Daily Market Outlook, February 12, 2021
US equity markets closed at fresh highs, while a number of Asian markets were shut for the lunar new year. Sentiment was more mixed in markets that remained open, with Australian indices for instance trading lower as the state of Victoria entered a new lockdown. In the UK, there were reports that the government is considering maintaining social distancing rules in England until the autumn. Wales was the first UK nation to reach the target of vaccinating all top four JCVI priority groups.
The UK economy officially avoided contraction in the final quarter of last year in figures released earlier this morning. According to the Office for National Statistics, December saw GDP growth of 1.2%m/m as the second lockdown in England was replaced with local tiered restrictions. For Q4 as a whole, UK GDP increased by 1.0%q/q, more than Bank of England estimates for about a half-point gain. Although Q4 growth was markedly slower than the 16.1% surge in Q3, it nevertheless remained positive, as businesses and households adapted better to Covid-19 restrictions.
Looking ahead, the BoE’s new assessment of economic prospects indicated that it now expects the economy to contract in Q1 by about 4%, principally as a result of the new national lockdown in the new year. However, in a newspaper article yesterday, BoE Chief Economist Andy Haldane said that the economy is “poised like a coiled spring”. Notwithstanding uncertainties surrounding the evolution of the pandemic (including new strains), growth is forecast to bounce back strongly later in the year, helped by the release of involuntary savings that has been built up. The BoE projects the level of output to return to pre-Covid levels by the first quarter of next year.
The only other noteworthy data release today is the University of Michigan consumer sentiment survey for February. US consumer sentiment fell to 79.0 in January, but tentative signs of improvement in the labour market and hopes for fiscal stimulus measures (politicians are still discussing it) may result in an improvement this month. Look for a modest rise to 80.5, keeping it above last spring’s lows, although sentiment remains below pre-pandemic levels.
G10 FX Options Expiries for 10AM New York Cut
EUR/USD: $1.2000-05(E1.0bln), $1.2040-50(E550mln), $1.2060-70(E751mln), $1.2095-00(E573mln), $1.2110-25(E1.3bln), $1.2165-80(E1.8bln), $1.2195-10(E899mln), $1.2250-55(E538mln)
USD/JPY: Y103.00-05($737mln), Y103.50-60($1.3bln), Y103.85-90($768mln), Y104.00-20($1.6bln), Y104.50($512mln), Y104.85-105.00($3.7bln), Y105.25-35($840mln), Y105.40-50($655mln), Y106.00-10($2.1bln), Y106.30-35($1.0bln)
GBP/USD: $1.3850(Gbp1.0bln-GBP puts)
EUR/GBP: Gbp0.8700(E607mln-EUR puts)
AUD/USD: $0.7620-30(A$1.1bln), $0.7700-10(A$1.1bln), $0.7720-35(A$1.4bln), $0.7750-70(A$955mln)
USD/CAD: C$1.2675-80($672mln), C$1.2715-25($625mln)
USD/MXN: Mxn20.00($1.1bln-USD puts), Mxn20.30($510mln)
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Larger Option Pipeline
EUR/USD: Feb16 $1.1940-50(E1.2bln), $1.2000(E1.25bln), $1.2200-05(E1.3bln); Feb17 $1.2120-35(E1.5bln), $1.2155-70(E1.1bln); Feb18 $1.2000-10(E1.7bln), $1.2200(E1.3bln)
EUR/GBP: Feb15 Gbp0.8800-10(E1.0bln-EUR puts)
AUD/USD: Feb17 $0.7615-25(A$1.2bln); Feb18 $0.7400(A$1.2bln)
USD/CNY: Feb18 Cny6.35($1.8bln), Cny6.45($1.1bln), Cny6.50($1.2bln); Feb19 Cny6.37($1.3bln), Cny6.45($1.9bln)
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 increasing through into the 1.3900 with increasing offers through any move higher weak stops likely on a break through the figure level and opening up a repeat of this week's movements. Downside bids light through the 1.3800 level and weak stops now moved up closer to the market and the downside limited in support through to the 1.3700 areas before stronger bids appearing through and into the 1.3650 area to increase further into the 1.3600 level.
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 stronger bids through the 104.20-103.80 area will likely see weak stops however, strong bids are likely to appear on any test of the 103.50 area and continuing through to the 103.00 level, Topside offers light through the 105.00 level and increasing into the 105.40-60 area however, strong resistance remains in the 105.80-106.00 level with congestion likely to continue through the 106.70-107.00 areas
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!