Daily Market Outlook, March 29, 2022
Overnight Headlines
- Russia No Longer Demanding Ukraine Be ‘Denazified’ In Ceasefire Talks
- Kremlin Spox: Would Use Nukes Only In Case Of 'Threat To Existence Of State'
- Ukraine Sets Ceasefire Goal For Talks But US Says Putin Not Ready To End War
- Shanghai Will Hand Out $22 Bln In Tax Relief To Firms Amid Covid Fight
- BoJ Policymakers Saw Need For Easy Policy Despite Rising Prices In Summary
- Japan’s Kishida Orders Measures To Shield Voters From Energy Cost Impact
- Japan’s Jobless Rate Fell In February, While Availability Of Jobs Increased
- Australian Retail Sales Jump In Feb, Suggesting Good Things For Q1 Growth
- Biden’s Budget Calls For More Defence Spending, Funds For Ukraine
- US Tsy Proposes 'Top-Up' Plan To Enforce 15% Global Minimum Corporate Tax
- US Senate Passes China Competition Bill To Start Talks With House
- Pentagon: Six US Aircraft, 240 Support Personnel To Deploy To Germany
- BMO Sees 50 Basis Point Bank Of Canada Rate Rises In April And June
- Japan’s Yen On The Ropes As BoJ Defends 0.25% Yield Target
- Traders Set For Further BoJ Bond Intervention, Yen Swings
- Oil Falls On Back Of Ukraine Peace Talk Hopes, China Demand Fears
- World Stock Markets Cast Aside Fears Of Rising Interest Rates
- Tesla Adds $84 Billion To Valuation On Stock-Split Signal, Rallyinig Further
The Day Ahead
- Hopes of progress in peace talks between Ukraine and Russia have buoyed market risk sentiment. Equities across the Asia-Pacific region are mostly trading higher, led by gains in Japan, Australia and South Korea stocks. China stocks are modestly down on the day, likely a reflection of the latest move to lock down Shanghai due to rising Covid cases. Meanwhile, the latest reading of German consumer confidence showed a decline to -15.5 from -8.5 the month before, reflecting the combined impact of rising prices and the war in Ukraine.
- A relatively limited data and events calendar today means that there is little in the way of major distractions from wider geopolitical events. Nevertheless, some attention is likely to fall on UK household borrowing data from the Bank of England. Housing activity surveys, such as that from the Royal Institute of Chartered Surveyors (RICS), suggest that the UK housing market has strengthened further in the early part of 2022, with new buyer enquiries continuing to rise. Consistent with ongoing strong demand for housing, we expect mortgage approvals to have picked up for a fourth consecutive month in February, rising from 74.0k in January to 75.5k. Consumer credit is expected to have risen at a faster rate in February (£1.3bn vs £0.6bn in January). Meanwhile, monthly household deposit data will provide a sense of how the rise in the cost of living is impacting personal saving patterns.
- Elsewhere, there are no major releases due across the Eurozone while, in the US, February JOLTS job openings data and the Conference Board’s consumer confidence report for March should attract some attention. On the latter, expect headline confidence to drop to 108.0 from 110.5 as high inflation weighs on sentiment. Also in the US, Philadelphia Fed President Harker is set to discuss the economy at an event hosted by the ‘Center for Financial Stability’ in New York. However, as a non-voting member of the Fed’s rate-setting committee, Harker’s views are likely to draw only a limited reaction from markets.
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: 1.0900 (722M), 1.0950-60 (1.3BLN), 1.0975-80 (1.33BLN), 1.1000 (2.78BLN), 1.1100 (956M)
- USD/JPY: 121.75 (430M), 122.00 (490M), 123.50 (200M)
- GBP/USD: 1.3000 (249M), 1.3170-75 (440M), 1.3220 (238M), 1.3400 (1.27BLN).
- AUD/USD: 0.7350 (300M)
Technical & Trade Views
EURUSD Bias: Bearish below 1.12 Bullish above
- Attains bid tone after early dip absorbed
- EUR/USD opened a few pips higher at 1.0986 after EUR/JPY buying underpinned
- It fell to 1.0969 in early Asia when USD and JPY moved broadly higher
- It then tracked higher and is at session high around 1.0995 into the afternoon
- EUR/USD resistance is @ 21-day MA @ 1.1002 and close above eases pressure
- Support is at the 61.8 of 1.0806/1.1137 and break would be bearish
- EUR/USD may consolidate with EZ inflation data and US jobs out later this week
GBPUSD Bias: Bearish below 1.3350 Bullish above.
- Touch firmer in a 1.3079-1.3106 range with only moderate flow
- EY Brexit tracker - 7,000 finance jobs have left London for EU
- EU job switch less than expected, but N Ireland protocol negotiations key
- UK to work hard for N.Ireland deal - but no sign of compromise
- Charts; momentum studies - 5, 10 & 21 daily moving averages conflict
- 21 day Bollinger bands contract - mixed signals favour range trading
- 1.3000 March and 2022 low, 1.3322 50% of Feb-Mar fall range parameters
- Sterling to test 1.3000 as negative factors build.
USDJPY Bias: Bullish above 116 Bearish below
- USD/JPY remains in play with heavy action seen in Tokyo today
- Range so far 123.25-124.31 EBS, good demand from importers into Tokyo fix
- Off later on heavy fiscal year-end repatriation flows, some exporter sales
- USD/JPY yesterday from 125.10 early London to 123.15 in NY, new parameters?
- Importers in a bind, have to buy with upside option barriers to 125 history
- Bids to trail down, 123.15 and levels below in particular
- Feeling BoJ may be amenable to JPY weaker with JGB intervention at 0.25%
- Talk in Tokyo of possible moves to 130, 135 and even 150 over time
- In meantime, some jaw-boning by Japan officials on need for FX stability
- US yields steady after good moves yesterday, Treasury 10s @2.464%
- Tokyo, AXJ more risk on than not, Nikkei +0.6% @28,110, E-Minis at par @4569
- JPY crosses also off from spike highs yesterday but holding own
AUDUSD Bias: Bullish above .7100 Bearish below
- AUD/USD opened -0.29% after USD/JPY led USD broadly higher
- It moved up to 0.7508 in early Asia before Tokyo sold AUD/JPY
- AUD/JPY fell over 0.50% with the AUD/USD trading down to 0.7475 at one stage
- Price action settled and the AUD/USD sat around 0.7490 into the afternoon
- Aus retail sales released today was better than expected but had no impact
- AUD/USD trending higher but techs are overbought after bearish outside day
- Support is at the 10-day MA at 0.7445 and break would suggest top is forming
- Key resistance is at the Oct 28/29 high at 0.7555 and break would renergize up-trend
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!