Daily Market Outlook, June 23, 2021

Overnight Headlines

  • Asian equity markets are mostly higher following reassuring comments from Fed Chairman Powell and other FOMC members for risk sentiment. The Fed’s Williams, for instance, said that interest rate rises are “way off in the future”, while Mester noted, “even with the most aggressive dot in the dot plot, we still have some time to go before we will think about interest rates”.
  • Ahead of tomorrow’s Bank of England (BoE) policy update, the UK flash PMIs for June will be closely watched for whether strong growth momentum is holding up. Expect the survey to reaffirm very strong activity in both manufacturing and services, in respective headline indices of 65.0 (vs 65.6 in May) and 63.2 (vs 62.9 in May), both well above the 50 no-change level. The Q2 GDP growth rebound will probably exceed the BoE’s forecast of 4.3%. There should, however, also be regard to the forward-looking components in the survey for signs that growth momentum might ease a little (although likely remaining strong) heading into Q3.
  • Eurozone June flash PMIs are also out this morning, with the regional aggregate as usual preceded by reports from France and Germany. Expect to see a more concrete improvement in services activity, which has so far lagged behind the US and the UK, supported by the acceleration in vaccine rollout and the lifting of some containment measures. Look for Eurozone services PMI to increase to 59.0 from 55.2, which would represent expansion (above 50) for a third month. Manufacturing activity is expected to remain strong, although we see a slight fall to 62.8 from 63.1. The outturns would reaffirm the likelihood of a return to growth in Q2 (although at a slower pace than the UK) and a further acceleration in Q3.
  • US June flash PMIs will also be released, although they typically receive less attention than their longer-established ISM counterparts (which are due in early July). Look for marginal improvements in both manufacturing and services PMI to 62.2 and 70.5, respectively. Look for an improvement in new home sales for May. US Fed speakers today include Governor Bowman on economic resilience and Boston Fed President Rosengren discussing the economy.

G10 FX Options Expiries for 10AM New York Cut

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

EUR/USD 1.1885-90 (375M), 1.1900 (462M), 1.1950 (360M), 1.1975 (516M)

USD/JPY 109.00 (500M), 109.50-60 (1.0BLN), 109.73 (500M), 110.00 (722M), 110.95-00 (665M)

EUR/JPY, 131.75 (830M)

GBP/USD 1.3890-00 (350M), 1.4000 (700M)

EUR/GBP 0.86 (510M)

USD/CHF 0.8900 (900M), 0.9150 (505M)

EUR/CHF 1.0775 (400M)

AUD/NZD 1.0750 (308M), 1.0795-00 (745M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.21 Bullish above

Drifting from the opening 1.1940 area to fall back in the Tokyo session steadily to the 1.1920 area. Light downside bids through the 1.1900 level and weak stops on a dip through to open another run through to the mid 1.18 levels and stronger bids below the 1.1820 level, Topside offers into the 1.1960 area and increasing on any push to the 1.1980-1.2020 area before stronger stops appear opening another push highs.

GBPUSD Bias: Bearish below 1.4080 Bullish above.

Moving through from the opening into Tokyo and the Fix saw the market holding around the 1.3950 area before showing a slow drift through to the 1.3925 area and another tight range basing on the level. Topside congestion through to the 1.3960 level before weaker sellers continue through the 1.4000 level and likely stronger stops above the level with limited resistance through to the stronger 1.4100 level and congestion several weeks deep. Downside bids light through the 1.3900 level with stronger bids then increasing on a move through the 1.3850 area and into the 1.3800 level strong stops likely on a test through the 1.3770 area and opening for a deeper move.

USDJPY Bias: Bullish above 108 targeting 112

Quiet run from the opening into the Tokyo Fix holding around the 110.65 level and then moving steadily through to the 110.85 area to make the high and a quiet range around the 110.75 level, topside stronger offers start to appear on any move towards the 110.80 level and likely to continue through the 111.20 level before stops appear however, stronger offers around the 111.50 level likely to limit the first move higher. Downside bids light through to the 109.00 and congestion all the way through, a push through the 108.80 level will likely see weak stops appearing and the market then seeing light congestion to the 108.50 and stronger bids from there on.

AUDUSD Bias: Bearish below .7790 bullish above

Making early highs in the Tokyo fix with the market lifted off the 0.7550 opening levels to test the 0.7560 area before immediately dropping back to the opening levels and slowly pushing through to range for a short period around the 0.7540 area lifting only a little before dipping back again, light congestion to the Topside through the 0.7550 area however, a push through sees very little to slow the market through to the 0.7620 area and likely weak stops starting to build in the area, downside bids light and weak stops likely on a dip through todays lows and the market opening for a test through to the 0.7350 level with little trouble before stronger congestion through into the 0.7300 level.