Daily Market Outlook, July 11, 2022

Daily Market Outlook, July 11, 2022 Overnight Headlines Asia Shares Open Under Pressure On U.S. Inflation, Earnings Season Treasuries Sit Out Haven Trades As Large CPI Event Risk Looms Rampant Dollar Hits New 24 Year Peak Through 137 On The Yen Japan Ruling Bloc Easily Wins Vote Held Days After Abe’s Murder Japan Orders Fall But Data Good, BoJ Easy, Money Supply Up Kuroda Warns Of High Economic Uncertainty, Repeats Easy Policy Bias RBNZ Shadow Board Recommends Half-Point Hike This Week - NZIER China's June Factory Inflation Cools Counter To Global Trends ECB’s Holzmann Foresees Steep Rate Hikes to Stem Fast Inflation ECB’s Stournaras: Strong’ ECB Crisis Tool Could Stay On Shelf Biden Decision On China Tariffs May Come Shortly, Raimondo Says Tories Look To Narrow Leadership Field Quickly As Rancour Grows Oil Mixed As Market Weighs Tight Supply Against Recession Jitters Europe On Edge As NS Russian Gas Link Set For Planned Shut-Down China Watchdog Fined Alibaba, Tencent Over Reporting Past Deals Twitter Assembles Legal Team To Sue Musk Over Dropped TakeoverThe Day Ahead Most Asian equity markets traded lower on the day as concerns over the Covid situation in China weighed on sentiment. Shanghai reported its first case of the BA.5 Omicron variant yesterday, prompting warnings of further lockdowns to contain its spread. 9 districts and areas of Shanghai where infections were found are due to undergo 2 rounds of mass testing between Tuesday and Thursday. Stocks across Japan were the exception, trading higher on the day following the ruling LDP/Komeito coalition expanding its majority in the yesterday’s Upper House election, opening the way for the current administration to face a “golden three years”, in which it would not need to face a national election. Over the past week, financial markets have remained volatile as the focus seesawed between inflation and growth concerns. This week, updates on China and UK GDP will provide key insights on global growth, with Wednesday’s US CPI report for June keenly watched for news on the latest inflation trends. More immediately, today’s calendar is void of any major data releases, leaving the focus on a handful of central bank speakers, although the extent to which monetary policy outlooks will be discussed remains uncertain. In the US, Fed member Williams is due to speak at event on the Libor transition, while the ECB’s Nagel will talk about the ‘digital euro’. Domestically, Bank of England Governor, Andrew Bailey is scheduled to appear in front of a parliamentary committee, alongside a number of Financial Policy Committee colleagues, to discuss the latest Financial Stability Report. The UK Conservative Party’s 1922 Committee of backbench MPs is expected to elect a new executive later today. The Committee is then expected to confirm the process for selecting a new permanent leader of the Party who will be invited to form a government by the Queen. The current process is that Conservative MPs will whittle down the candidates to two and the winner will be chosen by the wider party membership. Reports suggest the aim is to have a new leader in place by early September. As of this morning, 11 Conservative MPs have announced their intention to stand in the contest.CFTC Data IMM: USD long position grows as EUR, GBP, AUD specs sell into weakness USD net spec long grew in Jun 29-Jul 5 period; $IDX +1.9% EUR$ -2.44% in period specs -6,256 contracts now -16,852; spec eye parity $JPY -0.15% in period, specs sell 1,875 now short 54,445 contracts GBP$ -1.85%, specs sold 3,090 contracts now -56,208 prior to PM resignation CAD specs -4,804, AUD -4,641 contracts; recession fears weigh on commods BTC specs -665 contract long reduced to 420; crypto co.'s liquidity issues stir unwind(Source: Reuters)FX Options Expiring 10am New York Cut EUR/USD: 1.0050 (658M), 1.0125 (208M), 1.0200 (243M) 1.0225 (589M), 1.0250 (1.34BLN), 1.0300 (1.32BLN) 1.0350 (545M) USD/JPY: 136.50 (855M), 137.00 (200M) GBP/USD: 1.2035 (351M) USD/CHF: 0.9745 (205M). USD/CAD: 1.2985 (200M) EUR/CHF: 1.0150 (439M). AUD/USD: 0.6825 (418)Technical & Trade ViewsEURUSD Bias: Bearish below 1.05 Opens the week under pressure trading sub 1.0150 Upside capped by US Yields on increasing Fed rate hike bets ECB/FED policy divergence remains in focus, CPI Wed’s next catalyst Soaring energy costs, inflation and recession concerns pile on the pressure Bids eyed at 1.0070 offers sitting above 1.02 Bears eyeing a parity test; offers seen at 1.0340/60 20 Day VWAP is bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.2150 GBP soft in light Asian session Political power void likely to constrain BoE action in August Wednesday sees 1.15Bln options at 1.2035 Energy price inflation, recession fears and political unknowns weigh on GBP Bears breach YTD lows en-route to a test of 1.18 Offers seen at 1.20 Bids 1.1770 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 134 USDJPY trades at a 22 year high in the Asian session US Yields seen as supporting the upside Surge came as BoJ Kuroda reaffirmed the banks policies Tuesday sees 1.1Bln 137.60 option expiries Japanese importer bids seen at 135 Traders see range expansion 135/140 US10Y trad above 3% although retreating from best levels overnight Initial offers seen at 137.55/65 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .7050 AUD weighed by souring risk sentiment Fresh Covid concerns out of China, Shanghai finds new subvariant Commodities rolling over again Nickel falling as much as 3% Offers seen at .6870’s with bids .6770’s Next major support seen at the 50% retracement of the 0.5510/0.8007 move at 0.6758 20 Day VWAP remains untested confirming downside 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 22k BTC briefly tests 22k but quickly rejected 20 VWAP band contracting ready for next directional drive Trend remains down as within broader bearish channel Support seen at 19k then 18300 the base of the daily VWAP bands failure here opens a retest of lows Concerns regarding increasing Crypto scandals and scams leaves BTC vulnerable Additional pressure seen from BTC miners liquidating positions on declining profitability 20 Day VWAP is bullish, 5 Day bullish

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