Daily Market Outlook, May 19, 2022

Daily Market Outlook, May 19, 2022 Overnight Headlines Fed’s Evans Sees Inflation Curbed With Few Hikes Past Neutral US Bidding War Show Sign Of Cooling As Mortgage Rates Hurt China Banks May Lower Lending Rates, Giving Economy Relief China Covid Cases Trend Down But Lockdown Threat Remains Shanghai To Increase Easing In Zero-Covid Areas In Early June Japanese Inc Turns Against Central Bank's Monetary Stimulus Australia’s Unemployment Hits 3.9%, Lowest Level Since 1974 UK Pledge Targeted Tax Cut For Businesses In Autumn Budget Sunak Warns Extra Cost-Of-Living Help Risks Feeding Inflation Global Bonds Switch To Rally Mode, Recession Fears Intensify Asia To Increase US Gasoline Exports As Higher Prices Beckon Melvin Capital Set To Close Funds After Heavy Equities LossesThe Day Ahead Asian equity markets are down this morning, but most are now off their lows for the day. This follows a decline of 4% in the US S&P500 equity index yesterday. US Federal Reserve policymakers continued to warn of the likelihood of further interest rises. The Australian labour market showed the unemployment rate at 3.9% in April, its lowest since August 1974. In New Zealand, the finance minister used the annual budget to promise support to low and middle income families to cope with high inflation. Meanwhile, reports suggest that Chancellor Sunak will offer targeted support to business in the UK’s Autumn budget to boost investment. Today’s CBI industrial trends survey will be watched for signs of the impact of recent international developments such as the Ukrainian crisis and the new lockdown in China on growth and price trends. Last month, orders growth fell to a six month low, while export orders contracted. More positively, selling prices eased from their March peak, although they were still high by normal standards as cost pressures remained very elevated. US April housing starts may show further signs that the ongoing rise in interest rates is already impacting on a sector that is particularly rate sensitive. Sales have fallen in three of the last four months. In contrast, weekly jobless claims data continue to point to a tight labour market consistent with buoyant overall economic activity. The latest reading is expected to continue that trend. The release today of the minutes of the European Central Bank’s May policy meeting may provide further details on the evolution of its plans. There have been growing indications of late that high inflation is prompting the ECB towards an early interest rate hike despite ongoing concerns about economic growth. Last week, ECB President Lagarde suggested that a rate rise might follow hot on the heels of an end to the asset purchase programme early in Q3. That echoed the comments of many of her colleagues, further boosting market expectations that the June policy meeting may pave the way for a rate increase at the following update on 21st July. The post-Omicron rebound in UK economic activity seems to have petered out quickly reflecting various headwinds to growth. Potentially one of the most significant is the impact of high inflation on consumer spending power. Data due early Friday might further insight into its impact. The May GfK consumer confidence measure is expected to see a further fall, suggesting that the real income squeeze is a very real concerns for households. More positively April retail sales (also Fri) may show a modest rise but that follows a sizeable decline in March and may provide only limited assuranceFX Options Expiring 10am New York Cut USDJPY - 131.00 1.02bn (C). 130.00 556m. 128.40/50 1.47bn (778m C). 128.00/10 477m. 127.50/60 746m. 125.90/126.00 547m. EURUSD - 1.0600/10 639m. 1.0540/50 831m. 1.0450/60 528m. 1.0430/40 1.64bn (1.04bn P). 1.0410/20 622m. 1.0390/1.0400 714m. 1.0320 926m. GBPUSD - 1.2300 698m. AUDUSD - 0.7150 482m. NZDUSD - 0.6620 873m. 0.6250 507m. USDCAD - 1.2740/50 843m. 1.2620/30 486m. USDMXN - 20.00 770m. USDCNH - 6.80 700m. 6.72 500m. 6.60 523m. 6.54 1.56bn (C)Technical & Trade ViewsEURUSD Bias: Bearish below 1.07 Bullish above USD was offered in Asia and the mood lifted on positive China reports A Shanghai official outlined moves to reopen Shanghai and return to normal Asian equities came off their lows and E-Minis went from -0.7% to +0.15% The buoyant mood weighed on USD and EUR/USD traded up to 1.0507 Heading into the afternoon it is trading just below 1.0500 EUR/USD VWAP trending lower Resistance 1.0620 and break would warn momentum is slowing Support seen at 1.0470/50 break would encourage a retest of cycle lowsGBPUSD Bias: Bearish below 1.26 Bullish above. A short-term Fibo supporting at 1.2329, off 1.2156-1.2501 Double day highs, 1.2498-1.2501, on top Volatility still clouding near-term direction Underlying bias remains bearish but progress has slowed Risk of a 1.2000 breach but could see 1.2630-40 first Offers at 1.25 daily VWAP remains bearishUSDJPY Bias: Bullish above 127 Bearish below USD/JPY, JPY crosses rally after early weakness, former with US yields Japanese importers on the bid from overnight lows Interest from this bloc still sub-128.00, at tomorrow's Gotobi Tokyo fix Some offers from @128.50, more from ahead of 129.00, includes exporters Some gravitational pull from $1.6 bln 128.40-60 option expiries today US yields bounce too from early lows, Tsy 10s from 2.860% to 2.917% Support at 129, daily VWAP turning bearishAUDUSD Bias: Bullish above .7200 Bearish below AUD/USD firmed early Asia and traded up to 0.6976 with Tokyo in buying mix The market shrugged off a miss in Aus jobs - as unemployment fell t0 3.9% AUD/USD received an added boost when a Shanghai official outlined reopening Equity markets recovered lost ground and E-Minis went from -0.70% to +0.15% AUD/USD soared to 0.7021 as shorts were squeezed on break above 0.7000 Support eyed at .6950 Resistance is at the the daily VWAP .7050

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