Daily Market Outlook, March 24, 2021
Asian equity markets are again mostly down this morning with a number sharply lower amidst concerns about a ‘third wave’ of Covid-19. EU officials have said that the European Commission will today consider extending its powers to potentially block exports of the Covid-19 vaccine to the UK and other countries with higher vaccination rates. Treasury Secretary Yellen said yesterday that the US economy remained in crisis from the pandemic. President Biden claimed that 100 million Americans will receive new relief payments by the end of today.
Annual UK CPI inflation unexpectedly fell sharply to 0.4% in February from 0.7% in January, meaning that it is still more than 1% point below the 2.0% target. Core inflation also moved down to 0.9% from 1.4% in January. Clothing and footwear prices seem to account for much of the downside surprise, possibly reflecting unusual patterns as stores stayed shut during lockdown. Inflation is expected to pick up sharply from April, reflecting the impact of higher energy prices. However, some of the policy decisions announced in the Budget may help offset the near-term rise.
Today’s flash PMI surveys for March are expected to provide evidence that economic activity in the UK is stronger than in the Eurozone. Look for the UK services PMI to rise to 50.5, which would be a return to growth territory for the first time since October, helped by the impact of schools reopening. The UK manufacturing PMI may slip modestly but is still forecast to hold well above the 50 expansion level at 54.0. However, the detail is expected to show supply chain issues and rising costs as an ongoing issue.
In contrast to the UK expect the Eurozone services PMI to fall slightly to 45.7 leaving it below the key 50 level for a seventh successive month. Manufacturing activity, however, has been less affected by containment measures and we forecast its PMI reading to still be strong at 57.0.
In the US, the PMIs are less closely watched by markets than the longer-established ISM survey. However, they are timelier. This month’s readings are predicted to show both manufacturing and services indices holding well above the 50 level. February durables goods orders are forecast to post another solid rise.
US Federal Reserve Chair Powell and Treasury Secretary will testify to Congress for a second successive day about the programmes to support the economy. Yesterday’s testimony provided little new information as both emphasised that policy needed to remain stimulatory against an uncertain background. A number of other Fed policymakers are also scheduled to speak..
G10 FX Options Expiries for 10AM New York Cut
(Hedging effect can often draw spot toward strikes pre expiry if nearby)
EUR/USD: 1.1800 (320M), 1.1960-75 (732M), 1.2000-10 (615M)
EUR/NOK: 10.20 (850M). AUD/USD: 0.7710 (500M)
USD/JPY: 108.00 (1.4BLN), 108.45-50 (600M)
Technical & Trade Views
EURUSD Bias: Bullish above 1.20 bearish below
EURUSD From a technical and trading perspective, the failure to recapture 1.20 on the upside leaves the 1.1830 lows exposed, through here bears will press for a test of the yearly pivot at 1.1720.
Flow reports suggest topside offers weak through to the 1.1940-60 area with stronger offers then increasing through to the 1.2000 level with weak stops through the level and stronger offers into the 1.2050 level. downside bids light through to the 1.1800 area with weak stops through the 1.1780 level before stronger bids appear through the 1.1750 level and increase on a test into the 1.1720 level.
GBPUSD Bias: Bullish above 1.3750 bearish below
GBPUSD From a technical and trading perspective, a retest of 1.3750 pivotal trend support has seen fresh demand develop as this level continues to attract support bulls will target a retest of cycle highs en route to 1.44 upside objective. UPDATE... the loss of 1.3750 is a significant bearish development opening a move to test a corrective equality objective 1.3550
Flow reports suggest light bids through the 1.3700 level with weak stops on a dip through and then stronger bids appearing on a move through to the 1.3650 area with some limited buying through the 1.3600 level before weak congestion appear on further downside weakness, Topside offers light through to the 1.3800 area with weak stops on a move through the level and opening the market to a short squeeze higher through 1.3900 before stronger offers start to appear
USDJPY Bias: Bullish above 107.30 targeting 109.85
USDJPY From a technical and trading perspective, as 108.30 continues to attract demand bulls will target a test of pivotal 109.85 ahead of the yearly R1 pivot at 110.
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 .8200
AUDUSD From a technical and trading perspective, as .7820 contains upside attempts there is potential for a head & shoulders pattern to develop, a loss of pivotal .7560 would open a move to test trend support at .7400 next
Flow reports suggest topside offers through to the 0.7840-60 area and then increasing offers onwards through 0.7900, with the offers likely to continue through to the 0.7950 area and likely increasing resistance through to the 0.8000 levels, 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!