Wednesday August 25th, 2021

The US$ and oil prices strengthen, equity markets are mixed while US yields hold firm ahead of todays US Durable Goods Orders. The US Durable Goods are expected to drop -0.3% vs previous 0.9% in June, but any improvement from the number will provide strength to the US$. The US$ recoups some lost ground as anxiety increases ahead of Fed Chairs Jackson Hole speech on Friday and ongoing Delta variant concerns supported some fresh safe-haven US$ buying. In other news, House Dem’s make progress toward passing US$3.5T budget bill and infrastructure plan, pledging to vote on it by Sept 27th. China opposes talks between Japan & Taiwan’s ruling party. The US SEC chief warns Chinese companies listed in the US that they must submit to more scrutiny soon or face being delisted. Covid, A J&J booster trial saw covid-fighting antibodies increase by a factor of nine. A separate UK study supports booster vaccines for those with weak immune systems. Vietnam urges the WHO to send more covid vaccines as cases surge despite lockdowns. Australia, Sydney daily infection cases hit record numbers. In currency markets, CNY dips 0.1%, while Asian currencies are mixed with SGD, PHP, MYR & THB up 0.3% on average while INR, IDR, KRW & TWD dip 0. 15% on average vs US$. Trading currencies are mixed with NZD & AUD down 0.05%, JPY, NOK & MXN weaken 0.25% while ZAR rallies 0.4% vs US$. Intraday US Durables goods will help provide some market direction. 

Oil prices extends its 2-day rally gains with Brent Crude holding above US$71pb despite comments that Mexico will resume output by August 30th. Oil prices have rallied 8% over last two days finding support from falling US inventories and Mexican supply issues related to platform firm. C$ bounces off its lows yesterday of 1.2574 as risk-on appetite eases in the currencies despite oil prices holding US$71pb. Bias remains to take advantage of the US$ dips to sell C$ as oil prices are likely to weaken when Mexican oil supply comes back online. Intraday US data will provide some direction to the markets, but ahead Fridays Jackson Hole expect markets to consolidate recent gains. Support rests to 1.2575, if breached look for 1.2508 next, while resistance holds 1.2680, if breached look for 1.2810.

Euro fails to extend gains as risk sentiment eases amid weak German data. German IFO expectations and IFO Business Climate for August both fell below expectations. The Euro failed to advance through 1.1750 vs US$ and will likely consolidate ahead of Fridays Fed speech. Tension is mounting ahead of Fed Chair’s Powell speech at Jackson Hole where he is expected to refrain from setting tapering expectations. This morning ECB De Guidos will be speaking and is expected to maintain the banks dovish tone. Bias remains to sell Euro on rallies. Support rises 1.1660 next, while resistance holds at 1.1760.

EURGBP holds steady as markets consolidate ahead of the Jackson Hole Economic Symposium. Support resets to .8426 (1.1868) Feb 2020, if breached look for .8274 (1.2086) Dec 2019, while resistance holds at .8600 (1.1628).

GBP stalls below 1.3750 as the US$ consolidates its recent losses. The pound stalls as the risk-on sentiment stalls ahead of Fed Chairs Jackson Hole Economic Symposium speech nears. In the UK the pound remains under pressure after a downbeat Service Purchasing managers Index for August, high rates of new covid cases and an easing of risk-on mood will likely continue to cap the pound vs US$. Support at 1.3630 and resistance holds at 1.3750.