Daily Market Outlook, September 13, 2022

Overnight Headlines

  • US Benchmark CPI Set To Ease, Core Rate Poised For Increase
  • Biden Seeks To Make Economy An Election Asset — If Prices Ease
  • Fed Set For Another 75-Basis-Point Rate Hike; Early Pivot Unlikely
  • Chinese Premier Stresses Policy Implementation To Stabilize Econ
  • Analysts Expect China MLF Rate To Remain Unchanged – Daily
  • China Firms Face High Exchange Risk Hedging Costs, Paper Says
  • Australian Consumer Confidence Rises For First Time In 10 Months
  • Australia Household Spending Starts To Weaken On Inflation
  • UK’s Kwarteng Tells Treasury To Aim For 2.5% GDP Growth – FT
  • US Dollar Steadies Tuesday As Eyes Turn To U.S. Inflation Data
  • China Sets Stronger-Than-Expected Yuan Fix For Fourteenth Day
  • Oil Swings After Three-Day Advance On Demand Concerns, Dollar
  • Morgan Stanley Cuts Brent Oil Forecast By $12 To $98/BBL For Q3
  • Asian Equities Extended Global Rally Tuesday Into US CPI Report
  • Goldman Cautious On European Assets Until Clear Signs Of Trough
  • JPMorgan Says Soft Landing, Not Recession, Base Case For Markets
  • Oracle Reports 18% Revenue Growth After Cerner Deal Closes
  • Most Twitter Shareholders Vote In Favour Of Sale To Musk – RTRS

The Day Ahead

  • Asian equities are up this morning as the ‘risk on’ rally continues. Reports of Ukrainian territory gains in the war with Russia appear to be helping to fuel the rally. US Secretary of State Blinken said that the negative Iranian response to an EU proposal on a nuclear deal made a near-term agreement unlikely. In the UK, reports suggest that a ‘fiscal statement’ by the new Chancellor of the Exchequer may be scheduled for Thursday or Friday next week.
  • Data for the UK labour market showed that employment rose by a lower-than-expected 40k in the three months to July. Despite that, the unemployment rate fell to 3.6% from 3.8% previously. Meanwhile, annual average earnings growth ex bonuses picked up to 5.2% in the three months to July from 4.7%. Vacancies in the three months to August fell by 34,000, a possible early sign that labour market pressures are easing.
  • Today’s August US CPI data will provide an important update on the inflation picture ahead of next Wednesday’s Federal Reserve policy meeting. Annual headline inflation is expected to drop for the second month in a row to 8.1% compared with 8.5% in July and June’s peak for the year of 9.1%. However, the slowing is expected to mostly reflect lower oil prices, while ‘core’ inflation is forecast to rise to 6.1% from 5.9% previously. Recent comments from Fed officials suggest ongoing concern that inflationary pressures may remain elevated and so seem likely to announce yet another sizeable interest rate rise next week.
  • Today’s German ZEW survey will provide one of the first indications of Eurozone economic trends in September. Last month’s results saw a further fall in both current conditions and expectations readings, to their lowest for this year, with further declines expected this month.
  • August UK inflation data are scheduled to be released early Wednesday. Look for a marginal fall in headline inflation to 10.0% from 10.1% in July, due to lower petrol prices. Core inflation, however, is forecast to edge up to 6.3% from 6.2%. The government’s announcement last week that it will freeze household energy bills for two years implies that the previously expected sharp rise in inflation during autumn will now not happen. However, the Bank of England in setting monetary policy will need to weigh that up against the risk that significant additional fiscal support may add to domestic inflationary pressures.

FX Options Expiring 10am New York Cut

  • EUR/USD: 0.9850 (431M), 0.9900 (323M), 0.9915 (242M),
  • 1.0050 (1.4BN), 1.0100 (727M), 1.0125-35 (656M), 1.0170-80 (1.21BN),
  • 1.0200 (373M)
  • USD/JPY: 141.85 (210M), 142.00 (670M),142.50 (250M)
  • GBP/USD: 1.1500 (647M), 1.2000 (335M)
  • AUD/USD: 0.6855 (228M), 0.6900 (200M)
  • USD/CAD: 1.3110 (207M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.0250

  • EURUSD moves higher in LDN trade
  • EUR/USD opens +0.76% as USD and JPY selling continued ahead of US CPI
  • EUR/USD broke above key resistance levels, but failed to follow-through
  • It traded to 1.0198 to 61.8 fibo at 1.0176
  • The pullback from the highs resulted in a close below those prints
  • A pessimistic German IFO report took some of the shine off the EUR
  • EUR/USD support at yesterday’s 1.0060 low with bids ahead of that level
  • More support is at 1.0018 and 1.0008
  • EUR/USD will likely consolidate ahead of key US CPI later today
  • 20 Day VWAP bullish, 5 Day bullish

GBPUSD Bias: Bearish below 1.19

  • Bid as the USD retreats – jobs data adds further support
  • Steady in Asia after closing up 0.85%, as long USD positions unwind
  • Positioning and USD flows dominated weak, recessionary UK data
  • Sustained break of the 1.1570 10 day moving average was positive
  • 1.1759 pivotal – close above bullish targeting 1.2053 upper VWAP band
  • This would repeat the rising pattern seen in July and August
  • 20 Day VWAP is bullish, 5 Day bullish

USDJPY Bias: Bullish above 139

  • USD/JPY inside day yesterday, today too pre – US CPI?
  • USD/JPY inside day yesterday, 142.05-143.50 after 141.51-144.10 Monday
  • Asia so far today 142.55-80, quiet ahead of US CPI tonight
  • Expectations for US CPI to fall back to 8.1% from 8.5% previously
  • US yields remain firm nonetheless on hawkish Fed expectations
  • Treasury 2s to 3.586%, 10s up more to 3.377%, USD/JPY supportive
  • Japanese importer, spec bids on dips, exporters up top, especially 143.00+
  • Despite Japanese jaw-boning, no indication of actual FX intervention
  • That said, USD longs cautious, some position paring yesterday
  • Option expiries in area today – 142.00 $670 mln, 142.35-65 total $501 mln
  • Large option barriers still up at 145.00, specs sights still on test
  • 20 Day VWAP is bullish, 5 Day bearish

AUDUSD Bias: Bearish below .70

  • Under pressure due to AUD selling on crosses
  • AUD/USD drifting lower in Asia and is down 0.33% at 0.6865
  • AUD/JPY is down 0.50% and EUR/AUD is up 0.40% since the NY close
  • Talk of a decent selling order at 0.6900 is encouraging longs to pare back
  • It is testing 0.6865 and break targets 0.6808
  • AUD/USD weakness surprising as risk assets are generally buoyant in Asia
  • The NAB business survey released earlier also was positive news
  • Market is positioning for the US CPI to be released later today
  • 20 Day VWAP is bullish, 5 Day bullish

BTCUSD Bias: Bearish below 25.3K

  • Bitcoin rebound rally might fizzle unless 23.3K breaks
  • USD consolidating slightly higher before US CPI data
  • ETH merge expected Thursday; may attract new investors
  • But impact of the energy-saving move mostly priced in
  • Below 21,227 VWAP band marks exit from bullish channel
  • Through 25.3k will expose much more room till $30k psych barrier
  • 20 Day VWAP is bullish, 5 Day bullish