Daily Market Outlook, March 4, 2022 Overnight Headlines Ukraine Blames Russia For Attack On Europe’s Largest Nuclear Power Plant Ukrainian, Russian Negotiators Say Third Round Of Talks Will Be Held Shortly Ukraine Says Talks With Russia Agreed On Humanitarian Corridors Putin Says Russian Military Advance In Ukraine ‘Going To Plan’ China Likely To Set Lowest GDP Target Since 1990s At Key Meeting Japan’s Unemployment Edges Up Amid Record Covid Wave Australia Outshines Developed Global Peers On Profit Outlook Fed’s Williams: Situation Is Definitely Not One Of Stagflation UK Steps Back From Suspending Northern Ireland Trade Deal Euro Tumbles Further After News Of Fire At Ukrainian Nuclear Plant Bitcoin Falls Back Toward $40,000 On Report Of Nuclear Plant Hit Treasuries Advance As Ukraine Says Russia Shells Nuclear Plant Wall Street Is Already Pouncing On Russia’s Cheap Corporate Debt Oil Continues To Surge As Russian Troops Fire On Nuclear Plant Asia Stocks Fall As Fighting In Ukraine Reaches Nuclear PlantThe Day Ahead Reports that Russia has attacked Ukraine’s largest nuclear power station prompted another sharp ‘risk off’ move in markets overnight, although subsequent updates suggested that essential equipment was not impacted. Asian equity markets initially fell on the news, while US Treasury bonds rallied, and the US dollar firmed. Global energy prices remain elevated, with Brent crude oil holding close to an eight-year high above $111bbl. Meanwhile, wheat prices have surged to a 14-year high. The key data release of the day is the February US labour market report. It represents an important bellwether of broader economic conditions. January employment surprised significantly on the upside given concerns that the then prevailing high level of Covid cases was constraining economic growth. With the impact of Omicron fading rapidly, expect another strong rise in employment of 520k for February, while the unemployment rate could fall to a new post-pandemic low of 3.8%. Meanwhile, in an indication that the tightening labour market is boosting wages, look for annual earnings growth to accelerate to 5.9%, its highest since the early months of the pandemic. The UK construction PMI index rose to its highest level in six months in January as Covid restrictions were rolled back. This was primarily due to rising commercial activity. Continuing strong orders growth point to further output gains. However, less positively, house building slowed and the rebound in civil engineering was relatively sluggish. Given the scale of January’s rise, look for a modest pullback in the February headline index to 55 (from 56.3), although that would still be consistent with a brisk pace of growth. Already released data for some individual member countries, including a 1.5% gain for Germany, point to a rebound in monthly Eurozone retail sales in January following a big fall in December. Much of this improvement reflects the easing of concerns about Omicron and removal of restrictions. However, looking forward, the outlook for sales is clouded by the rapid rise in inflation that is eroding consumers’ real spending power. While the focus will continue to be on the Ukrainian crisis, today’s US labour market report will also attract attention as markets continue to debate the potential extent monetary tightening. Federal Reserve Chairman Powell repeated that he is likely to support an interest rate hike of 0.25% later this month and that further hikes are likely to follow. However, he also acknowledged that the outlook was particularly uncertain. The Fed now enters its communications blackout period ahead of the policy update on 16th March.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 ) USDJPY – 116.00 800m. 114.90/115.00 847m. 114.00 1.50bn (1.40bn P). EURUSD – 1.1300/10 1.20bn (858m C). 1.1250 497m. 1.1120 793m. 1.1100 1.04bn (717m P). AUDUSD – 0.7290/0.7300 1.04bn (635m C). 0.7240/50 470m. USDCAD – 1.3000 820m. 1.2800 924m. 1.2750 460m. 1.2700 1.74bn (930m C). 1.2590/1.2600 1.16bn (1.07bn P). EURGBP – 0.8520/30 745m. USDMXN – 20.70 1.51bn (1.05bn P). USDCNH – 6.35 425m. 6.30 451m.Technical & Trade ViewsEURUSD Bias: Bearish below 1.15 Bullish above EUR/USD under the gun again on reports of a fire at an Ukraine nuke facility Concerns over the Russia-Ukraine war already has the market risk off Fast approaching weekend and US NFP report tonight has many side-lined too EUR/USD from 1.1068 to 1.1010 in Asia so far, looking to test 1.1000 soon? Large option barriers tipped at 1.1000, break could see massive stops hit As to expirations today, only to upside – 1.1050 E594 mln, 1.1100 E1 bln EUR/USD drops to 1.10 EBS which is 78.6% 2020-2021 rise Target of the break is 2020 low at 1.0636 Current low shaped by option and corp hedging interest at 1.1000 Sparse option cover below 1.10000, risk market short gamma EUR/USD traders were building a big EUR/USD long position Trigger of 1.1000 barriers may result in faster paced decline as stops hitGBPUSD Bias: Bearish below 1.36 Bullish above. Softer in a choppy headline driven session Steady after a risk sell off on fears of Chernobyl type incident in Ukraine Now no signs of elevated radiation in Ukrainian nuclear plant Sterling fell 0.2% as risk appetite slid and now trades down just 0.05% Heavy volumes, cable 1.3317-55 range, EUR/GBP -0.15% in 0.8261-95 range Charts; momentum studies conflict, 5 10 & 21 day moving averages fall 21 day Bollinger bands slide – signals suggest the base is the weak side Targets 1.3161-66 longer term, Dec 2021 low and 38.2% 2020-2021 rise Close above 1.3457 50% of the February fall would end the downside biasUSDJPY Bias: Bullish above 114.50 Bearish below USD/JPY swoons with risk again off, Ukraine nuke fears Risk already off when news of fire at Ukraine nuclear facility hits wires Nikkei currently -2% @26,020, AXJ in red, E-Minis -0.75% @4326 USD/JPY in 115.25-56 range, some chop but moves both up and down limited Sat Gotobi Tokyo fix, pre-weekend/US NFP release position adjusts cited Support from area of 115.24 daily Ichi kijun, tenkan 115.10, 55-DMA 114.96 Spot in ascending hourly Ichi cloud between 115.19-44, 200-HMA 115.21 Option expiries – 114.00 $1.5 bln, 114.95-115.00 $845 mln, 116.00 800 mln US Treasuries bid on safe-haven flows, 10s currently yield @1.787% Most JPY crosses on back-foot, EUR/JPY especially, 127.79 to 126.94 EBSAUDUSD Bias: Bullish above .7100 Bearish below Resilient as headlines trigger a risk rout Trades up 0.1%, at the top of a busy headline driven 0.7301-0.7338 range Risk slumped on headlines Zaporizhzhia nuclear power station was on fire Largest nuclear station in Europe, but the fire was outside Stocks, yields fell and oil jumped, taking AUD lower, then came back Charts; 0.7324 200 DMA. 0.7330, 61.8% Oct-Jan fall tested and under pressure Close would be above a strong bullish sign for 0.7416, 76.4% of Oct-Jan fall 5, 10 & 21 DMAs head higher as 21 day Bolli bands expand – trending setup Close below the rising 0.7251 10 DMA needed to undermine topside bias
Source: Tickmill
