GLOBAL MARKETS STRATEGY DAILY UPDATE - Thursday, January,28 2021 18.11.2020

Thursday, January,28 2021

GLOBAL MARKETS STRATEGY DAILY UPDATE

Alexander APOSTOLOV, PhD, MBA
                                                                                                        Chief Investment Strategist
FX FOCUS                                                                                                www.bluesuisse.com/en/analysis
                                                                                                        analytics@bluesuisse.com

FOMC: Fed outlook improves but “premature” to talk taper for now
                                                                                                        Market Snapshot

USD: A close-to-unchanged FOMC statement overnight with steady 0-25bp policy rates and
continued $120bln/mth asset purchases - Chair Powell emphasizes that higher inflation and
financial stability risks remain moderate and are not seen near term and instead, sees “the pace        Main Quotes Heat Map
of the recovery and employment having moderated in recent months. He sees it as “premature”
to discuss or speculate on the timing on the removal of accommodation, endorsing the status-
quo. Powell claims the early inflation uptick will likely be short-lived, though acknowledging the
Fed will need to “wait and see.” bluesuisse.com analysts point out the lack of new guidance and
admonition not to discuss policy changes prematurely should not be mistaken for an absence of
potential changes later this year. bluesuisse.com analysts’ projections remain for a continued
robust rebound, spurred on by vaccinations and fiscal stimulus and upside risk to inflation and
tapering of asset purchases in Q4’21.
ECB hawk & Dutch CB Gov. Knot surprises with dovish comments on EUR, ECB council member                 1 Day Relative % Performance [USD]
and BoF Gov. Villeroy follows suit:
• EUR: Bloomberg sources report overnight that `ECB policymakers are uncomfortable with
investors appearing to largely rule out more interest-rate cuts and have agreed to stress that
such stimulus remains viable option officials are not currently considering another cut in
borrowing costs short term, but investors shouldn’t be ruling out such an action at a time when
economic uncertainty remains high and the euro is relatively strong.` Bloomberg sources later
add that “ECB officials agree to push back on market rate-cut skepticism”.
• EUR: The headlines follow ECB hawk and Dutch CB governor Knot, speaking to Bloomberg
overnight, surprising markets by turning dovish by pointing out the ECB has tools to counter            FX Technical Indicators Summary
EUR appreciation if needed, including a rate cut and that he is monitoring recent EUR strength
“very, very carefully” as a factor that may threaten ECB’s inflation objective. Bloomberg also
reports the ECB is studying differences with Fed policy and how this may impact EURUSD.
• EUR: ECB board member and BoF Governor Villeroy follow up to emphasize the ECB’s short-
term focus is on ensuring favorable financing conditions while the medium-term aim is to meet
its inflation target. The focus in the run-up to the 10-11 March ECB meeting will be how the ECB
can gauge `favorable financing conditions“ and which indicators should be included (likely
include both
domestic indicators of interest rates and spreads plus external indicators of currency strength).
Data released overnight:
• USD: US durable goods orders show durable growth momentum - headline US durable orders
advance 0.2%MoM, weaker than consensus for 1.0% but are revised up in November.
Meanwhile, ex- transportation durable orders are up a strong 0.7%MoM and well above pre-
COVID levels up 6.5%YoY. Shipments are also up strongly with shipments of capital goods
nondefense ex-air rising 0.5%MoM. Despite a technical headline miss driven by weak aircraft,
bluesuisse.com analysts point to strong shipments of capital goods will contribute strongly to US
Q4 GDP (released tonight) and likely continue to expand in 2021.
• AUD: Administrative prices drive Australian Q4 CPI; RBA unlikely to achieve its inflation target
in 2021 and may potentially become more vocal about AUD’s strength - Australia’s headline Q4
CPI comes in at +0.9%, the Q4 gain following the even stronger 1.6% result from Q3 and also
above consensus looking for +0.7%. In yearly terms, headline CPI is also up by 0.9%. The Q4
result is also higher than the RBA’s forecast from November 2020 of +0.5% while the trimmed-
mean CPI is also 1.2% higher than the same time last year and also slightly above the RBA’s 1%
forecast. But the Q4 inflation print is largely driven by administrative prices and absent that,
would’ve only risen 0.5% in Q4, according to ABS. bluesuisse.com analysts think inflation in
Australia is still likely to be too-little rather than too-much in 2021 as excess capacity remains an
ongoing concern for the RBA. bluesuisse.com analysts expect inflation to remain below the
bottom of the Bank’s 2% to 3% inflation target band through 2021. If there are pockets of
inflation in some domestic industries where demand has risen,
they are likely to be offset by deflationary pressures from a stronger AUD (hence RBA’s concerns
about AUD strength may become more vocal).
Data for the remainder of this week:
• USD: US GDP Annualized QoQ – : 5.1%, median: 4.3%, prior: 33.4%; Personal Consumption – :
3.7%, median: 3.2%, prior: 41.0% - bluesuisse.com analysts expect a solid 5.1% (QoQ SAAR)
increase in Q4 real GDP as economic activity continues to grow following an already substantial
bounce-back in Q3. This would imply a 3.5% drop in average US real GDP in 2020.
• USD: US Pers

Alexander APOSTOLOV, PhD, MBA
onal Income – : 0.3%, median: 0.1%, prior: -1.1%; Personal Spending – : - 0.3%, median: -0.5%,       Chief Investment Strategist
prior: -0.4%; Core PCE MoM – : 0.2%, median: 0.1%, prior: 0.0%; Core PCE YoY – : 1%, median:         www.bluesuisse.com/en/analysis
1.3%, prior: 1.4% - market attention will be on the core PCE release - despite slightly softer       analytics@bluesuisse.com
0.09% core CPI in December, bluesuisse.com analysts expect a 0.16% increase in December
core PCE inflation, although the year-on-year reading should fall to 1.3% due to less favorable
base effects. This though would be a solid increase that is likely to keep the path of core PCE on   Market Snapshot

track for a temporary overshoot of 2%YoY starting around April 2021.
• CAD: Canada GDP by Industry MoM (Nov) – : 0.4%, median: 0.4%, prior: 0.4%; GDP YoY – :
-3.2%, median: -3.1%, prior: -3.5% - bluesuisse.com analysts expect a 0.4%MoM increase in
Canadian GDP by industry in November. bluesuisse.com forecast is based on a strong increase
                                                                                                     Main Quotes Heat Map
in goods-producing industry output and a more moderate increase in service industry output.
And as oil production picks up again into 2021, the energy sector can help support overall
growth.

                                                                                                     1 Day Relative % Performance [USD]

                                                                                                     FX Technical Indicators Summary

Chart of the Day

US Dollar Technical Outlook Turning Positive

The US Dollar Index (DXY) is in the process of turning higher, representing what may potentially amount to a broad USD rally. The index in the short-
term is working on an inverse head-and-shoulders pattern that could soon have the March trend-line in focus if the neckline is broken. In the event, the
pattern is triggered and the March trend-line is breached, the next level of significant resistance to watch will be the September low at 91.74. Both of
these medium-term thresholds have significant importance to the outcome on a boost higher from here. Should the head-and-shoulders fail to trigger
above the neckline and rollover towards a break of 90.05, then look for a potential continuation in the downward trend towards the 2018 low at 88.27.
At the immediate moment, the upside is looking increasingly favorable, but we can’t rule out a pattern failure. With that in mind, waiting for
confirmation will be key. Turning to a few key USD charts; EUR/USD is looking nearly opposite the DXY (EUR = 57.6% of DXY), GBP/USD is posting a
rising wedge that could soon trigger, USD/JPY channel is about to break, and USD/CAD is trying to break a falling wedge.

• US DOLLAR INDEX (DXY) - DAILY

Alexander APOSTOLOV, PhD, MBA
                                                                                                     Chief Investment Strategist
Capital Markets Overview                                                                             www.bluesuisse.com/en/analysis
                                                                                                     analytics@bluesuisse.com

Weak session amid short-squeeze mania
                                                                                                     Market Snapshot

The US Dollar Index (DXY) is in the process of turning higher, representing what may potentially     World Exchanges Performance Heat Map
amount to a broad USD rally. The index in the short-term is working on an inverse head-and-
shoulders pattern that could soon have the March trend-line in focus if the neckline is broken. In
the event, the pattern is triggered and the March trend-line is breached, the next level of
significant resistance to watch will be the September low at 91.74. Both of these medium-term
thresholds have significant importance to the outcome on a boost higher from here. Should the
head-and-shoulders fail to trigger above the neckline and rollover towards a break of 90.05, then
look for a potential continuation in the downward trend towards the 2018 low at 88.27. At the
immediate moment, the upside is looking increasingly favorable, but we can’t rule out a pattern
failure. With that in mind, waiting for confirmation will be key. Turning to a few key USD charts;
EUR/USD is looking nearly opposite the DXY (EUR = 57.6% of DXY), GBP/USD is posting a rising
wedge that could soon trigger, USD/JPY channel is about to break, and USD/CAD is trying to
break a falling wedge.
                                                                                                     1 Day Relative Performance
• US DOLLAR INDEX (DXY) - DAILY

                                                                                                     Technical Indicators Summary