Investment Bank Outlook 17-08-2021
CIBC
FX Flows
RBA said the board is prepared to act in response to further bad news. The August meeting minutes showed that recent outbreaks from Delta variant and extended lockdowns has interrupted the economic recovery, near-term outlook is highly uncertain. The minutes shook AUDUSD down to 0.7304. Our trader Jon said it was also stoploss triggered that got the pair down. In my previous notes, I have said corporate bids are scattered below 0.7310. I think it is just matter of time before we visit 0.7290. What’s very obvious is AUDJPY, the cross is looking very awful.
New Zealand reported first positive case of Covid-19 since February. The headline caused the NZDUSD move from 0.7017 to 0.6980. This headline took AUDUSD to 0.7302. It is very obvious that market is short AUDNZD, the cross popped on the new Covid-19 case from 1.0420 to 1.0468.
Not a big deal in USDJPY, narrow range in Asia. I am told that Japanese retail day traders have turned to long USD past 24 hours and also, Japanese importers are looking to purchase USD. Not a lot to talk about in terms of option strikes, our traders suggest range for the day 109.00-50.
Weak AUDUSD pushed the USDCAD to 1.2594. We should see some resistance around 1.2600. There are near $1bn of 1.2580 and 1.2600 option strikes due this week. Oil futures contracts are steady, should distract USD buyers for now. September contract near $67.50, October around $67.27.
On the snap election, our macro strategist Bipan said there is not much impact on the currency. There isn’t much of a delta for policy differences between the major political parties, that Canada’s reputation for fiscal prudence not a risk yet no matter what scenario. Bipan does not see risk of outflows.
GBPJPY traded lower, risk off from the moment Tokyo opened. GBPUSD intraday resistance atop 1.3870 and we should see some support near the 200-day SMA 1.3785.
Data:
Later we will have the US retail sales which is likely eased off in July as a swing in spending towards services could have curtailed demand for goods. Fed Res Chair Powell will host a town hall with educators tonight, there will be Q&A and could potentially acting as a precursor to the Jackson Hole symposium next week.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.