Thursday April 29th, 2021

Oil prices trade higher, equity markets are positive, US$ & US yields inches higher as markets focus on the US GDP & US Jobs data for direction today. The US$ hit fresh 9-week low after the Fed Chair reiterated that interest rates will remain “lower for longer” and that tapering monetary support is still a long way off. The US$ bounced slightly after the US Presidents Congressional Address where the President took a tough tone towards China & Russia. The President also pressed his tax, US$2T infrastructure and US$1.8T families plans, stating the US is “ready for takeoff”. Also, in the news CDC director says she is “cautiously optimistic” about the coronavirus situation in the US. The Fed comments will likely keep-short term pressure on the US$ and helped CNY & Asian currencies rally 0.2% on average vs US$. Trading currencies mostly stalled overnight with AUD & NZD flat, MXN & NOK dropped 0.2%, JPY fell 0.4%, with the outlier ZAR which strengthened 0.2% vs US$. Markets will change their focus today to US GDP, US Initial Jobless Claims and Pending Home Sales to provide intraday direction.

Oil prices strengthen on optimistic demand outlook outweighing concerns about the impact of rising covid cases in India, Brazil, and Japan. Also providing a short term price boost was Citibank’s forecast that oil demand could rise to 101.5M BPD into the summer. C$ hit a 3-year high on Wednesday driven by the combination of strong domestic data, strengthening oil prices and a weakening US$ on the Fed’s comments. Our bias is to take advantage of this dip to buy US$, with US yields strengthening which should be positive for the US$. Support drops to 1.2246 (Feb2018), if breached look for 1.2057 (Sep2017) while resistance resets 1.2360, if breached expect a move back to 1.2430. 

Euro gives back early gains, retreating towards 1.21 after hitting fresh 2-month highs vs US$. Euro rallied post the Fed comments and eased into the US Presidents tough stance on Russia & China and is stalling as US yields strengthen. Positive data out of Spain and the EU this morning is providing Euro support and markets are waiting for German CPI later out in the morning. Covid cases are falling, and vaccinations are rising across Europe which is a positive sign for the Euro going forward. Support holds at 1.2060 and resistance at 1.2150.

EURGBP continues to stall at the key .8700 as markets settle down post FOMC & the Presidential Address. Analysts remain bearish Eur looking for a potential move towards 0.83 (1.2048) vs GBP into H2/2021. Support holds to .8585 (1.1650) with resistance remaining at .8700 (1.1495).

GBP slips from its highs as markets rebalance post-FOMC and the PM’s political issues continue. The pound is balancing between a weaker US$, ongoing Brexit/Norther Ireland as the NIDU leader announces she is stepping down over the handling of the NI protocol. UK PM remains under pressure from his comments about preferring seeing “bodies pile up in the streets”. The UKs strong vaccination program has been priced into the pound, so in the short-term GBP is vulnerable for further weakness. Support at 1.3870, while resistance holds at 1.3965.