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Daily Market Outlook, September 8th, 2021
Overnight Headlines
- US House Panel Sets Debate This Week On Its Portion Of The $3.5T Bill
- GOP Pressure To Block Bipartisan Infrastructure Bill Builds In The House
- Senator Manchin Backs As Little As $1.0T Of Biden's $3.5T Spending Plan
- Fed’s Bullard Pushes For Quick ‘Taper’ Despite Weak US Jobs Growth
- Merkel Implores Germans To Back Conservatives As They Hit Record Low
- French Outlook Brightens As Economy Shows Immunity To Delta Wave
- China's Long-Term Economic Policy Unchanged Amid Regulatory Wave
- Japanese Ruling Party Contender Kishida Vows Bold Monetary Policy
- Japan Upgrades Second Quarter GDP On Stronger Business Spending
- Dollar Near One-Week Top Amid Rise In Yields, Caution Before ECB
- Oil Climbs Amid Slow Supply Return After Hurricane; Gold Steadies
- Asian Equity Markets Mixed After A Lacklustre Day On Wall Street
The Day Ahead
- US stocks largely retreated on Tuesday as traders returned from the long Labour Day weekend. The Dow Jones fell 0.8% and the S&P 500 pulled back by 0.3% amid mounting evidence that the US economic growth has peaked and may lose momentum further as the Covid Delta variant continues to spread. Tech driven NASDAQ rose marginally (+0.07%) to reach a record level. Elsewhere, European shares pared gains from recent rallies as investors awaited the ECB’s meeting. Asian equities were boosted by China’s positive trade data.
- US treasury yields rose on Tuesday as investors brushed off the lower payroll number last week and focused on rising wage growth instead. A Fed tapering is still on the table this year although a September move is unlikely. The benchmark 10Y UST yield picked up 5bps to 1.37%. European sovereign bond yields advanced ahead of the ECB’s Thursday decision as markets look forward to a change in the pace of the PEPP program.
- The dollar firmed up against all G10 currencies as risk sentiment weakened. Commodity currencies were the top losers in Tuesday’s session with CAD leading the declines just ahead of today’s Bank of Canada’s monetary policy decision. The dollar index added 0.5% to 92.51, its best day since mid-August.
- Economic Data (GMT) • 06:45 FR Jul Curr Acct Bal, E0.5 bln deficit prev; Trade Bal, E5.82 bln deficit prev • 08:00 IT Jul Retail Sales SA MM 0.70% prev; NSA YY 7.70% prev
- Looking Ahead – Events, Auctions, Other Releases (GMT) • 08:20 ECB Kerstin in virtual Handelsblatt Banking Summit • 11:00 ECB McCaul in virtual Kangaroo Group debate • 13:45 ECB Fernandez-Bollo in Ljubljana Eurofi Forum panel discussion • 14:00 Bank of Canada policy announcement • 15:00 BoE Gov Bailey, Broadbent, Ramsden, Tenreyro, Hall parliamentary testimony
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
- USDJPY - 109.90/110.00 983m. 109.40/50 1.13bn (675m C). 108.50 459m. 107.80 400m.
- EURUSD - 1.2030 437m. 1.1810/20 428m. 1.1800 689m. 1.1770/80 765m.
- GBPUSD - 1.3810 437m.
- AUDUSD - 0.7620 604m. 0.7420 974m. 0.7350/60 511m. 0.7220 1.03bn (P). 0.7070 1.02bn (P).
- NZDUSD - 0.7260 496m.
- AUDNZD - 1.0400 490m.
- USDCAD - 1.2640 980m. 1.2640 980m. 1.2600 769m. 1.2560/70 755m. 1.2330 500m. 1.2300 500m.
- AUDJPY - 84.40 596m. 84.30 304m. 80.00 520m. 79.50 340m. 78.00 520m.
- EURSEK - 10.25 1.03bn (591m P).
- EURNOK - 10.20 396m. 10.10 598m.
- USDZAR - 14.67 450m. 14.26 665m.
- USDMXN - 20.22 600m.
- EURAUD - 1.6130 793m.
- USDCNH - 6.55 500m. 6.45 475m.
Technical & Trade Views
EURUSD Bias: Bearish below 1.19 Bullish above
- Idles in tight range in countdown to ECB
- EUR/USD opened -0.25% at 1.1842 after USD broadly firmed on higher US yields
- In a quiet Asian session the EUR/USD could only manage a 1.1841/50 range
- Market is starting to look ahead of Thursday's ECB meeting for fresh ideas
- EUR/USD technical picture mixed and ECB decision likely to tip the balance
- It has made a lower daily top last 2 days after 10 days of higher highs
- This could indicate loss of momentum and a move back towards middle of range
- Short-term moving averages bullish with 5, 10 & 21-day in bullish alignment
- Support is at the 10-day MA at 1.1830 and 21-day MA at 1.1781
- Resistance is at the double-top formed at 1.1909
GBPUSD Bias: Bearish below 1.39 Bullish above.
- Mixed signals, as the dollar currently leads
- Little changed in a 1.3776-1.3789 range with occasional decent interest
- Modest moves in commodities, currencies, yields and stocks today in Asia
- Unusual price action, it is typically busy after U.S. Labor day long weekend
- Treasury yields likely key for the USD, which currently drives cable
- Charts; Tuesday's dip turned the positive daily signals back to neutral
- 21 day Bollinger bands contract, momentum studies 5, 10 & 21 DMAs conflict
- Tuesday's 1.3768 London low and 1.3746, 50% of the Aug-Sep bounce support
- 1.3820, 5 and 200 DMAs then Tuesday's 1.3850 early London high resistance
USDJPY Bias: Bullish above 109 Bearish below
- JPY crosses hold bid with offshore yields
- JPY under the gun with yields abroad on up-up on hawkish CB expectations
- USD/JPY 110.26-33 EBS in Asia, quiet, await next move in US yields
- Treasury 10s @1.362% , Asia range 1.361-1.372% into US Beige Book release
- USD/JPY 110.40-60 resistance, offers - recent highs in area 9/1, 8/12-13
- Japanese exporter offers still on rallies, importers-investors on dips
- Option expiries today - more below than above, from 110.00, tom on 110
- Risk on in Tokyo with Nikkei back above 30K, now +0.8% @30,161
- EUR/JPY 130.59-67, GBP/JPY 151.86-152.08, AUD/JPY 81.36-64, NZD/JPY 78.21-45
- Japan data out today won't affect BoJ policy.
AUDUSD Bias: Bearish below 0.75 Bullish above
- Back to starting point after early rally fizzles
- AUD/USD opened -0.70% at 0.7488 after USD rose and risk assets slipped
- It moved higher in early Asia when buying flows emerged in AUD and NZD
- AUD/USD traded to 0.7403 before sellers emerged as the buying flows faded
- There is talk that recent buying is related to miner dividend payments
- Heading into the afternoon session the AUD/USD is trading around 0.7385/90
- AUD/USD looks vulnerable after completing bearish outside day yesterday
- Support is at 10-day MA at 0.7359 and break would shift pressure to downside
- Resistance is at last week's high at 0.7477 with selling tipped at 0.7470
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!