Daily Market Outlook, February 4, 2022

31699 daily market outlook february 4 2022

Daily Market Outlook, February 4, 2022 Overnight Headlines Fed’s Barkin: Rates Should Move To Pre-Pandemic Levels Fed Nominees Face Intense GOP Assault Over Credentials Biden Approval Rating Plummets To New A Low, Poll Sees US Warn China Firms Against Aiding Russia Amid Sanction Ukraine Briefings Spurs Urgency On Sanctions In Congress BoJ’s Kuroda Vows To Keep Ultra-Easy Policy In ECB Wake Japan See Vulnerability To China Supply Chain Constraints RBA Map Route To Faster Inflation, Stays Patient On Rates BoE Hike Places On Brink Of Fastest Tightening Since 1997 UK Johnson’s Key Aides Quit, Leaves The Premier On Brink Amazon Eyes Record US Market Value Surge In Wild Swing Ford Stock Sinks As Supply Shortages Set Earnings ShortfallThe Day Ahead The Euro is heading for its best week since March 2020 and was testing a near three-month high after Thursday’s hawkish shift from the European Central Bank stoked speculation about the pace and timing of rate hikes. Though the ECB kept rates on hold as widely expected, the euro climbed 0.26%, reaching as high as high as $1.468 in Asian trading on Friday in reaction to ECB president Christine Lagarde acknowledging the mounting inflation risks and declining to repeat previous guidance that an interest rate increase this year was extremely unlikely. Lagarde opened the door for a new tightening cycle beginning by the ECB this year. The market has been pushing a bit towards that but the fact that the president has acknowledged this is a big deal. The ECB had been seen as among the most dovish of the world’s leading central banks. As a result the dollar index, measuring the greenback against six major peers, was at 95.169 having tumbled 2% this week, it’s biggest weekly fall since March 2020. This is a sharp reversal after the index gained 1.65% a week earlier, when traders rejigged positions preparing for faster Federal Reserve rate hikes than had been previously expected. The markets are now factoring in five U.S. rate hikes this year. U.S. non-farm payroll data is due later on Friday, but though it is expected to show a sharp slowdown in jobs growth due to the spread of the Omicron strain of COVID-19 in January, the data won’t be as crucial for the Fed as in the past, as the focus is more on inflation. Traders have got to be ready for more volatility in FX markets and in markets in general when major central banks start entering a new pricing cycle, and that’s what we’ve seen in a dramatic way in the dollar in recent weeks. Markets start wondering not only when (central banks) are going to hike but more importantly how quickly and how high they are going to go. It’s not just a Fed story now, its also a Bank of England, an ECB story and even an RBA story. The Reserve Bank of Australia governor, on Wednesday said a rate hike this year was possible, though argued there was a rare opportunity to reach full employment that justified being patient. Friday’s RBA monetary policy statement did little to change that picture.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: 1.1100 (1.07BLN), 1.1140-50 (430M), 1.1175 (555M), 1.1200-05 (2.2BLN), 1.1225 (453M), 1.1300 (936M), 1.1350 (658M), 1.1400 (1.36BLN), 1.1450 (300M), 1.1600 (300M), 1.1700 (410M) USD/JPY: 113.80 (310M), 114.00 (1.04BLN), 115.20 (290M), 115.95-00 (535M), 117.05 (250M), 117.50 (310M) GBP/USD: 1.3400-10 (540M), 1.3500 (250M), 1.3540-50 (580M), 1.3650 (230M), 1.3750 (961M). EUR/GBP: 0.8375 (251M) AUD/USD: 0.7030-35 (380M), 0.7100 (759M), 0.7195-00 (612M), 0.7300 (1.32BLN) USD/CAD: 1.2400 (590M), 1.2500-05 (1.83BLN), 1.2600-10 (1.0BLN) , 1.2690-00 (900M), 1.2705-10 (715M), 1.2740-50 (1.0BLN), 1.2765-70 (960M), 1.2795-05 (652M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.15 Bullish above EUR/USD opened 1.2% higher at 1.1439 after ECB made a hawkish pivot After trading 1.1432 early Asia, the EUR/USD resumed its march higher Heading into the afternoon it is trading at a session & 3-week high @ 1.1464 Resistance is at the Jan double-top at 1.1480/85 and break would be bullish The 100-day MA – which was resistance – is support at 1.1429 More support @ the 21-day MA at 1.1332 and break would ease upward pressure Key will be US jobs data later today and may decide extent of EUR/USD rallyGBPUSD Bias: Bearish below 1.36 Bullish above. GBP holding bid in Asia except against EUR, risk for more upside vs USD, JPY GBP/USD head-fake down to 1.3521 before rally to 1.3628 yesterday Remains better bid in Asia between 1.3600-11 after BoE hike Awaiting London, fresh moves in UK yields, yield on Gilts 10s to 1.387% o/n GBP option expiries above/below today – 1.3400-10 GBP526 mln, 1.3750 961 mln GBP/JPY holding bid too, Asia 156.12-50, still below 157.76 high of year 1/5 Bias up with Japan-UK yield differential looking to widen further EUR/GBP 0.8409-0.8422 in Asia, above 0.8416 high yesterday, risk still up? Up against flat 55-DMA at 0.8421, 100-DMA at 0.8459 maybe on decisive breakUSDJPY Bias: Bullish above 114.50 Bearish below USD/JPY and the JPY crosses bid in Asia on hawkish shift in CB expectations USD/JPY 114.82-115.05 EBS, holding around flat daily Ichi kijun at 114.91 Well clear now of 114.40 55-DMA, 114.03-16 daily Ichi cloud, now supports Bias up but depends on moves in US yields after key US NFP release tonight Few large nearby option expiries today, 114.00 $1 bln, 116.00 $474 mln US Treasury 2s @1.215%, 5s @1.685%, 10s @1.846%, 30s @2.166% Nikkei up small @27,275, E-Minis +1% @4516 EUR/JPY up more after rally to 131.54 EBS yesterday, Asia 131.46 to 131.80 To remain bid on hawkish ECB? 131.60 top Jan 5 eclipsed, 133.48 Oct 20 ’21 GBP/JPY to 156.50 after BoE hike o/n, Asia 156.12-50, risk up on hawkish BoE Moves towards high of year of 157.76 on Jan 5 may be in cardsAUDUSD Bias: Bearish below 0.7250 Bullish above AUD/USD dithers as RBA bides time in global inflation battle AUD/USD creeps higher but lacks drive as RBA drags its feet Capped by Ichimoku Cloud – reinforced by 21 DMA at 0.7163 Fri close above needed to unlock bullish potential Australia central bank wary of tightening policy too fast Cites slow wage growth as an inhibiting factor US NFP due later may disappoint, spur AUD/USD bids; exp 150k

Source: Tickmill

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