Daily Market Outlook, May 10, 2022

Daily Market Outlook, May 10, 2022 Overnight Headlines Shanghai Covid Cases Fall Amid Signs Of Tighter Pandemic Curbs Japan Household Spending Beats Expectations, But Inflation Risks Loom Australia Business Sentiment Holds Up Amid Acute Cost Pressures Fed Warns Of Worsening Market Liquidity In Their Stability Report Fed’s Kashkari: May Have To Carry Bulk Of Burden In Hitting Infl. Goal Senate Democrats Plan Tuesday Vote To Confirm Cook For Fed Biden Is To Speak Tuesday, Regarding Inflation At 1130 ET, 1530 GMT House And Senate Democrats Are Pushing A Nearly $40 Billion Ukraine Aid Biden Team Sees ‘Pivot’ To China Accelerated As Putin Falters In Ukraine UK's Truss Set To Ditch N.Ireland Protocol After Giving Up On EU Talks UK’s Rising Cost Of Living Puts Brakes On Consumer Spending Japan Maintains Warning On Weak Yen, Vows G7 Contact On Any Action Commodity Currencies Hit By Tumbling Oil Prices, BTC Near 10-Mth Low Oil Tumbles On Global Economic Worries And A Strong US Dollar EU Drops Plans To Ban Shipping Russian Crude In Face Of Opposition Germany Prepares Crisis Plan For Abrupt End To Russian Gas China Tech Stocks Tumble On Renewed Growth Fears, Global Rout Tesla Halts Production At Shanghai Plant Due To Supply IssuesThe Day Ahead Asian equity market performance is mixed overnight. That follows another day of big losses in European and US markets as concerns about economic growth and inflation remain to the fore. In its semi-annual Financial Stability Report the US Federal Reserve warned about deteriorating liquidity conditions across markets. Meanwhile, oil prices fell to their lowest in two weeks on concerns about the demand outlook. In its quarterly monetary policy report China’s central bank promised to be proactive in addressing mounting economic pressures and boosting market confidence. Today’s data is light with nothing of note in the UK. In the Eurozone the German ZEW survey will provide some of the first insights into May economic conditions in the single currency area. As a survey of financial analysts, it might be considered less reliable than surveys of businesses. However, it is timely as other gauges such as the first readings of the PMI surveys will not be available for another couple of weeks. The prints for both March and April showed sharps falls in the updates for both current conditions and expectations. Last month the current conditions measure was at its lowest since May 2021, while expectations slipped to their lowest since the start of the first lockdown in March 2020. That probably reflects the region’s and in particular Germany’s close economic links to both Russia and the Ukraine. Further falls in both measures are forecast for May. The April update for the US NFIB small business sentiment measure is expected to show a fourth consecutive monthly fall. Already released readings for some of the subcomponents showed unfilled job openings unchanged at an elevated level. Meanwhile, the percentage of firms who have recently increased or expect to raise wages fell modestly but only to a still historically high level. A number of US Federal Reserve policymakers are set to speak today. Their comments will be watched for any further colour on last week’s monetary policy announcement by the US central bank. That saw interest rates raised by 0.50%, while Fed Chair Powell said that similar sized rises were on the table for both June and July. Things to look for today include any indications on what might stop the Fed from going ahead with those rises and signs that some officials might favour a larger rise of 0.75% at least one meeting. April CPI data for China due early Wednesday are expected to show a modest acceleration in annual inflation. Nevertheless, inflation remains much lower than elsewhere and seems unlikely to stand in the way of the authorities continuing to prioritise loose monetary policy.FX Options Expiring 10am New York Cut USD/CAD: 1.2900-10 (480M), 1.2935 (3.34BN) EUR/USD: 1.0500 (335M), 1.0540-50 (467M), 1.0570-75 (500M), 1.0600 (454M), 1.0625 (519M), 1.0665-75 (715M) USD/JPY: 129.00 (262M), 129.80-83 (330M) AUD/USD: 0.7050 (429M), 0.7200 (506M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0950 Bullish above Edges higher as USD gives back early gains EUR/USD opened 1.0558 after once again finding buyers below 1.0500 Asia started risk-off and USD firmed against the risk currencies... EUR/USD edged down to 1.0553, as EUR/AUD buying underpinned Risk assets recovered ground late morning and USD gave back gains EUR/USD rallied to 1.0580 before settling around 1.0570/75 EUR/USD resilient as EUR gaining on the crosses due to short-covering EUR/USD downward momentum in a stall as 5-day MA crosses above 10-day MA Resistance is at the May 5 high at 1.0642 and 21-day MA at 1.0678 Support has formed between 1.0465/95 where bids are tipped A break below 1.0460 needed to reignite trend lower German ZEW later today in the key event risk in EuropeGBPUSD Bias: Bearish below 1.30 Bullish above. GBP/USD pivots 1.2350 as calm follows Monday's storm Cable has traded a 45 pip range thus far Tuesday; 1.2320-1.2375 Those parameters are well within Monday's 1.2262-1.2405 range 1.2262 was lowest level since June 2020. 1.2405 = high since May 5 (BoE day) Risk-sensitive pound supported by modest equity revival UK PM Johnson looks to Queen's speech to win back voters Truss set to ditch NI protocol after giving up on EU talks-TimesUSDJPY Bias: Bullish above 125 Bearish below USD/JPY unfazed by barrage of verbal intervention Plenty of verbal intervention from Japanese officials on USD/JPY rise FinMin Suzuki again emphasized importance of FX stability Rapid FX moves undesirable, eyeing impact of FX on real economy No comment on FX levels per se, won't comment on 'tolerable' lvl limit In close contact with US, other countries on FX Suzuki also notes confidence in BoJ to steer monetary policy appropriately Separately, BoJ Uchida also notes sharp JPY moves undesirable Adds BoJ has no plan to tweak 50-bps JGB 10s band, cap still at 0.25% USD/JPY 130.57 to 129.80 EBS early before bouncing to 130.46 with US yieldsAUDUSD Bias: Bullish above .7300 Bearish below Recovers from early spill as Asian markets settle AUD/USD opened -1.74% at 0.6951 after heavy falls in equities and commodities Asia opened on a sour note with AXJ index falling 2.0% and Dalian iron ore falling over 6.0% AUD/USD fell to 0.6911 before bids ahead of 0.6900 gave some support Asian markets recovered some ground and AUD/USD reversed higher Heading into the afternoon it is trading around 0.6970 as shorts pare back AUD/USD likely to remain heavy while risk assets remain under pressure... Resistance is at the 10-day MA at 0.7080 and break would ease the pressure There isn't any strong support until the 50% of pandemic low/high at 0.6758

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