Daily Market Outlook, January 25, 2022 Overnight Headlines Australian Core Inflation Jumps To 7-1/2 Year Peak In Major Shock Australian Business Confidence Bruised By Coronavirus Surge China: Too-Fast Stimulus End In Some Nations May Hit Exports China Newspaper Calls For Faster Approval Of Property M&A Loans BoJ’s Kuroda Vows Easy Policy, Aware Of Early Inflation Risk PM Kishida: Japan’s Inflation Driven By Energy, Commodity Costs US Pres Biden: Fight Against Consolidation Will Help Tame Inflation Differences Splinter U.S. Team Negotiating With Iran On Nuclear Deal 8 Senators Revive Russia Sanctions Push As Ukraine Fears Mount Dollar Near Two-Week High Amid Jitters Over Fed, Ukraine Tensions U.S. Yields Flatten After Slide On Ukraine Tensions, FOMC Caution Wall Of Money Stays Put In Japan Bonds During Global Turbulence Oil Rises On Supply Disruption Jitters As Geopolitical Tensions Grow Asian Shares, U.S. Futures Slide As Traders Fret About Ukraine & Rates Evergrande Seeks Patience From Global Investors On Repayment China’s Embattled Shimao Gears Up Asset Sales For Debt Relief IBM Beats Revenue Expectations On Cloud, Consulting Strength Tesla Raised To Ba1 From Ba3 By Moody’s Outlook Positive Rio Tinto And Mongolia Settle Feud Over Oyu Tolgoi Copper MineThe Day Ahead European stock futures are rising thanks to a surprise late rebound on Wall Street on Monday but volatility is likely to persist as rate and geopolitical risks reduce visibility over the short-term direction of markets. So while contracts on the Euro STOXX 50, DAX and FTSE indices came off highs to trade up around 0.6% after the region suffered its worst day since June 2020, futures on the Nasdaq fell more than 2% and those on the S&P 500 slid 1.6%.Investors remain nervous about the potential for military conflict in Ukraine and ahead of a key Fed meeting that could offer hints about the timing and pace of rate hikes. NATO said on Monday it was putting forces on standby and reinforcing eastern Europe with more ships and fighter jets, in what Russia denounced as Western “hysteria” in response to its build-up of troops on the Ukraine border. Keeping traders on their toes, the Federal Reserve will begin its two-day meeting later on Tuesday, with some investors starting to speculate about a surprise rate hike announcement though that is still seen as a small possibility. The big question mark is about the pace of the Fed hiking cycle, as the central bank seeks to tame the increase in inflation and the impact on equity markets. Fed tightening is putting pressure on some central banks in Asia to follow suit, potentially hurting their equity markets as happened in 2013 when the U.S. central bank began tapering its post-financial crisis stimulus. Just released UK public finances figures showed borrowing (excluding public sector banks) in December at £16.8bn, £7.6bn lower than a year ago. The outturn was below the market median forecast for £18.5bn while we predicted a fall to £15.0bn. Borrowing in the prior month was also revised down to £14.7bn from £17.4bn. This morning sees the release of the German IFO business survey and the UK CBI industrial trends survey. This afternoon also sees updates for the Conference Board consumer confidence survey and the Richmond Fed manufacturing survey. German business confidence fell for a sixth consecutive month to 94.7 in December for the IFO headline index, the lowest since February. Look for a modest rise to 95.1 in January, although the consensus forecast is for another decline, albeit a small one. Omicron and supply chain disruptions have weakened near-term economic activity, but markets will be watching to see whether prospects start to improve. In the UK, the CBI survey will provide an update on current trends in the manufacturing sector. The consensus forecast is for the total orders index to edge lower in January but to continue to signal relatively strong demand, although supply issues are affecting output volumes. Equally interesting is the index for average selling prices in the next three months which fell slightly (but remained high) in December after reaching its highest level in November since the 1970s. The survey will also contain quarterly questions, including investment intentions. In the US, the Conference Board measure of consumer confidence rose for a third month in December to 115.8, a five-month high. However, expect it to fall back in January due to Omicron which has resulted in economic activity slowing and possibly falling in some sectors in recent weeks. We forecast a fall in consumer confidence to 112.0G10 FX Options Expiries for 10AM New York Cut(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )USDJPY – 115.20/30 550m. 115.00 455m. 114.20/30 534m.EURUSD – 1.1490/1.1500 898m. 1.1450/60 1.57bn (1.04bn P). 1.1400 442m. 1.1330/40 774m. 1.1300/10 1.62bn (1.46bn P). 1.1250 522m. 1.1220 443m.GBPUSD – 1.3600 407m. 1.3500 433m. 1.3260 449m.AUDUSD – 0.7100 411m.USDCAD – 1.2680 424m.EURCHF – 1.0720 1.07bn (C). 1.0320 1.09bn (P)Technical & Trade ViewsEURUSD Bias: Bearish below 1.15 Bullish above Offered tone as equity market volatility continues EUR/USD opened -0.10% at 1.1332 after recovering when Wall Street rebounded Equity market weakness returned in Asia with E-minis falling over 1.0% EUR/USD traded down to 1.1310 and is near there heading into the afternoon Support is at trend-line at 1.1288 and break would add to downward pressure Resistance is at 10-day MA at 1.1368 and break would ease downward pressure Volatility expected to continue up until and through Wednesday’s FOMC EUR/USD barely moving during a period of heightened risk aversion EUR undermined by close proximity to area of potential conflict USD should be underpinned as world reserve currency EUR/USD static near center of Nov-Jan range with vol sinking SNB intervention underpins EUR/USD before reserve rebalancing weighs EUR/USD stuck since Nov with vol sinking Yesterday EUR/CHF hit multi-year low at 1.0300 before rallying SNB has been actively supporting pair since NovGBPUSD Bias: Bearish below 1.36 Bullish above. Holds below 1.35 amid stock market volatility Cable holds sub-1.35 after rallying off 1.3441 on U.S. equity bounce Monday 1.3441 was Monday’s three-week low as U.S. stocks tanked GBP is risk-sensitive; USD safer-haven. U.S. stock futures down 1.3500 is a former support point. Monday’s low was 10 pips shy of Jan 3 low We understand concern over PM Johnson’s lockdown birthday party, Shapps says UK Dec PSNB less than expectedUSDJPY Bias: Bullish above 114.50 Bearish below Renewed risk-off mood helps push USD/JPY, JPY crosses down in Asia Wall Street rally into close, higher US yields help USD/JPY to 114.10 Move up ephemeral however, off later as risk sours, to 113.76 EBS Nikkei -2% @27,027 at writing, AXJ down too, E-Minis -1% @4358 Ascending 113.85-87 daily Ichi cloud working as pivot for USD/JPY Low yesterday 113.47, underlying support at 113.31 ascending 100-DMA Yield on US Treasury 10s range between 1.758%-1.783%, now @1.770%AUDUSD Bias: Bearish below 0.7250 Bullish above AUD/USD opened -0.38% at 0.7145 after recovering from 0.7090 on Wall Street rally It popped higher to 0.7178 after Aus Q4 CPI came in hotter than expected Market convinced RBA will have to start tightening cycle sooner than planned Equity markets in Asia slumped with E-minis falling 1.0% and AXJ index -1.4% AUD/USD dragged lower by risk selling and is below 0.7140 into the afternoon Support is at the Dec 20 low at 0.7082 and break targets 0.6994 Sellers are eyed ahead of 0.7090 with resistance at 0.7205/15 The 10 & 21-day MAs converge at 0.7205/15 and break eases downward pressure AUD/USD remains vulnerable while equity volatility remains elevated
Source: Tickmill
