Daily Market Outlook, March 31, 2022

Daily Market Outlook, March 31, 2022 Overnight Headlines US Weighs Oil Release To Combat Inflation, Considering 1M Bpd, Totalling 180M Beijing Moves To Strengthen Moscow Ties In Wake Of Ukraine Invasion Ukrainian Negotiator: Side’s Will Resume Peace Talks Online On April 1 Britain's Spy Chief: Russian Soldiers Refused To Carry Out Orders In Ukraine Russia Plays Down Progress In Peace Talks, Intensifies Attacks In E. Ukraine China's Factory Activity Contracted On Covid Resurgence In March Japan's February Factory Output Rises For First Time In Three Months White House Plays Down Yield Curve Inversion As US Recession Indicator Biden May Invoke Defence Production Act For Electric Car Battery Metals Fed’s George: We Must Move Expeditiously To Neutral Funds Rate Euro Holds At One-Month High, Yen Set For Worst Month Since 2016 FCA Extends Crypto Registration Deadline For 12 Firms In U-Turn Japan's 10-Yr Bond Yield Rise After BoJ's Expanded Intervention Oil Prices Tumble More Than $5/Bbl As Biden Weighs Massive Release OPEC+ Technical Committee Replaces IEA With Wood Mackenzie, Rystad Germany Claims Putin Is Backing Off Demand For Ruble Gas Payments China Stocks Weaken On Manufacturing Data And US Shares FellThe Day Ahead Asian equity markets are mixed to lower as the first quarter draws to a close. Chinese stocks underperformed as the latest PMI surveys were weaker than expected. The manufacturing PMI fell to 49.5 and the non-manufacturing index declined to 48.4, both below the 50 growth/contraction level. Lockdown measures in parts of China to tackle Covid outbreaks will probably weigh further on the PMIs next month. Meanwhile, oil prices fell after reports that the US is considering releasing a million barrels a day from its strategic reserves. The Lloyds Business Barometer, released earlier today, showed a fall in UK business confidence of 11 points to 33% in March. It was the biggest one-month drop since the early days of the Covid 19 pandemic and brings confidence to an eight-month low, but it remains above the long-term average of 28%. The report also reveals that both pay and price inflation pressures are continuing to build, which will likely maintain the pressure for further interest rate increases by the BoE at least in the near term. Separately, the ONS revised up Q4 GDP growth to 1.3%q/q from 1.0%q/q. Consumer spending growth, however, was revised lower and the savings ratio fell. In Europe, further signs of rocketing inflation mainly due to accelerating energy costs will be in evidence today. Yesterday saw preliminary March CPI inflation estimates (EU-harmonised measures) for both Germany and Spain far exceeding consensus forecasts, with annual rates rising to 7.6% and 9.8% respectively. Earlier this morning, France reported an increase in its March annual inflation rate to 5.1%, also stronger than expected. Italy will reveal its data later this morning. It means that tomorrow’s Eurozone flash annual CPI estimate will be well above the original consensus forecast for 6.7% and probably higher than even our initial forecast for 7.3%. Although high inflation predominantly reflects imported costs, there will even intense discussions among ECB rate-setters whether to increase interest rates before the end of the year after the likely end to QE in Q3. The ECB’s Chief Economist Lane is scheduled to speak today. The US data focus today will be on personal spending figures and the PCE deflator (the Fed’s preferred inflation measure) for February, ahead of tomorrow’s labour market report. The PCE deflator is forecast to show annual inflation rising to 6.5%, a 40-year high providing further confirmation that near-term inflationary pressures remain intense. Consumer spending growth is expected to normalise to around 0.5% after a stellar outturn in January. Overall, a buoyant labour market is supportive of the consumer, but high inflation has weighed on sentiment.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: 1.1000 (3.15BLN), 1.1050-60 (634M) 1.1070-80 (1.19BLN), 1.1100-05 (1.67BLN) 1.1110-15 (658M), 1.1120-25 (880M), 1.1130-35 (453M) 1.1150-60 (896M), 1.1175 (501M), 1.1195-05 (2.6BLN) 1.1230 (337M) USD/JPY: 121.60-70 (740M), 123.50 (455M) 124.00 (350M) GBP/USD: 1.3195-00 (693M) USD/CAD: 1.2500 (658M). AUD/USD: 0.7400 (500M) 0.7500 (1.73BLN), 0.7550 (579M), 0.7600 (445M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.12 Bullish above Maintains firm tone in Asia as recovery extends EUR/USD opened +0.66% at 1.1158 as weak USD and short-covering underpinned After trading 1.1156, the EUR/USD extended its recovery to trade at 1.1185 Heading into the afternoon it is settling around 1.1165 EUR/USD trending higher with the 5, 10 & 21-day MAs in a bullish alignment Resistance is at the 55-day MA at 1.1197 and 61.8 of 1.1495/1.0806 at 1.1231 Support is at the 10-day MA at 1.1047 and break would ease upward pressure EUR/USD may consolidate gains ahead of EZ inflation data and US jobs on FridayGBPUSD Bias: Bearish below 1.3350 Bullish above. Busy end to Q1 – softer as EUR/GBP demand weighs -0.1% at the base of a 1.3125-1.3145 range with consistent strong flow EUR/GBP climbed 0.2% with very strong morning activity on D3 Brent -5% $108 - Biden plans largest ever oil reserve draw Should oil settle below $100 it would calm aggressive inflation expectations Charts; positive momentum studies - 5, 10 & 21 DMAs edge gently lower 21 day Bollinger bands contract - modest negative signals at familiar levels First major support is 1.3000 2022 low and 1.2990 lower 21 day Bolli band Asian 1.3145 high, then 1.3195/00 892 MLN strikes initial resistanceUSDJPY Bias: Bullish above 120 Bearish below USD/JPY steady in Asia after recent volatility, 121.83-122.45 EBS Repatriation and trade flows mostly done at fiscal year-end In gradual rise from 121.32 low yesterday, ascending 200-HMA 121.63 Resistance from 55/100-HMAs at 122.60/63, hourly Ichi cloud above Option expiries in area today - 121.60 $670 mln, 122.00-05 $305 mln US yields soggy, Treasury 10s @2.332%, 2s @2.286%, weighs on USD Nikkei off after open, recovers, now -0.2% @27,977 Some govt jaw-boning on FX but shrugged off Eyes turning to US jobs report out tomorrow, NFP +490k eyed Most JPY crosses mirror USD/JPY EUR/JPY bid with EUR/USD, Asia 136.03-84 EBS, above 134.90 low yesterdayAUDUSD Bias: Bullish above .7300 Bearish below Heavy tone as AUD – cross selling caps rallies AUD/USD opened unchanged at 0.7510 after AUD fell against EUR, JPY and NZD It fell to 0.7492 when USD/JPY gains led USD higher Buyers returned when Dalian iron ore jumped 4% and AUD/USD traded 0.7528 It fell quickly from the higher and is back below heading into the afternoon AUD/USD is struggling to rally as investors unwind long AUD/EUR and AUD/JPY Support is at the 10-day MA at 0.7482 and break would suggest top is forming Resistance is at the Oct high at 0.7555 and break would reenergize trend higher

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