Daily Market Outlook, September 15, 2022

Overnight Headlines

  • Upgrade Of Ethereum Blockchain Sees ETH Trade Down 1%
  • US Retail Sales Expected To Drift Sideways Ahead Of Fed Hike
  • Ray Dalio Does The Math: Rates At 4.5% Would Sink Stocks By 20%
  • Australia’s Jobless Rate Climbs For First Time In 10 Months
  • NZ Economy Grew More Than Forecast In Second Quarter
  • Japan Logs Record Aug Trade Deficit On Weak Yen, Costly Oil
  • China Holds Key Rate, Withdraws Liquidity Amid Yuan Defense
  • ECB’s Holzmann Says Inflation Set To Accelerate Even More
  • UK Consumer Conf Drop Feeds Concern About House Prices
  • Australia, NZ Dlrs Struggle To Escape Lows Despite Solid Data
  • US 2- To 30-Year Curve Reaches Most Inverted Level This Century
  • Chinese Corporate Dollar Debt Issuance Falls At Record Pace
  • Oil Higher Market Weighs Weak Demand, Potential Supply Disruption
  • Asian Shares Mostly Higher After Wobbly Gains On Wall St

The Day Ahead

  • Markets steadied after equities and bonds fell sharply following the US CPI report earlier in the week that showed a smaller decline than forecast. That cemented market pricing for another 75bp increase in interest rates by the Fed next week and pushed short-dated Treasury yields higher. Asian equities were mixed overnight, with indices higher in Japan and Australia but lower in China.
  • The latest read on UK inflation expectations from the Bank of England/Ipsos survey will attract some attention. With UK inflation remaining close to 40-year highs, the extent to which this is feeding through to expectations of higher inflation in the future has been a key focus for the Bank of England. Since last spring, year-ahead inflation expectations have risen consecutively, in tandem with the move higher in spot inflation, raising concern among MPC members of a more vicious inflationary spiral. However, with the August survey responses having been collected prior to the government’s announcement of the Energy Price Guarantee scheme, the results of the latest quarterly survey are likely to be seen as somewhat redundant.
  • UK retail sales data for August will be released at 07:00BST tomorrow. Look for a fall of 1.5%m/m in the headline measure and expect the downward trend in retail sales volumes to continue as rising prices weigh on household budgets.
  • The US focus is the release of retail sales and industrial production figures as well as some regional Fed manufacturing surveys. Expect the retail sales ‘control group’ measure to have risen strongly by 0.7%m/m in August, with consumer incomes supported by the recent fall in gasoline prices. Survey evidence on manufacturing activity have been mixed, but markets anticipate a 0.4%m/m rise in the industrial production numbers.
  • Economic data for China early Friday are expected to show signs of stalling in the recent economic recovery from Covid lockdown measures earlier in the year. That is expected to partly reflect the authorities’ measures to contain new Covid outbreaks, while concerns surrounding the country’s housing sector are ongoing. China’s industrial production is expected to hold steady at 3.8%y/y, while retail sales are predicted to edge up only slightly to 3.2%y/y from 2.7%y/y.

FX Options Expiring 10am New York Cut

  • EUR/USD: 0.9850 (260M), 0.9990-00 (1.6BLN), 1.0015-20 (602M)
  • 1.0050-60 (1.2BLN), 1.0070-75 (452M), 1.0090-00 (878M)
  • 1.0175-85 (730M), 1.0195-05 (743M), 1.0220-30 (419M)
  • USD/JPY: 143.00-10 (325M), 144.00 (220M)
  • GBP/USD: 1.1675 (427M), 1.1700 (224M), 1.1900 (480M)
  • EUR/GBP: 0.8600 (1.4BLN), 0.8670 (346M), 0.8700 (283M)
  • EUR/CHF: 0.9600 (330M)
  • AUD/USD: 0.6755 (252M), 0.6790-00 (394M), 0.6945-50 (342M)
  • USD/CAD: 1.2950-55 (647M), 1.3050 (490M), 1.3200 (365M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.0250

  • EU’s energy plan key longer term, large parity strikes
  • -0.05% with the U.S. dollar a touch firmer, after closing up 0.1%
  • EU announced a suite of measures to insulate consumers from energy crisis
  • They plan to raise more than $140 billion from energy firms
  • Unprecedented measures for a very difficult situation – outcome key for euro
  • September 0.9864-1.0198 range appears a viable into Fed on September 21
  • 1.174 BLN 1.0000 are the close strikes for Thursday
  • 20 Day VWAP bearish, 5 Day bearish

GBPUSD Bias: Bearish below 1.19

  • Higher on benign CPI, but BoE to hike 75pts next week
  • Steady after closing up 0.4%, as UK CPI eased recession fears
  • Despite softer CPI, BOEWATCH prices a 75pt hike at 87.39% on September 22
  • Tuesday’s key reversal pattern still dominant suggesting further downside
  • Targets a test of the key 1.1407 support, being the September and 2022 low
  • Close above 1.1651 would be a positive signal
  • Early London 1.1480 low and NY 1.1589 high are initial support, resistance
  • 20 Day VWAP is bearish, 5 Day bearish

USDJPY Bias: Bullish above 139

  • USD/JPY attempts up rebuffed
  • Stronger MoF/Japan govt talk threatening intervention sets market tone early
  • Defense of option barriers at 145.00 cited, tick above 144.99 high 9/7
  • Japanese exporter offers also noted up top, importers from @144.00
  • Specs eyeing test of 145.00 soon however on talk Fed maybe more hawkish
  • US yields buoyant but off early Asia highs, Tsy 2s @3.775%, high 3.805%
  • Smattering of option expiries 144.49-83 today, total $695 mln
  • Asia risk off post-Wall St crash, Nikkei -2.2% @27,994, E-Minis +0.2% @3959
  • JPY crosses mixed, some off hard from recent highs, some still buoyant
  • 20 Day VWAP is bullish, 5 Day bearish

AUDUSD Bias: Bearish below .70

  • Muted reaction as Aus jobs close to expectations
  • AUD/USD barley reacting to Aus jobs data that are close to expectations
  • Data unlikely to alter RBA expectations and AUD moves linked to external factors
  • AUD/USD has traded in a 0.6740/61 range in Asia and is now around 0.6755
  • Resistance is at 0.6782 and break would ease downward pressure
  • AUD/USD bids are eyed around 0.6735 with support at 0.6680/0.6900
  • 20 Day VWAP is bearish, 5 Day bearish

BTCUSD Bias: Bearish below 25.3K

  • BTC recovers above 20k
  • Might stay above 20k support, avoid bearish signal
  • A close below 19,360 cues VWAP downtrend channel
  • ETH merge successful according to co-founder
  • But impact of the energy-saving move mostly priced in, ETH trades down 1%
  • 20 Day VWAP is bearish, 5 Day bearish