U.S. Dollar Index Future ( DX1! ), H1 Potential for Bearish Drop

Type: Bearish ContinuationKey Levels:Resistance: 103.265Pivot: 102.380Support: 101.985Preferred Case:With price moving below the Ichimoku cloud , we have a bearish bias that price will drop to our 1st support at 101.985 in line with the 100% Fibonacci projection from our pivot at 102.380 in line with the horizontal overlap resistance and 61.8% Fibonacci retracement .Alternative Scenario:Alternatively, price may break pivot structure and head for 1st resistance in line with the overlap resistance, -27.20% Fibonacci expansion and 50% Fibonacci retracement .Fundamentals:In the face of strong inflation , Bostic emphasized that two 50-bps raises at forthcoming Fed meetings are still realistic. We have a Mixed-to-Weak Bearish view on the index.

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Investment Bank Outlook 24-05-2022

CIBCKey Headlines Risk is off, no one cared about JPM, it was all about Snapchat and the other social media platforms. FX traders paid close attention to US equity futures and then the UST yields. No fresh chicken for Singapore! Malaysian government announced it will halt exports of 3.6mio chickens a month from June 1.FX FlowsUS equity futures weak at the open, NQM2 is down 1.65% after Snapchat cut its revenue and profit forecasts below the low end of its guidance. Other social media platforms shares are also lower in after-hours trading. Snap’s CEO told employees that the firm plans to slow hiring this year to 500.Most commodity futures were weak during Asia morning. Which also placed some pressure on the commodity currencies.Market had expected New Zealand Q1 Retail Sales Ex-Inflation to gain 0.3% over the quarter but was disappointed with -0.5% and also lower revision to +8.3% from +8.6%. NZ$ did slip a little but not immediate, from 0.6459 to 0.6450. Was fairly quiet until US$ strengthened across the board. Further pressure after » Dairy Companies Association of New Zealand said 11-month milk collection fell 3.9% over the year.Australia May flash PMIs were softer than previous month. Manufacturing slipped to 55.3 from 58.8, S&P Global said output was affected by issues of Covid-19 disruptions and poor weather conditions. However, manufacturing demand remained robust. The firm said overall business sentiment remained positive. AU$ a tick lower, barely any damage. AU$ slipped further on weak US equity futures, thanks to Snap.Nice job in $YEN, Tokyo banks bid the pair higher for the usual Tokyo fix, then reversed back to 127.70. We didn’t stay down there for long. Investors turned their attention to the US Treasuries, yields went up and that took $YEN along as well. We understand that the Japanese retail guys are long and likely to fade the move up. The large strikes above have expired, this should smooth the move up and first resistance 128.50.EUR$ peaked at 1.0694, one reporter noted leveraged names reducing short after market broke 1.0620. We are likely to run into some resistance around 1.0700, nothing much thereafter unless we break 1.0755 then stop buy orders kick in. Despite the ECB hawks yesterday, Asia didn’t pay much attention. It was more about the risk sentiment and EUR$ drifted lower.Over in UK, railway unions will hold a vote today to walk out of every Tube station on Monday June 6. This will cripple the London Underground when millions of people return to work after the Queen’s jubilee weekend. PM Johnson’s photograph of him drinking with aides at a lockdown-breaking party in No 10 is all over the British media. I wonder what he will say to that? I guess nothing. GBP$ ended the morning lower, in line with the rest.Weak commodity prices, WTI July contracts ended the morning session lower, $CAD returned to 1.28-handle. Overall, low activity. Only interesting option strike is 1.2870 for $605mio. Later today we shall have the May economic mood index, previously 54.3.

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Daily Market Outlook, May 24, 2022

Daily Market Outlook, May 24, 2022 Overnight Headlines Quad Leaders Vow To Stand Together For Free, Open Indo-Pacific Biden: No Change To Policy Of Strategic Ambiguity On Taiwan US Trade Chief Tai: The US Must Be ‘Strategic’ On China Tariffs Fed's Bostic Suggests Pausing Rate Hikes In Sep To Assess Impact Fed's George Sees Policy Interest Rate Around 2.0% By August German Minister Expects EU Embargo On Russian Oil 'Within Days UK To Start Legislating Against Brexit Deal Within Three Weeks China Rolls Out Tax Relief, Construction Bonds To Spur Economy Beijing Covid Cases Drop As Capital Remains Under Restrictions Japan’s Factory Activity Grows At Slowest Rate In Three Months Oil Prices Ease On Recession Concerns, Weaker Consumption Asian Equity Markets Slip With US Futures, Euro Holds Gains Snap Leads After Hours Tech Rout After Issuing Profit Warning The Day Ahead Asian equity markets have fallen this morning despite yesterday’s gains in Europe and the US. Futures for the US are also down as reports suggest that tech stocks are leading the sell-off. A further rise in Covid cases in China and that yesterday’s optimism about a US tariff reduction on Chinese goods may be misplaced have also be cited as concerns. In the UK, Northern Ireland Secretary Lewis said that the government plans to introduce a bill to override the Northern Ireland protocol in the Brexit deal within three weeks. Just released data showed UK government borrowing for April, the first month of the new financial year, at £17.8bn. That was close to expectations and down from £23.4bn at the same point a year ago. Meanwhile, media reports suggest that Chancellor Sunak is preparing plans for a windfall tax on power generators and oil & gas companies. Today’s ‘flash’ estimates for the May manufacturing and services PMIs are potentially the most interesting releases of the week in the UK. While showing some evidence of slowing growth in the past couple of months partly as post-Omicron impetus begins to fade, both measures still point to continued growth. That means they seem more positive than official GDP data which showed no growth in February and a small fall in March. The May readings will again be impacted by the Ukrainian crisis and by Covid restrictions in China but, overall, expect another set of solid prints. Look for the manufacturing measure rising to 56.5 from 55.8 in April and the services measure down to 57 from 58.9. Eurozone PMI data will also provide indications of May economic trends. As in the UK, the Eurozone PMI data are still solidly in growth territory, expect that to once again be the case in May. However, look for both measures to be down from their April levels. In the US, PMI data tend to be less closely watched than the longer-running ISM surveys. However, those will not be available for another week. In the meantime, the US PMIs are forecast to show both manufacturing and services mostly still growing at a relatively strong pace. The latest New Zealand central bank policy update due early Wednesday is expected to result in the fifth increase interest rates. Rates have already gone up from a low last October of 0.25% to 1.5%. However, economists are split over the size of this week’s rise with a majority forecasting a second successive 50 basis point increase to 2% but some suggesting a smaller hike of 25bp. FX Options Expiring 10am New York Cut EUR/USD: 1.0370 (1.76BLN), 1.0435-40 (592M) 1.0445-50 (462M), 1.0480 (279M), 1.0540-50 (813M) 1.0585 (784M), 1.0600 (401M), 1.0650-55 (833M) 1.0740 (952M) USD/JPY: 127.00 (599M), 128.00 (405M), 128.50 (229M) 129.00 (631M), 130.00 (300M) GBP/USD: 1.2500 (378M), 1.2600 (302M) EUR/GBP; 0.8380-85 (256M) AUD/USD: 0.7135 (247M), 0.7245-50 (628M) USD/CAD: 1.2690-00 (326M) 1.2820-25 (258M), 1.2720 (225M), 1.2820-25 (410M) 1.2870 (605M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.07 Bullish above EUR/USD has swiftly risen towards overbought territory It's unlikely to rise much further in the short-term 20-day two standard deviation is 1.0745 Consolidation likely, perhaps slide towards the VWAP 1.0535 Given importance of Jun ECB/Fed meets a lengthy consolidation possible EUR/USD VWAP has turned bullishGBPUSD Bias: Bearish below 1.26 Bullish above. GBP nursing its topside breakout as it fails to extend above 1.2600 A negative session would damage prospects for a run into the 1.27s Still respect May 13 key day reversal but wary of fresh bearish signals 14-day momentum has flipped to bullish Daily VWAP has turned bullishUSDJPY Bias: Bullish above 127 Bearish below Correction of USD/JPY's overbought uptrend has stalled by 127.00-EBS Supports include late April lows, and 23.6% Fibo The minimum correction taken off 112.53-131.35 advance is at 126.91 Pressure from overbought daily RSIs has been relieved However, weekly and monthly studies remain top-heavy Bearish unless daily ranges are made above the 129.00AUDUSD Bias: Bullish above .7200 Bearish below AUD/USD opened +0.84% at 0.7111 after USD fell and Wall Street soared It came under pressure early when E-minis opened around 1.0% lower Talk in street glut of China growth outlooks from major banks also weighed AUD/USD traded down to 0.7066 before settling at 0.7080/85 late morning Support is at 0.7041 A break below 0.6995 would put the trend low at 0.6829 in focus Resistance is at the 38.2 of the 0.7661/0.6829 move at 0.7146

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Six high-yielding funds for income investors to buy now

Rising interest rates are starting to make many popular income funds look less than attractive. Here, David Stevenson picks six that should weather the storm.

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How to ask for a pay rise

A higher salary is the best way to combat the cost of living crisis. Ask for a pay rise now, says Ruth Jackson-Kirby.

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Investment Bank Outlook 23-05-2022

Credit AgricoleWeekly FX OutlookUSD: In the near term, the USD should remain supported by the relative outperformance of the US economy that will allow the Fed to normalise policy more quickly. The USD should further benefit from its role as a liquid safe-haven currency during recurrent bouts of risk aversion. Medium term, we expect the US economic outperformance to become less pronounced and the Fed to embark on gradual policy normalisation, which could keep US real rates and yields negative. This, coupled with central bank tightening outside of the US, could encourage diversification flows out of the USD, especially given lingering concerns about the US twin deficits and the USD’s overvaluationEUR: The war in Ukraine has fanned stagflation headwinds in the Eurozone and should continue to complicate the ECB’s plans for policy normalisation and weigh on the EUR across the board. It will further have lasting consequences for the Eurozone’s international competitiveness, external position, relative real yields and commodity terms of trade. Our analysis based on our long-term fair value model G10 VALFeX suggests the long-term EUR/USD value can drop to 1.1130 from 1.1950 at present and thus signals a much less constructive FX outlook. Many negatives seem to be in the price of EUR/USD and its outlook in the coming months could stabilise in part thanks to the repatriation of funds held abroad into the Eurozone to fund the growing domestic outlays. We also think that the overhang of EUR[1]shorts in the markets can help the single currency benefit from future bouts of risk aversion especially as its rate disadvantage is diminished by the ECB’s policy normalisation.GBP: The GBP could remain an attractive stagflation and risk aversion hedge for now. Soaring energy costs, labour market shortages, global supply chain disruptions and persistent Brexit-related headwinds continue to plague the UK economic recovery and thus complicate the BoE’s ability to normalise in the face of uncomfortably high inflation. This could keep UK real rates and yields very negative and weigh on the GBP in the near term. In the longer term, the undervalued GBP may recover as UK growth hurdles ease and this allows the BoE to hike rates more aggressively. That said, the war in Ukraine as well as idiosyncratic risks related to Brexit or a potential indyref2.0 should make the UK’s economic recovery much less robust than we expected previously.JPY: Going forward, we believe the threat of and any actual FX intervention as well as further UST yield curve inversion will constrain USD/JPY upside. We are not confident in a speedy resolution to the Ukraine crisis, however, and so higher oil prices will remain a weight on the JPY along with Haruhiko Kuroda’s dogged adherence to the BoJ’s YCC. A gradual changing of the BoJ Board’s make-up will start in July when new members will potentially open the discussion of the adjustment of YCC, however.AUD: While the start to RBA rate hikes is a positive for the AUD, we think the AUD will struggle to move higher against the USD. The RBA is being outgunned by the FOMC and while China is pledging support for its economy including looser fiscal policy and a big infrastructure spend up, it will take longer than usual for this to give the economy a boost while the government pursues its zero-Covid strategy and lockdowns.NZD: While the RBNZ is being forced to hike rates aggressively by strong inflation, the negative terms-of-trade shock from the Ukraine crisis, weakening Chinese growth as well as rate hikes are weighing on the local economy. These factors will curtail NZD appreciation due to a hawkish RBNZ.

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Daily Market Outlook, May 23, 2022

Daily Market Outlook, May 23, 2022 Overnight Headlines Pounded By Russia In The East, Ukraine Rules Out Concessions White House Adviser: US Economy Is In A ‘Period Of Transition’ Lagarde Signals That July Is Likely Liftoff Date For ECB Rates UK Housing Market Frenzy Shows Signs Of Slowing: Rightmove Beijing Sees Record Covid Cases, Reviving Lockdown Concerns Anthony Albanese Leads Labor To Australian Election Victory RBA’S Kent: Currently Has No Plans to Sell Bonds in Portfolio Dollar Wobbles Lower As Chinese Growth Hopes Lift Aussie Oil Prices Climb In Tight Market As US Driving Season Looms Asian Equity Markets On A Mixed Footing; US Futures Rise Broadcom Reportedly In Talks To Acquire Cloud Firm VMwareThe Day Ahead Equity indices are mostly trading higher across the Asia Pacific, albeit stocks in China and Hong Kong continued to fall as record numbers of new Covid cases in Beijing raised concerns of a broad lockdown across the capital, in adherence with China’s stringent Covid policy. US equity futures are also trading higher, although this follows seven weeks of decline and overall equity sentiment remains soft. There are still a few weeks to go before the next set of announcements from the European Central Bank (9th June), US Federal Reserve (14th June) and BoE (15th June). In the meantime, comments from policymakers will continue to be examined closely for clues on their intentions. The US Fed’s message is clearest with its policymakers united in indicating that for now they are more concerned about inflation and that, as result, 50 basis point increases in interest rates are likely in both June and July. However, with the recent fall in equities generating some of the required tightening in financial conditions that the central bank is trying to achieve by raising interest rates, there are questions of whether some Fed members may start to point to the need for a lower peak in interest rates. Later today, Fed members Bostic and George are scheduled to speak and any indication of a wavering in hiking intentions will be closely watched for. Recent ECB comments indicate that an increasing number of policymakers and, possibly a majority, now favour or are open to an interest rate hike at the 21st July policy update despite ongoing economic uncertainties. Minutes of their April meeting released last week noted that several policymakers were ready to move rates at that point. But that obviously was not true of the majority and the consensus now seems to be building around using the June update to signal a July move. A number of ECB officials are due to speak over the course of the day, including De Cos, Nagel, Holzmann and Villeroy. The last two will be speaking about “The Return of Inflation” at an event in Vienna, alongside BoE Governor Bailey. Data wise, today’s German IFO survey for May will provide an update on economic trends. Since the war in Ukraine started, the index has fallen below its long-term average, and as expected a further modest fall this month. Early tomorrow morning, monthly UK public finance data for April will be released. While the figures are the first for the new fiscal year (2022/23), they will be watched for indications of the leeway for the government to offer extra support to households. As concerns about the ‘cost of living squeeze’ have intensified, there have been growing calls for action and recent media reports have suggested a package may be introduced before the parliamentary recess in July. Potential measures that have been talked about include further specific support for fuel bills and a temporary cut to VAT.CFTC Data(Reuters Data) USD IMM net spec Fell in May 11-17 period as the $IDX dipped 0.61% EUR$ +0.24% in period, specs bottom-fish add 3,810 contracts to long Yen net short -8,145 to -102,309 contracts; $JPY -0.85% in period GBP specs +357 contracts now -79,241; GBP$ rose 1.47% in period AUD, CAD, kiwi specs sold in period; AUD short now 2,928, CAD -14,496 Bitcoin specs buying recent dip, +103 contracts now long 806; BTC -3% in periodFX Options Expiring 10am New York Cut USDJPY - 131.00 500m. 130.00/20 1.17bn (744m C). 129.80 750m. 128.90/129.00 1.53bn (1.06bn P). 128.00/20 2.80bn (1.77bn C). 127.00 465m. EURUSD - 1.0600 963m. 1.0450 1.25bn (787m C). 1.0400 2.61bn (P). 1.0350 471m. 1.0250 584m. AUDNZD - 1.0960 1.87bn (1.72bn C). EURJPY - 139.50 2.27bn (1.48bn P). USDCNH - 6.61 638m. 6.48 590m.Technical & Trade ViewsEURUSD Bias: Bearish below 1.07 Bullish above Resistance is at the 38.2% of the 1.1185/1.0349 move at 1.0668 EUR/USD stopped trending lower and will likely consolidate in a range More short-covering possible if US yields continue to move lower EUR/USD VWAP flattening Support seen at 1.0470/50 break would encourage a retest of cycle lowsGBPUSD Bias: Bearish below 1.26 Bullish above. Cable rises to 1.2572 after Biden says considering reducing tariffs on China 1.2572 is highest level since May 5 (BoE MPA day) Biden steer has lifted equity futures, GBP is risk-sensitive GBP/USD strength follows biggest weekly rise since Dec 2020 1.2578 was London morning high on May 5, before BoE's UK recession warning Bailey takes part in panel discussion on monetary policy/inflation 1415 GMT Offers at 1.25 daily VWAP remains bearishUSDJPY Bias: Bullish above 127 Bearish below USD/JPY earlier swoon from 128.05 to 127.16 EBS Exporter, option-related, offshore fund and day-trader sales Stops sub-127.50 too, all in rather thin market Bounce into Europe, London underway, pair back up to 127.91 Uptick in US yields helped, Treasury 10s from 2.797% to 2.842% Market still seen heavy 128.00+, massive option expiries above Today to see $2.8 bln between 128.00-25 strikes, more aboveAUDUSD Bias: Bullish above .7200 Bearish below AUD/USD opened around 0.7055 and after dip to 0.7046 it tracked higher E-minis popped up close to 1.0% and helped to lift risk currencies AUD/USD received added support from a near 4% rise in Dalian iron ore Heading into the afternoon it is 0.5% higher at 0.7085/90 AUD support coming from optimism China will continue to support the economy Sellers at 0.7100 with resistance at 38.2 of 0.7661/0.6829 move at 0.7146 Support is at .7000

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Market Update – May 23 – USD Dips, Stocks remain pressured

USD slipped again, Stocks had a torrid day on Friday, but recovered in final hour, Bear market talk dominates weekend press. Asian markets rise, after improvements in Shanghai covid news as isolation times are reduced, but record cases in Beijing.  Biden in Tokyo, offers olive branch to Kim, says US recession “not inevitable” and is willing to us force to defend Taiwan.  AUD & NZD rally on new Aussie PM.  

• USDIndex down to 12-day low at 102.6 and 5th down day of last seven.
• Equities – USA500 0.57 (0.005%) at 3901, US500FUTS at 3952 now.
• Yields down 10-yr closed at 2.788%,  Trades up at 2.79%   
• Oil & Gold both had positive sessions –  USOil rallied to test $110.00 earlier today from $103.50 on Thursday.  Gold holds $1850 today from lows at $1788 last week. 
• Bitcoin rotates through $30K – Lagarde says crypto assets are ‘worth nothing.’
• FX markets – EURUSD up from 1.0355 to 1.0600, parity calls falling. USDJPY under 128.00, and Cable back to 1.2570.  AUD again outperformed in Asia.  

Overnight – JGBP House Prices  hotter than expected  & RBA’s Kent says the Bank’s estimate of the neutral rate is 2 to 3%.

Today – German Ifo Survey, Speeches from BOE’s Bailey ECB’s Villeroy & Fed’s Bostic

Biggest FX Mover @ (06:30 GMT) AUDUSD (+1.20%) Rallied from lows at 0.7000  on  Friday to 0.7125 today, following new labor PM’s election.  MAs aligning higher, MACD signal line & histogram moving higher & testing 0 line, RSI 48 & rising, H1 ATR 0.346, Daily ATR 1.67.

 

Click here to access our Economic Calendar

Stuart Cowell

Head Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distribution.

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Bitcoin is on the Rise

Last week Bitcoin was staying at the supporting level of 28600. The asset broke this level, trying to jump. Bitcoin might potentially have to face the resistance at the level of 45000.Brent oil is finally done with the fan drawing after breaking the triangle. The asset is likely to hit the level of about 138 although it might also break this level through and jump up. So, it would be worth observing what is about to happen next.The US stock index S&P500 has formed the head and shoulders pattern on the weekly time frame. At the end of the trading week, the index dived below the neckline, trying to signify the breakout. The index is likely to drop and gain the required support at the level of 3400.

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Key economic events and reports for the week ahead

Global equity markets suffered heavy losses in the first half of this week, however sentiment stabilized in the second half as stocks started to recover. The dollar took another step back, oil prices fell below $110 per barrel. The first positive news appeared on reopening of China economy after a period of severe social restrictions, some signs of de-escalation in Russia-EU relations emerged as well, in particular, EU appears to have accepted Russia’s scheme of gas payments.The situation on the foreign exchange market reflected a decrease in risks, both geopolitical and inflation, which was primarily expressed in greenback retreat, which has been rising all this time due to the fact that US assets were perceived as the best place in terms of risk-reward ratio.Over the next week, the downward trend in risks, or at least in perception that risks are decreasing, is likely to continue, which should have slightly negative consequences for the dollar. The pound and Euro may still rise against the dollar, EURUSD rally could reach 1.0650, GBPUSD could test 1.25. Other currencies of the G10 countries will likely rise against the Dollar as well.On Monday, the head of the British Central Bank Bailey will deliver a speech, in light of strong recent data on the UK labor market, there may be more determination to tighten policy, which should be reflected in Bailey’s remarks. RBNZ will hold a meeting and the Fed will release the Minutes of its last policy meeting on Wednesday. Powell was pretty clear this week about his commitment to tackle high inflation so the Minutes may contain little surprise and cause moderate market reaction.

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The end of the era of optimisation

A focus on maximising returns has made economies too fragile, says Edward Chancellor.

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USDJPY, H4 | Potential Bearish Continuation

Type: Bearish ReversalKey Levels:Resistance: 128.892Pivot: 128.09Support: 127.14Preferred Case:On the H4, with prices moving below the Ichimoku indicator, we have a bearish bias that price will drop from our pivot at 128.09 where the 38.2% Fibonacci retracement and horizontal overlap resistance is to our 1st support at 127.14 in line with the 78.6% Fibonacci projection.Alternative Scenario:Alternatively, price may break pivot structure and head for 1st resistance at 128.892 where the horizontal overlap resistance and 61.8% Fibonacci retracement is.

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GBPUSD, H4 | Potential Bullish Continuation

Type: Bullish BounceKey Levels:Resistance: 1.26296Pivot: 1.24979Support: 1.23988Preferred Case:On the H4, with price moving above the Ichimoku indicator, we have a bullish bias that price will rise from our pivot at 1.24979 where the horizontal overlap support is to our 1st resistance at 1.26296 in line with the 78.6% Fibonacci projection. Alternative Scenario:Alternatively, price may break pivot structure and head for 1st support at 1.23988 where the horizontal overlap support and 61.8% Fibonacci retracement are.

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China Stock Market Could be the Next Trigger of Global Risk Aversion

The Chinese hedge fund segment, worth about $1 trillion, could worsen the turmoil in the stock market, as massive losses force some portfolio managers to cover their loss by indiscriminately selling their assets.Some 2,350 equity-linked hedge funds fell below the point at which they would normally need to cut holdings last month, with many close to the point at which they would need to be liquidated, Bloomberg reported, citing an industry data provider.Such signs of stress are "close to historic highs," analysts at China Merchants Securities Co. said in a report.A sign indicating that the situation has drawn attention of regulators is the fact that exchange operators began to ask some funds to assess the extent of pressure on their portfolios since March, writes Bloomberg, citing people familiar with it."The pressure on the market may be quite large after strong expansion of the industry last year," said Yang Hong, director of the Chinese hedge fund research center at the Shanghai Advanced Institute of Finance.The Chinese stock index CSI 300 Index in January-April showed the worst performance since 2008. The index has fallen by about 17% since the start of the year as tough coronavirus policies and inspections of private companies hurt investor confidence. Weak statistics fuel fears that markets will remain under pressure if China does not change its approach.The hedge fund segment grew 66% last year, with a total value of all assets under management of 6.1 trillion yuan ($903 billion). As of March 31, hedge funds managed 6.35 trillion yuan in assets.

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