Daily Market Outlook, February 2, 2021
Asian equity markets are up for the second day in a row as a ‘risk on’ mood returns to markets, following last week’s sell-off. Hopes of further US fiscal stimulus are helping boost markets. White House officials were reported as having met with Republican Senators to discuss a smaller compromise stimulus package. Meanwhile, the lower chamber of Congress will probably vote on President Biden’s $1.9bn package this week. The Australian central bank left interest rates unchanged at its latest policy update but announced a further A$100bn of asset purchases from April when the current tranche ends.
The UK applied to join an 11 member Trans-Pacific trading bloc on Monday. Meanwhile, UK PM Johnson said the country is starting to see signs of a flattening and maybe a falling off in infection rates and hospitalisations. He has directed ministers to ramp up preparations for reopening schools. Chancellor Sunak has ruled out raising the rates for income tax, national insurance or value-added tax to strengthen public finances.
Eurozone GDP rose sharply in Q3 of last year as lockdown restrictions were eased. However, it seems likely that output will have declined in Q4 as restrictions were re-imposed. Releases last Friday for France, Germany and Spain were better than expected as Q4 GDP only fell by 1.3% in France and unexpectedly rose by 0.1% in Germany and by 0.4% in Spain. Nevertheless, look for a decline of 0.7% for the Eurozone as a whole, which would be the third fall out of the last four quarters. Moreover, with severe restrictions seemingly likely to continue to be in place for most of Q1, another quarterly fall in output seems likely. Ahead of the Eurozone numbers, Q4 Italian data are expected to show a 2% quarterly decline.
The rest of today’s data calendar is very sparse. French CPI for January is predicted to reveal a modest rise in inflation. In the UK there is no data of note today. Markets are waiting for Thursday’s monetary policy update from the Bank of England. Ahead of that, the focus is likely to be on further information about the vaccine rollout.
There will be no BoE speakers this week prior to Thursday’s announcement. However, today is scheduled to see speeches from both European Central Bank and US Federal Reserve policymakers. For the ECB, De Cos will talk about the impact of Covid-19 on the European economy. In the US, Cleveland Fed President Mester and Dallas Fed President Kaplan will speak. However, neither has a vote on monetary policy this year.
G10 FX Options Expiries for 10AM New York Cut
OPTIONS: Expiries for Feb02 NY cut 1000ET (Source DTCC)
EUR/USD: $1.1950-65(E653mln), $1.2050(E603mln), $1.2150(E1.4bln-EUR puts), $1.2200(E536mln), $1.2220(E563mln),$1.2290-1.2300(E1.1bln)
USD/JPY: Y106.00($530mln)
AUD/USD: $0.7600(A$1.4bln, A$1.29bln of AUD puts), $0.7650(A$624mln-AUD puts), $0.7685(A$1.1bln-AUD puts), $0.7735(A$592mln-AUD puts), $0.7845-50(A$604mln-AUD puts)
AUD/NZD: N$1.0665-90(A$850mln-AUD puts)
USD/CNY: Cny6.55($1.1bln)
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Larger Option Pipeline
EUR/USD: Feb03 $1.2070-80(E1.2bln-EUR puts)
USD/JPY: Feb04 Y104.30-40($1.55bln), Y105.00($1.1bln); Feb05 Y103.00($1.0bln-USD puts), Y104.95-105.00($1.0bln)
USD/CAD: Feb09 C$1.2960($1.2bln)
USD/CNY: Feb08 Cny6.45($1.5bln); Feb09 Cny6.50($2.1bln), Cny6.55($1.2bln)
USD/MXN: Feb04 Mxn20.50($1.8bln)
Technical & Trade Views
EURUSD Bias: Bullish above 1.20 targeting 1.24
EURUSD From a technical and trading perspective, as demand persists above 1.20 bulls will be targeting a retest of prior cycle highs en-route to a test of offers and stops above 1.24. Only a closing breach of 1.20 would concern the bullish thesis opening a move to test the equality objective at 1.19 ahead of the yearly pivot back towards 1.17
Flow reports suggest downside bids into the 1.2050 area with increasing bids into the 1.2000 level with weak stops on any move through into the 1.1980 level with break out stops a possibility, Topside offers through the 1.2100 level light with the topside likely to remain weak through to the 1.2180 area before some stiffness appears through to the 1.2200 level with very little in stops until 1.2220 level and weak stops easily absorbed in stronger resistance
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 through the 1.3750 area and increasing on any move towards the 1.3800 level weak stops on a break through opens up a larger rise with limited stops through the 1.3850 area but opening the 1.41/1.42 over time. Downside bids light through to the 1.3650 area and stronger bids currently being tested with weak stops likely on a dip through light for the moment and stronger bids into the 1.3600 level and increasing on any move to the 1.3550 area.
USDJPY Bias: Bullish above 104 targeting 105.50
USDJPY From a technical and trading perspective, as 104 acts as support look for a test of 105.50 from here watch for bearish reversal patterns to suggest a resumption of the dominant downtrend
Flow reports suggest topside offers through the 105.00-20 area with possible weak stops through the level before stronger offers start to appear in a congestive move through into the 105.60 level and after a little bit of weakness increases through to the 106.00 level with stronger stops above the 106.20-30 area. Downside bids light through to the 104.50 level with bids beginning to fill the market around the level and stronger 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. Note .7800 is an interim measured move upside objective that may prompt a profit taking pullback before the uptrend resumes from.7550 trend support
Flow reports suggest stronger bids likely just below through into the 0.7580 area before weak stops appear opening the market a little through to the 0.7550 area with stronger bids again and possibly continue through to the 0.7500 area. Topside offers light through the 77 cents level and likely to continue through to the 0.7750 with very little interference however beyond that level is likely to see stronger offers the closer the market gets to the 78 cents area and continuing through to the 0.7820 area before stops appear and open a higher move over the next couple of days
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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!