Daily Market Outlook, March 4, 2021
Asian equity markets are lower this morning after a decline on Wall Street yesterday which reports suggest were promoted by rise in US Treasury yields. The US Senate delayed the start of the debate on the Biden Administration’s $1.9trn fiscal stimulus bill until at least Thursday, potentially delaying a final vote.
Yesterday’s UK budget extended most current economic support measures but also pointed to tax increases ahead. The EU has threatened legal action after the UK government unilaterally extended the grace period for initiating checks on goods exports to Northern Ireland.
Today’s UK construction PMI measure is forecast to stage a rebound back above 50 in February after posting its first sub50 reading (an indication that activity is declining) since May. Only housing activity continued to expand and even that was at a slower rate, while both commercial and civil engineering activity fell. However, as the construction sector is less directly impacted by ongoing lockdown restrictions, look for a pickup to 51.0. Also of interest will be whether the survey identifies the same sort of issues with input cost rises and supply chain difficulties that appear to be having a significant impact on manufacturing.
In the Eurozone, January retail sales are expected to be down sharply reflecting the ongoing impact of restrictions. Consensus expectations are for a 1.2% monthly fall but, as Germany posted a larger drop of 4.5%, there may be downside risks to that forecast. The Eurozone unemployment rate is expected to be unchanged at 8.3% in January. In the US, weekly initial jobless claims will provide insight on the state of the labour market ahead of tomorrow ’s monthly report for February. Last week the numbers surprised on the downside but that may reflect temporary weather-related disruptions, and in general recent releases have pointed to sluggish employment growth at best. Nevertheless, given signs that US economic growth is accelerating, the jobs market may now start to pick up. Already released durable goods orders suggest a sizable gain in overall US factory orders, look for a 2.1% increase.
US Federal Reserve Chair Powell is scheduled to speak today. In other recent comments he has played down the likelihood of a rapid rebound in inflation and Fed said that US monetary policy is likely to remain very stimulatory for some time. However, he has also seemed to suggest that the recent rise in government bond yields may be a justified reaction to improving economic conditions.
G10 FX Options Expiries for 10AM New York Cut
Larger Option Pipeline
EUR/USD: Mar04 $1.1890-10(E1.2bln)
USD/JPY: Mar04 Y105.60-75($1.6bln); Mar05 Y105.45-60($1.6bln), Y106.40-60($2.0bln-USD puts), Y107.00-05($1.0bln); Mar08 Y104.25-40($2.8bln), Y105.50-55($1.7bln)
AUD/USD: Mar04 $0.7800(A$944mln), $0.7820-25(A$1.4bln-AUD puts)
AUD/NZD: Mar11 N$1.0730(A$1.7bln-NZD puts)
USD/CAD: Mar05 C$1.2500-20($1.0bln), C$1.2620($1.1bln)
USD/CNY: Mar08 Cny6.45($1.5bln)
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
Flow reports suggest topside offers 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 into the 1.2000 area with weak stops likely on a move through to the 1.1980 area congestion around the sentimental 1.1950 area before stronger bids are likely into the 1.1900 levels.
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 downside bids into the 1.3850 area with likely weak stops on a move through before stronger bids likely into the 1.3800 level and increasing congestion possible to the 1.3750 area before weakness reappears to the downside, topside offer light through the 1.4000 with limited sentimental offers before weak stops appear and the market likely to be weak through to close to 1.4100 where the market sees stronger offers.
USDJPY Bias: Bullish above 104.50 targeting 107
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
Flow reports suggest topside offers continue through to the 107.20 level with weak stops possible on a breakthrough the level and limited offers through to the 107.40-60 area before opening to stronger offers through the 107.80 area possibly extending through the figure level and strong option interest. Downside bids light through to the 106.50 area with light congestion before weakness appears to the 106.00 level a little stronger bid with weak stops on a move through the 105.80 before stronger bids appear through the 105.50 level increasing to the 105.00 area.
AUDUSD Bias: Bullish above .7560 bullish targeting .8200
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 downside bids into the 0.7700 area and likely to be strong however, weak stops through the 0.7680 area with the market likely only to open a short distance before stronger bids again appear and the market struggles for any further downside movement, Topside offers light through the 78 cents level with weak stops likely above the level and the 79 cents level then likely to open quickly and very little to curb the push.
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!