical and trading perspective, as 109.50 continues to attract support bulls will look for a test of 112. A loss of 109.30 opens a retest of bids at 108.50

Flow reports suggest topside light congestion through to the 110.80 level before weak stops then weakness through to the stronger offers around the 111.80 area 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: Bearish below .7700 targeting .7453

AUDUSD From a technical and trading perspective, as 7700 contains upside advances bears will target a test of the downside equality objective at .7453 before trend resumption may develop

Flow reports suggest light offers through the 0.7700 area with weak stops through the level and the market opening to the 78 cents area before 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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