April 21, 2021 12:54:31

Headlines

* US stock futures steady, European bourses staging partial recovery

* USD gains on virus and lockdown worries

* Netflix set to open 8% lower as new subscribers hugely disappoint

US equity futures are just about in the green after a second day of selling saw investors turn risk-off. The reflation trade and reopening plays were hurt badly, commodities sold and safe havens were bid. The tech-laden Nasdaq is underperforming with sentiment around earnings rarely so bullish.

USD has bounced back for a second day though is soft against a few of the commodity currencies which are endeavouring to make a comeback from yesterday’s about-turn. The USDX is above the 100-day SMA and mid-March lows but is still in corrective mode below the recent break of 91.50.

Market Thoughts – Big figures matter

While much attention will be on Netflix and the wider implications for how much is priced into highly expectant stock markets, the risk-off environment has seen the dollar bid as virus and geopolitical worries come to the fore. It seems to us that the India and Brazil concerns have been well flagged in many ways, but the Japan situation and possible lockdowns in Tokyo ahead of the Olympic games may grab more headlines. Just as investors turned to the euro during “peak vaccine rollout shambles”, so India’s news about their distribution to the population may push traders back to the reflation trade.

This means seasonals come back into play (USD traditionally tops out at the end of March) while commodity currencies resume their uptrend and the safe haven JPY and CHF struggle. For sure those big levels in the major matter (GBP 1.40, EUR 1.20 and JPY 108, AUD 0.78) but it can take a few attempts to get through them, hence their significance! Of course, if lockdowns persist or the Russian border build up kicks off, then those levels will act as major resistance.

Chart of the Day – Take advantge of nervy Sterling

GBP has seen a bout of economic figures released this week with the jobs market still very much supported by the furlough support scheme with unemployment even dipping, while today’s inflation numbers bounced back and are set to rise above 2% later in the year.

Cable has felt a big squeeze of sizeable long positions which should result in limited downside going forward. The UK’s growth advantage with its continental neighbours and early release of lockdowns should be similarly worthy so it might be time to take advantage of the pullback in GBP/USD as long as we can close above the early April highs. 1.40 is the obvious barrier to more gains at present but a mini trendline and the 50-day SMA should offer solid support around 1.3870.