Daily Market Outlook, December 20, 2022 

  • As suggested by wire reports yesterday, the Bank of Japan has confirmed overnight that they will loosen their yield curve control policy, increasing its tolerance band to 0.5%, the confirmation saw the 10-year yield surge to test its ceiling level which added support to the Japanese yen, the move in Japanese government bonds was sufficiently volatile to trigger circuit breaker protection, with the benchmark Nikkei225 currently trading down just under 3%. This move marks the end of the stalwart of easy monetary policy, the BoJ had refrained all year from joining other G7 central banks in tightening monetary conditions, and investors are faced with a new year of broadly tightening financial conditions across all developed markets. 

 

  • With Asian equity markets retreating in unison with the Nikkei, European bourses are poised for a soggy start to trading, a lack of tier-one data catalysts and declining liquidity in the final full trading week of the year is likely to see a continuation in the softness in risk sentiment, the Euro Stoxx 50 futures printed one-month lows before the open, with the DAX & FTSE futures all pointing to losses of just under 1%. 

Overnight Headlines

  • BoJ Allows Yields To Rise More In Surprise Tweak To Policy

  • China Keeps Loan Rates Unchanged, Cut Seen In Next Year

  • China’s Covid Outbreak Has US Worried Over New Variants

  • North Korea Slams Japan’s Security As Vows Counteraction

  • RBA Considered Pausing Hikes In Dec, Still See More Ahead

  • ECB’s Nagel: Still ‘Long Way’ From Achieving Inflation Goal

  • UK Lords Warn Labour Shortages Shape Of Things To Come

  • UK Extend Mortgage-Guarantee Program To Boost Housing

  • Yen Jumps To 4-Month Peak Post Hawkish BoJ Policy Tweak

FX Options Expiring 10am New York Cut

  • EUR/USD: 1.0400 (225M), 1.0695-05 (955M)

  • USD/JPY: 132.45-50 (404M), 135.50 (312M)

  • EUR/CHF: 0.9975 (652M)

  • AUD/USD: 0.6505 (622M), 0.6535 (374M)

  • 0.6640-50 (396M), 0.6725 (387M), 0.6900 (569M)

  • USD/CAD: 1.3450 (200M),

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 3900

  • Primary resistance is 3900

  • Primary downside objective is 3700

  • Above 3950 opens a test of 4000

  • 20 Day VWAP bearish, 5 Day VWAP bearish

EURUSD Bias: Bullish Above Bearish below 1.0550

  • Primary resistance is 1.0650

  • Primary downside objective is 1.0450

  • Above 1.0680 opens a test of 1.0735

  • 20 Day VWAP bullish, 5 Day VWAP bullish

GBPUSD Bias: Bullish Above Bearish below 1.2250

  • Primary resistance is 1.2250

  • Primary downside objective 1.20

  • Above 1.2275 opens a test of 1.2340

  • 20 Day VWAP bearish, 5 Day VWAP bearish

USDJPY Bias: Bullish above Bearish Below 134.50

132 Target Achieved, New Pattern Emerging

  • Primary resistance is 134.50

  • Primary downside objective is 130

  • Above 135 opens a test of 136.40

  • 20 Day VWAP bearish, 5 Day VWAP bearish

AUDUSD Bias: Bullish Above Bearish below .6740

  • Primary resistance is .6740

  • Primary downside objective is .6535

  • Above .6775 opens a test of .6890

  • 20 Day VWAP bearish, 5 Day VWAP bearish

BTCUSD Bias: Intraday Bullish Above Bearish below 16200

  • Intraday 16200 is primary support

  • Primary upside objective is 17200

  • Failure at 16000 opens a test of 15500

  • 20 Day VWAP bearish, 5 Day VWAP bearish