Daily Market Outlook, July 19, 2022

Overnight Headlines

IBM Shares Slide After Hours After Company Trims Cash Flow Forecast
Russia’s Gazprom Tells Europe Gas Flow Halt Is Beyond Its Control
Biden Could Declare Climate Emergency As Soon As This Week: WaPo
Oil Prices Fall; Gold Subdued As Firmer US Dollar, Yields Dent Appeal
Rishi Sunak Tops Tory Leadership Poll, As Tom Tugendhat Out Of Race
House Speaker Pelosi To Visit Taiwan Next Month Amid China Tensions
Senate To Vote Today On Slimmed-Down China Semiconductor Bill
Russian Missiles Strikes Cities Across Ukraine, Gas Supplies In Focus
Chinese Covid Cases Jump To Almost 700 As Shanghai Widens Testing
RBA’s Bullock: Households Can Withstand Further Rate Hikes
Asian Equity Markets Mostly Lower; US Equity Futures Edge Higher

The Day Ahead

Equity markets are mostly lower, led by technology stocks, as the risk tone turned cautious on concerns about the global economic outlook and reports of rising Covid cases in China. Japan’s Nikkei rose, catching up after the long weekend. In Europe, concerns about Russian gas supplies increased. Media reports suggest that the European Commission is preparing voluntary targets for member states to reduce gas consumption.

The UK labour market report released this morning were mixed. It showed unemployment unchanged at 3.8% in the three months to May, in line with expectations. Employment rose by a robust 296k in the latest three months, but the timelier payrolled employees measure rose by less than expected at 31k in June and the prior month was revised down as well. Regular pay growth (excluding bonuses) edged up to 4.3% from 4.2%, as expected, while total pay growth was weaker than expected, falling to 6.2% from 6.8%. In real terms after adjusting for inflation, wage growth is falling, including a record fall in real regular wage growth. The number of unfilled vacancies remained high at 1.3 million but appears to have topped out.

Later this morning, Eurostat’s final release for Eurozone June CPI inflation is expected to confirm the earlier flash estimate of 8.6%y/y which was stronger than predicted. The release comes ahead of the ECB’s expected announcement on Thursday for the first increase in interest rates for eleven years.

The relatively quiet US calendar this week includes housing reports. Housing starts and building permits data will be released this afternoon. Yesterday’s NAHB survey of homebuilders confirmed slowing activity in the sector as interest rates rise.

Attention returns to the UK this evening. A further vote in the Conservative leadership contest is expected to whittle down the number of candidates to the three. The scheduled TV debate this evening will not now take place. Markets will be more focused on BoE Governor Bailey’s Mansion House speech, as speculation grows on whether interest rates may be raised by 50bp in early August rather than 25bp. New Chancellor of the Exchequer Zahawi will also address the event.

More UK data will be released at 7am tomorrow. Look for an annual headline CPI inflation to increase for a ninth straight month, to 9.3% in June from 9.1%, lifted by higher fuel prices. The core measure (excluding food and energy), however, is expected to fall for a second month, to 5.7% from 5.9%, but it will still be at an elevated level.

FX Options Expiring 10am New York Cut

EUR/USD: 1.0100 (562M), 1.0150-55 (1.31B), 1.0200-05 (892M)
USD/JPY: 136.00 (1.3B), 138.00 (2.72B), 138.50-55 (939M), 138.75 (555M)
USD/JPY: 139.25 (537M), 140.00 (1.53B). AUD/USD: 0.6750 (797M)
GBP/USD: 1.1900 (534M), 1.2120 (370M), 1.2280 (405M), 1.2310 (324M)
GBP/USD: 1.2350 (780M), 1.2395 (520M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.0350

EUR/USD cautious in Asia after failing to sustain rally above 1.0200 Monday
Growing concerns that Russia will use energy as weapon against Europe weigh
Fears heightened as Gazprom declares force majeure on gas supplies to Europe
Planned reopening of Nord Stream 1 gas pipeline, ECB meeting Thursday eyed
Cooling Fed rate bets & lower inflation expectations limit EUR downside
Resistance 1.0200-05, 1.0225-30, support 1.0100-05, 1.0070-75
20 Day VWAP is bearish, 5 Day bearish

GBPUSD Bias: Bearish below 1.2150

Cable rises to 1.1973 intra-day high on better than expected UK jobs data
Employment +296k in 3mths to May vs 170k f/c; jobless rate 3.8% vs 3.9% f/c
1.1926-1.1964 was Asian session range (pre-UK jobs data)
1.2034 was Monday’s one-week high, before U.S. stocks sagged
Strong UK jobs data supports case for 50 bps BoE rate hike on August 4
BoE Governor Bailey to deliver Mansion House speech at 1745 GMT.
20 Day VWAP is bearish, 5 Day bearish

USDJPY Bias: Bullish above 134

USD/JPY steadies after push down yesterday to 137.90 EBS
Asia 137.98-138.39, bid into Tokyo fix, off in afternoon trading
Below ascending 100-HMA at 138.20 but support to 137.90
Overall bias remains up despite bouts of retracement
Underlying support at 137.35 daily Ichi tenkan
Nearby option expiries today include massive $2.7 bln at 138.00
Below 137.40-50 $540 mln, above 138.15/30 $717 mln, 138.50-55 $939 mln
US yields steady into FOMC next week
20 Day VWAP is bullish, 5 Day bullish

AUDUSD Bias: Bearish below .7050

AUD/USD eyes higher levels on Central Bank comments drive rally
AUD/USD extends higher as market digests RBA comments
Attempting to push past 21 DMA resistance 0.6846
Tues close above will clear the way higher in near term
Technical pivot at 0.6903 will inspire bulls to add to bets
Closing above engages daily VWAP uptrend channel
RBA sees a fair bit more tightening till neutral.
20 Day VWAP is bullish, 5 Day bullish

BTCUSD Bias: Bearish below 22k

BTC surged as much as 9.4% to reach $22,760, last sub 22k again
Sudden strength followed Wall St lead, but US stocks faded
Crypto assets broadly higher with tentative risk-on
Support seen at 19k then 18300 the base of the daily VWAP bands failure here opens a retest of lows
Concerns regarding increasing Crypto player forced liquidations leave BTC vulnerable
Additional pressure seen from BTC miners liquidating positions on declining profitability
20 Day VWAP is bullish, 5 Day bearish

Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.

High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% and 68% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Written by Patrick Munnelly

Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!

GBPUSD, H4 | Potential Bullish Continuation

Investment Bank Outlook 19-07-2022

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Daily Market Outlook, July 19, 2022