Daily Market Outlook, June 16, 2021

Overnight Headlines

  • Congressional Democrats wary of U.S. Senate infrastructure plan • U.S. Senators want Commerce Dept to list tech to keep away from China • Biden's Asia nominee says U.S. should develop Taiwan ties in every sector • COVID debt restructuring push not advanced enough, IMF chief cautions • Long-term yuan appreciation could hurt China employment -former SAFE official • China to release national reserves of copper, aluminium and zinc • Japan exports jump most in 41 years, YY, 49.6%, 51.3% f'cast, 38% prev • JP May Imports YY, 27.9%, 26.6% f'cast, 12.8% prev; Trade Balance Yen, -187.1 bln, -91.2 bln f'cast, 255.2 bln prev, 253.1 bln rvsd • JP Apr Machinery Orders YY, 6.5%, 8% f'cast, -2% prev • Japan to decide soon on allowing domestic spectators at Olympics • Australian public attitudes to China sour, survey finds • NZ c.bank adds debt serviceability restrictions to policy toolkit • Australia's Melbourne to allow residents to leave city, despite stubborn virus outbreak
  • Looking Ahead – Economic Data (GMT) • 09:00 EZ Q1 Labour Costs YY, 3% prev • 09:00 EZ Q1 Wages in Euro Zone, 3.5% prev
  • Looking Ahead – Events, Other Releases (GMT) • 07:55 BOE's Clair Mills and Varun Patel participate virtually in Central Banking Summer Meeting • 08:30 ECB's Frank Elderson speaks at EBRD and ECB joint online conference • 09:00 ECB's Luis de Guindos participates in a Q&A session in Frankfurt • 10:30 Bank of Portugal presents the June economic bulletin in Lisbon • 17:30 Spain's economy minister Nadia Calvino speaks at a conference in Madrid

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 (287M), 1.2115-20 (1.2BLN), 1.2130 (427M), 1.2200 (553M)

USD/CHF: 0.9015-30 (371M)

AUD/USD: 0.7740-45 (600M)

USD/JPY: 109.70-75 (965M), 110.00-05 (785M), 110.25-30 (610M), 110.40-50 (350M)

AUD/JPY: 84.45 (200M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.2150 bullish above

Overnight trade: Settles around 1.2120 as market on hold ahead of Fed • EUR/USD opened at 1.2126 and traded in a 1.2117/30 range in quiet trading • Heading into the afternoon is was steady around 1.2120 with light volumes • Resistance is at 10-day MA @ 1.2249 with option related sellers at 1.2160 • Support is at the 55-day MA at 1.2080 with bids eyed at 1.2090/95 • Market side-lined ahead of FOMC decision later today • Key will be Treasury market reaction to statement and Powell presser • Market may have priced in risk of more hawkish Fed so risk is both ways

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 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: 1.4028 key support into CPI • A touch softer in a tight, quiet 1.4077-1.4085 range pre FOMC • UK fails to plan for climate change impact despite warnings FT • Climate Change committee said emission cuts and government planning needed • Charts; daily momentum studies 5, 10 & 21 DMA and 21 day Bolli bands slide • Bearish setup to be confirmed by a close below 1.4028, 38.2% April June rise • 1.4069 lower 21 day Bollinger band and 1.4035 London low are initial support • NY 1.4095 high then 1.4125 10 day moving average are first resistance • UK inflation leads event risk in London – CPI y/y poll 1.8%

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: June high vulnerable – safe haven USD key • Touch firmer in the middle of a quiet 110.04-110.15 range pre FOMC • Japan exports jumped, machine orders rise, both miss forecasts • Soft markets, Nikkei -0.3%, AsiaxJP stocks -0.3% and E-mini S&P flat • Charts – continues to trade above the daily cloud – top a distant 108.87 • 109.44 Kijun line climbs – break of 109.75 Tenkan line would be bullish • Momentum studies 5, 10 & 21 DMAs head higher – positive setup • Break of 110.32 June high would target 110.97 March and 2021 top • London 109.99-110.17 range is initial support and resistance

Flow reports 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: Consolidates below 0.7700 ahead of FOMC • AUD/USD opened -0.32% at 0.7687 after 4% fall in copper weighed • It traded a 0.7684/94 range in Asia and is near the high into the afternoon • Support is at June 3 low at 0.7646 and break would encourage fresh selling • Resistance is at the 190day MA at 0.7717 and 100-day MA at 0.7727 • AUD/USD likely to consolidate ahead of key events in next 24 hours • Fed decision should impact USD while RBA Governor Lower speaks tomorrow

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.