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SquaredCommentary: 15th January 2021


15 January 2021

Risk sentiment is starting to become a concern.  The virus picture is looking increasingly negative across the world with hospitals overwhelmed and   daily deaths breaking records. Even with US stimulus and vaccines being distributed markets cannot ignore the fact that stricter global lockdowns are imminent.  So, do we really want reduced fears of tapering driving the USD bid again?

Drivers


So far, the USD sell off has been able to resume against growth currencies as Biden’s $1.9T stimulus plans have lifted risk sentiment.  Meanwhile EUR has remained under pressure.  It seems as though the spread of the virus across Europe and their slow roll out of vaccines has dented sentiment towards the EUR.  Given most of Europe is headed for tougher restrictions, EURJPY could continue lower, a close below 126.00 will be significant.

Powell spoke overnight “When the time comes to raise interest rates, we will certainly do that,” he said. “And that time, by the way, is no time soon.” With other FOMC members also pushing back against tapering expectations and CPI not showing any cause for concern (yet), expect the fear of higher US yields to continue to fade.

New York and Florida both reported over 200 deaths. Meanwhile Spain posted record cases, France is extending a 6pm curfew across the country and Angela Merkel wants to tighten Germany’s lockdown.

US Initial Jobless Claims came in worse than expected at 965k vs 789k expected.  This should also limit the move higher in US yields as it’s too early to be concerned about a tight labour market.

We are also expecting this overall sentiment to lead to further EUR weakening against currencies where the vaccine is being rolled out rapidly such as the UK.  A close below 0.8863 in EURGBP would be significant.

Numbers to Watch


EURUSD is a tougher call as the USD downtrend   can resume now that tapering fears are fading but any risk off moves are likely to drive USD bid again.  It broke 1.2130 support yesterday so positioning should be very clean here.
Short AUDJPY and CADJPY makes sense.


Market Updates

Rony Nehme, Chief Market Analyst at SquaredFinancial


Rony has over twenty years of experience in financial planning and professional proprietary trading in the equity and currency markets. Prior to joining SquaredFinancial, Rony educated and coached numerous traders helping them find their edge and arming them with proven trading methodologies to successfully battle the markets. Rony obtained a B.S. in Finance from Concordia University in Montreal, and his professional designations include Certified Financial Planner CFP® obtained from the Canadian Securities Institute.

#source

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