Sat, Nov 27, 2021 @ 20:51 GMT
HomeAction InsightMarket OverviewMarkets in Profit Taking Retreat, Yen and Dollar Recovering Grounds

Markets in Profit Taking Retreat, Yen and Dollar Recovering Grounds

European stocks and US futures turn softer today, apparently on pre-weekend profit taking again. FTSE is additionally pressured, possibly as Prime Minister Boris Johnson was tested positive for coronavirus. In the currency markets, Yen regains some ground together with Swiss Franc and Dollar. Commodity currencies are mildly lower. However, for the whole week, Dollar remains the worst performing one while Sterling is the best.

Technically, while Dollar is recovering, some resistance levels are needed to be taken out to confirm completion of pull back. Those levels include 1.0888 support in EUR/USD, 1.1933 support in GBP/USD, 0.5870 support in AUD/USD and 0.9718 resistance in USD/CHF. Ideally, if the greenback is to have a comeback, 1588 support in Gold should be taken out too.

In Europe, currently, FTSE is down -5.63%. DAX is down -3.90%. CAC is down -4.55%. German 10-year yield is down -0.1052 at -0.471. Earlier in Asia, Nikkei rose 3.88%. Hong Kong HSI rose 0.56%. China Shanghai SSE rose 0.26%. Singapore Strait Times rose 1.66%. Japan 10-year JGB yield closed flat at 0.010.

Quick update: BoC cuts overnight rate to 0.25%, starts government securities purchases

In an unscheduled announced, BoC decided to lower overnight rate by -50bps to 0.25%. Bank rate is then correspondingly at 0.50% and deposit rate at 0.25%. BoC said, “this unscheduled rate decision brings the policy rate to its effective lower bound and is intended to provide support to the Canadian financial system and the economy during the COVID-19 pandemic.”

Additionally, BoC launches two new programs. Firstly, the Commercial Paper Purchase Program (CPPP) will help to alleviate strains in short-term funding markets and thereby preserve a key source of funding for businesses. Secondly, to address strains in the Government of Canada debt market and to enhance the effectiveness of all other actions taken so far, the Bank will begin acquiring Government of Canada securities in the secondary market. Purchases will begin with a minimum of $5 billion per week, across the yield curve.

Full statement here.

US personal income rose 0.6%, spending rose 0.3%

US Personal income rose 0.6% in February, well above expectation of 0.3%. The increase in personal income primarily reflected increases in compensation of employees and farm proprietors’ income. Farm proprietors’ income increased USD 34.1B, which included an increase in subsidy payments associated with the Department of Agriculture’s Market Facilitation Program. Personal spending rose 0.2%, below expectation of 0.3%.

Headline PCE price index was unchanged at 1.8% yoy, above expectation of 1.7% yoy. Core PCE price index accelerated to 1.8% yoy, above expectation of 1.6% yoy.

Fed Kaplan: Economy to have substantial contraction in Q2, unemployment to jump to mid-teens

Dallas Fed President Robert Kaplan said his forecast is for the US economy to have substantial contraction in Q2, in the 20% range on an annualized basis. Unemployment rate could rise to mid teens before falling back to 7-8% by year end.

He added, “we are working furiously here at the Fed to have this in place and work out the details” of the new Main Street lending program. However, small and medium companies are worried about survival even with loan assistance.

UK PM Johnson tested positive for coronavirus, in self-isolation

UK Prime Minister Boris Johnson confirmed that he had tested positive for coronavirus, a day after he appeared at the weekly Q&A session in the House of Commons chamber.

“Over the last 24 hours I have developed mild symptoms and tested positive for coronavirus,” Johnson said. “I am now self-isolating, but I will continue to lead the government’s response via video-conference as we fight this virus.”

Earlier this week, Prince Charles, he 71-year-old heir to the British throne, tested positive for coronavirus. So far, he’s in good health and in self-isolation in Scotland, with mild symptoms. Total coronavirus infections in the UK now stands at 11,658, with 578 deaths.

Italy: We’re haven’t reached peak of coronavirus yet

Italy’s chief of the Superior Health Institute Silvio Brusaferro warned that “we haven’t reached the peak and we haven’t passed” the coronavirus pandemic. Nevertheless, there were signs of slow down in new infections, and the peak may not be far away. He added, “when the descent begins, how steep it is will depend on our behavior.”

Italy’s cases, currently stand at 80,589, is set to take over China’s “reported” case of 81,340 rather soon. What’s more worrying is the huge death toll at 8,215, nearly double of Spain’s 4,858 as second.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9565; (P) 0.9671; (R1) 0.9738; More

Intraday bias in USD/CHF remains on the downside as pull back from 0.9901 is still in progress. Deeper fall could be seen to 61.8% retracement of 0.9181 to 0.9901 at 0.9456. Sustained break there will target a test on 0.9181/6 key support holds. Nevertheless, break of 0.9718 will indicate completion of the pull back. Intraday bias will be turned back to the upside for 0.9901 next.

In the bigger picture, decline from 1.0237 is seen as the third leg of the pattern from 1.0342 (2016 low). It could have completed at 0.9181 after hitting 0.9186 key support (2018 low). Further rise could be seen to retest 1.0237 high. After all, medium term range trading will likely continue between 0.9181/1.0237 for some time.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:30 JPY Tokyo CPI Core Y/Y Mar 0.40% 0.40% 0.50%
12:30 USD Personal Income M/M Feb 0.60% 0.30% 0.60%
12:30 USD Personal Spending Feb 0.20% 0.30% 0.20%
12:30 USD PCE Price Index M/M Feb 0.10% 0.10% 0.10%
12:30 USD PCE Price Index Y/Y Feb 1.80% 1.70% 1.70% 1.80%
12:30 USD Core PCE Price Index M/M Feb 0.20% 0.10% 0.10% 0.20%
12:30 USD Core PCE Price Index Y/Y Feb 1.80% 1.60% 1.60% 1.70%
13:00 CAD BoC Rate Decision 0.25% 0.75%
15:00 USD Michigan Consumer Sentiment Index Mar F 93.3 95.9

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