Daily Market Outlook, February 9, 2021
Asian equity markets are mostly up again this morning, although gains outside China are relatively modest. Signs of slowing rates of Covid-19 infections, with US figures dropping to 3-month lows, helped lend support. Hopes of more US fiscal stimulus also remain in focus. New regulations mean that all international travelers to the UK will need to take two additional tests as well as a negative test before departure.
The British Retail Consortium’s measure of sales grew by 7.2% year-on-year in January (4.8% December) as strength in on-line sales offset weakness elsewhere. In Australia, business confidence rose in January, although the reading in current conditions dropped. Chinese motor vehicle sales rose 34.6% from a year ago as the world’s largest car market continued its strong recovery.
Former US President Trump’s impeachment trial is scheduled to begin in the Senate today. Overall it seems unlikely to have much impact on financial markets. The indications are that voting will split along party lines with only a handful of Republicans expected to join the Democrats and vote for impeachment. As a two-thirds majority is needed for conviction that appears unlikely. Even a guilty verdict probably would have little immediate impact as Trump has already left office. However, it would probably mean that Trump couldn’t stand for Presidency again in 2024. What the trial may do is delay the passage of a fiscal stimulus package. It is also likely to show how difficult it is for the two main US political parties to act together in the present highly partisan environment. That means the Democrats are unlikely to get Republican support for their planned fiscal measures.
The rest of today’s data calendar is light with nothing of note in the UK. Italian industrial production for December is expected to post a small rise. Already released data for Germany and Spain showed rises in manufacturing activity for the month. This is a further indication that, across many countries, the sector is being less impacted by current restrictions than most other parts of the economy.
In the US, the NFIB index will provide a timely update on the small business sector. Overall confidence fell in both November and December despite the start of the vaccine rollout but the measure is still some way above last spring’s low. A modest rebound is expected in the first reading for 2021.US Federal Reserve policymaker Bullard will speak at a web event this evening for the London-based NIESR. He will probably talk about his views regarding the likely pace of the US economic rebound and the Fed’s next policy actions. It will be interesting to hear if he has anything to say about the effectiveness of negative interest rates, particularly as the Fed has been more inclined than the Bank of England to rule out such a move.
G10 FX Options Expiries for 10AM New York Cut
EUR/USD: $1.1850-55(E511mln), $1.2000(E853mln), $1.2050(E644mln), $1.2090-1.2100(E544mln), $1.2160-75(E591mln)
USD/JPY: Y105.00-10($699mln)
USD/CAD: C$1.2960($1.2bln)
AUD/CAD: C$0.9860(A$640mln-AUD puts)
USD/CNY: Cny6.4325-45($812mln), Cny6.45($781mln), Cny6.50($2.1bln), Cny6.55($1.2bln)
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Larger Option Pipeline
EUR/USD: Feb10 $1.1920-30(E1.36bln), $1.2020-25(E1.0bln), $1.2065(E905mln), $1.2300(E1.1bln); Feb12 $1.2000-05(E1.0bln), $1.2170-85(E1.3bln); Feb16 $1.1940-50(E1.2bln), $1.2000(E1.2bln)
USD/JPY: Feb11 Y105.75($2.1bln); Feb12 Y103.50-60($1.3bln), Y104.95-105.00($2.6bln), Y106.00-10($2.1bln), Y106.30-35($1.0bln)
GBP/USD: Feb12 $1.3850(Gbp698mln)
AUD/USD: Feb10 $0.7550(A$1.4bln-AUD puts)
AUD/JPY: Feb11 Y80.73-75(A$1.0bln)
USD/CNY: Feb10 Cny6.4350($1.0bln)
Technical & Trade Views
EURUSD Bias: Bearish below 1.2050 targeting 1.1895
EURUSD From a technical and trading perspective, the closing breach of 1.20 opens a move to test the equality objective at 1.19 unless fresh demand develops here bears will target a test of the yearly pivot back towards 1.17. A close through 1.21 and the descending trendline would be a bullish development opening a retest of prior highs at 1.2350
Flow reports suggest downside bids scattered around levels 1.1950 and through to the 1.1900 level with stronger bids likely until the 1.1880 breaks and weak stops appear. Topside offers into and through the 1.2080 area continuing to the 1.2120 area before weakness appears and light weak stops open the 1.2150 area for a test, from there though topside offers start to increase into the 1.2200 level and above to limit any sudden moves
GBPUSD Bias: Bullish above 1.35 targeting 1.3830/60
GBPUSD From a technical and trading perspective, as as 1.35 supports then prices can extend higher to test interim wave 5 upside objectives to 1.3830/60 area
Flow reports suggest topside offers strong into the 1.3800 area before weak stops open up through the 1.3820 area before stronger congestion through the level into the 1.3850 area before weakness starts to appear and the market opens up for a longer term move through to the 1.4100 levels. Downside bids light through to the 1.3600 level and weak stops through the level before stronger sentimental bids appear into the 1.3550 areas
USDJPY Bias: Bullish above 104.50 targeting 107
USDJPY From a technical and trading perspective, 105.50 target achieved anticipate a profit taking pullback to develop ahead of 106 to retest bids back to 104.50. 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 into the 106.00 area with congestion through the level with weak stops likely on a move through to the 106.20 area and then further strong congestion into 106.50 area, increasing offers through the 106.70 area and continuing into the 107.00 level with stronger offers on a further test higher into the 107.50 area. Downside bids light back through the 105.00 level with increasing bids into the 104.50 level with bids beginning to fill the market around the level and stronger bids into the 104.00-20 areas and stronger bids below the 103.60 levels.
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 0.7750 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!