Core PCE: Previewing the planet’s new most important economic release

There could also be upside risks to the present week’s core PCE report as higher prices start to become psychologically entrenched…
You can’t get through the front page of any business newspaper without reading about the risks of rising inflation, which trend has only become more dramatic since last week’s hawkish surprise from the Federal Reserve System . With the financial institution essentially telegraphing that it’s looking to announce an idea for tapering asset purchases within the next few months, the market is laser-focused on the Fed’s preferred inflation measure: Core Personal Consumption Expenditures (PCE).

According to the Bureau of Economic Analysis, “the core PCE price level measures the costs paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends.” Unlike the more widely-followed consumer price level (CPI) of inflation, core PCE measures price changes for all households and nonprofit institutions serving households, not just urban households, making a broader measure for the country as an entire .

Last month’s core PCE report came in at 0.7% m/m and three .1% y/y, marking the very best year-over-year rate in nearly 30 years. For Friday’s release, traders and economists expect a 0.6% m/m rise, which might raise the y/y rate of inflation to three .4%.

While most economists and therefore the majority of the Federal Reserve System still believe any increases in inflation are going to be transitory, that argument will become more tenuous if hotter-than-expected inflation readings still compile . Notably, this month’s University of Michigan Consumer Sentiment survey showed that buyers expect prices to rise 4.6% over subsequent year and three .0% on the average over subsequent five years, suggesting that there could also be upside risks to the present week’s core PCE report as higher prices start to become psychologically entrenched.

Technical view: EUR/USD

With investors depending on a widening policy divergence between the Fed and therefore the European financial institution , EUR/USD are going to be a pair worth watching closely round the core PCE report release. The world’s most widely-traded currency pair is trading higher on the week after dropping to a two-month low last week, but the recovery looks more sort of a counter-trend correction than a sustainable trend change at now .

As long as prices remain below previous-support-turned-resistance within the 1.20 zone and therefore the 4-hour RSI indicator remains in bearish territory (below 60), readers can view the present pattern as a bearish flag pattern, signaling a possible resumption of the recent downtrend with potential for a move to 1.1850 or 1.1800 within the coming days.

European Open: GBP/CHF Rises to 9-week High Ahead of UK Flash PMI

With PMI data released for France, Germany, eurozone, UK and US, this places GBP, EUR and USD pairs into focus for news traders.
APAC flash PMIs off to a soft start
A lift of coronavirus restrictions saw UK business confidence rise to its highest level since 2016, rising 21 percentage points to 11. Furthermore, employers confidence also rose to a near-5-year high of 29. The pound remained flat yet firm overnight, before flash PMI data today.

Flash PMI data for Europe and therefore the US are the most data points today within the calendar. Data from the APAC region came in softer than expected, with Australian manufacturing falling to 58.54 (64.4 prior) and repair right down to 56 (58 prior). This dragged the composite right down to 56.1 from 58.0. it had been an identical case for Japan’s manufacturing sector which expanded at the slower pace of 51.5 compared with 52.3 expected down from 53.

The FTSE 100 rose 0.39% yesterday to a two-day high and has recouped around half Friday’s bearish range. it’s the second strongest performer week so far at 1.03%, with DAX taking top place at 1.22%. an opportunity above 7100 also takes it back above the 10-day eMA, and we’d wish to see prices hold above the 7073.55 low to retain an intraday bullish bias.

FTSE 350: Market Internals
FTSE 350: 4064.49 (0.39%) 22 June 2021

255 (72.65%) stocks advanced and 80 (22.79%) declined
14 stocks rose to a replacement 52-week high, 2 fell to new lows
85.19% of stocks closed above their 200-day average
17.09% of stocks closed above their 20-day average

  • 7.20% – Sirius land Ltd (SRET.L)
  • 6.71% – Travis Perkins PLC (TPK.L)
  • 6.17% – Beazley PLC (BEZG.L)

-3.37% – Network International Holdings PLC (NETW.L)
-3.07% – Capita PLC (CPI.L)
-2.64% – Hargreaves Lansdown PLC (HRGV.L)

Forex: Aussie trade surplus hits a record
Preliminary trade data for Australia saw exports rise 11% and take its trade surplus to a replacement record of A$13.3 billion. 42% of exports were sent China’s way, and ore accounted for 18% of exports last month. AUD/NZD pared around ¾ of yesterday’s losses after probing the weekly low. It nudged its way higher against the yen, euro, pound, Canadian dollar and Swiss franc . AUD/USD is currently -0.04% lower against the dollar. However, with an epidemic in Sydney behind 120 exposure venues, talk about another lockdown is ramping up with QLD following VIC’s move to shut their border with NSW.

The US dollar was the strongest major overnight, rising against all major currencies whilst CHF and NZD were the weakest. GBP/JPY is resting beneath yesterday’s high after reaching out upside target, therefore the UK’s PMI release might be a make or break for bullish momentum over the near term.

GBP/CHF has risen to the highest if its 9-week range before the ecu open, which places 1.2820 because the main focus this session. Over this era of your time , the weekly chart has mostly held above its 200-week eMA and is now trying to accelerate faraway from the 10-week eMA. So there’s a case for a bullish breakout on the upper timeframes, although whether that happens today is yet to be seen.

The four-hour chart shows a possible bearish wedge (not textbook, but its there in spirit) which might take prices back towards 1.2700 is confirmed. The weekly R1 pivot is additionally capping as resistance, so another dip lower is out of the question. But if we will see an opportunity or a hourly close above 1.2820 then it could signal a bullish breakout from its 9-week range and convey

Commodities drift higher after Powell’s testimony:
Commodities were higher overnight after Jerome Powell kept to his transitory inflation script and pledged to stay rates low.

Copper prices rose 1% overnight and are now testing the broken trendline outline in today’s Asian open report, note that the weekly pivot is around 4.85 which leaves a transparent line within the sand for bullish or bearish setups today.

Gold futures rose 0.25% although remains within yesterday’s bearish range, and silver futures are currently 0.65% higher.

Brent futures are probing yesterday’s high although we’d got to see an opportunity above 75.58 (April 2019 high) before assuming resumption of its bullish trend. Prices gave back earlier gains yesterday after OPEC+ talked about raising production.

Is USD/JPY ready to break into near territory?

USD/JPY appears able to bust higher above the March highs of 110.97
In early June 2015, USD/JPY hit a high of 125.86. almost 1 year later, price had fallen to a coffee of 98.79! USD/JPY has been oscillating within that range since then, forming lower highs along the way. At the start of the pandemic in February and March 2020, USD/JPY tried to push above the downward sloping trendline from the highs but failed whenever . That is, until March of this year. In March, USD/JPY finally closed above the trendline. Price pulled back to retest the trendline and therefore the RSI moved from overbought conditions to neutral. Now, USD/JPY appears able to bust higher above the March highs of 110.97.

On a daily timeframe, USD/JPY had continued moving lower since the pandemic highs and eventually narrowed towards the apex of a descending wedge (green). It then formed a coffee at 102.59 on January 6th (price did not remove the spike low during the coronavirus volatility in March 2020). USD/JPY continued to maneuver higher (along with the US Dollar Index) and broke above the future weekly trendline (red). Price traded as high as 110.97 before correcting. Notice that the RSI had been overbought for two weeks before reaching those highs, a sign that USD/JPY may are ready for a pullback.

USD/JPY then pulled back to the 38.2% Fibonacci retracement level from the January 6th lows to the March 31st highs, near 107.73, however did not close below it. USD/JPY also remained above the long-term trendline from the weekly chart. Price has been drifting higher since and appears to be able to remove the 110.97 level from late March!

Everything you ought to realize the japanese Yen

On a 240-minute timeframe, USD/JPY has been moving higher along a trendline off the January 6th lows green line) and is testing the March 31st highs. If price moves above 110.97, subsequent resistance level isn’t until 112.22. which is that the high from February 2020 (see daily). Support is below at the upward sloping trendline near 109.85. Below there, price can fall to horizontal support near 108.16, before the April 23rd lows of 107.48.

Note that the BOJ meets on Friday. Revisions to forecasts are expected, however nothing market moving. Also still watch the parade of Fed speakers in the week for clues on when the Fed may announce tapering. As of the time of this writing, Fed Chairman Powell is speaking, however markets aren’t reacting to any of his comments.

What is market liquidity? Definition, calculation, and examples

Market liquidity may be a key component of a functioning financial market, because it determines how briskly trades are often executed at the well-liked price. Discover what market liquidity is, how it’s measured and what the foremost liquid markets are.
What is meant by market liquidity?
Market liquidity is that the extent to which an asset are often bought or sold at the present market value , without impacting its value. it’s simply how briskly you’ll exchange something for cash. Liquidity applies to any financial market, from stocks to precious metals, but some are more liquid than others.

When people mention liquidity, they’re usually either pertaining to market liquidity or accounting liquidity.

Market liquidity – this is often the measure of how efficiently a market (such because the stock exchange or forex market) enables participants to shop for and sell assets at stable prices. it’ll be characterised by high trading volumes and an in depth bid-ask spread
Accounting liquidity – this is often a term wont to describe whether a corporation can meet its financial obligations with the assets available to them. This metric is usually employed by investors and analysts to work out how strong a company’s record is
What causes market liquidity?
Market liquidity is caused by trading activity. When there are high levels of trading activity – meaning there’s both supply of, and demand for, the asset in question – individuals are going to be ready to easily complete transactions. Finding someone willing to require the opposite side of an exchange is simpler , so there’ll be little effect on the market value .

In a market with low activity, one sale can take tons longer to finish thanks to a scarcity of willing buyers and sellers. Once a transaction has taken place, it can have a way larger impact on the market value to account for the shortage of willing participants.

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How to measure liquidity within the market
Market liquidity is difficult to live because it doesn’t have a hard and fast value. But there are a couple of indicators which will be wont to assess how liquid a market is. These are:

Trading volume – this is often a measure of the entire number of a given asset that was traded over a particular period. High volume typically mean more liquidity and better execution, while low volume means there’ll be fewer counterparties available
Bid/ask spreads – the difference between the costs buyers and sellers are willing to simply accept will lessen in liquid markets and widen in illiquid markets. When the spread within the underlying market is lower, it means your provider are going to be ready to charge you lower spreads to execute your trade
Turnover ratios – share turnover may be a means of calculating liquidity in equity markets by dividing the entire number of shares traded during a period by the typical number of outstanding shares for an equivalent period. In theory, the upper the share turnover, the more liquid the market
Accounting liquidity is measured with specific ratios. The three commonest are:

Current ratio – the amount of current assets divided by current liabilities
Quick ratio – the entire sum of money , assets and equities divided by liabilities
Cash ratio – the entire amount of money divided by liabilities
Is market liquidity good or bad?
Liquidity may be a excellent thing. Financial markets need enough market liquidity to make sure that traders can efficiently exchange assets and investment instruments. High levels of liquidity will make it easier to open and shut positions quickly and cause a tighter bid-ask spread. These favourable conditions then only increase the amount of active market participants, which successively adds to liquidity.

When a market isn’t liquid, it becomes difficult to shop for or sell goods, so you’ll either need to wait an extended time for a counterparty to return along or hand over on your transaction altogether. In an illiquid market, buyers and sellers cannot agree on the worth of the market, which usually results in wider bid-ask spreads and better execution costs.

What are the foremost liquid markets?
The most liquid market is cash because it can instantly be converted into other assets. Meanwhile, markets that deal in physical assets are less liquid – like land and art – because the sale process takes for much longer .

Here are a number of the opposite most liquid markets:

Forex – the forex market is assumed of because the most liquid market within the world. Major pairs are traded by governments, banks, and even individuals when they’re happening holiday. Unlike other highly liquid markets, the forex market doesn’t have stable pricing. The forex market is legendary for its volatility, which is what makes it so exciting to traders. Minor pairs and exotic pairs are less well traded, which makes them less liquid
Stocks – the stock exchange as an entire varies in terms of liquidity, with large-cap stocks being generally more liquid than small caps. These more liquid shares will have more stable prices and are likely to possess a better number of active traders willing to shop for and sell them
Commodities – each commodity market will have different levels of liquidity. Oil is that the most highly traded commodity, which usually means it’s a liquid market – although issues like storage shortages are known to steer to liquidity risk when nobody is willing to shop for the commodity.

Bitcoin is Finished? US Dollar says otherwise!

If traders believe that DXY will still act as a number one indicator for Bitcoin, they ought to expect Bitcoin to bounce.
China has been on a rampage trying to crackdown on cryptocurrencies, threatening banks and miners throughout the country. Over this past weekend, China ordered domestic banks and payment platforms to prevent provides services linked to trading of virtual currencies. As a result, Bitcoin has been selling off on fears that way forward for currency might not be Bitcoin, but rather simply digital fiat currencies. However, China isn’t the sole one spreading fear into crypto HODLers. An Elon Musk tweet can send Bitcoin in either direction, counting on how he feels that day. The United States government retrieved ransom Bitcoin, which until now , was thought to be untraceable. additionally , more and more officialdom within the US and round the world are calling for regulation of cryptos (governments always way their piece of your money!).

So, Bitcoin is moving lower. In February, Bitcoin began forming a rounding top formation and reached its all-time high on April 14th at 64895.22, which happened to be an equivalent day because the Coinbase IPO (coincidence?). On May 10th, the cryptocurrency began to unload aggressively and stalled near 30,000. Bitcoin consolidated during a flag pattern from May 10th to June 22nd between 30,066 and 41,341. On June 19th, the 50 Day Moving Average crossed below the 200 Day Moving Average forming a “Death Cross”, which because the name may imply, may be a bearish signal. Today, price broke below the 30,066 lows and therefore the bottom of the flag. The target of a flag pattern is that the length of the flag poll added to the breakdown point from the flag, which during this case targets near 11,500.

If we overlay a chart of DXY (blue line) on a chart of Bitcoin, it appears that the US Dollar Index has been leading BTC since February. Price in DXY formed 3 higher highs before Bitcoin. The US Dollar then began moving lower on March 30th, before the Bitcoin selloff which began in April 14th. DXY bottomed on May 25th and commenced moving higher, with a breakout on June 16th (FOMC). The US Dollar Index traced to the 61.8% Fibonacci retracement level from the March 31st highs to the May 25th lows, near 92.00. If traders expect this relationship to continue, BTC could also be certain an aggressive bounce soon. It’s difficult to work out where BTC may bounce to if it’s following DXY, as we don’t yet know if today’s low goes to be the low to live from. However, if we assume it’s , the 61.8% Fibonacci retracement in Bitcoin from the April 14th highs to today’s lows is near 51,030!

BTC by itself points to a continued selloff to close 11,500. However, the present relationship between US Dollar and Bitcoin points to a bounce to 51,030. Which is right? If traders believe that DXY will still act as a number one indicator for Bitcoin, they ought to expect Bitcoin to bounce. If traders feel the flag pattern may be a more reliable formation, BTC will move lower. Perhaps BTC won’t reach either level. However, if Bullard and Kaplan still be hawkish, while Williams and Powell still be bearish, there’s bound to be good 2-way action within the coming months in both BTC and therefore the US Dollar!

US open: Futures edge higher ahead of Fed Powell’s testimony

After strong gains within the previous session, Wall Street is heading for a quietly positive start with most preferring to remain on the sidelines before Fed Powell’s testimony before Congress.
All eyes to Fed Powell

After solid gains within the previous session, US stocks are pointing to a mildly stronger start as investors weigh up the prospects of further economic process against inflation concerns. Whilst the Dow gained a powerful 1.8% within the previous session trading before Fed Powell’s testimony before Congress today is probably going to be subdued.

In pre-released remarks, Powell once more reassured those inflationary pressures are going to be transitory whilst also expressing optimism surrounding the outlook for the economy. These comments sound familiar but the6y come against a backdrop of a surprise hawkish shift within the Fed seen last week.

The Fed now expects 2 rate of interest hikes before the top of 2023.


Gamestop trades +8.4% pre-market after raising $1.1 billion in an offering of 5 million shares as the troubled computer game retailer cashes in on the surge in its stock price this year.

Torchlight Energy trades 4.1% higher pre-market, adding to 50% gains yesterday because it becomes the newest stock to catch the eye of retail investors.

Where next for the Nasdaq?

The Nasdaq trades above its 50 & 100 sma on the 4 hour chart. It also trades above its month old ascending trendline during a bullish trend. Aftter slipping briefly below the 50 sma within the previous session, the very fact that the Nasdaq has broken back above resistance at 14077 adds to the suggestion that there might be more upside to return . an opportunity above 14209 would bring fresh all time highs. Its worth noting the RSI bearish divergence could suggest that the move higher is running out of steam. 14077 offers support now and a move below 14000 could negate the near term uptrend.

The US Dollar is one the increase , clawing back a number of yesterday’s losses. US Dollar price movement has been volatile since the Fed’s hawkish surprise last week when it suggested that there might be two rate of interest rises in 2023. All eyes are now on Fed Powell for further clues on how transitory the spike in inflation could be .

GBP/USD is paring gains from the previous session. Sterling trades struggling despite the general public sector finances improving. Public sector net borrowing came in at £24.3 billion in May, down from £31.7 billion in April and better than the £26.1 billion forecast. The reopening of the economy means tax receipts have picked up, furlough number have declined and government spending on supporting the economy slowed slightly. Whilst this is often an improvement it’s still the second highest level of net borrowing in May since record began.

GBP/USD -0.3% at 1.3893

EUR/USD -0.2% at 1.1897

Oil eases lower on USD strength

Oil prices are edging lower on Tuesday after booking solid 2% gains within the previous session. Oil rallied following comments from the newly elected Iranian President which suggested that he could put the brakes on the US – Iranian nuclear talks. As a result, the prospect of the US lifting sanctions on Iranian oil and it flooding back to the market faded.

A strong demand outlook continues to under pin the worth of oil as economies reopening and travel picks up. However US Dollar strength is simply taking the sting off demand for the black gold.

API inventory data are going to be focused later after big draws on stocks piles were recorded last week.

US crude trades -0.7% at $72.56

Brent trades -0.6% at $73.73

Top US stocks to watch: Alphabet, GameStop and Plug Power

Alphabet comes under the regulatory spotlight again, GameStop capitalises on the surge in its share price, Plug Power misses expectations, Delta Air Lines plans to rent 1,000 new pilots, Europe orders more Moderna vaccines, and Sanderson Farms might be exploring a purchase .
Regulators within the European Union have launched a fresh investigation into Alphabet’s Google to think about whether its dominance within the digital advertising market is stifling competition by favouring its own online services over that of rival publishers, advertisers and tech firms.

Separately, YouTube is celebrating a win after Europe’s top court ruled that online platforms aren’t responsible for people uploading unauthorised work without copyright unless they fail to require swift action to get rid of it. The court said platforms might be liable if they are doing not make an attempt to introduce new measures to stop infringement of copyright .

‘As currently stands, operators of online platforms don’t , in theory , themselves make a communication to the general public of copyright-protected content illegally posted online by users of these platforms,’ the EU Court of Justice said. ‘However, those operators do make such a communication in breach of copyright where they contribute, beyond merely making those platforms available, to giving access to such content to the general public .’

GameStop said it’s raised $1.12 billion by selling 5 million shares within the ‘at-the-market’ offering because the company capitalises on the surge in its share price to boost funds to fuel its plans to show the business around and make it fit the digital age.

GameStop had told investors back in April that it might issue up to an extra 5 million shares after it raised $551.7 million by issuing 3.5 million shares that month. GameStop shares are up over 1,000% since the beginning of the year and have risen over 18% since it completed the last equity raise.

The news comes at some point after GameStop’s new chief executive Matt Furlong, one among variety of Amazon executives recruited in recent months to spearhead its new strategy, formally took his position on the board of directors.

Plug Power
Hydrogen firm Plug Power missed expectations within the half-moon of its new fiscal year after facing variety of operational challenges that it hopes will abate because the year goes on.

Gross billings rose to $73.7 million from $43.0 million the year before, but that missed the $76.9 million expected by Wall Street. Its pretax loss of $60.7 million was wider than the $37.5 million loss booked the year before and came in much larger than the $44.9 million loss forecast by analysts. It reaffirmed its raised guidance for the full-year.

It was a busy quarter for the corporate , which raised $2 billion from shareholders and secured an extra $1.6 billion from Korean outfit SK Group. It also struck a replacement partnership with Renault and unveiled plans to create the most important green hydrogen production facility within the US in Western ny , where it’ll also build the primary PEM and electrolyzer Gigafactory.

Delta Air Lines
Delta Air Lines is preparing to rent over 1,000 pilots by next summer, consistent with a memo seen by Reuters.

The report said Delta is expecting US leisure visit return to pre-pandemic levels this month which business travel continues to recover, paving the way for it to report a pretax profit within the last half of 2021. The note sent to employees by chief of operations John Laughter said it had been ‘remarkable’ that Delta Air Lines was getting to return to profit in June, just 15 months after suffering the most important crisis to hit the aviation industry in history.

Notably, the news comes only one day after it had been reported that American Airlines had to cancel many flights over the weekend and trim its flight schedule in July by 1% due to a shortage of staff also as increased maintenance and weather-related problems.

The European Commission has exercised an choice to buy 150 million further doses of Moderna’s coronavirus vaccine and is functioning on a replacement deal to secure supplies for ‘new generation vaccines’ designed to tackle evolving variants of the virus.

The doses are going to be delivered in 2022 and form a part of the 300-dose order outlined in February. President of the ecu Commission Ursala von der Leyen confirmed the news via a tweet and said the new negotiations would make sure the bloc has the pliability to secure adapted vaccines to guard people from new variants.

Sanderson Farms
Chicken producer Sanderson Farms is considering selling-up, consistent with reports from the Wall Street Journal.

The company is assumed to be exploring a purchase after attracting interest from buyers as a results of rising demand for its products as restaurants reopen. Continental Grain, an agricultural investment company that owns a smaller chicken processor named Wayne Farms, is assumed to be among those interested.

If Continental Grain made a move and was successful, it might create the second largest chicken firm within the country in terms of volumes, only narrowly behind Pilgrim’s Pride.

Pear Therapeutics
Pear Therapeutics is getting to go public by merging with SPAC Thimble Point Acquisition during a deal which will raise $400 million for the business and provides it a worth of around $1.6 billion.

The company has developed app-based therapy to assist people with the likes of insomnia or drug abuse , which it believes has huge potential when combined with traditional pharmaceuticals.

The company is backed by Softbank, which has said prescription digital therapeutics ‘are creating a replacement category of medicine’.

Quanergy Systems
Quanergy Systems, a developer of self-driving car technology, is preparing to travel public by merging with SPAC CITIC Capital Acquisition to boost $278 million and value the business at around $1.4 billion.

The company provides LiDAR systems and 3D perception software and said its CMOS OPA solid state technology utilized in its LiDAR sensors is ‘poised to rework the automotive and IoT industries by driving down the value of solutions while enabling powerful levels of automation and insights.’

The deal is predicted to shut within the last half of 2021.

European Open: Indices mixed, oil and energy lower, RBA hold rates

With no surprises by the RBA and mixed data from Asia, traders looked to weaker oil prices for a lead.
It was a mixed picture for equities across Asia today, with shares in Japan and China trading mostly lower, the ASX 200 essentially flat yet major indices for South Korea , Singapore and Taiwan were higher.

Only consumer staples and therefore the financial sectors closed higher for the ASX 200, with energy, materials and industrials each falling over 1%. Energy stocks were lower as oversupply concerns weighed on oil prices and sent WTI back to $60 before Thursday’s OPEC meeting. Yet volatility was contained overall. Gold resources (GOR.AX) was the weakest stock within the index, falling -7.5% in line with gold prices which touched fresh lows and fell to 1,706.

The Nikkei 225 was struggling following weak CAPEX (capital expenditure) data, which revealed that Japanese companies had cut spending on large equipment for a 3rd consecutive quarter as manufacturer’s continued to chop costs.

Forex: Dollar slightly bid, EUR/USD quietly breaks support
The USD is slightly firmer with the US dollar index (DXY) rising +0.2% to a 3-week high. EUR/USD quietly broke beneath the 1.2023 low in Asian trade but, with the 100-day eMA and 1.2000 handle in close proximity, we are on one’s guard for a false break and corrective bounce higher. USD/CHF closed above its 200-day eMA yesterday and costs have remained during a tight range near yesterday’s highs. subsequent major resistance is around 0.9200, which is around 45 pips away.

GBP/USD printed a 2-week intraday low but prices have since recovered back above 1.3888 support. Failure for bears to overcome this level could end in a minor, technically driven rebound. GBP/AUD nudged its was to a 2-day low following RBA’s meeting and traded back below its 100-day eMA. Last week’s rally appears to possess topped out after finding resistance at its 200-day eMA on Friday.

USD and CHF are currently the strongest major whilst GBP and CAD are the weakest. Although it’s been a quiet session overall with all pairs remaining well within their 10-day ATR’s (average true ranges).

Asian PMI’s still rally
South Korean manufacturing PMI expanded at its fastest rate in 11 years in February, reaching 55.3 and up from 53.2 in January. With new orders and output hitting 11 year high it paints a really rosy picture for global demand and, ultimately, global growth in H2 2021. New export orders also rose for a fifth consecutive month, with respondents highlighting domestic demand and from South Asia.

RBA keep policy unchanged in dovish meeting
The Federal Reserve Bank of Australia predictably held rates at 0.1%, where they expect to carry them until inflation rises comfortably within their 2-3% firing range . The RBA think the economy still operates with considerable spare capacity and “significant gains” for employment are required to satisfy their goals. Moreover, wage growth also will got to be “materially higher”. and that they don’t expect to ascertain this until 2024. Dovish it’s then!

It appears that Monday’s doubled-the-usual bond purchase may are a single-off event, as against a change in momentum as their statement made regard to bond purchases being “brought forward in the week to help with the graceful function of the market”. But they’re going to still answer “market conditions” (translates as ‘higher bond yields’) if and when need be.

The Australian dollar gave little response, although that would be expected since there was no element of surprise at today’s meeting. The ASX 200 spiked 70-points but now trades back near its opening price around 6,785.

USD/CAD focused for Canada’s GDP
With GDP data for Canada released later within the US session and therefore the recent rebound of the US dollar, we are seeking bullish opportunities on USD/CAD.

Recent price action on the weekly charts have made us question whether USD/CAD has already printed a big low. February’s candle produced a Rikshaw Man Doji and last week’s candle produced a “buying tail” (lower wick) after bears did not hold prices beneath the January 2021 and April 2018 low.

Switching to the hourly chart shows that a bullish engulfing candle formed at the 50-hour eMA and costs have now broken above its high to suggest a swing low is in situ . The low has also respected a 38.2% Fibonacci retracement level. Given the strength of the rebound from the 1.2465 low, we suspect recent price action to be corrective and bulls will attempt to target the highs around 1.2746/63.

German retail sales are expected to fall -0.3% in January, although there could also be potential for a downside surprise given lockdowns.

Canada’s GDP is predicted to 7.5% in Q4, a far cry from Q3’s 40.5% rebound but admirable none the less. A downside surprise should help lift USD/CAD in line with our bullish bias, whereas a stronger print could cap upside potential.

Vaccine optimism, a calmer bond market, stimulus & Zoom in focus

US regulators approve JNJ vaccine boosting hopes of a quicker reopening. The bond market stabilises leaving US stimulus & Zoom earnings after the closing bell focused .
US futures

Dow futures +1% at 31235

S&P futures +1% at 3848

Nasdaq futures +1.2% at 13070

In Europe

FTSE +1.3% at 6568

Dax +0.9% at 13918

Euro Stoxx +1.3% at 3683

Stocks cheers the covid stimulus bill progress

US stock markets are pointing to a stronger start amid a calmer mood within the bond market and leaving the main target firmly on the US covid stimulus bill which was voted on within the House of Representatives over the week and now makes its thanks to the Senate where it’s expected to be voted on next week.

Calmer bond market

After the bond market rout roiled financial markets last week, the image is notably calmer in the week . the ten year US treasury yield continued to ease back from its spike higher to 1.6% last week to current levels of 1.43%.

However, speeches by Federal Reserve System policymakers John Williams and Lael Brainard could well push the main target back on inflation expectations and therefore the bond market.

Manufacturing PMIs focused

The latest round of producing PMIs have revealed broadly upbeat readings; China being the notable outlier. China’s Caixin PMI dropped to its lowest level in 9 months, although the market has shrugged off the figures given the likely distortion from the Lunar New Year .

Final PMI’s were upwardly revised across Europe with the Eurozone PMI recording its highest level since 2018 as demand surged.

US ISM manufacturing PMI is due at 15:00 UTC.

FDA approves Johnson & Johnson vaccine

Reopening optimism is adding to the upbeat mood after the US regulators approve the Johnson & Johnson round covid vaccine. this is often the third vaccine to receive approval stateside and has the potential to hurry up the reopening process dramatically boosting risk sentiment.

Zoom earnings

One of the most beneficiaries of the pandemic has undoubtedly been Zoom. It’s share price has soared across the year from an IPO price of $36 in late 2019 and valuation of $9 billion to its current price of $370 and a valuation of $120 billion.

Revenue has also surged with Q3 seeing a 367% jump in revenue to $777.2 million, well before the $694 million expected and significantly up from Q1 2020 revenues of just $328 million. The share price has been on the decline since late October’s all time high of $588 because the prospect of a successful vaccine rollout and economies reopening have raised fears that growth will slow. So guidance are going to be closely eyed. Expectations are for EPS $0.78c.

FX – EUR shrugs off accelerating German inflation

The US Dollar is extending 0.6% gains from the previous week. US Dollar Index DXY +0.15% holding above 91.00.

EUR/USD – trades depressed versus the stronger USD despite German inflation accelerating in February. German CPI February jumped 1.7% vs 1% Jan and 1.2% expected. The ECB weekly bond purchases are awaited.

Analyst Fiona Cincotta looks at EU/USD price action and levels to observe .

GBP/USD trades -0.20% at 1.3906

EUR/USD trades -0.25% at 1.2045

Oil resumes uptrend

Oil along side other risk assets is on the increase at the beginning of the week due to the upbeat market mood. Investors still cheer the continued economic recovery and therefore the prospect of a vaccine led reopening of the economy.

Iran’s rejection of the EU and US’s invitation for direct nuclear talks is additionally underpinning the worth . Iran refuses to restart talks without the US first halting sanctions.

Attention will address this week’s OPEC+ meeting with chatter surrounding a production hike increasing.

US crude trades +2% at $62.25

Brent trades +0.4% at $64.81

Currency pair of the week: AUD/USD

Direction of AUD/USD goes to depend upon comments from central banks regarding the recent spike in yields.
The Federal Reserve Bank of Australia meets in the week and is predicted to go away rates unchanged at all-time lows of 0.10% and reiterate the monetary policy will remain accommodative until CPI is sustainable at their targeted level of 2%-3%. At their February meeting, the RBA said that they expected that point will are available 2024! However, RBA governor Lowe will likely need to address the recent rise in yields and therefore the central banks intervention. Last week, rates within the Australian 10-year bond rose 45bps! As a results of the rise in bond yields, the RBA had to intensify its buying of 3-year bonds. They bought an estimated A$3 billion on Thursday and A$1 billion in Wednesday (and rates still went higher). Today, the RBA announced they were buying A$4 billion of longer-dated bonds, double the standard size! New coronavirus cases have continued to drop by the country, with sporting event capacities increasing to 50% and a few dance clubs reopening. Vaccines distribution is starting. With life in Australia moving back towards normal, is there an opportunity the RBA will need to raise rates before expected? Comments from financial institution in the week are going to be closely monitored.

Federal Reserve Chairman Jerome Powell gave his semi-annual testimony to Congress on Monetary Policy. He noted that current inflation expectations were transitory which the recent rise in yields was unsustainable. He also said that the Fed will keep monetary policy in situ until inflation is above the Fed’s target of 2%-3% for a few time, and until maximum employment is achieved. Yields within the US 10-year Treasury bond rose last week with a disappointing 7-year auction on Thursday. However, they need drifted lower off the highs from near 1.60% to 1.44% as of the time of this writing. Powell is about to talk on Thursday on the US economy at the WSJ Jobs Summit. His comments are going to be closely monitored to ascertain if he addresses the recent rise in yields and if the Fed will adjust monetary policy. The US stimulus package passed within the House of Representatives on Friday evening, and now will head to the Senate. additionally , although concerns are moving to the forefront regarding the coronavirus variants within the US, Johnson and Johnson’s vaccine was approved for emergency use within the US and is now the 3rd vaccine available. consistent with Bloomberg’s vaccine tracker, 75.2 million doses are given within the US, roughly 22% of the population. If things return to normal at a faster pace than the Fed expects, it’s going to put the Fed during a bind as inflation expectations and interest rates will rise, pushing the US Dollar lower!

AUD/USD had been in an orderly trend higher since early November 2020, then paused in January, forming a flag pattern. The pair broke higher on February 9th and was advancing nicely, on its way towards its flag target near 0.8400. However, on Thursday last week a confluence of resistance halted the move. First, the pair reached the phycological round number resistance at 0.8000. It also reached the 161.8% Fibonacci extension from the highs of January 6th to the lows of February 2nd, near 0.7960. Finally, price reached a better high because the RSI made a lower high, in overbought conditions, which could also be a sign of a reversal may be near. As a result, price did reverse, forming a bearish engulfing pattern on the daily timeframe. Price continued lower aggressively lower on Friday as stops were taken out below horizonal support below 0.7820.

On a 240-minute timeframe, AUD/USD is holding the 61.8% Fibonacci retracement and horizontal support near 0.7733. Below there, price can fall back to February 2nd lows near 0.7561. Further horizontal support is near the December 21st, 2020 lows near 0.7459. Short-term horizontal resistance doesn’t cross until near 0.7900, then the highs from Thursday near 0.8010.

Direction of AUD/USD goes to depend upon comments from central banks regarding the recent spike in yields. The RBA meeting and comments for Fed Chairman Powell (and other Fed speakers this week) are going to be closely monitored for clues to any quite adjustment to monetary policy. additionally , if AUD/USD breaks near term support at today’s lows (actual low is 0.7692), price may continue lower.