Daily Market Outlook, May 4, 2022

Overnight Headlines

  • Shanghai Lockdown Exit Delayed By Stubborn Community Spread
  • Australia Retail Sales Hit Record, Underlining Economic Momentum
  • Goldman Sachs Forecast The RBA Cash Rate At 2.6% By The End Of 2022
  • RBNZ Gov Orr: Cannot Rule Out A Global Recession In Coming Months
  • RBNZ Says Sharp Housing Correction ‘Plausible’ As Rates Rise
  • New Zealand Jobless Rate Holds Record Low As Wages Gain
  • ECB Director Schnabel Believes A Rate Hike In July Is Possible
  • EU To Unveil Plan To Replace Two-Thirds Of Russian Gas This Year
  • EU's Borrell: New Russia Sanctions To Hit Oil, Cut More Banks From SWIFT
  • BRC: Shop Prices In Britain Rise, Fastest Rate Since 2011, Worse To Come
  • Aussie Retail Sales Surprises To The Upside And Supports AUD/USD
  • US Junk Bonds Drop To Lowest In Over Two Years Ahead Of Fed Meeting
  • Oil Climbs As Investors Weigh Inventory Estimates, China’s Curbs
  • China’s Independent Refiners Start Buying Russian Oil At Steep Discounts
  • Chinese Tech Stocks Slide As SEC Probe Didi, US Equity Futures Waver

FX Options Expiring 10am New York Cut

  • EUR/USD: 1.0550 (329M), 1.0570 (464M), 1.0600 (1.92BLN) 1.0700 (1.14BLN)
  • USD/JPY: 129.00 (380M), 130.50 (740M)
  • GBP/USD: 1.2425 (405M), 1.2555-60 (247M)
  • AUD/USD: 0.7000 (234M), 0.7100 (734M), 0.7130 (374M) 0.7250 (570M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.0950 Bullish above

  • Consolidates ahead of key Fed decision
  • EUR/USD opened +0.10% at 1.0519 after whippy US session
  • Interest was low in Asia as market readies for Fed decision later today
  • Powell's press conference will likely dictate short-term price action...
  • Support is at last week's 1.0469 low and break targets 2017 low at 1.0340

GBPUSD Bias: Bearish below 1.30 Bullish above.

  • Touch softer ahead of the Fed, as inflation flares
  • -0.05% at the base of a quiet 1.2488-1.2515 range on D3, pre FOMC
  • UK shop prices rise at fastest rate since 2011 - BRC
  • Rising energy prices and supply chain issues unlikely to ease short term
  • Adds to the BoE pressure on the May 5, as the economy falters
  • Charts; momentum studies conflict, 5, 10 & 21 day and week MA's slide
  • 21 day Bollinger bands fall, which remains a strong bearish trending setup
  • Targets a test of the 1.2360 low in July 2020 then 1.2252 June 2020 base
  • Close above 1.2624 10 day moving average would undermine downside bias

USDJPY Bias: Bullish above 125 Bearish below

  • OMC shapes up as the trigger for the next move
  • Steady in a very tight 130.05-130.19 range, with Japan on holiday
  • FX majors saw little interest in Asia, as markets await the FOMC
  • Fed expected to hike 50pts - focus on Fed statement and press conference
  • The tone of the Federal Reserve's outlook will drive UST yields and USD
  • Friday's 129.32 low, and last week's 131.25 high are the initial key levels
  • Longer term 5, 10 and 21 day, week and month moving averages head higher
  • Unusual and powerful bullish signals - 126.26 Kijun line is key support
  • Long term target is 135.04/20 monthly highs in February and January 2002

AUDUSD Bias: Bullish above .7300 Bearish below

  • AUD/USD opened +0.62% after outperforming due to aggressive RBA hike
  • Goldman call that RBA will hike 50 BP in both June & July underpinned
  • AUD/USD traded above 0.7100 and received added boost from better Aus retail sales...
  • It traded above 0.7110 and traded to a session high at 0.7117
  • Heading into the afternoon it is settled around 0.7110
  • Resistance is at 0.7145/50 where yesterday's high and 10-day MA converge
  • A break above 0.7150 would suggest a bottom is forming
  • Support is at Monday's 0.7030 low with bids ahead of 0.7000