Daily Market Outlook, April 14, 2021
Asian equity markets are mostly higher, although Japanese indices are down slightly. That followed a positive close on Wall Street, as investors shrugged off US CPI inflation figures which came in stronger than expected. US Treasury yields fell, supported by strong demand at the 30-year bond auction. A few hours ago, the Reserve Bank of New Zealand left interest rates unchanged at 0.25% and said that it will maintain stimulus given that ‘uncertainty remains elevated’.
With little economic data releases of note, today’s focus will be on a number of major central bank speakers. In particular, US Federal Reserve Chair Powell is scheduled to speak at 17:00BST. Before that, Dallas Fed President Kaplan will discuss the economic outlook at 14:15BST. Later on, Fed speakers include Vice Chair Clarida and New York Fed President Williams. Yesterday’s US CPI inflation jumped up to 2.6% in March from 1.7%, although most of that rise was anticipated as our and the consensus forecast was 2.5%. The Fed’s preferred inflation gauge, the PCE deflator for March, is not due for another couple of weeks. Further increases in inflation are anticipated in the coming months owing to the comparison with the unusual drop in prices last spring at the onset of Covid-19. The central message from the Fed, however, is that the pickup in inflation is expected to be temporary and that there remains significant slack in the economy as activity recovers from the impact of the pandemic. The Fed Beige Book release this evening will provide an update of economic conditions, and it may show further optimism amid vaccination progress and as restrictions are lifted further.
In the UK, Bank of England MPC member Haskel is scheduled to speak at 15:30BST, although the focus of his remarks appears not to be on the near-term monetary policy outlook. ECB President Lagarde’s appearance at 15:00BST to discuss the economic recovery, however, could be more interesting from a financial markets perspective. She recently said the recovery is ‘delayed’ but ‘not derailed’, and reiterated that the ECB is prepared to use fully the flexibility of its Pandemic Emergency Purchase Programme (PEPP). The ECB’s March forecasts showed GDP contracting in Q1, but returning to growth in the second quarter.
Eurozone industrial production for February is forecast to fall by 1.2% after a positive start to the year. There were sharp falls in data already released for Germany and France, but broadly flat prints in Italy and Spain. The Eurozone manufacturing PMI survey, however, points to very strong business conditions for the sector in March
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD: 1.1800 (587mln), 1.1900 (1.1bln), 1.1925 (1.3bln) 1.1950-60 (1.1bln)
GBP/USD: 1.3850 (660mln)
EUR/GBP: 0.8600-10 (919mln)
USD/JPY: 108.00 (831mln), 108.50 (525mln), 109.00 (678mln)
USD/CHF: 0.9200 (350mln)
USD/CAD: 1.2465 (750mln), 1.2500 (1.2bln)
AUD/USD: 0.7700 (700mln)
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 topside offers increasing on any move through to the 1.1980 area with weak stops through the 1.2020 level and weak congestion around the 1.2050 level and stronger offers beyond. downside bids light through to the 1.1820 area with weak stops on a move through to the 1.1780 level with limited bids through to the 1.1700 area and only light congestion through the 1.1750 level.
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 into the 1.3800 level with weak stops on the move through likely to see some small gains through to the 1.3850 area before finding increasing offers through to the 1.3900 levels. downside bids light into the 1.3650 area and then increasing on a move to the 1.3600 area with stronger stops on a dip through but again strong congestion on a move to the 1.3550 level and increasing into the 1.3500 area.
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 through to the 109.00 area, with weak stops through the 108.80 area likely to run into stronger bids through the 108.40-60 area and then into the 108.20-107.80 before stronger stops appear.
AUDUSD Bias: Bearish below .7700 targeting .7453
AUDUSD From a technical and trading perspective, as 7700 contains upside advance bears will target a test of the downside equality objective at .7453 before trend resumption may develop. A closing breach of .7730 would relieve downside pressure opening a move to test offers towards .7820
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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