Daily Market Outlook, April 21, 2021
Asian equity markets are mostly down this morning following losses yesterday in both Europe and the US. Concerns about a renewed rise in Covid-19 cases has been cited as the main reason for the decline. The falls are most marked in Japan where local reports suggest that a state of emergency will be declared for three regions imposing new restrictions to last for three weeks. In other news, Australian March retail sales beat expectations with a 1.2% increase, while New Zealand Q1 annual CPI inflation rose 1.5% leaving it still below target.
Just released UK CPI data for March showed a modest rise in annual inflation to 0.7% up from 0.4% in February, in line with our expectations. That still leaves it well below the 2.0% inflation target. Much of the increase was due to higher petrol prices and the ‘core’ measure excluding those effects was up by less to 1.1% from 0.9% in February. Next month is likely to see a further acceleration as more energy price increases come through. Moreover, supply chain disruptions which are adding to business costs point to further near-term upside risks and producers input prices again rose sharply in March. However, as the Bank of England seems to regard these factors are temporary they seem unlikely to lead to an immediate change in monetary policy.
The rest of today’s economic calendar is again extremely sparse with no data of note in either the UK or the US. Bank of England Governor Bailey and Deputy Governor Ramsden are both scheduled to speak but neither are scheduled to talk about monetary policy on this occasion. However, as Monetary Policy Committee members will soon go into their ‘quiet’ period ahead of the BoE’s monetary policy update in early May, either or both of them may want to use the opportunity to throw out some hints to markets about what to expect from that.
Today’s Bank of Canada policy update is not expected to lead to a change in interest rates. However, Canadian economic data have generally surprised on the upside since the BoC’s last policy meeting and this week’s very growth supportive Federal Budget and a strengthening US economy seem likely to provide further boosts. Those developments are expected to have led the BoC to upgrade its economic forecasts. As a result, it seems likely that the Bank will follow through on previous hints and immediately taper its asset purchases. There has also been speculation that the Bank will adjust its forward guidance and indicate a possibility that interest rates will rise before the end of next year, while previously it had suggested that rates were unlikely to go up before 2023.
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD: 1.1980-90 (700M), 1.2015 (400M), 1.2050 (500M)
GBP/USD: 1.3800 (638M)
AUD/USD: 0.7740-45 (1.1BLN), 0.7770 (410M)
USD/JPY: 107.75 (350M). NB: Thursday Apr 22 has 3BLN between 108.00-40
Big NZD/USD Thursday Apr 22 - 2-BLN between 0.7060-90
Technical & Trade Views
EURUSD Bias: Bearish below 1.1950 bullish above
EURUSD From a technical and trading perspective, the breach of 1.20 resistance opens a test of 1.2090/1.21, as 1.1950 supports look for a test of trendline resistance at 1.2125
Flow reports suggest topside offers start to increase on a move through the 1.2080 area before weak stops appear around the 1.2120 level and given the perchance of some banks to call a move to fade the Euro above the 1.2000 possibly starting to cause pain as option hedges go could see a squeeze higher and into the Feb ranges before seeing offers coming in above the 1.2150 level and increasing. Downside bids light through to the 1.1980 level with weak stops on a breakthrough to the medium congestive 1.1950 and therefore exposing the stronger bids 1.1900 level through to the 1.1880 and strong stops
GBPUSD Bias: Bullish above 1.39 bearish below
GBPUSD From a technical and trading perspective, as 1.39 now acts as support bulls will target a test of prior cycle highs at 1.4240
Flow reports suggest topside offers light through to the 1.4000 area with offers into the 1.4010 area and possible option plays around the level before breaking higher and triggering weak stops and possible option players caught short, 1.4050 then sees light congestion and stronger on a move through to the 1.4100 area with topside then open to stronger gains. downside bids light through to the 1.3900 level with limited congestion starting to build in the area before weak stops on a dip through the figure level and opening a move through to the 1.3840 area and stronger congestion appears.
USDJPY Bias: Bullish above 108 targeting 112
USDJPY From a technical and trading perspective, as the equality objective at 108 continues to attract demand bulls will look for a test of 112. A failure below 108 opens a test of trendline support at 107.33
Flow reports suggest downside bids into the 108. 00 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 appearing through the 108.80 level and increasing into the 109.00 level light offers until the 109.40 area is likely to see strong congestion increasing through to the 110.00 level before stronger stops are likely to appear
AUDUSD Bias: Bearish below .7700 bullish above
AUDUSD From a technical and trading perspective, the closing breach of .7730 has relieved downside pressure opening a move to test offers towards .7820
Flow reports suggest topside offers continue through the 0.7800 area with a break through the 0.7820 area likely to see weak stops and a test towards the sentimental 0.7850 area however, while there maybe some offers in the area the market Looks to be fairly open through to the 79 cents level and ultimately ranges from the end of Feb, downside bids light through the 0.7700 level with weak stops likely on a move through the 0.7680 before stronger bids around the 0.7650 area and continuing through to the 0.7600 likely increasing in size, any further moves are likely to see strong support into the 0.7550 to calm the situation
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% and 65% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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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!