Daily Market Outlook, February 17, 2021
Asian equity markets are mixed this morning. The number of new Covid-19 cases have generally continued to fall and the US has reported a fifth consecutive weekly decline. President Biden promised to accelerate the US vaccination programme. Meanwhile, reports say that the UK government is planning a mass testing ’blitz’ as part of its strategy to ease lockdown restrictions.
Just released data show that the annual rate of UK CPI inflation rose to 0.7% in January from 0.6% in December. That still leaves it well below the 2% target. Inflation seems set to move sharply higher over the next few months reflecting the recent rise in energy prices and the expiration of the temporary VAT cut for the hospitality industry. The rest of today’s data calendar in Europe is light. In the UK, the ONS’s official house prices for December is expected to provide further indications of the boost to the market from the temporary reduction in ‘stamp duty’. December Eurozone construction output will be watched for whether a sector that is relatively lightly directly impacted by restrictions continued to grow after a 1.4% monthly gain in November.
Today’s US releases will provide important insights into the pace of economic growth in early 2021. Restrictions in the US continue to vary by state but overall seem less onerous than in Europe. Partly because of that, US GDP is expected to continue to grow in Q1 while it is forecast to fall in both the UK and the Eurozone. Nevertheless, the pandemic has had a considerable negative impact on the US and there signs that growth almost stalled heading into year-end. In particular, retail sales, which grew strongly in Q3 saw monthly declines in each of the last three months of the year. So markets will be closely watching that the expected January rebound did actually occur. Industrial production, which is less directly impacted by restrictions grew sharply in Q4 and is forecast to have risen again in January.
Amongst a number of central bank speakers, possibly of most interest may be comments from Bank of England policymaker Ramsden, who is scheduled to talk about QE. Markets will be looking for indications as to what the BoE plans to do when the current tranche of money for asset purchases expires (probably around September). There are also a number of US Federal Reserve speakers and the Fed will release the minutes from its last policy meeting. They can be expected to confirm the message that policy will now be on hold for some time as they monitor developments.
G10 FX Options Expiries for 10AM New York Cut
EUR/USD: $1.2000-10(E880mln), $1.2035-40(E611mln), $1.2075(E544mln), $1.2100-05(E654mln), $1.2120-40(E2.4bln-EUR puts), $1.2150-55(E527mln), $1.2170(E699mln)
USD/JPY: Y105.35-50($735mln)
EUR/GBP: Gbp0.8700(E781mln-EUR puts), Gbp0.8750(E501mln-EUR puts)
EUR/CHF: Chf1.0725(E445mln), Chf1.0775(E430mln)
USD/NOK: Nok8.40($610mln-USD puts), Nok8.50($300mln-USD puts), Nok8.80($560mln-USD puts)
AUD/USD: $0.7615-25(A$2.1bln), $0.7750(A$759mln), $0.7850-55(A$564mln)
AUD/JPY: Y80.00(A$636mln), Y81.75-85(A$697mln)
USD/CAD: C$1.2650($475mln)
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Larger Option Pipeline
EUR/USD: Feb18 $1.2000-10(E1.8bln), $1.2100(E1.3bln), $1.2200(E1.5bln); Feb23 $1.2135-55(E1.95bln-EUR puts)
USD/JPY: Feb18 Y107.75($1bln); Feb24 Y103.70-80($1.6bln), Y105.00(E1.2bln), Y105.70-80($1.5bln), Y107.00-05($1.0bln)
EUR/GBP: Feb26 Gbp0.8750-65(E1.0bln-EUR puts)
AUD/USD: Feb18 $0.7400(A$1.2bln), $0.7555-75(A$1.3mln); Feb24 $0.7865-75(A$1.4bln); Feb26 $0.7900(A$2.1bln)
USD/CNY: Feb18 Cny6.35($1.8bln), Cny6.45($1.1bln), Cny6.50($1.25bln); Feb19 Cny6.37($1.3bln), Cny6.45($2.0bln)
USD/TRY: Feb25 Try7.00($935mln), Try7.10($1.5bln), Try7.25($1.0bln)
Technical & Trade Views
EURUSD Bias: Bullish above 1.2050 targeting 1.2350
EURUSD From a technical and trading perspective, the closing breach of 1.21 and the descending trendline is a bullish development opening a retest of prior highs at 1.2350, only a move back through 1.2040 would suggest further consolidation
Flow reports suggest topside offers into the 1.2150 area and then after a brief weak period increasing into the 1.2180-1.2220 level with weak stops above the level and increasing on any push above the 1.2250 level with possible strong offers into the 1.2300 level Downside bids light through to the 1.2080 area and possible weak stops appearing through the level and opening the chance of a test to the 1.2000 level in the short term with stronger bids into the 1.1950.
GBPUSD Bias: Bullish above 1.3750 targeting 1.40
GBPUSD From a technical and trading perspective,look for profit taking pullback to test 1.3750 as support as this level attracts fresh demand bulls will target 1.40 next.
Flow reports suggest topside offers light through 1.3950 with stronger offers likely through the 1.4000 area and option related barriers to clear with weak stops on a strong break of the 1.4000 areas, light offers into the 1.4050 areas and increasing again into the 1.4100 level and offers then thinning out for further moves through the sentimental levels, downside bids light through to the 1.3850 area with weak bids continuing through to the 1.3800 level and weak stops appearing on a dip through the level to run into stronger bids through 1.3750
USDJPY Bias: Bullish above 104.50 targeting 107
USDJPY From a technical and trading perspective, as 104.50 supports there is potential for a further squeeze higher to test offers towards 107. A loss of 103.50 would negate further upside and suggest a resumption of trend
Flow reports suggest topside offers around the 106.50 area and stronger offers through to the 107.00 areas with stronger stops through the level. Downside bids light through to the 105.00 level and weak stops light through the 104.80 area and then stronger bids likely to appear below the 104.50 areas and continuing into the 104.00 level.
AUDUSD Bias: Bullish above .7560 bullish targeting .8000
AUDUSD From a technical and trading perspective, as the major trendline support at .7560 now acts as support, look for target wave 5 upside objective towards .8000. A closing breach of .7730 of the internal descending trendline will encourage the bullish thesis.
Flow reports suggest offers through the 0.7800 area and then likely to see increasing offers through to the 0.7820 area before congestive offers then start kicking in on any move through the area into the 0.7850-60 areas. Downside bids light back through the 77 cents level and weak stops on a dip through the 0.7680 area and limited bids through to the 0.7620 level and increasing through to the 0.7580 level before stops appear
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. 75% 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.
Futures and Options: Trading futures and options on margin carries a high degree of risk and may result in losses exceeding your initial investment. These products are not suitable for all investors. Ensure you fully understand the risks and take appropriate care to manage your risk.
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!