Daily Market Outlook, February 14, 2020
Global risk appetite turned a tad more cautious overnight, with S&P500 losing 0.16% amid news of increasing number of Covid-19 cases, especially the tenfold surge in China using new methodology to count clinically diagnosed cases and White House advisor Kudlow also criticised China’s transparency over Covid-19 as the CDC confirmed the 15th case in the US. Alibaba Holdings also warned that the virus is affecting production and changing consumer patterns.
UST bonds also gained on news that the Fed is cutting back on its repo operations earlier than expected starting from Friday’s overnight offering, with the 10-year yield falling to 1.62% and the $27b 30-year UST bond auction fetched a record low yield of 2.061%. Crude oil prices also rose on market speculation of supply cuts from OPEC and Russia.
US inflation surged in January on higher fuel prices: Consumer price index rose more than expected by 2.5% YOY in January (Dec: +2.3%), its largest annual gain since Oct-18 despite a smaller MOM change (+0.1% MOM vs +0.2% MOM). The jump in cost of energy (+6.2% YOY vs +3.4% YOY) contributed to the higher headline reading as food prices rose steadily at 1.8% YOY. Gasoline prices surged by nearly 13% last month. Excluding food and energy, growth in core CPI topped estimate to hold steadily for the fourth consecutive month at 2.3% YOY (Dec: +2.3%) of which services inflation picked up to 3.1% YOY (Dec: +3.0%).
Little change in US initial jobless claims: The number of American claiming for unemployment benefits was little changed last week as initial jobless claims rose by a mere 2k to 205k for the week ended 8 Feb (previous: 203k revised), adding to signs of a firm labour market.
UK house prices surged in January after Brexit uncertainty lifted: The RICS House Price Balance Index jumped to 17% in January (Dec: 0%), reflecting surges in all its sub-categories of price expectations, sales expectations, new buyer enquiries, new instruction and agreed sales. The sudden take-off in demand happened in the month where Great Britain officially withdrew from the European as uncertainties surrounding Brexit eased significantly thus offering buyers comfort to return back to the housing market.
US data docket is substantial today including import & export prices, advance retail sales (Bloomberg est: 0.3% MOM from 0.3% in Dec), existing homes sales, industrial production (Bloomberg est: -0.2% MOM from -0.3% in Dec) for January, December business inventories and lastly, University of Michigan consumer sentiment survey for February. Cleveland Fed President Loretta Mester, (voter in 2020 FOMC) is the only Fed senior official speaking in public today and her topic of discussion is payments modernization.
Today’s Options Expiries for 10AM New York Cut (notable size in bold)
- EURUSD: 1.0750 (EUR450mn); 1.0825 (EUR305mn); 1.0875 (EUR1.1bn)
- GBPUSD: 1.2800 (GBP890mn); 1.2875 (GBP716mn); 1.2905 (GBP233mn); 1.2910 (GBP272mn); 1.2935 (GBP230mn); 1.3050 (GBP381mn); 1.3100 (GBP271mn); 1.3125 (GBP239mn); 1.3200 (GBP503mn)
- USDJPY: 109.00 (USD1.6bn); 109.15 (USD385mn); 109.25 (USD301mn); 109.35 (USD330mn); 109.40 (USD390mn); 109.50 (USD761mn); 109.70 (USD372mn); 109.75 (USD376mn); 109.80 (USD970mn); 110.00 (USD1.1bn)
- AUDUSD: 0.6665 (AUD600mn); 0.6680 (AUD338mn); 0.6750 (AUD662mn); 0.6762 (AUD308mn); 0.6770 (AUD535mn); 0.6785 (AUD413mn)
Technical & Trade Views
EURUSD (Intraday bias: Bearish below 1.0860 Bullish above)
EURUSD From a technical and trading perspective, bearish targets the yearly, monthly and weekly pivot confluence sited at 1.0880/70 achieved.The sustained push through 1.0850 will now have bears mounting a move to fill the ‘GAP’ at 1.0726. Note the DXY is testing its Yearly first resistance pivot point, if this level holds there is a window for a recovery in the EUR, however, unless we close above yesterday’s high this will more likely prove a ‘dead cat’ bounce before the next leg lower
GBPUSD (Intraday bias: Bullish above 1.30 Bearish below)
GBPUSD From a technical and trading perspective, Tuesday’s reversal flipped the daily chart bullish as per the near term volume weighted average price the anticipated follow through to test offers and stops above 1.30 has extended to run stops above 1.3050 as 1.30 now acts as support look for a pivotal test of the descending trendline resistance sited at 1.31
USDJPY (intraday bias: Bullish above 109.60 Bearish below)
USDJPY From a technical and trading perspective, the sustained grind higher continues, as 109.40 caps corrections look for a test of offers and stops to 110.50. Caution counselled as we test these levels with significant sentiment divergence likely to be addressed once again. See yesterday’s Chart of The Day for more details
AUDUSD (Intraday bias: Bearish below .6740 Bullish above)
AUDUSD From a technical and trading perspective only sustained trading above .6740 would suggest minimum conditions for cycle completion have been met and as such another corrective phase is underway, a move through .6770 would encourage further short covering suggesting further upside corrective action. A failure today below .6700 would suggest a replay of last week’s bearish end to the week and open a move to test bids and stops below .6650
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