Next 24 hours: Inflation data in the spotlight
Today’s report: Things looking up......but
Investors are doing their best to feel good about China’s national team stepping in to buy stocks and the OECD upgrading its outlook for global growth. We’ve since seen a healthy rebound in risk appetite, with stocks back up and the US Dollar under pressure again.
Wake-up call
- soft growth
- covid cases
- Profit taking
- SNB policy
- confidence reads
- Oil weakness
- risk appetite
- Stocks vulnerable
- Dealers report
- Bigger money
- risk appetite
Peformance chart: 30 Day Performance vs. US dollar (%)
Suggested reading
- GameStop Soaring Again, But Why Aren’t Its Bonds?, B. Chappatta, Bloomberg (March 9, 2021)
- How the Pandemic has Undermined Our Sense of Risk, A. Schrager, City Journal (March 8, 2021)
Chart talk: Technical & fundamental highlights
Choose pair:
EURUSD – technical overview
The market is in the process of correcting following an impressive run to its highest levels since April 2018. There is room for additional downside over the coming sessions, though ultimately, the overall structure remains constructive and the market will be looking for that next higher low ahead of a bullish continuation. Only a break back below 1.1500 would negate the outlook.EURUSD – fundamental overview
The Euro managed to find some demand on Tuesday, with the single currency shrugging off worse than expected growth numbers, instead focusing on the uptick in global sentiment around China activity to support markets, and the OECD upgrade of global growth. Looking ahead, US inflation data is the only notable standout on the Wednesday calendar.EURUSD - Technical charts in detail
GBPUSD – technical overview
Technical studies are in the process of unwinding from stretched levels after the push to fresh multi-month highs. This leaves room for additional setbacks over the coming sessions, before the market considers a meaningful bullish continuation towards a retest of the 2018 high. But look for setbacks to now be very well supported into the 1.3500 area.GBPUSD – fundamental overview
UK covid cases are at the lowest level in 5 months and this along with an uptick in global sentiment and renewed broad based selling of the US Dollar helped to support the Pound on Tuesday. Looking ahead, US inflation data is the only notable standout on the Wednesday calendar.USDJPY – technical overview
The major pair remains confined to a massive multi-year triangle and it's going to take a clear break above or below the triangle to determine the direction of the next major move. We have seen a contraction in range as the market reaches the apex of the triangle, which suggests a breakout is coming soon. But until the triangle is broken, look to continue to see the market play the range within the triangle.USDJPY – fundamental overview
Data out of Japan hasn't been great this week, as reflected through household spending and GDP, though this really hasn't factored into Yen price action. It seems most of the latest demand for the Yen is on profit taking from shorts and renewed broad based US Dollar demand. Looking ahead, US inflation data is the only notable standout on the Wednesday calendar.EURCHF – technical overview
Lots of sideways price action here, with no clear directional insight. For the most part, price action has been confined between 1.0600 and 1.1200, and it will take a weekly close above or below for an indication of the next big move.EURCHF – fundamental overview
The SNB remains uncomfortable with Franc appreciation and continues to remind the market it will need to be careful about any attempts at trying to force an appreciation in the currency. But the SNB will also need to be careful right now, as its strategy to weaken the Franc is facing headwinds from a less certain global outlook. Any signs of renewed risk liquidation will likely invite a very large wave of demand for the Franc that will put the SNB in the more challenging position of needing to back up its talk with action, that ultimately, may not prove to be as effective as it once was, given where we're at in the monetary policy cycle.AUDUSD – technical overview
Technical studies have turned up in recent months, after the market traded down to its lowest levels since 2003 in 2020. There is evidence of a longer-term bottom following the latest push back through 0.7000, though at this stage, there is risk for a deeper pullback to allow for shorter term studies to unwind. Setbacks should now be well supported ahead of 0.7500.Solid data out of Australia this week by way of business confidence and business conditions has helped to prop Aussie, along with the rebound in risk sentiment and renewed downside pressure on the Buck. Looking ahead, US inflation data is the only notable standout on the Wednesday calendar.
USDCAD – technical overview
Has been in major decline since topping out in 2021 above 1.4600. At this stage, with the decline now well extended, the market is likely to find solid support into the 1.2500 area ahead of a resumption of gains. Ultimately, only a weekly close below 1.2500 would suggest otherwise. Back above 1.3000 will strengthen the outlook.USDCAD – fundamental overview
The Canadian Dollar wasn't able to benefit as much as its peers on Tuesday, with the currency running into resistance in the form of downside pressure in the price of oil. Looking ahead, we get the Bank of Canada policy decision and US inflation data.NZDUSD – technical overview
There's a case to be made for a meaningful bottom, after the market bottomed out in 2020. The recent break back above 0.7000 further strengthens this outlook, with the market back in uptrend mode as per the weekly Ichimoku cloud and focused on pushing back towards longer-term resistance in the 0.7500 area. Any setbacks are expected to be well supported ahead of 0.7000.NZDUSD – fundamental overview
Most of the price action in the New Zealand Dollar has revolved around macro themes. We've seen some demand into the mid-week on the back of a resurgence in risk appetite and concurrent round of broad based US Dollar weakness. Looking ahead, US inflation data is the only notable standout on the Wednesday calendar.US SPX 500 – technical overview
Longer-term technical studies are looking quite exhausted and the market is showing signs of wanting to roll over after racing to another record high. Look for rallies to be well capped ahead of 4000, with a break back below 3600 to strengthen the outlook.US SPX 500 – fundamental overview
We're trading just off fresh record highs, and yet, with so little room for additional central bank accommodation, given an already depressed interest rate environment, the prospect for sustainable runs to the topside on easy money policy incentives and government stimulus, should no longer be as enticing to investors. Meanwhile, ongoing worry associated with coronavirus fallout should weigh more heavily on investor sentiment in 2021.GOLD (SPOT) – technical overview
The 2019 breakout above the 2016 high at 1375 was a significant development, opening the door for fresh record highs and an acceleration beyond the next major psychological barrier at 2000. Setbacks should now be well supported above 1600. Longer-term technical studies are however in the process of unwinding, with the market in search of a higher low ahead of a bullish continuation.GOLD (SPOT) – fundamental overview
The yellow metal continues to be well supported on dips with solid demand from medium and longer-term accounts. These players are more concerned about exhausted monetary policy, extended global equities, and coronavirus fallout. All of this should keep the commodity well supported, with many market participants also fleeing to the hard asset as the grand dichotomy of record high equities and record low yields comes to an unnerving climax.BTCUSD – technical overview
The short-term outlook should be less constructive in the aftermath of this latest wave of parabolic price action to fresh record highs through $55,000. Key indicators are unwinding from extreme overbought territory across multiple timeframes, warning of a period of deeper correction and consolidation before any meaningful bullish continuation can be expected. At the same time, look for setbacks to now be well supported into the $35,000 - $40,000 area.BTCUSD – fundamental overview
With so much of the good news priced in around all of the new adoption from major players in the traditional markets, and with the market as extended as it was in early 2021, a major period of pullback was fully anticipated in Q1. And while there is certainly a place for bitcoin to benefit in periods of risk off given its store of value draw, at the moment, the crypto asset is still vulnerable to periods of risk liquidation in US equities. We do however see plenty of demand from larger players into dips, with the $35,000-$40,000 seen as an attractive area to build exposure.BTCUSD - Technical charts in detail
ETHUSD – technical overview
The market has entered a period of overdue correction following a parabolic run to fresh record highs through 2,000 in February. There is room for additional declines, potentially back into the 1,000 area, before the market looks for that next higher low and a bullish continuation.ETHUSD – fundamental overview
Ether is in the process of an overdue price correction after an explosive start to 2021 that resulted in fresh record highs beyond $2,000. There were already signs of overvaluation in the defi space and this in conjunction with a deterioration in global risk sentiment have been behind a lot of this downside pressure. Still, we believe there will be plenty of demand for ether down into the $1,000 area.