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SquaredCommentary: 18th January 2021


18 January 2021

We start the week with a bearish tone.  Risk and equities were supported in the first two weeks of the year as investors allocated 2021 assets, but the continued pressures of Covid and the inconsistent global roll-out of vaccines is now leading to investor caution.

Drivers


US markets are closed for Martin Luther King Jr Day so some traders will have an extra day to evaluate the impressive Chinese Q4 GDP data which came in at +6.5% back at pre-pandemic levels. Although the full year figure was +2.3% the lowest number in 4 decades.  Industrial growth was very strong (+7.1%) but flagged the relative weakness in retail sales (+4.6%).

This week we will be watching the different Central Bank meetings.  At the BoC on Wednesday, there is the possibility they could cut rates by 10bps to 0.15% from 0.25% although there is almost nothing priced.  The last employment print was weak with unemployment ticking up to 8.6% although recent PMI’s and Business Outlook figures have been strong.

So, we expect to see risk off moves to continue this week, with oil likely to under pressure from reduced travel.  We are also looking for risk off to drive USD bid so wait for a dip to 1.2000 in EURUSD to fade this move. Concerns around Italian politics and stricter lockdowns in Europe likely to continue to weigh on EUR in the short term.

Numbers to Watch


GBP is struggling with the risk off and USD bid. GBPUSD tends to move with a higher beta that EURUSD in risk off, USD bid environments so expecting EURGBP to rally from here after failing to break below the 0.8863 level we have noted.
Look to fade rallies to 0.8950 leaving room to add at 0.9000, however we are still expecting UK to outperform EU given the speed of the vaccine roll out in UK but in the short term the risk off could lead to GBP position reduction.


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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