Daily Market Outlook, October 8th, 2021

Overnight Headlines

  • Senate Advances Short-Term Debt Limit Hike After GOP Scramble
  • Big Tobacco Comes Out Swinging Against Biden’s Build Back Better Bill
  • Big Short Builds In US Bonds On Wariness Of Convexity Trigger
  • Germany’s Armin Laschet Signals His Departure As CDU Leader
  • China's September Services Activity Returns To Growth
  • China's Energy Crisis Is Hitting Everything From iPhones To Milk
  • PBoC Drains Cash As China Markets Re-Open, Bond Futures Slide
  • Japan PM Kishida Orders Cabinet To Compile Extra Stimulus Budget
  • Asian Shares Rise As Chinese Markets Return From Break
  • US Dollar Takes A Pause Ahead Of Non Farm Payrolls Data
  • Oil Climbs On Switch From Gas And Doubts Over US Releasing Reserves

The Day Ahead

  • Ireland has decided to sign up to a global deal that will push its corporate tax rate to 15%, marking a huge shift in its policy. The G-7 and G-20 nations agreed earlier this summer to join forces to tackle tax evasion and harmonize rules across the globe. The plan, if implemented, would force multinationals to pay tax where they operate not just where they have their headquarters and would impose a minimum corporate rate of 15%. The Republic of Ireland has one of the most attractive rates for corporations in the world at 12.5% and had, until now, refused to join the plan. Different Irish governments had fiercely defended the low rate, arguing it was a tool to attract businesses to a small economy
  • Economic Data (GMT) • 06:00 DE Aug Trade Balance SA E15.8 bln f'cast, 17.9 bln prev • 06:00 DE Aug Exp SA MM 0.5% f'cast, 0.5% prev; Imp MM 1.8% f'cast, -3.8% prev
  • Looking Ahead – Events, Other Releases (GMT) • 10:00 ECB Holzmann at Vienna seminar • 12:00 BoE Tanaka speaks at MMF 7th Policy Conference • 13:00 BoE Tenreyro speaks at CBRAA conference • 13:00 ECB Panetta at Frankfurt G7 conference

G10 FX Options Expiries for 10AM New York Cut

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

  • USDJPY - 111.90/112.00 687m. 111.70/80 1.38bn (1.13bn C). 111.50 587m. 111.00/10 3.00bn (1.73bn C). 110.50/60 1.30bn (926m P). 110.30/40 1.06bn (818m P). 110.10/20 805m. 110.00 1.06bn (719m P). 109.70/80 1.10bn (936m P). 109.50/60 619m. 109.00 954m.
  • EURUSD - 1.1700 1.89bn (1.52bn P). 1.1670 403m. 1.1650 1.68bn (1.35bn P). 1.1610/20 406m. 1.1600 1.68bn (1.22bn P). 1.1570/80 1.23bn (646m P). 1.1550 557m. 1.1520/30 482m. 1.1500 979m. 1.1450/538m. 1.1420/30 574m.
  • AUDUSD - 0.7490 1.83bn (C). 0.7330/40 3.60bn (2.74bn C). 0.7300 1.07bn (740m C). 0.7200 859m. 0.7150/60 1.71bn (P). 0.7000 2.12bn (P).
  • AUDNZD - 1.0600 402m. 1.0500 673m.
  • USDCAD - 1.2800/10 1.48bn (C). 1.2750 950m. 1.2690/1.2700 2.01bn (1.79bn C). 1.2670/80 1.35bn (698m C). 1.2650/60 1.16bn (812m C) 1.2600 736m. 1.2570/80 654m. 1.2550/60 1.26bn (1.09bn P). 1.2530/40 1.10bn (736m P). 1.2510/20 710m. 1.2490/1.2500 2.01bn (1.37bn P).
  • EURGBP - 0.8470/80 489m.
  • USDCHF - 0.9200 421m.
  • AUDJPY - 81.00 493m.

Technical & Trade Views

EURUSD Bias: Bearish below 1.17 Bullish above

  • Consolidates above 1.1550 ahead of US payroll report
  • EUR/USD opened unchanged at 1.1555 and traded in a 1.1551/60 range in Asia
  • Market is side-lined ahead of the key US non-farm payroll report today
  • EUR/USD trending lower with the 5, 10 and 21-day MAs in a bearish alignment
  • A break above the 10-day MA at 1.1603 would ease the downward pressure
  • Support at Wednesday's low at 1.1529 and break targets 1.1490/1.1500
  • Bias is for lower, but US jobs miss could result in short-covering

GBPUSD Bias: Bearish below 1.36 Bullish above.

  • Resilient as wages and inflation fears rise
  • Steady in a very tight 1.3612-1.3619 range - modest interest pre US payrolls
  • UK starting pay jumps by most on record as staff shortages bite...
  • Pay rises broad based - supports comments from BoE's Pill...
  • Charts; momentum studies, 5, 10 & 21 daily moving averages conflict
  • 21 day Bollinger bands slide - bias remains lower while 1.3661 21 DMA caps
  • Targets another test of 1.3419, 38.2% May 2020 to June 2021 rise
  • Sustained 1.3670 break to target a test of falling 1.3913 upper 21 day Bolli

USDJPY Bias: Bullish above 109 Bearish below

  • USD/JPY up from 111.60 to 111.89 EBS in Asia, Tokyo fix, other demand
  • Some offers from Japanese exporters, longs booking profits on way up
  • Move in tandem with further rise in US yields, Tsy 10s to 1.593%
  • Massive $2.2 bln in option expiries between 111.75-112.00 to anchor for now
  • Some caution still ahead of US payrolls data tonight
  • Temporary US debt ceiling extension confirmed, good for risk sentiment?
  • Nikkei +2.2% @28,275, up with Wall St o/n, Kishida disappointment over?
  • Selective JPY crosses bid, CAD/JPY 88.87 to 89.26, best since July 6
  • NOK/JPY 12.9917 to 13.0441, AUD/JPY 81.55 to 81.90, NZD/JPY 77.23 to 77.72
  • Central bank expectations and recent surge in commodity prices help

AUDUSD Bias: Bearish below 0.75 Bullish above

  • AUD/USD opened +0.55% at 0.7313 after AUD outperformed due to risk rally
  • After trading at 0.7307 it moved higher when Asian equities rallied
  • AUD/USD matched yesterday's 0.7324 high before sellers at 0.7325 capped
  • Heading into the afternoon it was idling around 0.7315
  • Resistance is at the 50% of the 0.7477/0.7170 move at 0.7324
  • Break above 0.7325 targets the 61.8 of that move at 0.7360
  • Bias is for higher as surging 10-year Aus yield attracts AUD buyers
  • Support is at the 21-day MA at 0.7280 and 10-day MA at 0.7267