Daily Market Outlook, April 19, 2022 Overnight Headlines Russia Unleashes Offensive On Ukraine, Ushering In New Phase Fed’s Bullard: A 75 Basis-Point Hike Could Be Option If Needed Yellen To Attend G-20 Sessions As US Retreats On Boycott Idea Goldman Sachs Sees US Recession Odds At 35% In Next 2 Years Macron’s Lead Over Le Pen Widens Slightly Ahead Of Election Record Number Of UK Finance Bosses Warn On Operating Costs China Sees Multiple Growth Risks, Vows To Meet GDP Target Shanghai Reports 7 More Covid Deaths As Cases Stay Elevated RBA: Faster Inflation Brings Forward Likely Rate-Rise Timing RBNZ Gov Sees More Tightening As Inflation Expectations Build Japanese Yen Sinks To A Fresh 20-Year Low Versus The Dollar Oil Rises As Libya Outage Adds To Supply Woes; Gold Steady Asian Equity Markets Mixed; US Equity Futures Edge HigherThe Week Ahead This week, the main highlight will be the flash PMI data for April, in the US, Eurozone and UK. In March, the services PMIs continued to move higher in all three regions, having already been firmly in expansion mode, as the sector continued to rebound after the removal of restrictions. The manufacturing PMI though, fell to its lowest level in 14 months in the Eurozone, as geopolitical tensions weighed on demand and business confidence. The UK reading also moved lower, while in the US, the index rose to its highest level in six months. In April, the consensus is for both sector readings to decline in the Eurozone, as the war in Ukraine weighs more heavily on sentiment. In the UK, services are forecast to continue to outperform manufacturing. In the US, both sectors are expected to be relatively unchanged. However, across the board, the PMIs are projected to remain well above the key 50 threshold. Other survey data, including the flash reading of consumer confidence for April will also feature in the Eurozone. In March, consumer confidence plunged to its lowest level since April 2020, as households became more pessimistic about the general economic outlook and their own financial situation. The index is forecast to decline for the seventh month running in April. In terms of inflation, the final reading of Eurozone HICP is set to confirm inflation rose by 7.5% YoY in March. In terms of more lagging indicators, industrial production is expected to rise by 0.8% in February. In the UK, retail sales data will garner attention for any signs that households have tightened their belts as inflation rises. Sales excluding fuel are projected to rise by 0.6% in March. In the US, a slew of housing market data are due, including housing starts, existing home sales (Mar) and homebuilder sentiment (Apr)CFTC Data CFTC data for the week through Tuesday show another reduction in the aggregate USD bullish bet that had built to a twelve-week high in late-March. The overall position across the major currencies we cover shows a USD1.4bn decline in the USD’s net long to total USD 12.9bn, following last week’s reduction of USD2.2bn. Adjustments across the key currencies was mixed, lacking a clear sense of narrative for the reduction in USD bullish sentiment while another increase in bearish positioning in the CHF and the JPY reflected the USD’s yield advantage over these two currencies, whose respective central banks remain far from tightening policy. Net JPY shorts rose by USD648mn to USD11.1bn, which represents the largest negative position on the yen since late-October in dollar terms and since early-2018 in net contract terms. As for the CHF, the USD201mn bet against it took the currency’s aggregate short to USD1.9bn—a seven-week high. A net bet of USD1.6bn in favour of the EUR represented the largest move over the week. The overall EUR long climbed despite the currency aiming for a re-test of 1.08 at the data’s cutoff date, with investors possibly expecting a reversal of the EUR’s decline as they added another 11k long contracts (11k last week as well) while adding fewer than 1k shorts. The EUR’s net long of USD5.3bn is over five times larger than the next largest bullish position, that of the CAD. The CAD net long rose to near the USD1bn mark thanks to a USD407mn push that took overall bullish sentiment to a five-week-high in a period that preceded the BoC’s policy decision last Thursday (50bps hike, as expected). The increase was mainly a result of reduction of 4.8k in outstanding short contracts that now total 25.6k a nine-month low, with only a small increase in outright CAD longs. Amid the GBP’s break below 1.30 last week, the pound experienced the largest bearish bet this week of the currencies we monitor as speculators added USD899mn to the GBP’s USD4.3bn net short. Indeed, while long contracts were only trimmed slightly, the 11k increase in shorts to a five -week-high stands as clear evidence of weak GBP sentiment. We see further GBP downside risk amid overpriced BoE rate hike expectations. Despite lagging all of its peers in this report with a 1.6% depreciation over the week, the AUD saw its net short trimmed by USD207mn to USD2.1bn as the currency recently traded briefly above 0.76, a ten-month high. The move in AUD positioning follows from continued short covering with a ~4k reduction in outstanding shorts (to their lowest since June) while gross longs rose by 4.9k (to their highest since November). • Elsewhere, speculators placed bets of USD355mn and USD89mn on the MXN and NZD, respectively.FX Options Expiring 10am New York Cut EUR/USD: 1.0800 (1.3B), 1.0900 (1.2B), 1.0930 (830M), 1.1000 (405M) GBP/USD: 1.3000 (470M). EUR/GBP: 0.8325 (245M) USD/JPY: 128.00 (700M). EUR/JPY 136.50 (505M) USD/CAD: 1.2400 (600M), 1.2590 (745M), 1.2600 (425M), 1.2615-25 (965M) AUD/USD: 0.7350 (350M), 0.7400 (770M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.12 Bullish above Trades with offered tone in quiet Asian session EUR/USD opened -0.27% at 1.0781 after USD broadly firmed on rising US yields After trading 1.0787 in early Asia, the EUR/USD drifted lower It traded down to 1.0762 before settling around 1.0770 into the afternoon EUR/USD trending lower with the 5, 10 & 21-day MAs in a bearish alignment Resistance @ the 10-day MA @ 1.0844 and break would ease downward pressure Support is at last week’s 1.0754 low and the 2020 trend low at 1.0636 Diverging central bank expectations likely to keep EUR/USD in down-trendGBPUSD Bias: Bearish below 1.3350 Bullish above. Off 0.15%, as weak yen led U.S. dollar higher, USD/JPY +0.7%, 20yr high Cable traded in 1.2990-1.3016 range with consistent flow on D3 British executives expect high inflation to squeeze profits CFO’s expect sustained inflation, with the Bank of England behind the curve Charts, momentum studies, 5, 10 & 21 day moving averages crest or fall 21 day Bolli bands edge lower – net negative signals above recent range base Last week’s 1.2973 2022 low and 1.2962 lower 21 day Bolli band first support Asian 1.3016 high then NY 1.3041 top are initial resistanceUSDJPY Bias: Bullish above 120 Bearish below USD/JPY in fresh surge with official jawboning shrugged off FinMin Suzuki jawboning failed to stop USD/JPY from surging more again From 126.98, pair as high as 127.81 EBS before steadying Eyes on 128.00 break but good resistance see here Site of $700 mln in option expiries today and barriers tipped too Stops above, could see further moves towards 129.15 high in May 2002 Japanese exporter offers trail up but, like jawboning, can’t halt rise Japanese importers, others still in buy-dip mode Firm US yields supportive, Treasury 10s @2.842%, highest in 3 years JPY crosses bid, EUR/JPY 126.97 to 137.70, best since 139.00 Aug 2015 GBP/JPY 165.16 to 166.21, highest since 174.96 in February 2016 AUD/JPY 93.24 to 94.00, still below 94.30 March 28 spike highAUDUSD Bias: Bullish above .7300 Bearish below Moves higher in Asia as AUD/JPY buying underpins AUD/USD opened -0.50% at 0.7353 after underperforming in broad USD strength It moved up to 0.7368 in early Asia on the first round of AUD/JPY buying It was around 0.7455 when the RBA minutes were released but reaction was muted RBA confirmed hawkish pivot by saying the next rate hike has been brought forward AUD/USD hit session low after the minutes when E-minis gave back early gains Stock rallied again and AUD/JPY buying resumed pushing AUD/USD higher It is around session high at 0.7365/70 heading into the afternoon AUD/USD resistance is @ the 10-day MA @ 0.7429 and break would ease pressure Support is at the 55-day MA at 0.7324 and 200-day MA at 0.7295
Source: Tickmill
