Daily Market Outlook, October 15th, 2021

Overnight Headlines

  • Fed Nearing Bond-Buying Taper Remains Split On Inflation
  • Fed’s Harker: Soon Be Time Start Tapering Asset Purchases
  • Biden Signs Measure Raising US Debt Limit Until December
  • Biden Banking On Another McConnell Debt Ceiling Retreat
  • PBoC Keep Status Quo On Liquidity As Policy Loan Rollover
  • China Eases Mortgages For Year For Evergrande Contagion
  • EU Leaders To Give Green Light To Energy-Crisis Relief Plan
  • Brussels Urged Prepare Contingency Plan For UK Trade War
  • Two BoE Officials Push Back On Talk Of Imminent Rate Hike
  • Bitcoin Futures ETF Won’t Face SEC Opposition At Deadline
  • Aluminium Makers Sound Alarm About US Magnesium Drop
  • Rio Tinto Cuts Iron Shipments Forecast On Labour Squeezes

The Day Ahead

  • The more positive mood in equity markets has continued with Asian markets up today following yesterday’s gains in Europe and the US. A number of Federal Reserve policymakers have confirmed that the US central bank is almost ready to taper its asset purchases. That will reinforce expectations that an announcement is set to come in November. Meanwhile, reports suggest that China President Xi will not attend next month’s climate change conference in Glasgow.
  • Today’s light economic calendar points to it being a quiet end to the week in Europe. There are no data releases in the UK. In the Eurozone, today’s September consumer price inflation data for France and Italy are second readings that are not expected to be revised. The Eurozone August international trade report will be new data but it rarely has much impact on markets. However, it may provide some further evidence into how shipping issues are impacting on the international movement of goods.
  • The calendar in the US is busier and potentially more interesting. Earlier this week September CPI data provided further evidence that various supply issues continue to push up inflation. Today the focus will be more on indicators of economic activity and what they reveal about the extent to which growth is slowing. The New York Fed’s October survey will provide some up-to-date information on manufacturing but of most interest will be the data on consumer activity.
  • After a strong start to the year, US retail sales certainly seem to have decelerated during the summer. The August report surprised significantly on the upside but that followed a big fall in July, look for another, albeit more modest, decline in September. Several factors may have impacted on spending. Car sales have been particularly weak primarily because of a lack of supply. There also seems to have been a switch away from goods and towards services (which are not fully covered by the retail sales data) as restrictions have eased.
  • There are also indications, however, that US consumers may have become more reluctant to spend. The University of Michigan consumer sentiment measure provides support for that view. It fell sharply in August and only rebounded modestly in September so today’s readings for October will be an important indication of whether sales are likely to pick-up heading into the important pre-Christmas spending period.

G10 FX Options Expiries for 10AM New York Cut

(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )

  • USDJPY - 115.50 713.50 501m. 113.00/20 1.54bn (C). 112.50/60 1.02bn (785m C). 111.90/112.00 911m. 110.90/111.00 1.40bn (750m C).
  • EURUSD - 1.1820/30 1.02bn (575m C). 1.1650 753m. 1.1600 886m. 1.1550/60 1.42bn (1.25bn P). 1.1450 716m.
  • NZDUSD - 0.6820 573m.
  • USDCAD - 1.2600 581m. 1.2570/80 920m. 1.2550 572m. 1.2490/1.2500 1.19bn (1.02bn P). 1.2470/80 942m. 1.2450/60 582m. 1.2400/10 1.52bn (1.03bn P). 1.2360/70 740m.
  • USDCHF - 0.9350 430m.
  • EURJPY - 130.00 406m.
  • USDCNH - 6.55 670m. 6.45 770m. 6.40 891m.

Technical & Trade Views

EURUSD Bias: Bearish below 1.17 Bullish above

  • EUR/USD buoyant in Asia after rally to 1.1624 EBS o/n, Asia 1.1589-1.1611
  • Despite push up, upside still limited? Resistance from 1.1640 high Oct 4
  • Also total E1.3 bln or so in option expiries 1.1605-50, to help contain
  • Support from @1.1600, E825 mln in option expiries at strike
  • Overall EUR view still for softness after current retracement up over
  • Dovish ECB, weaker economic recovery eyed

GBPUSD Bias: Bearish below 1.37 Bullish above.

  • Bid – safe haven USD eases with buoyant risk appetite
  • +0.1% with safe haven USD softer as stocks, commodities and risk climb
  • Traded in a tight 1.3670-1.3687 range with moderate interest
  • No tier 1 UK data, but BoE,s Anna Sweeny and Jon Cunliffe to speak
  • Charts; 5, 10 & 21 day moving averages conflict, 21 day Bolli's contract
  • Momentum studies head north - mixed signals favour range trading
  • Rejection lower 21 day Bolli in September then closed above 1.3623 21 DMA
  • Setup targets 1.3768 falling upper 21 day band as seen in July & August

USDJPY Bias: Bullish above 111.50 Bearish below

  • USD/JPY and the JPY crosses again on the up-up in Asia
  • USD/JPY 113.68 to 113.95 EBS, best since 114.21 in Nov 2018, Oct high 114.55
  • Reports another major US money centre bank calling for 117 soon
  • Comments from FinMin Suzuki on FX shrugged off for now...
  • Bias remains up, talk some option barriers at 114.00, stops above large?
  • $980 mln in option expiries today between 113.75-114.00 help contain action
  • Dip-buying interest from Japanese importers, institutional investors
  • Japanese exporters still mostly conspicuous in their absence
  • JPY crosses all bid, NOK and CAD at/near fresh highs, even EUR/JPY up

AUDUSD Bias: Bearish below 0.75 Bullish above

  • +0.05% - 0.7406-0.7425 range - light interest - positive stocks, commodities
  • Sydney to end COVID-19 quarantine for international travellers
  • A key policy plank as Australia reopens, bringing optimism to tourist sector
  • Charts, daily momentum studies, 5, 10 & 21 day moving averages rise
  • 21 day Bollinger bands expand, which is a bullish trending setup
  • 0.7413 upper 21 day Bolli band is a good indicator of an overbought market
  • Upper Bollinger suggest buying dips rather than breaks at this time
  • Uptrend initially targets a test of the September high at 0.7477