Daily Market Outlook, March 11, 2021
Asian equity markets are mostly higher this morning, following on from the positive finish in Wall Street, including the outperformance of technology stocks which have been under pressure in recent weeks. Risk sentiment was supported by yesterday’s softer-than-expected US CPI figures which resulted in lower Treasury yields. The US $1.9 trillion fiscal stimulus plan was also approved in the Senate. President Biden is expected to sign it tomorrow,
Today’s ECB policy update is not expected to announce changes to interest rates or to the size of its asset purchase programmes. Nevertheless, President Lagarde’s comments at the press conference from 1.30pm will be closely watched, especially on the recent rise in government bond yields. The reaction of ECB officials to the bond sell-off has been mostly more cautious than some other central banks such as the US Federal Reserve. In part, that is likely a reflection of more economic fragility in the Eurozone amid the relatively slow vaccine rollout.
Markets will be looking for indications that the ECB will use the flexibility in the €1.85 trillion Pandemic Emergency Purchase Programme (PEPP) to increase the pace of bond buying. Latest data suggest the ECB has not started doing so yet. The ECB will also release new economic projections which are likely to show weaker growth and higher inflation in the short term, but little change to medium-term forecasts, hence the rise in inflation in the coming months is expected to be oil price related and temporary.
The overall message from the ECB is likely to be that policy will remain accommodative for a considerable time and it will use the flexibility of its policy tools to counter unwarranted tightening of financial market conditions.
In the UK, tomorrow morning (at 7am) sees the release of January GDP. Look for a month-on-month decline of 4.6% due to the initial impact of the third national lockdown and also some potential impact from new EU trading arrangements (the monthly trade data will therefore also be closely watched). That drop in GDP will probably represent the low point in Q1 if post-Brexit frictions recede and as restrictions start to ease. Still, Q1 GDP as a whole is likely to be down, but quarterly growth should resume in Q2 and accelerate in the second half of the year if, as hoped, most restrictions to activity are removed.
G10 FX Options Expiries for 10AM New York Cut
EUR/USD: $1.1800(E1.2bln), $1.1900(E791mln), $1.1910-15(E1.1bln), $1.1995-00(E630mln)
USD/JPY: Y106.20-25($581mln), Y107.75($1.8bln), Y108.50($1.2bln)
AUD/USD: $0.7600(A$1.7bln), $0.7710-25(A$1.1bln-AUD puts), $0.7950(A$630mln), $0.8000(A$1.8bln)
AUD/JPY: Y81.20-30(A$930mln)
AUD/NZD: N$1.0730(A$2.2bln-AUD puts)
NZD/USD: $0.7200(N$606mln), $0.7450(N$510mln)
USD/CAD: C$1.2600-10($609mln-USD puts), C$1.2770($860mln)
USD/CNY: Cny6.5000($868mln)
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Larger Option Pipeline
EUR/USD: Mar12 $1.1995-1.2000(E2.35bln), $1.2100-10(E1.2mln), $1.2250-70(E1.3bln); Mar17 $1.1900(E1.0bln), $1.2000(E1.2bln), $1.2040-55(E1.3bln); Mar18 $1.1900(E1.1bln)
USD/JPY: Mar12 Y105.95-106.00($2.7bln), Y108.30-35($2.2bln); Mar16 Y106.00($1.6bln), Y107.00($1.45bln);
Mar17 Y108.50-55($1.2bln)
GBP/USD: Mar16 $1.3750(Gbp797mln-GBP puts)
EUR/GBP: Mar18 Gbp0.8600(E1.3bln-EUR puts)
AUD/USD: Mar12 $0.7720-25(A$1.1bln-AUD puts), $0.7745-60(A$1.1bln); Mar16 $0.7500(A$1.2bln), $0.7650(A$1.4bln)
AUD/NZD: Mar12 N$1.0730(A$1.3bln-AUD puts); Mar18 N$1.0770-75(A$1.3bln-AUD puts)
USD/CAD: Mar16 C$1.2800($1.15bln); Mar18 C$1.2685-90($1.4bln)
USD/CNY: Mar18 Cny6.3450($1.2bln), Cny6.43($1.1bln)
USD/MXN: Mar12 Mxn20.30($1.1bln)
Technical & Trade Views
EURUSD Bias: Bullish above 1.20 bearish below
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 1.20 would suggest further downside opening a potential test of 1.17 yearly pivot...UPDATE responsive buying from the equality objective at 1.1850, through yesterday's highs opens pivotal 1.20 test
Flow reports suggest congestion through the 1.1820-1.1780 area with weak stops possibly being cleared up quickly through to the 1.1750 and again stronger congestion and likely to continue through the 1.1700 level, topside offers light back through the 1.1920 area and weak stops possibly setting up a small short squeeze through to the 1.1980 area before stronger offers start to appear into the 1.2000 level. Topside offers light through to the 1.1950 area with offers then starting to increase through to the 1.2000 level with weak stops above the 1.2020 level before the offers return increasing into the 1.2040-60 level.
GBPUSD Bias: Bullish above 1.3750 targeting 1.44
GBPUSD From a technical and trading perspective, as 1.40 now acts as support bulls will target a test of 1.44 as the next upside objective. Below 1.40 opens a retest of 1.3750 pivotal trend support.
Flow reports suggest topside offers weak back through the 1.3900 level and light stops limited at best before running into light offers around the 1.3950 area and then increasing resistance through to the 1.4000 before slightly stronger stops appear and the market opens to the 1.4050-1.4100 with patchy resistance until closer to the topside of that range and stronger offers thereafter, downside bids into the 1.3800 level with weak stops likely on a dip through the 1.3780-40 levels with congestion likely to soak up much of the selling through to the 1.3700 level with possibly strong congestion then around the 1.3700 level increasing into the 1.3650 level before being able to make a move to the 1.3600 area and strong bids again.
USDJPY Bias: Bullish above 107.30 targeting 109.85
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. Target achieved, look for a profit taking pause to develop above 108.60, as 107.30 support bulls will target a test of 109.85 next
Flow reports suggest topside congestion is likely to soak up some of the weak stops above through to the 109.50 area where strong congestion is likely to appear and increasing offers into the 110.00 and like the previous spikes at the beginning of last year any move is likely to find resistance above and continuing through the 110.00 with break out stops likely to be a little more nervous, downside bids light through to the 108.00 level with weak stops on any retrace through the 107.80 level and opening a dip to the 106.00 area possible over the coming week
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 topside offers through the 0.7700-20 area with limited potential for stops however, the offers don’t really look that strong until the 0.7800-20 areas with weak stops likely beyond that area to open up the potential for another higher run, downside bids into the 76 cents level with strong bids likely through to the 0.7580 area, weak stops are likely to be few and far between with stronger bids likely into the 0.7550 level and likely stronger congestion through to the 0.7500 area.
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!