Daily Market Outlook, March 11, 2022

Overnight Headlines

  • Goldman Sachs Cuts US Growth As Commodity Prices Bite
  • Biden Set To Call For End Of Russia Preferred Trade Status
  • Yellen Sees Painfully High 2022 Inflation But No Recession
  • US Senate Pass $1.5 Trillion Funding Bill With Ukraine Aid
  • China Covid Figures Top 1,000 For First Time In Two Years
  • RBA Governor Lowe Tells Borrowers Plan For Higher Rates
  • US, Iran Nuclear Deal At Impasse After Russia Interruption
  • Iran's ForMin: A Good, Durable Nuclear Deal Within Reach
  • US Report North Korean Satellite Launches Tests For ICBM
  • Russia Military Convoy NW Of Kyiv Dispersed, Redeployed
  • EU President Set To End Russian Energy Reliance By 2027
  • JPMorgan, Goldman Lead Wall Street Retreat From Russia

The Day Ahead

  • Asian shares extended a global slump on Friday after the fastest U.S. inflation in four decades bolstered expectations for more aggressive rate hikes, and as Chinese equity markets slumped over regulatory concerns of U.S.-listed mainland firms.Sentiment also suffered on worries over Russia's war against Ukraine, after talks between their foreign ministers on Thursday brought little respite in the conflict between the two countries.
  • Stripping Russia of its favored nation status paves the way for the United States and its allies to impose tariffs on a wide range of Russian goods, which would further ratchet up pressure on an economy that is already heading into a "deep recession." By mid-afternoon, MSCI's broadest index of Asia-Pacific shares outside Japan had skidded 2.0%, after a retreat on Wall Street spilled over on many of the region's country benchmarks, which turned deeply red.Sellers swarmed Hong Kong's equity market after U.S.-listed Chinese stocks tumbled following the naming of the first Chinese firms to be potentially de-listed in the United States.
  • U.S. consumer inflation jumped an annualised 7.9% in February, the largest increase in 40 years, data on Thursday showed. The surge implied the FOMC could move "more aggressively" to curb inflation, as promised by Fed Chair Jerome Powell last week. Markets are already expecting the Federal Reserve to raise its Fed funds target rate by 25 basis points at the conclusion of next week's monetary policy meeting. Expectations of tighter monetary policy were also fuelled by a hawkish tone from the European Central Bank, which said on Thursday it will stop bond-buying in the third quarter.

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 )

  • EUR/USD: 1.0910 (477M), 1.0950-60 (400M), 1.0975-85 (810M) 1.1000 (437M), 1.1020-25 (400M), 1.1050 (309M) 1.1120 (386M), 1.1150 (395M), 1.1200 (1.1BLN)
  • USD/JPY: 114.50 (1.2BLN), 114.75 (780M), 114.90 (545M) 115.25-30 (1.2BLN), 115.50 (727M), 115.75-80 (772M) 115.90-00 (2.73BLN), 116.15-25 (1.2BLN)
  • EUR/GBP: 0.8450 (200M)
  • USD/CAD: 1.2750 (1.53BLN) 1.2900 (1.16BLN)
  • AUD/USD: 0.7150 (411M), 0.7300 (485M), 0.7340 (270M) 0.7395-00 (930M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.15 Bullish above

  • Pivots around 1.1000 in quiet Asian session
  • EUR/USD opened -0.80% at 1.0988 after whippy reaction to ECB decision
  • It moved higher early Asia on profit taking and traded to 1.1018
  • Asia when risk-off and USD broadly firmed - pushing EUR/USD back to 1.0981
  • Buyers emerged 1.0975/80 and it is around 1.1000 into the afternoon
  • EUR/USD outlook bearish while EZ economy faces stagflation
  • Ukraine-Russia conflict also adding weight on the single currency
  • Resistance is @ 10-day MA @ 1.1026 and close above would ease pressure
  • Support is at the March 7 trend low at 1.1806

GBPUSD Bias: Bearish below 1.36 Bullish above.

  • Poised to move lower, as charts, USD strength weigh
  • +0.1% in a 1.3074-1.3101 range with only moderate interest on D3
  • Asia cautious - risk off - E-mini S&P -0.3%, Brent -1%, Nikkei -2.45%
  • Volatility in Hong Kong listed tech giants fuels Asian caution
  • Charts; momentum studies, 5 10 & 21 daily and weekly moving averages fall
  • 21 day Bollinger bands expand - signals suggest downtrend remains strong
  • 1.3000 an option magnet, no major support until 1.2831, 50% 2020-2021 climb
  • Close above the falling 1.3228 10 day moving average would end downside bias
  • Oversold conditions have unwound, bearish signals, next move likely lower

USDJPY Bias: Bullish above 114.50 Bearish below

  • USD/JPY thru Jan – Feb double top, crosses steady, mixed views
  • USD/JPY through Jan-Feb 116.34/35 double top, to 116.48 EBS, low 116.12
  • Trade orderly, importer demand into Tokyo fix, stops 116.35 taken out
  • More upside limited however with specs taking profits on way up, on Ukraine
  • Resistance to 116.50, option barriers likely at strike, stops above large
  • Exporters continue to sell into rallies, for current/next fiscal years
  • Base seen rising, maybe as high as 116.00 now talk 'whale' bids @115.50
  • Option expiries today to exert some gravitational pull, more supportive
  • Massive at 115.50-95, total $2.3 bln, 116.00 $1.9 bln, 116.15-25 $1.1 bln
  • Firmer US yields supportive, Treasury 10s @1.965%, to 2.021% post-US CPI
  • EUR/JPY 127.70-128.03 EBS, off from 128.85 o/n but ECB maybe more hawkish
  • GBP/JPY still heavy, 151.88-152.36, AUD/JPY bid, 85.23-60, best since 11/2

AUDUSD Bias: Bullish above .7100 Bearish below

  • Slips in Asia as risk aversion weighs
  • AUD/USD opened +0.49% at 0.7358 as commodity currencies outperformed
  • After testing Thursday high at 0.7368 the AUD/USD tracked lower
  • Sell off in Asian equities weighed on AUD with the AXJ index -2.0%
  • AUD/USD is trading at the session low at 0.7335/40 into the afternoon
  • Support is at 0.7310/15 where the 10 & 200-day MAs converge
  • Resistance is at the March 7 trend high at 0.7440
  • Strong commodity prices underpin AUD while global growth concerns cap