Investment Bank Outlook 11-01-2022

Credit AgricoleAsia overnight Investors remain nervous ahead of the US inflation data later this week. Sentiment is being supported a little by news that Pfizer could have an omicron-variant[1]specific vaccine for Covid by March. A potential peak in omicron infections in New York is also helping support sentiment as the peak would be about a month after the city’s initial contact with the virus and would be consistent with South Africa’s experience. Most Asian bourses were trading lower and S&P500 futures slightly in the red at the time of writing. G10 FX traded in a more risk-on fashion, however, with the AUD and NOK the outperformers; the former on the back of strong Australian retail sales data. The JPY and USD were the underperformers during the Asian session.CitiEuropean OpenOil and high-beta currencies were higher on the Asian morning, while equities were seen to be flat. DXY ticked lower, while UST yields flattened, led by front end yields moving higher a tad. This follows the slight risk off tone in the NY session which saw equities sell off and then subsequently make a comeback. AUD saw bumper retail sales, while JGB futures continued their slide. Meanwhile, we saw constructive headlines from the US-Russia talks, as we head into another two rounds of talks this week.The highlight of the day will undoubtedly be the Senate Banking Committee hearing on Powell’s Nomination at 15:00 GMT. While we expect Powell to be nominated, the attention will be on the Fed’s orientation in light of the recent expectations on policy normalization. Similarly, the Fedspeak from George (14:30 GMT) and Bullard (21:00 GMT) will also be closely watched. EUR will see the Germany Bundesbank Handover Ceremony at 10:00 GMT, although we see limited market risk. In the EM space, TRY will see a CA balance at 07:00 GMT, MXN an IP at 12:00 GMT and BRL an inflation print at 12:00 GMT.CIBCFX FlowsFixing demand over the Tokyo fix for $YEN and YEN-crosses carried the USD onto 115.30’s. Rumour that leveraged accounts have been reducing long positions over the last few sessions, suspect they will fade the rally. Also, there are some $2.6bn worth of 115.50 option strikes due this week. Japanese retail day traders on the other hand, is covering back short $YEN. There is an option strike at 115.00 total $2.3bn due this week, suspect there are stops under 114.95.YEN-cross steered commodity currencies higher. AUD$ rose from 0.7171 to high of 0.7189, move up has been orderly. Talk of offers at 0.7200 linked to option strikes rolling off this week, total A$1.25bn with A$786mio due today.EUR¥ led EUR$ higher, volume has been light. Positioning has been mixed and I think it is balanced, leveraged accounts are short while IMM type are long. Offers should kick in above 1.1380, while bids linked near 1.1310.Bets on short GBP$ have reduced, I read from one report that leveraged names scaled back short GBP$. Light selling near 1.3600, should see stop buy orders thereafter 1.3615.

Source: Tickmill

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