Daily Market Outlook, April 26, 2022 Overnight Headlines China Central Bank Seeks To Calm Markets With Support Pledge Japan Readies $48bn Package To Ease Inflation Pain – Nikkei Goldman Sachs Now Sees ECB Hiking Interest Rates In July Oil Advances As Investors Weigh China’s Covid-19 Resurgence Dollar Ascends On China Covid Fears, Fed Rate Hike Pace Asia Shares Edge Up, Sentiment Fragile On China Growth Fears HSBC Quarter 1 Profit Slides As Ukraine Conflict, Inflation Bite UBS Posts Surprise 17% Q1 Profit Rise, Santander Q1 Profit Rises 58% Whirlpool Cuts Full Year Sales View, Reviews Europe BusinessThe Day Ahead Asian shares bounced up on Tuesday after a late revival on Wall Street, though global growth fears stoked by China’s strict COVID-19 curbs and an expected streak of aggressive Federal Reserve tightening sapped risk appetite. The nervousness about China’s economic slowdown, however, hit Australian shares, with the local benchmark down 2% by early afternoon, hurt particularly by declines in miners. Japan’s Nikkei stock index pared earlier gains and was down 0.04% by early afternoon. U.S. stock futures were little changed in Asia trade.The lockdown in Shanghai, and the spread of cases in other big cities like Beijing, is weighing on the growth outlook for the world’s second largest economy and investment sentiment. Markets have also been fretting that an aggressive pace of tightening by the U.S. Fed could derail the global economy, which has only just started to recover from the pandemic. The Fed is expected to raise rates by a half a percentage point at each of its next two meetings. Lockdown in China’s financial hub has dragged into a fourth week, as authorities stick to their “dynamic zero-COVID” policy to combat the latest outbreak of Omicron cases. In currency markets, the dollar was in fine fettle on safe-haven demand. China’s offshore yuan was steadier, at 6.5558 per dollar after the People’s Bank of China said late on Monday it would cut the amount of foreign exchange banks must hold as reserves.That helped it recover from a year-low of 6.609 per dollar on Monday, hurt by fears about China’s economic growth. The dollar was higher against most peers, with its index against a basket of rivals at 101.58, just off its overnight two year peak. Benchmark U.S. 10-year yields ticked up to 2.8566% in early afternoon deals. Treasury yields retreated on Monday from hawkish Fed-induced highs, as the China lockdown and growth fears sent investors to the safety of U.S. bonds. US releases include durable goods orders and new home sales data today, as well as the Conference Board consumer confidence report. Durable goods orders are expected to partially recovery from the drop in March, but markets will be looking to see to what extent geopolitical uncertainties and supply bottlenecks will restrain activity going forward. For US housing, sales overall seem to show some signs of higher interest rates already having an impact, although housing starts appear to be holding up for now. US consumer confidence, meanwhile, is expected to broadly steady in April with the strong labour market providing an offset for concerns about inflation. The Conference Board measure has not fallen by as much as the University of Michigan survey which showed an unexpected rise in consumer sentiment in April.FX Options Expiring 10am New York Cut EUR/USD: 1.0700 (757M), 1.0725 (815M), 1.0735 (461M) 1.0750 (1.05BLN), 1.0785-90 (500M), 1.0795-05 (2.07BLN) 1.0900-10 (560M), 1.0995-00 (544M) USD/JPY: 126.75-80 (850M), 128.00 (655M) GBP/USD: 1.3170 (200M) AUD/USD: 0.7125 (298M), 0.7145-50 (574M) 0.7170 (395M), 0.7220 (1.22BLN), 0.7350 (741M) 0.7370-75 (754M). AUD/JPY: 88.25 (684M), 90.80 (703M) USD/CAD: 1.2675 (655M), 1.2785 (740M) NZD/USD: 0.6830 (565M). AUD/NZD: 1.0800 (396M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.12 Bullish above EUR/USD opened -0.90% at 1.0712 after USD and JPY surged across the board After trading 1.0707 it tracked higher led by a 0.5% drop in USD/JPY USD selling continued, as risk assets steadied and USD/CNH fell from highs EUR/USD is trading close to the 1.0735 session high into the afternoon Resistance is at former support at 1.0755/65 where sellers are tipped EUR/USD trending lower with the 5, 10 & 21-day MAs in a bearish alignment Only a break above the 10-day MA at 1.0804 would suggest bottom is forming The next level of decent support is the 2020 low at 1.0636GBPUSD Bias: Bearish below 1.3350 Bullish above. +0.2% with a softer USD amid profit taking on short yuan and yen positions Trades at he top of a 1.2732-1.2772 range with consistent flow in Asia UK cost of living crisis will hit economic growth hard – poll Poll justifies the cautious outlook of BoE Governor Bailey Charts; momentum studies, 5, 10 & 21 day moving averages head lower 21 day Bollinger bands expand – strong bearish trending setup Targets a test of 1.2496, 61.8% of the 2020-2021 rise Close above 1.3028 21 day moving average would end downside biasUSDJPY Bias: Bullish above 120 Bearish below USD/JPY heavy but downside limited, 127-129, 127.50-129.50 core range still USD reverses lower after good buying yesterday, helps major ex-JPY up Risk back on following Wall St reversal up, Nikkei +0.5% @26,726 JPY crosses base for now, major reason behind USD/JPY push down yesterday USD/JPY 128.23 EBS early high to 127.35, bounce since to 127.83 Japanese importers on bid sub-127.50, trail down, JPY shorts done paring Good bounce from 127.50 200-HMA area, 128.24 100-HMA resistance Option expiries today both side, more below than above, 126.00-80 $2.5 bln US yields more supportive after bounce from o/n lows, Tsy 10s @2.820%AUDUSD Bias: Bullish above .7300 Bearish below AUD/USD staging a healthy recovery after Monday’s vicious sell-off Asian equity markets moving higher and the USD/CNH is well off early highs AUD/USD is up 0.60% from NY close and up 1.25% from 0.7135 Monday low Resistance is at former support at 0.7230/35 with high so far at 0.7224 Key resistance is at the 200-day MA at 0.7293 and break eases pressure Support at 76.4 of 2022 low/high at 0.7131 validated by price action
Source: Tickmill
