Daily Market Outlook, December 19, 2022 

  • Investors continue to digest last week’s central bank activity, as the Fed, the BoE, and the ECB all raised interest rates and struck a distinctly hawkish tone. Asian equity markets took their lead from a weak close on Wall Street, however, European markets are set to post a rebound this morning, as the macro data calendar begins to wind down, focus is shifting to the potential for a shift in monetary policy in Japan. The Japanese government is suggesting a revision to its decade-old joint statement with the Bank of Japan which focuses on a strict 2% inflation target, this implies the potential for a shift away from the yield curve control strategy, these reports have seen the Japanese yen strengthen overnight.

 

  • With markets poised to wind down for the festive period, the data calendar for the week ahead is quieter, in the UK the focus will be on Wednesday’s Lloyds Business Barometer, investors will be looking for any nascent signs of improvement in business conditions ahead of Thursday’s Q3 GDP updates, which is expected to deliver an unrevised quarter over quarter contraction of 0.2%. In the Eurozone, today’s German Ifo release is the only data of note, this is expected to show another uptick in sentiment, as investors are hoping that the economic downturn may prove less severe than previously expected. In the US Friday’s personal consumption and expenditure, the Feds preferred inflation metric, is expected to show lower year-over-year levels of inflation for both the headline and core readings, with markets expecting a sub-5 % print for core, ex-food, and energy.

 

  • Markets-wise, with Friday’s massive options expiration complete investors are hoping for some stability to develop in the week ahead, European bourses are set to open on firmer footing, with a lack of tier-one data catalysts a rebound in risk sentiment may develop, as investors pin their hopes on a Santa rally for the festive period after one of the most bruising years for investors since the great financial crisis of 2008

Overnight Headlines

  • Biden, House GOP To Start 2023 With Scant Ties, Tension

  • Manchin Says No Intentions Of Ditching Democratic Party

  • China Hints At Pro-Business Push, Small Fiscal Boost In 2023

  • Chinese Business Confidence At Lowest In Almost A Decade

  • Covid Outbreak Throws Chinese Factories, Supply Into Chaos

  • Reports Japan Government Consider Revising BoJ Statement

  • Bank Of Japan To Sit Tight As Markets Weigh Post-Kuroda Path

  • EU Considers Lower Gas-Price Cap In Latest Plan To Limit Crisis

  • Putin’s Belarus Visit Stokes Fears Could Drawn Into Ukraine War

  • UK Recession Will Last Until The End Of Next Year, Report KPMG

  • Oil Advances On China’s Growth Pledge And US Move To Refill SPR

  • Apple Scales Back Mac Pro Plans, Weighs Production Move To Asia

FX Options Expiring 10am New York Cut

  • EUR/USD: 1.0400 (965M), 1.0620 (252M), 1.0660 (235M)

  • 1.0700 (546M)

  • USD/JPY: 135.00 (372M), 135.95-00 (430M)

  • GBP/USD: 1.2395-00 (253M). EUR/GBP: 0.8720 (230M)

  • AUD/USD: 0.6825 (213M), 0.6860 (251M)

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 3900

  • Primary support is 3900

  • Primary downside objective is 3700

  • Above 3950 opens a test of 4000

  • 20 Day VWAP bearish, 5 Day VWAP bearish

EURUSD Bias: Bullish Above Bearish below 1.0550

  • Primary support is 1.0590

  • Primary upside objective is 1.07

  • Failure at 1.05 opens a test of 1.04

  • 20 Day VWAP bullish, 5 Day VWAP bullish

GBPUSD Bias: Bullish Above Bearish below 1.22

  • Primary support is 1.22

  • Primary upside objective 1.24

  • Failure at 1.2180 opens a test of 1.2030

  • 20 Day VWAP bearish, 5 Day VWAP bearish

USDJPY Bias: Bullish above Bearish Below 137.50

  • Primary resistance is 137.50

  • Primary downside objective is 132

  • Above 138 opens a test of 139.30

  • 20 Day VWAP bearish, 5 Day VWAP bearish

AUDUSD Bias: Bullish Above Bearish below .6700

  • Primary support is .6700

  • Primary upside objective is .6900

  • Failure at .6700 opens a test of .6600

  • 20 Day VWAP bu, 5 Day VWAP bearish

BTCUSD Bias: Intraday Bullish Above Bearish below 16500

  • Intraday 16500 is primary support

  • Primary upside objective is 17200

  • Failure at 16400 opens a test of 16000

  • 20 Day VWAP bearish, 5 Day VWAP bearish