Daily Market Outlook, June 10, 2021

Overnight Headlines

  • ECB to keep money taps wide open even as recovery takes hold • ECB policymakers to hold 3-day retreat June 18-20 to discuss review – sources • As Fed taper looms, global central banks eye their own exits from stimulus • FACTBOX – How global central banks are leaning as Fed taper talk grows • Fed’s reverse repo volume surges to record half a trillion dollars • U.S. senators discuss U.S. infrastructure plan that avoids tax hikes • Biden warns Russia it faces robust response for harmful actions • Japan’s Suga to compile big stimulus package around summer – Nikkei • Japanese buy net Y67.5 bln foreign stocks, Y665.9 bln bonds, Y242.4 bln bills Jun 5 wk • Foreign investors buy net Y94.5 bln Japan stocks, Y489.2 bln JGBs, Y1.4023 trln bills Jun 5 wk • Japan's wholesale prices rise at fastest pace in 13 years on commodities surge • JP May Corp Goods Price MM 0.7%, 0.5% f'cast, 0.7% prev; YY 4.9%, 4.5% f'cast, 3.6% prev • China cbank governor expects 2021 inflation to be below 2%, will keep CNY stable • China’s top banking regulator warns of bad debt, Ponzi schemes • China, U.S. commerce chiefs to cooperate on handling differences, Beijing says • UK house-buying frenzy builds ahead of tax cut deadline – RICS • In a world first, El Salvador makes bitcoin legal tender
  • Looking Ahead – Events, Other Releases (GMT) • 08:10 BoE Planas at London WomenTech Global Conference • 08:30 UK ChancExch Sunak, BoE Gov Bailey at London BIS event • 09:00 BoE Segal-Knowles speaks at London eForum policy conference • 11:45 ECB policy announcement, no changes to policy eyed, refi rate to remain at zero • 12:05 BoE Haldane takes part in a workshop on technological change • 12:30 ECB Pres Lagarde press conference

G10 FX Options Expiries for 10AM New York Cut

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

EUR/USD: 1.2100 (1.1BLN), 1.2140 (631M), 1.2170-80 (1.4BLN)

1.2185-90 (1.2BLN), 1.2200-10 (1BLN)

USD/CHF: 0.9000-10 (308M), 0.9060 (250M), 0.9100 (225M)

GBP/USD: 1.4085-1.4100 (314M), 1.4200 (261M), 1.4250 (348M)

EUR/GBP: 0.8600 (1.2BLN)

AUD/CAD: 0.9380 (1.2BLN), 0.9450 (1.2BLN). EUR/CAD: 1.4700-20 (785M)

AUD/USD: 0.7650 (568M), 0.7700 (270M), 0.7750 (743M), 0.7800-05 (420M)

USD/JPY: 108.95-109.10 (1.5BLN), 109.60-65 (2.4-BLN), 109.70-80 (1.1BLN)

110.00 (1.1BLN)

AUD/JPY: 83.25 (270M), 83.60 (205M), 0.8535-50 (362M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.2150 bullish above

Overnight trade: Drifts lower ahead of ECB meeting • EUR/USD opened 1.2177 and traded in a 1.2166/81 range during the morning • Heading into the afternoon it is trading at the session low • Pair drifted lower as market positions for a dovish ECB event • ECB expected to refrain from taper-talk despite revising inflation forecast • After the ECB the eagerly awaited US CPI will be released • EUR support is at Monday's 1.2145 low and break targets 1.2104 • Resistance is around 1.2185 where the 10 and 21-day MAs converge • Sellers are camped above 1.2200 with resistance at May 25 high at 1.2266

Flow reports topside offers congested through to the 1.2220 area before weak stops appear and the market opens for a renewed push to the 1.2300 level with weak stops limited through the 1.2320 area and long term trend line around the 1.2345 area likely to see strong offers before weak stops opening the topside to further gains through the 1.2400 level. Downside bids into the 1.2140-60 level likely to be light and then increasing through the 1.2120 level to 1.2080 before weak stops appear and open up a deeper move through to the 1.2000 level with very little congestion until that point.

GBPUSD Bias: Bullish above 1.41 bearish below.

Overnight trade: Busy in a tight range with recent low in view • Flat, but with plenty of interest, in a very tight 1.4110-1.4124 range • U.S. pressure for a solution to the Northern Ireland impasse • Leaders to work on reopening travel between U.S. and UK • Charts; 5, 10 & 21 DMAs coil, momentum studies slip, 21 day Bolli's contract • Neutral setup, 1.4080-1.4250 range in place since mid May to extend • 1.4082 June low and 1.4067 21 day lower Bollinger band key support zone • 1.4067 lower 21 day Bolli should hold, but a close below would be bearish • 1.4082 range base and Asian 1.4124 high initial support resistance

Flow reports suggest topside offers light through the 1.4250 area with some congestion increasing on any move to the 1.4300 and stronger offers in the area, a break above the 1.4310 area will likely see weak stops and breakout stops coinciding and the topside open to a quick squeeze through the 1.4350 level and an attempt on the possibly weak 1.4400 area and stronger stops again through the level. Downside bids likely to increase on a move through to the 1.4100 with a couple of weeks of congestion building up in the area with weak stops on a break through the 1.4090-80 area and opening to the 1.4000 level with very little support other than limited sentimental bids, however, the move through will then start to see stronger bids into the 1.3950-1.3900 area limiting any further loses.

USDJPY Bias: Bullish above 108 targeting 112

Overnight trade: remains in funk ahead of US CPI, participation low • USD/JPY holds in tight 109.52-68 EBS range in Asia, quiet pre-US CPI • Participation low, flows few-far between, US CPI +0.4% n/n, +4.7% y/y eyed • Massive nearby option expiries help contain action, $5.1 bln 109.00-80 • Chunks at 109.00-10 $1 bln, 109.60 $795 mln, 109.65 $1.4 bln, 70-80 1.1 bln • More in area tom, 109.00-25 $1.1 bln, 109.75-80 1.2 bln, 110.00 1.6 bln • Base of sorts eyed at gradually ascending 55-DMA at 109.24, recent support • Japanese importer and investor bids eyed on dips, exporters on rallies • Recent fall in US yields to help cap upside, Treasury 10s $1.480%

Flow reports suggest downside light through the 109.20-00 with increasing bids into the 108.50 this opens the market to a new test of the 108.00 level, stronger bids into the 107.80 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 through to the 110.00 level with light congestion through the figure level and weak stops possibly limited and stronger offers likely increasing on a move higher towards the 111.00

AUDUSD Bias: Bearish below .7790 bullish above

Overnight trade: Steady in quiet Asian session ahead of key events • AUD/USD opened at 0.7730 and traded in a 0.7722/35 range • Heading into the afternoon it is trading close to the session high • AUD/USD has repeatedly failed above 0.7760 where sellers are camped • Resistance is at the 50% of 0.7891/0.7646 at 0.7768 • Buyers are tipped ahead of 0.7700 with support at last week's 0.7646 low • AUD/USD and other USD pairs marking time ahead of ECB and US CPI later today

Flow reports topside offers into the 0.7800 area with weak stops through the 0.7820 before opening for a new run higher and strong offers likely through the 0.7840-60 area to build for the 79-cent level. Downside bids into the 0.7700 level with weak stops on a move through the 0.7680 area however, stronger bids then start to show through into the 0.7650 and ultimately the 0.7600 area and likely to continue in that fashion through to the 0.7550 area