Daily Market Outlook, September 13th, 2021

Overnight Headlines

  • House Democrats Set To Propose 26.5% Corporate Tax Rate
  • Manchin Favours Trimming Biden Budget Plan By More Than Half
  • Fed's Harker: Start Tapering Soon; Inflation May Be Long Lived
  • New Zealand Extends Auckland Lockdown As Delta Outbreak Persists
  • Japan August Producer Prices Rise 5.5% Y/Y; Est. +5.6%
  • S. Korea Sept. 1-10 Exports Rises 30.7% Y/Y; Chip Exports -2.1%
  • N. Korea Test-Fires New Long-Range Cruise Missile - State Media
  • Japan's Vaccines Min Kono Leads Opinion Poll On Succeeding Suga
  • Iran To Allow IAEA Access To Cameras In Its Atomic Facilities
  • Los Angeles Port Logjam Tops 50 Ships; Wait Exceeds Eight Days
  • German Election Frontrunner Stands Firm as Merkel Heir Struggles
  • CBI Head Warns Sunak Of Further Backlash Over Corporate Tax Hikes
  • Dollar Finds Footing As Traders Await Inflation Data Tuesday
  • Libor Transition Stokes Sales Of Risky Corporate Debt - WSJ
  • Oil Extends Advance As U.S. Supply Is Slow To Return After Ida
  • Goldman Sachs Says Commodities To Surge On `Growing Scarcity'
  • Asia Makes Watchful Start Monday, Nikkei Nears 30-Year High
  • Beijing Seeks To Create Separate App For Alipay Loan Ops
  • Vodafone And Birla Fight To Salvage Indian Tele Joint Venture
  • Carlyle Said To Consider $6 Billion Sale Or IPO For Novolex

The Day Ahead

  • Ahead of a busy week for key data reports in both the UK and US, today’s calendar is noticeably empty with no releases or central bank speakers of note. That is likely to keep markets’ attention focused on the twin issues of delta variant risks and elevated and rising inflation. At last week’s ECB policy meeting, President Lagarde noted that the delta variant could delay full economic reopening and slow the recovery in global trade. The latter point is a salient one since vaccination rates are lower in many of the emerging market economies that are important in the global supply chain. Shortages in materials and equipment were acknowledged to be holding back economic activity (particularly manufacturing) and increasing prices, although officials continued to expect the effects to be temporary.
  • Early tomorrow morning, the ONS will publish its latest update on the UK labour market. Buoyant demand for labour was confirmed by the vacancy figures in last month’s report, which increased to over a million (a record high) in July, while the unemployment rate fell to 4.7% in the three months to June. Expect the unemployment rate to fall again to 4.6%, and employment to rise by 200k in the latest three months to July. As the end of the furlough scheme approaches, the hope is that those still furloughed (nearly 1.6m at the end of July, according to HMRC data) will be absorbed back into the labour market, thus preventing a significant rise in unemployment. That should be helped by strong labour demand, but there remains uncertainty over how quickly possible job-skill mismatches can be resolved. Expect headline annual average earnings growth to ease back, but remaining above 8%, affected by distortions due to a greater proportion of lower-paid workers dropping out of the calculation. The near-term distortions are the reason for the government’s decision to temporarily suspend the state pension triple lock, which was announced at the same time as the increase in National Insurance contributions from next April for employees and businesses.

G10 FX Options Expiries for 10AM New York Cut

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

  • EUR/USD: 1.1715-25 (474M), 1.1800-10 (431M), 1.1975-80 (1BLN)
  • EUR/GBP: 0.8480 (210M), 0.8480 (200M)
  • AUD/USD: 0.7350 (551M). AUD/NZD: 1.0350 (500M), 105.00 (500M)
  • EUR/AUD: 1.6100 (661M), 1.6145 (818M)
  • NZD/USD: 0.6990-0.7010 (800M), 0.7090 (705M)
  • USD/CAD: 1.2650 (450M)
  • USD/JPY: 110.00-15 (400M). EUR/JPY: 131.00 (315M),
  • AUD/JPY: 79.50 (821M), 82.00 (446M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.19 Bullish above

  • Under pressure as bids at 1.1800 fail to support
  • EUR/USD opened 1.1811 and traded in a 1.1802/14 range through the morning
  • Hawkish comments from Fed's Harker in Nikkei interview underpinned USD...
  • It was under pressure for much of the session but bids at 1.1800 held
  • Support is at the 21-day MA at 1.1788 and break increases downward pressure
  • Resistance is at the 10-day MA at 1.1837 and sellers are around 1.1850
  • US CPI Tuesday a key event this week, as it may shape Fed expectations
  • If it is hotter than expected it could rattle markets and support USD

GBPUSD Bias: Bearish below 1.39 Bullish above.

  • FX traders play off Friday's failure
  • Friday's potential topside breakout failed at 1.3888, ahead of resistance
  • Sept 3 high 1.3890, cloud top 1.3911 and 100DMA at 1.3916
  • Long upper candle shadow Friday adds to bear side risk
  • Rising weekly cloud and long lower weekly shadow gives bulls some hope
  • On balance sideways risk within new 1.3727-1.3888 s/t range
  • We stand aside for now but will monitor further failures ahead of 1.39

USDJPY Bias: Bullish above 109 Bearish below

  • USD/JPY through offers at 110.00 but plenty more above
  • USD/JPY up from 109.86 to 110.04 EBS in Asia, large offers at 110.00 filled
  • Despite the push through 110.00 offers, upside limited, plenty more above
  • Market moving in on top of hourly Ichi cloud at 110.03, break bullish
  • Despite USD/JPY buoyancy, upside still seen limited
  • Funds and retail playing both sides, currently more on offer
  • 55-DMA just above at 110.05, Ichi daily cloud top 110.19
  • Few nearby option expiries of consequence today, tomorrow
  • US yields less supportive, off New York highs Friday

AUDUSD Bias: Bearish below 0.75 Bullish above

  • Underpinned in Asia by AUD/NZD bargain hunting
  • AUD/USD opened 0.7353 and tracked higher to 0.7368 at one stage
  • The move higher was on the back of AUD/NZD buying, which traded to 1.0366
  • Once the cross buying subsided - the AUD/USD drifted back to 0.7355
  • AUD/USD support is at the 38.2 of the 0.7106/0.7477 move at 0.7335
  • A break below 0.7335 targets the 21-day MA at 0.7310 where buying is tipped
  • Resistance is at the 10-day MA at 0.7380 with sellers above 0.7400
  • AUD/USD sentiment is bearish while equity markets remain under pressure
  • Global growth concerns mixed with high inflation a negative for AUD/USD