Daily Market Outlook, August 22, 2022

Daily Market Outlook, August 22, 2022 Overnight Headlines US Yield Approaches 3% As Jackson Hole May Cement Hawkish Bets Oil Falls On Concerns Economic Slowdown May Dent Fuel Demand Asia Markets Mixed As Investors Weigh Concerns Over Fed Hikes China Cuts Benchmark Loan Prime Rate To Boost Faltering Economy Hawkesby:RBNZ Wants Rates 'Comfortably Above Neutral' To Tame Inflation Taiwan Set To Welcome More Foreign Delegations Despite Chinese Pressure ECB’s Nagel Wants More Rate Hikes, Says German Recession Likely Biden, European Allies Discuss Iran As US Weighs Latest Proposal Dollar Hits 5-Week High On Hawkish Fed Before Jackson Hole Australia To Map Crypto Tokens As Part Of Regulatory Ramp-UpThe Day Ahead Risk sentiment is mostly lower in Asia as investors anticipate further policy tightening by the US Federal Reserve to tackle inflation. The US 10-year Treasury yield increased for a third week but is marginally lower overnight. Chinese stocks gained, however, after the PBoC (China’s central bank) cut one- and five-year loan prime rates. Oil prices, meanwhile, are lower reflecting softening global demand and prospects of an Iranian deal and the resumption of supply from the country. Adding evidence to weakening global demand are figures overnight revealing a fall in South Korean export growth. There are no major UK or European data releases in today’s calendar. The US Chicago Fed’s national activity index is the only release. That has been negative in the past two months, indicating that activity growth has fallen below trend. This week’s highlights include the Jackson Hole Economic Symposium which is an annual central banking gathering. Remarks from US Fed Chair Powell on Friday will be closely analysed as markets assess the outlook for monetary policy The message from Powell will probably be hawkish with the near-term priority to tackle high inflation. A further rise in US policy interest rates of 50bp or 75bp is expected next month. Key data focus includes tomorrow’s flash August PMI survey reports for the UK, the US, and the Eurozone. Japan’s flash PMIs will be released tonight. The recent trend for activity across countries has been downward, although we look for small rebounds this month for both the UK and the US services measures but a further fall in the Eurozone index. The survey’s price indices will be closely watched for further signs of easing (but still high) inflationary pressures. Also out will be the German IFO business survey and the published minutes of the ECB’s July policy meeting when it raised interest rates more than expected by 50bp – both are due on Thursday. In the US, Q2 GDP on Thursday is expected to be unrevised at an annualised rate of -0.9%, but there will be focus on Friday’s readings for personal spending and the PCE deflator (the Fed’s preferred inflation gauge) for the start of Q3.FX Options Expiring 10am New York Cut EUR/USD: 0.9865 (223M), 0.9950-60 (518M) 1.000 (258M), 1.0140 (360M), 1.0180 (536M) USD/JPY: 135.00 (630M), 137.00 (367M) 137.20 (300M), 137.50 (230M), 138.00 (280M) EUR/JPY: 137.50 (638M) EUR/CHF: 0.9550 (493M), 0.9800 (491M) AUD/USD: 0.6760 (385M), 0.6945(399M) 0.7000 (450M). NZD/USD: 0.6150 (403M) USD/CAD: 1.2925 (360M), 1.2950 (231M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0410 Off 0.1% in Asia after closing down 0.45% on Friday and 2.1% on the week No end seen to Ukraine war, EU inflation surges Chances of recession in Europe grow, as ECB fights inflation U.S. has many problems, but Europe being hit harder, suggests EUR slide Bids are tipped around 1.000 with support at the July 14 trend low at 0.9952 Resistance is at Friday's 1.0095 high where offers are eyed It may consolidate ahead of tomorrow's EZ flash PMI 20 Day VWAP bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.23 Workers at UK's biggest container port to begin 8-day strike Next PM must address cost of living crisis to avoid deeper economic turmoil 20 day VWAP bands expand - strong bearish trending setup 1.1864 lower 20 day VWAP suggests sterling is over sold short term NY 1.1789-1.1857 range Friday is initial support and resistance 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 136 Extends gains in Tokyo, stocks lower and USD firm +0.2% early, leading the USD higher in Asia, as risk sours Nikkei -0.6% E-mini S&P -0.5%, Treasury yields are little change from NY close Friday USD strength and yield differentials rather than risk appetite lead JPY 136.30 is initial significant support 137.26, 76.4% of the July-August fall is under pressure Close above 137.26 would target a test of 139.38 July high 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bullish above .7050 After trading 0.6869 it attained a bid tone when Tokyo bought AUD/JPY The AUD/JPY rose over 0.50% and AUD/USD traded to 0.6906 Iron ore was up over 2.0% and Copper gained 0.45% Sellers above 0.6900 absorbed the flows and it is 0.6895/0.6900 late morning Resistance is at Friday's 0.6919 high and the 21-day MA at 0.6979 Support is at the 61.8 of the 0.6682/0.7136 move at 0.6855 A break below 0.6850 would open the way to the trend low at 0.6682 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 25.3K BTC testing pivotal 21k FTX grew revenue 1,000% during the crypto craze, leaked financials show – CNBC Bulls need a close above 25k to gain significant upside momentum Closing below 21k would be a noteworthy downside development 20 Day VWAP is bearish, 5 Day bearish

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