Daily Market Outlook, May 9, 2022

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Daily Market Outlook, May 9, 2022 Overnight Headlines China Export Growth Slows To Lowest In Almost 2 Years, Imports Flat China Paper Sees Q2 GDP Slow To 2.1%; RRR Cut Unlikely In May China Stimulus Fails To Ignite Housing Sales Over Key Holiday China Premier Warns Of ‘Grave’ Jobs Situation As Lockdowns Weigh Shanghai Tightens Lockdown To Hit Zero-Covid Goal By Late May Some In BoJ Called For Keeping Easy Policy In The March Meeting Minutes Japan March Real Wages Fall For First Time In Three Months Biden To Give Remarks On Inflation Tuesday, Contrast Plan GOP’s Pelosi Urges Congress To Approve $33Bln In Aid For Ukraine By End Of May EU’s Borrell: EU Should Seize Russian Reserves To Rebuild Ukraine ECB’s Holzmann: Two Or Even Three Steps To Hikes Appropriate This Year UK Deputy Prime Minister: UK Moving Fast To ‘Fix’ Northern Ireland Protocol Putin To Send ‘Doomsday’ Warning To West At Russia’s WW2 Victory Parade Yuan Touches New 18-Month Low As Lockdowns Cloud Economic Outlook Bitcoin’s Value Drops By 50% Since November Peak Last Year Oil Prices Slip As Investors Eye EU Vote On Russian Oil Embargo G-7 Leaders Commit To Banning Imports Of Oil From Russia Asian Stocks Follow Wall Street Futures Lower On Rate, Lockdown WorriesThe Week Ahead This week’s data calendar is dominated by U.S. consumer prices as inflation fears hang over global financial markets. April headline CPI is expected to rise 8.1% year-on-year, down from 8.5% in March. A hotter-than-expected reading will raise concerns the Federal Reserve is behind the inflation curve. Other U.S. data this week includes April PPI and University of Michigan consumer sentiment. Germany’s ZEW will be the key release out of Europe this week. Other euro zone data includes industrial production and German CPI. The main event in the UK this week will be preliminary Q1 GDP. The Bank of England highlighted growth concerns while raising rates last week, making the pound the worst-performing major currency. The UK will also be releasing trade and manufacturing output data. China is due to release trade data on Monday and the focus will be on the import and export components rather than the net trade balance. Chinese PPI and CPI are also on tap this week; monthly credit data may be released as well. Japan released services PMI data early Monday ; trade, current account and household spending data are due during the week. In Australia it will be the NAB business survey, along with consumer sentiment and retail trade. No top-tier data is due in New Zealand or Canada.CFTC Data This week’s positioning data from the CFTC show a massive buildup in the aggregate USD long position to its highest level of the year ahead of the Federal Reserve’s policy decision on Wednesday. The bullish USD position rose by USD6.0bn to USD19.4bn in a period when the DXY traded at its strongest level in close to two decades. In terms of currency performances, only the MXN managed to gain ground against the dollar in the week to Tuesday (+0.7%) among the currencies we cover in this report, with the JPY weakening the most (-2.2%). The EUR net long was sharply slashed to a small net short of USD839mmn as it followed two consecutive USD1bn+ declines with a massive USD3.8bn bet against it this week. The currency has held close to the 1.05 mark over the past seven sessions and struggling to make up much ground. This is the first time investors have held a negative position on the EUR since the first week of the year; outstanding short contracts are at their highest level since November. Investors’ sentiment in the GBP continued to worsen as the pound’s short climbed to a new high since Q4-2019. Accounts increased the bearish GBP position by USD295mn to USD5.8bn ahead of the Fed and BoE decisions—with the latter’s dovish hike yesterday contributing to the GBP briefly trading below 1.23 this morning. After the shift in the EUR position, the CAD’s net long fell the most with a USD925mn drop to USD703mn—its lowest level in five weeks—that still represents the largest bullish bet of the currencies shown in this report. The MXN, which led its report peers this week followed by the CAD, saw its small net long fall by USD132mn to USD360mn (roughly half of the CAD’s). The large JPY short retraced about a quarter of last week’s improvement with investors placing a USD295mn bet against the yen taking its aggregate short to USD9.7bn (almost USD4bn more than the GBP’s). The CHF, which also underperformed over the period with a 1.6% drop, saw its bearish position grow by USD105mn to USD1.8bn as the franc is also on the backfoot amid surging US yields. Finally, the AUD short climbed by a marginal USD54mn to now sit at USD2bn in a week that included a larger-than-expected hike by the RBA on Tuesday—while Aussie remains pressured by a weak risk mood in markets. Neutral NZD sentiment turned into a net short of USD 425mn owing to a USD430mn wager against the kiwi.FX Options Expiring 10am New York Cut EUR/USD: 1.0500 (391M), 1.0520 (500M), 1.0600 (688M), 1.0630 (301M) AUD/USD: 0.7100 (1.4BN), 0.7125 (76M) USD/CAD 1.2780 (290M), 1.2805 (588M), 1.2820-30 (1.09BN) Technical & Trade ViewsEURUSD Bias: Bearish below 1.0950 Bullish above Falls to 1.0500 as USD rises while equities swoon EUR/USD opened around 1.0550 after closing unchanged around 1.0545 Friday USD firmed in Asia after E-minis gapped nearly 1% lower at the open Risk currencies bore the brunt of USD buying while EUR/USD eased to 1.0503 Support for the EUR/USD is at the April 28 low at 1.0469 Bids below 1.0500 have underpinned EUR/USD over the past week A break below 1.0450 targets the 2017 trend low at 1.0340 Resistance is at the 10-day MA at 1.0543 and 21-day MA at 1.0690 USD should remain firm while risk assets remain under stressGBPUSD Bias: Bearish below 1.30 Bullish above. Heavy, as domestic factors cap and USD climbs -0.35% amid broad safe haven USD strength, as stocks fall, E-mini S&P -1% Trades towards the base of a 1.2287-1.2359 range – plenty of activity on D3 UK urge N. Ireland to agree way forward after Sinn Fein win Sterling to slide until confidence in policy returns… Charts; momentum studies edge lower, 5, 10 & 21 day and week MA’s slide 21 day Bollinger bands fall, as the strong bearish setup remains in play 1.2478 10 DMA resistance tested last week – now the first major barrier 1.2276 early Europe low Friday and 1.2252 June 2020 base initial supportsUSDJPY Bias: Bullish above 125 Bearish below USD/JPY powers above 131.00 again on wider Japan-US int rate diffs Interest rate differential on 10s as high as 291 bps early Asia Diverging central bank policies could see differential 300 bps+ soon USD/JPY from 130.59 early to 131.05 EBS, nearing 131.25 spike high Apr 28 Japanese exporter sales post-Tokyo fix only take it back to 130.68 Heavier offers 131.00+ but not enough to cap, spec sales too to book profits Stops on 131.25 break, above presumed option barriers at 131.50 Tokyo, most of Asia risk-off, Nikkei -2.1 @26,432, E-Minis -1% @4077 EUR/JPY steady with EUR/USD heavy but holding above 1.0500, 137.51-82 EBS GBP/JPY 160.72-161.41, heavy, AUD/JPY heavy too, 91.58-92.40 Japan April PMI services 50.7, flash 50.5, comp 51.1, Mar 50.3AUDUSD Bias: Bullish above .7300 Bearish below Holds above 0.7000 – China trades better than expected AUD/USD made fresh session low at 0.7004 but holding above 0.7000 for now China exports and imports for April came in a bit better than expected The better China data may give the AUD/USD a short reprieve after sell-off Sellers are now tipped at former support at 0.7030 AUD will continue to struggle while equities and metals remain pressured.

Source: Tickmill

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