Daily Market Outlook, September 6, 2022

Daily Market Outlook, September 6, 2022 Overnight Headlines Bank Of England’s Mann Calls For ‘Forceful’ Action On Rates Retailers Warn Of Storm Ahead As UK Sales Growth Stutters UK Shoppers, Feeling The Inflation Hit, Cut Back On Non-Essentials Truss Earmarks £130Bln To Keep UK Energy Bills Below £2K China Delays Key Annual Financial Forum Amid Covid Flare-Up Japan's Household Spending Extends Growth But Inflation Risks Loom Japan July Real Wages Continue To Slide As Rising Prices Weigh The RBA Lifts Rates To 2.35%, More Increases To Come Australia Current Account Surplus Balloons In Q2, Boosts Growth Australia Government Spending Makes Minor Contribution To Q2 GDP China Sets Yuan Fix Weaker Than 6.9 A Dollar, Unseen Since 2020 Oil Holds Advance After OPEC+ Delivers Modest Cut In Production EU Chief Negotiator: Iran Nuclear Deal ‘In Danger’ Brussels Pushes For EU-wide Caps On Gas Price Stocks In Asia Turned Mixed, While US Equity Futures Rose CVS Agrees To Buy Signify Health For About $8 BillionThe Day Ahead Asian equity markets are mixed as investors continue to assess the outlook for the global economy and interest rates. The Reserve Bank of Australia raised interest rates by 50bp to 2.35% as expected. US Treasury yields rose overnight after yesterday’s hiatus for a public holiday. In the UK, the British Retail Consortium reported like-for-like sales easing to 0.5%y/y in August, down from 1.6%y/y in July. Oil prices pared gains after rising yesterday following the decision by OPEC+ to cut production. New Conservative Party leader, Liz Truss, formally becomes UK Prime Minister today after Boris Johnson tenders his resignation to the Queen. Market reaction yesterday to Truss’s victory in the leadership contest was limited because the outcome was in line with expectations. A new package of measures to support the economy is expected to be announced on Thursday which could include plans to freeze household energy bills for households. According to reports, the measures could cost over £100bn. The only notable UK data release today is the August construction PMI. The headline index fell to 48.9 last month, below the key 50 level separating expansion and contraction for the first time since early 2021. Markets are looking for a sixth consecutive decline today, to 48.0. The US data calendar is relatively quiet this week, but it includes today’s August ISM services report. The July ISM services index unexpectedly rose to a three-month high of 56.7, despite recession concerns. Expect it to ease back to 54.5, although that would remain firmly in the growth zone. In contrast, the alternative US services PMI compiled by S&P Global has been below 50 in both July and August. The final August reading for that survey is also due today.FX Options Expiring 10am New York Cut EUR/USD: 0.9900 (792M), 0.9995-1.0000 (1.08B), 1.0095-1.0100 (896M) USD/JPY: 138.75 (600M), 140.00 (626M). USD/CHF: 0.9815-25 (720M) AUD/USD: 0.6800 (722M), 0.6875 (1.06B). USD/CAD: 1.0325-30 (996M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0250 Recovery from 20 year low continues, nears resistance EUR/USD tracking higher in Asia as short-covering continues It has traded as high as 0.9971 with the 10-year MA at 0.9976 A clear break above 0.9976 would likely force more short-covering USD softer against most currencies as Asia trading with a risk-on tone Sustained 0.9900 break would target 0.9608 base in September 2002 20 Day VWAP bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.2050 Relief rally as UK political uncertainty ends +0.5%, leading USD lower - short squeeze as Truss becomes PM Cautious UK shoppers, feeling inflation, cut non-essentials Food spending +7.2%, utility bills +45.2% on Barclaycard - tough winter Bearish trending setup targets 1.1413 March 2020 base longer-term Close above 1.1672 needed to undermine downside bias 1.1413 March 2020 low initial support, 1.1519 NY close resistance 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 133.40 Japan FX jaw – boning again fall on deaf ears USD/JPY bounces after to dip to 140.25 EBS despite fresh jaw-boning FinMin Suzuki again lashed out at high FX volatility Stressed FX must reflect fundamentals, move in stable fashion As in recent past, he is watching the market with sense of urgency USD/JPY downside remains limited with market bias remaining up Hawkish Fed, higher US yields, importer demand to keep USD bid on dips 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .71 Gives back early gains – RBA reaction muted AUD/USD opened -0.16% at 0.6797 and immediately moved higher E-minis opened -0.60% and provided a positive tone for Asia AUD/USD traded up to 0.6832 as USD broadly weakened Rally ran out of steam and AUD/USD was around 0.6805 into the RBA decision RBA hiked 50 BPs to 2.35% as expected and statement was same as August AUD/USD grated around 0.6800 before settling 0.6805/10 Market will now focus on global growth outlook now the RBA is out of the way AUD/USD support is at double-bottom formed around 0.6770 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 25.3K BTC trades sub 20k again ETH outperforms BTC as merge countdown continues Cardano & Cosmos competing blockchains notable outperformers Macro econ uncertainty continues to weigh on BTC as USD prints 20yr highs BTC supported by Jul 13 low 18.9k Aug 28's 22.2k may pull BTC higher 20 Day VWAP is bearish, 5 Day bullish

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