Daily Market Outlook, February 15, 2022 Overnight Headlines Japan’s Economy Rebounds During Lull Before Omicron Wave Analysts Say PBoC May Cut RRR, Interest Rates This Year – CSJ China Banks Boost Lending To Property Sector In January – CSJ Australia’s Central Bank Has Goals In Sight, Just Waiting On Wages CBA Brings Forward First RBA Rate Hike To June From August Biden Team Sees Limited Ability To Press China In Trade Talks Senators Weigh Non-Binding Resolution As Russia Sanctions Stall U.S. Inflation Outlook Falls For First Time Since October 2020 ECB’s Lagarde Repeats Pledge For Gradual Monetary Policy Shift Banxico Is Likely To Match Fed Rate Hike In March, Deputy Gov Says Chinese Yuan Firms As China Refrains From More Easing, For Now Iron Ore Tumbles 10% On SGX As Beijing Fights To Rein In Prices Barclays Raises 2022 Brent/WTI Price Forecast By $7 To $92/$89Bbl US Banking Regulators Warn Of Risks In Leveraged Loan Market Asia Markets Slip, Investors Mull Potential Impact Of Russia Invasion BHP First-Half Profit Jumps 57%, Declares Record Interim Dividend Regulators Probe Block Trading At Morgan Stanley, Goldman Sachs Intel Near Roughly $6 Billion Deal To Buy Tower SemiconductorThe Day Ahead Asian stock markets are mostly down this morning although Chinese indices have moved higher. That follows big declines in Europe yesterday and a smaller fall on Wall Street. Uncertainties regarding the Ukraine-Russia situation and the outlook for inflation and interest rates remain key factors for markets. Japanese GDP data recorded a 1.3% rise in activity in Q4 2021 following a 0.7% decline in Q3. Meanwhile, the minutes of the Australian central bank’s last policy meeting said it is prepared to be patient as it assesses the need for a tightening in monetary policy. Just released UK labour market data showed that employment fell by 38k in the three-months to December while the unemployment rate was unchanged at 4.1%. However, more timely figures for January saw a 108k rise in employees in employment while unfilled job vacancies rose to a record 1.3 million. Wage data was mixed as annual average earnings growth accelerated to 4.3% in December (from 4.2%) but fell modestly excluding bonuses. The German ZEW survey will be one of the first indications of the strength of the Eurozone economy in February. As a survey of financial analysts it can be less reliable than the PMI data but gets attention because of its timeliness. Last month’s update saw expectations climb to their highest since last July, but current conditions fell to its lowest since last June. This month, expectations may have slipped modestly but we look for a rebound in the reading for the immediate outlook as Omicron fears recede. In the US, January producer prices data will provide a gauge of pipeline inflationary pressures. Consumer price inflation surprised on the upside in January primarily because of energy prices, although ‘core’ inflation also continued to climb. The PPI will provide indications whether a further rise in energy prices could lead to inflation moving up again in February particularly as concerns about the Ukrainian situation put upward pressure on both gas and oil prices. Also of interest will be the New York Fed manufacturing survey for February which may show that the negative impact on activity from Omicron is fading. UK consumer price data for January will be released early Wednesday. Annual CPI inflation surprised on the upside for a third straight month in December rising to 5.4%, a rate not seen for almost thirty years. Expect it to stay at that level in January but with the regulated energy prices set to increase by more than 50% in April, inflation seems set to rise considerably further in the near term. After choppy trading session both UK and US government bond yields ended the day up yesterday. In currency markets the US dollar started the week up against both the euro and sterling as it seemed to benefit from its perceived ‘safe haven’ status. G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls ) EUR/USD: 1.1185 (400M), 1.1200 (353M), 1.1295-00 (520M) 1.1340-50 (710M), 1.1395-00 (615M), 1.1420 (337M) 1.1460-65 (425M), 1.1480-85 (300M), 1.1495-00 (464M) USD/JPY: 114.35 (200M), 114.65 (230M), 114.80-85 (333M) 115.00 (396M), 115.45-50 (400M), 115.70-75 (625M) 115.90-00 (1.2BLN), 117.00 (220M) GBP/USD: 1.3600 (437M), 1.3770 (595M) EUR/GBP: 0.8450 (330M) AUD/USD: 0.7065 (210M) 0.7120-25 (352M), 0.7195 (200M). NZD/USD: 0.6550 (226M) USD/CAD: 1.2550 (290M), 1.2600 (586M), 1.2695-00 (2.05BLN)Technical & Trade ViewsEURUSD Bias: Bearish below 1.15 Bullish above EUR/USD in a rough spot under 1.14; EZ Q4 GDP data ahead 21 DMA at 1.1327 adds to technical suppression of EUR/USD Recent rejection of 100 DMA leaves bulls disillusioned Bears may capitalize if Eurozone Q4 GDP due later misses Would make ECB more reluctant to tighten policy EUR/USD Bollinger downtrend channel awaits at 1.1239GBPUSD Bias: Bearish below 1.36 Bullish above. GBP/USD reacts calmly to UK earnings and employment data Cable holds within 1.3528-1.3546 Asian session range as UK data digested UK wages hit by inflation, unemployment rate steady at 4.1% 1.3546 approximates to NY session high Monday (courtesy of Russia’s Lavrov) Lavrov said diplomatic possibilities ‘far from exhausted’ 1.3495 was Monday’s one-week low amid risk aversion on Ukraine fears GBP is risk-sensitive; USD is safer-havenUSDJPY Bias: Bullish above 114.50 Bearish below USD/JPY daily double top plays long lower shadows Long lower candle shadows, demand on dips, slowing the bear run Market still feeling the weight of a Jan-Feb double-top: 116.355/34 peaks There is more balance to the market and good support points close by A long play could be entertained, close to the 115.20 cloud top There might be room to take out a run back to the recent highs However, for now we are on hold to assess broader double-top riskAUDUSD Bias: Bearish below 0.7250 Bullish above AUD/USD bearish reversal pattern continues to play out AUD/USD continues lower after recent bearish chart pattern Last week’s doji candlestick reversal has nullified upside More downside available if it ends below 0.7076 Tues Daily Bollinger downtrend channel would then be engaged Near-term target will then shift to double bottom near 0.7000 RBA still preaches patience on policy tightening
Source: Tickmill
