Daily Market Outlook, June 9, 2021

Overnight Headlines

  • G7 to agree on creating guidelines to prevent leaks of sensitive research data – Nikkei • U.S. Senate passes sweeping bill to address China tech threat • U.S. to work with allies to help Pacific islands amid China rivalry • Biden shifts infrastructure talks to new bipartisan group • U.S. CDC eases travel recommendations on some 110 countries, territories including Japan • U.S. SEC commissioner warns against strict cryptocurrency rules – FT • Websites back online after Fastly-linked glitch takes down internet • Japan leans toward holding the Games with local spectators – Asahi • China's factory gate prices see fastest growth since 2008, May PPI YY, 9%, 8.5% f'cast, 6.8% prev • CN May CPI YY, 1.3%, 1.6% f'cast, 0.9% prev; MM,-0.2, -0.1% f'cast, -0.3% prev • China considers price controls on surging coal market – Bloomberg • China cannot be blindly optimistic about foreign trade in 2021 -commerce ministry • RBA’s Kent – Australia inflation unlikely within RBA target range until 2024 • Australia consumer sentiment slugged by Victoria coronavirus shutdown, June -5.2%, -4.8% prev• Australia's Melbourne to exit COVID-19 lockdown but some restrictions remain • UK pushes for City of London to be exempt from G7 global tax plan -FT
  • Looking Ahead – Events, Other Releases (GMT) 11:15 German FinMin Scholz speaks at VAP foreign press association • 14:40 German EconMin Altmaier speaks at DIHK event • 14:40 BOE Greener in BAFT Virtual Global Annual Meeting panel discussion

G10 FX Options Expiries for 10AM New York Cut

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

EUR/USD: 1.2135-55 (2.2BLN), 1.2165 (1BLN), 1.2200-15 (1.8BLN) 1.2240-50 (2.1BLN)

USD/CHF: 0.8975 (1.2BLN), 0.9035-50 (350M)

EUR/CHF: 1.0980 (400M), 1.1040 (896M)

AUD/USD: 0.7690 (306M), 0.7750 (779M)

NZD/USD: 0.7285 (247M), 0.7320-25 (249M), 0.7370 (351M)

USD/JPY: 108.50 (1BLN), 109.00-10 (1.25BLN), 109.50 (270M), 109.85 (335M)

EUR/JPY: 132.50 (480M), 135.00 (400M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.2150 bullish above

Overnight trade: Consolidates in narrow range ahead of key events • EUR/USD opened 0.14% lower at 1.2173 and traded in a 1.2171/84 range • Heading into the afternoon it is at the session high around 1.2184 • EUR/USD isn't trending after the whippy price action at the end of last week • Market is on the sidelines ahead of Thursday's ECB meeting and US CPI • EUR/USD hasn't reacted to move lower in US yields, but may do eventually • Support is @ Monday's low @ 1.2145 low and break targets Friday's 1.2104 low • A close above 1.2187 will add upward pressure

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: Bid and busy ahead of EU-UK negotiations • +0.1% at top of a 1.4147-1.4168 range with solid interest and a softer USD • EUR/GBP saw heavy low at the open – trades at base of 0.8596-0.8604 range • UK wants City of London to be exempt from G7 global tax plan-FT • U.S. forming expert groups on safely lifting global travel bans • Timely and effective resumption of global travel key to economic rebound • Charts; 5, 10 & 21 DMAs, momentum studies conflict – neutral setup • 1.4080-1.4250 range in place since mid May looks set to extend • EU-UK talks on Northern Ireland will be event risk

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: edges lower but downside limited, participation low • USD/JPY off a hair from 109.50 to 109.41 in lethargic Asia trade • Participation low ahead of key US CPI release tomorrow, ECB too • Large nearby option expiries today and tomorrow help contain action • Today 109.00-10 $1.5 bln, some 109.50+; tomorrow 109.50-80 total $3.5 bln • Ichi daily kijun 109.33, 55-DMA 109.23, Ichi cloud top 108.90 – supports • Japanese importers, investors look to buy dips, exporters to sell rallies • US yields in sag mode, to help cap upside, Treasury 10s @1.531% • JPY crosses quiet, most steady, hold own but bias remains up

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: Consolidates at familiar levels as new catalysts sought • AUD/USD opened 0.24% lower at 0.7737 after USD broadly firmed Tuesday • In a very quiet morning session the AUD/USD only managed a 0.7735/44 range • The high was hit after China CPI came in tamer than expected • AUD/USD support is at 0.7732 and Monday's 0.7727 low • Resistance is at 0.7765/70 where daily highs and 50% retracement converge • A close above 0.7775 is needed to reignite upward momentum • A fall below 0.7720 targets last week's low at 0.7646 • AUD/USD may move sideways ahead of Thursday when ECB meets and US CPI is out USD downtrend could resume, if the bond market is right The flattening of the U.S. yield curve suggests the bond market is giving credence to the Federal Reserve's view that inflation is transitory.

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.