Daily Market Outlook, April 20, 2021
Asian equity performance is mixed this morning with Japanese indices down but most others showing modest gains. The overnight release of the minutes to the last Australian central bank monetary policy meeting, at which policy was left unchanged, noted that policy settings were helping hold down the currency but warned about rising house prices. Meanwhile, Bank of Japan Governor Kuroda said that it was too early to debate changes to the BoJ’s asset purchase programme.
Just released UK labour market data showed a much smaller than forecast fall in employment of 73k in the three months to February, while the unemployment rate unexpectedly slipped to 4.9% from 5% previously. Unemployment continues to be suppressed by the government’s furlough scheme, which was extended until September in last month’s Budget. Consequently there remain concerns that unemployment may rise once the scheme is rundown. However, some recent business surveys have pointed to an upturn in employment prospects as businesses become more optimistic about economic conditions, so it is possible that unemployment will peak at a much lower level than has previously been suggested.
The rest of today’s economic calendar is extremely sparse with no data of note. A couple of European Central Bank policymakers are scheduled to speak. However, given the proximity to Thursday’s ECB policy update neither are expected to touch on near-term economic developments. In fact, one is supposed to talk about financial regulation and the other about cryptocurrencies.
The UK March CPI report, which will be released early tomorrow is expected to show a rise in annual inflation to 0.7% from 0.4% in February. That increase is forecast to be led by petrol prices and so the ‘core’ measure excluding food and energy prices is likely to rise only modestly, to 1.0% from 0.9%. That will still leave inflation some way below the 2.0% inflation target. A further upward move is expected in next month’s report due in part to a more general rise in energy prices. Nevertheless, the move seems unlikely to have much impact on the outlook for monetary policy, particularly as the Bank of England seems to think that much of the pick-up is likely to be temporary.
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD:1.1905-15 (530M), 1.2000-10 (500M)
EUR/GBP: 0.8600 (400M), 0.8700-10 (519M)
AUD/USD: 0.7620-40 (705M), 0.7720-30 (900M)
USD/CAD: 1.2485-90 (735M), 1.2500-10 (625M), 1.2615-25 (600M)
USD/JPY: 108.50-65 (1.9BLN), 110.00 (1.2BLN)
Technical & Trade Views
EURUSD Bias: Bearish below 1.1950 bullish above
EURUSD From a technical and trading perspective, the breach of 1.20 resistance opens a test of 1.2090/1.21, as 1.1950 supports look for a test of trendline resistance at 1.2125
Flow reports suggest topside sellers and offers moving through and likely to continue in varying sizes to the 1.2080 level where stronger and more determined offers are likely to appear, weak stops and the possibility of a short squeeze through the 1.2120 area but continuing offers likely, downside bids light back through the 1.1950 level with some light profit taking possible before 1.1880 stops appear and opening a limited dip through to the 1.1850 area and stronger bids.
GBPUSD Bias: Bullish above 1.3910 bearish below
GBPUSD From a technical and trading perspective, the close through 1.39 would suggest the current correction is complete, opening a retest of 1.40 offers. As 1.39 now acts as support bulls will target a test of prior cycle highs at 1.4240
Flow reports suggest strong offers into 1.4000, Downside bids light through to the 1.3740 area and then increasing the deeper the market grinds through the congestion with weak stops not likely until deep into the 1.3650 areas.
USDJPY Bias: Bullish above 108 targeting 112
USDJPY From a technical and trading perspective, as the equality objective at 108 continues to attract demand bulls will look for a test of 112. A failure below 108 opens a test of trendline support at 107.33
Flow reports suggest downside bids into the 108.20-00 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 appearing through the 108.80 level and increasing into the 109.00 level light offers until the 109.40 area is likely to see strong congestion increasing through to the 110.00 level before stronger stops are likely to appear
AUDUSD Bias: Bearish below .7700 bullish above
AUDUSD From a technical and trading perspective, the closing breach of .7730 has relieved downside pressure opening a move to test offers towards .7820
Flow reports suggest weak stops likely on a break of the 0.7820-30 area are likely to quickly run into further congestion on any move towards the 0.7850-0.7900 area. Downside bids light through the 0.7700 area and weak stops likely on any dip through the 0.7680 area to test quickly to the lower end of the congestion through 0.7650 with increasing bids into the 76 cents level and through to the 0.7550 area
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