Daily Market Outlook, March 22, 2022 Overnight Headlines RBA: Won’t Respond Until There Is Evidence Of Pervasive Price Pressures Kuroda Renews Powerful Easing Pledge In Wake Of Hawkish Fed Signal Australia Consumer Confidence Plunges As Price Expectations Jump Japanese Yen Moves Through 120 To US Dollar, Weakest In Six Years Ether Outperforms Bitcoin As Excitement Builds For Software Upgrade U.S. Yield Curve Crushed As Short-End Rates Surge Most In Years Oil Extends Rally As EU Members Weigh Russian Ban, Gold Steady Asia-Pacific Stocks Rise As Fed Works To Combat High Inflation Alibaba Raises Share Buyback To $25 Billion From $15 Billion Nike Reports Sales Growth Driven By North American DemandThe Day Ahead Asian equity markets are mixed this morning. In a speech late yesterday US Federal Reserve Chair Powell said that curbing inflation was the top priority for 2022 and warned that, if necessary, the Fed would raise interest rates by more than 25 basis points “each time”. In contrast, Australian central bank head Lowe seems in no hurry to hike interest rates. He warned yesterday, as Australian consumer confidence fell to its lowest since 2020, that he would not react until he saw evidence of pervasive price pressures. Meanwhile, in China the authorities promised stronger monetary policy support for the economy. Just released UK public finances data for February showed a monthly rise in net government borrowing of £12.3bn. That was higher than expected but down from £15.2bn for the same month last year. It is further confirmation that this fiscal year’s budget deficit will be much lower than was forecast in the autumn leaving Chancellor Sunak with some wiggle room. The February Lloyds Bank Recovery Tracker was released this morning. It shows a welcome recovery in some sectors, notably motor vehicle production and tourism and recreational services, where activity has been restrained by disruptions arising from the Covid pandemic. However, overall, the number of UK sectors reporting output growth fell in February to its joint lowest since last August. Moreover, UK businesses increased their prices at the fastest rate in 22 years as a range of costs continued to rise. The March CBI industrial survey will provide one of the first indications of the initial impact of the Ukrainian crisis on the factory sector. Previous recent prints have showed elevated cost pressures but also indications that orders are picking up. Several policymakers from the Bank of England, US Federal Reserve and the European Central Bank are scheduled to speak today. Many are participating in a conference on financial innovation and so may not talk about the immediate outlook for monetary policy. Nevertheless, markets will still look for further clues on how quickly interest rates are likely to rise across all three economies. February UK consumer price data, to be released early Wednesday, is expected to post a further rise in inflation. Expect the annual rate of headline CPI inflation to rise to 6.0% from 5.5% in January and the ‘core’ rate to move up to 5.0% from 4.4%. Inflation is expected to move even higher in the next few months to around 8% in April and the BoE last week pointed to the possibility of another peak in October. However, after that, the BoE expects inflation to fall sharply through 2023.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: 1.1010 (EU1.14b), 1.1075 (EU677m), 1.1150 (EU572.5m) USD/JPY: 112.80 ($750m), 112.00 ($452m), 114.80 ($447m) AUD/USD: 0.7250 (AUD1.29b) USD/CNY: 6.3700 ($300m) NZD/USD: 0.7050 (NZD571.7m)Technical & Trade ViewsEURUSD Bias: Bearish below 1.12 Bullish above EUR/USD opened -0.325 at 1.1015 after USD gained on hawkish Powell comments There was a bout of broad USD buying that pushed the EUR/USD down to 1.0981 Buyers emerged at the low and it drifted back t around 1.1000 The break below the 10-day MA at 1.1006 was bearish but a close below is needed Fundamental factors are lining up against the EUR/USD and it is vulnerable The next level of support is a minor fibo at 1.0932 Resistance is @ the 21-day MA @ 1.1065 & break would ease downward pressureGBPUSD Bias: Bearish below 1.3350 Bullish above. GBP/USD deflated by growing risk of 50 bps Fed hike in May Cable hit 1.3121 circa 0700 GMT after extending south from 1.3210 1.3210 was Monday’s high, before USD rose on Powell’s hawkish message GS expects 50 bps Fed hikes in May and June UST yields up 1.3121 is 10 pips shy of last Friday’s low 1.3210 was pip shy of last Thursday’s high (1.3088 was Thursday’s low) UK Feb PSNB ex-banks GBP 13.1 billion vs GBP 8.1 billion f/cUSDJPY Bias: Bullish above 116 Bearish below USD/JPY catches second wind, surges to 120.46 USD/JPY catches a second wind in Asia afternoon trading To a fresh high of 120.46 EBS, off a bit after initial push through 120.00 Japanese importers, other players back in on bid on limited downside Base seen moving higher with US yields still very buoyant, bias up US Treasury 10s to as high as 2.346% in Asia, currently @2.340% USD/JPY bias up but will likely face resistance at every 50-tick mark Possibility of option barriers from 120.50, towards 125 “Kuroda ceiling” Next major tech resistance not till 121.49 high in February 2016AUDUSD Bias: Bullish above .7100 Bearish below AUD/USD opened -0.20% at 0.7400 after hawkish comments from Fed’s Powell After trading 0.7401 it eased on steady USD buying flows – led by USD/JPY AUD/USD traded down to 0.7376 before settling around 0.7385 It is trending higher with the 5, 10 & 21-day MAs in a bullish alignment Support is at the 10-day MA at 0.7322 and break would suggest top is forming Resistance is at the March 7 high at 0.7440 with sellers tipped 0.7420/30 AUD/USD supported by elevated communities while central bank divergence caps
Source: Tickmill
