Daily Market Outlook, July 14, 2022

Daily Market Outlook, July 14, 2022 Overnight Headlines Fed’s Mester Says CPI Data Gives No Reason For Smaller July Hike Dollar Resumes Relentless Rise As Inflation Stokes Fed Bets Lowest Jobless Rate Since 1974 Sends RBA Rate Bets Soaring Singapore Tightens Monetary Policy To Cool Inflation; Q2 GDP Up 4.8% Fed's Daly Says Her Most Likely Posture Is 0.75ppt Hike - NYT Barkin Says Inflation Fight Must Occupy Fed’s Full Attention U.S. Budget Deficit Down Sharply From 2021 As Pandemic Aid Fades EU Cuts Euro-Area GDP Forecast, Sees 7.6% Inflation, Draft Shows Italy's 5-Star To Snub Key Vote, Pushing Draghi's Govt To The Brink Oil Prices Up Ahead Of Potential Large U.S. Rate Hike, Gold Rebounds Adeyemo Sees No Need for Secondary Sanctions Over Russia Oil Cap Asian Shares Bruised As U.S. Inflation Data Boosts Recession FearThe Day Ahead Equity markets in the Asia-Pacific region are mixed as investors assess the possibility of the Fed raising interest rates even more aggressively than previously expected. Following yesterday’s increase in US headline CPI inflation to a fresh forty-year high of 9.1% and the Bank of Canada’s decision to hike rates by 100bp to 2.5% There are no major UK or Eurozone data releases today. The UK RICS housing survey overnight showed the net balance of respondents reporting higher prices moderated to 65% in June from 72% in May. RICS said the market is ‘starting to cool off’ but a lack of stock is keeping prices high. The European Commission will release updated economic forecasts this morning. Reports suggest it will raise this year’s Eurozone inflation forecast to 7.6% from 6.1% and downgrade next year’s GDP growth to 1.4% from 2.3%. The afternoon sees the release of US producer price inflation for June and the latest weekly jobless claims data. On the heels of yesterday’s headline CPI inflation, today’s PPI figures are likely to remain elevated, suggesting that there are still substantial cost rises in the pipeline. Meanwhile, initial jobless claims data are expected to reaffirm some cooling of the labour market although it remains very tight. Early Friday sees the release of Chinese Q2 GDP which is forecast to weaken because of Covid lockdowns in Shanghai and other cities. Nevertheless, the monthly data for retail sales and industrial production are expected to show recovery through the quarter as curbs were eased. Markets, however, have been concerned about more recent reports of Covid case numbers starting to rise again. Markets will be looking ahead to US releases in the rest of Friday, including retail sales, industrial production and the University of Michigan consumer sentiment survey. The remaining Fed speakers will appear before next week’s pre-meeting ‘blackout’ period. Fed Governor Waller will discuss the economic outlook later today.FX Options Expiring 10am New York Cut EUR/USD: 1.0000 (234M), 1.0095-00 (854M), 1.0150-60 (968M) USD/JPY: 137.50 (340M), 137.75 (350M), 138.00 (365M) 139.00 (1.48BLN) GBP/USD: 1.1700 (488M), 1.1820 (616M) USD/CHF: 0.9735 (250M), 0.9780-90 (910M) 0.9825 (380M), 0.9850 (225M). EUR/CHF: 1.0020 (400M) AUD/USD: 0.6765 (382M), 0.6865-75 (458M), 0.6890-00 (549M) NZD/USD: 0.6090-00 (1.03BLN), 0.6120 (1.33BLN) USD/CAD: 1.2925 (420M), 1.2945 (405M)Technical & Trade ViewsEURUSD Bias: Bearish below 1.0350 EUR/USD down 0.4%; Bloomberg reports that GDP forecast for Euro-Area slashed European Commission cuts 2023 GDP projection to 1.4% from 2.3%-Bloomberg Hikes inflation forecast to 7.6% in 2022 from previous 6.1% Largest increase in US consumer inflation since 1981 also undermines EUR Increased expectations of a 100 bps Fed July rate hike weigh Bids eyed below parity .9950 offers sitting above 1.0050 20 Day VWAP is bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.2150 GBP off lows although upside seems capped by Dollar dominance BoE back in the frame after better growth data Energy price inflation, recession fears and political unknowns weigh on GBP Offers seen at 1.20 Bids 1.1720 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 134 USDJPY bid in Asian session printing highest levels since Sep ‘98 Supported by hot US inflation and market pricing a historic 100bps rate move 1.5Bln of options rolling off at the NY cut today Traders see range expansion 135/140 US10Y trading higher up over 1% on the session Offers seen at 139.15 bids 136.75 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .7050 AUD recovers post CPI fade on better domestic jobs data Australia unemployment dives to 48-year low on jobs boom Jobless rate slides to 3.5% from 3.9%, vs.3.8% fcst; lowest since Aug 1974 Commodity losses, metals meltdown and risk aversion cap upside Offers seen at .6830’s with bids tipped at .6685 20 Day VWAP remains untested confirming downside 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 22k BTC recover after testing bids below 19k US inflation weighed but reversal from 19k support encourages short covering Crypto lender Celsius on bankruptcy watch as market eyes another filing 20 VWAP band contracting ready for next directional drive, currently pointing south Trend remains down 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 leave BTC vulnerable Additional pressure seen from BTC miners liquidating positions on declining profitability 20 Day VWAP is bullish, 5 Day bearish

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The global property bubble bursts

After a two-year long worldwide boom in house prices fuelled by ultra-low interest rates, central bankers are tightening monetary policy and the global property bubble is starting to deflate.

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Investment Bank Outlook 13-07-2022

BofAUSD has all bases coveredAll roads continue to lead to the dollar as the USD index broke to new cyclical highs this week. The depth of USD buying has been indiscriminate this year with only CAD exhibiting some semblance of composure through 2022. But what strikes us about the dollar’s performance this year has been the lack of clear delineation between high/low beta FX performance in G10 and this is a clear indication to us that USD remains the currency for all seasons: higher rates = USD positive; higher volatility = USD positive. We think that the current market setup provides the perfect storm for further USD outperformance – yield support versus low yielders such as JPY, EUR and CHF and risk[1]off support versus the high beta complex. We have previously discussed how we think that the USD is benefitting from both sides of the so-called USD smile.This theory asserts that USD tends to benefit when the US economy outperforms its peers or when global growth slows and market volatility is high. Despite mounting evidence that the US economy is slowing, the domestic economy remains in a strong position, supported by a strong labor market and the Fed appears to be on autopilot in terms the tightening cycle. We would argue that of the major central banks, that the Fed has the strongest commitment to fighting inflation despite signs of an impending slowdown in growth. However, on the flip side has been the obvious deterioration in market conditions. BofA’s own GFSI™ measure of market risk (composite measure of cross asset volatility) has correlated strongly with USD particularly versus commodity FX.Despite the news this week of China fiscal stimulus, we doubt that this shifts the dial materially on further USD strength. It seems clear that markets are focused on parity in EUR/USD, a key risk which have flagged for some time. Next week’s US data flow is significant and could provide that catalyst. At the same time, we doubt further rate hikes by the RBNZ or the Bank of Canada next will provide any support for the NZD and CAD respectively if AUD price action in the aftermath of the RBA is any guide. Elsewhere, the UK entered yet another sliding doors moment with the resignation of Prime Minister (PM) Johnson. Since the Brexit Referendum, the UK has had three Prime Ministers and three leadership contests. At the time of writing, contenders are yet to reveal their hand but we are puzzled by GBP price action this week. In 2019, GBP rallied on news that Johnson had won the leadership contest to replace PM May; in 2022, GBP rallies on news that PM Johnson was to resign. We find this response perplexing: the resignation of Johnson does not suddenly vanish away all of the UK’s issues; it does not guarantee more fiscal spending or tax cuts; nor does it solve the Brexit conundrum. Quite the opposite as we think the quid pro quo for leadership support will be a tough stance on UK-EU relations.Finally, and not least, this does not impact the near-term reaction function for the Bank of England. Our views on GBP are therefore unchanged though admittedly the risks are become slightly more symmetric in the near-term.

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Market Update – July 13 – Eyes on US Inflation

USD steady at 108 & Euro steady slightly above $1 with US inflation ahead a key test for the asset. EUR was hit by a very weak ZEW sentiment report. Sterling adrift as markets wait for Tories to choose leader (Chancellor Sunak front runner). Cautious comments from BoE’s Bailey that he expects inflation to come down next year have pressured the Pound. Stocks’ bears took over once again. In China, stocks rose today, after data showed export growth beat analysts’ expectations, while recent rising COVID-19 cases clouded outlook for an economic recovery. German June HICP inflation was confirmed at 8.2% y/y. Italy is also facing yet another political crisis as PM Draghi is pressured to agree to more handouts.

Overnight: : RBNZ and BOK each hiked rates 50 bps, both as expected amid the global inflation fight. The former pushed its official cash rate up to 2.50% after a half point boost in May to 2.00%, and a half point in April to 1.50%. The bank also indicated it is appropriate to continue to tighten apace, and forecasts project another 150 bps in hikes over the next year.

• USDIndex hovering around the 108.00 barrier, in the run up to today’s US inflation report and with investors betting on more aggressive tightening moves from the Fed, non-interest-bearing bullion continues to underperform.
• Yields: 10-year yield fell 10 bps richer into the open to 2.90%, though closed at 2.965% after a poor 10-year sale.
• Stocks: USA100 tumbled -0.92%. The USA500 is off -0.92%, and the USA30 has slid -0.62%. Nikkei and ASX managing gains of 0.5% and 0.2% respectively. PepsiCo (-0.57%) announced “strength and resilience of our categories and consumer demand trends” as it lifted its full year revenue guidance for a second time, although the EPS outlook was unchanged. American Airlines (+9.98%) maintained its outlook on Q2 sales as lower oil prices offset increases in other costs.
• USOIL drifted to $93.56 on worries that aggressive rate hikes could hit oil demand & also due to warnings from the IEA that nations are experiencing the first global energy crisis so far not had much of an impact on prices. Prices fell by more than 7% yesterday.
• Gold at $1,722.
• FX Markets: EURUSD at 1.0039, USDJPY retests to 137.18 & Cable at 1.1940
• Today – Focus is on the US inflation, which is expected to hit a 4-year high, the data will bolster expectations for more aggressive rate hikes from the Fed. Earnings: Fastenal, Delta Air lines.

 

Biggest FX Mover @ (06:30 GMT) EURGBP(-0.34%) extends declines for a 7th day. MA’s aligned lower, MACD histogram & signal line lower & declining, RSI 31 & falling. H1 ATR 0.00097, Daily ATR 0.00575.

Click here to access our Economic Calendar

Andria Pichidi

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 distributed without our prior written permission.

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Daily Market Outlook, July 13, 2022

Daily Market Outlook, July 13, 2022 Overnight Headlines IMF Cuts US 2022 GDP Growth Forecast To 2.3% VS June Est. 2.9% EURUSD Clings To Parity As Markets Await U.S. Inflation Data Twitter Sues To Force Tesla CEO Elon Musk To Complete $44bn Deal New Zealand Hikes Rate By Half-Point, Signals More Tightening Bank Of Korea Joins Jumbo Hikers As Inflation Fight Heats Up Japan Business Mood Subdued On Chip Shortage, Raw Material Costs Fed's Barkin Says 'Definitely' Sees Signs Economy Is Softening BoE Gov Bailey Pledges To Bring UK Inflation Back Down To 2% Target UK Economy Needs More Than Tax Cuts, Warn Three Reports Oil Steadies After Tumbling Below $100 On Concerns Over Demand API Shows Crude, Fuel Stocks Rise In Latest Week - RTRS Sources Asian Shares Bounce, Markets On Edge Ahead Of U.S. Inflation Data Google Pulls Back Hiring In Face Of Economic Uncertainty - InsiderThe Day Ahead Asian equity markets are mostly modestly higher this morning, partly erasing yesterday’s declines. Overnight, the Reserve Bank of New Zealand increased interest rates again by 50bp to 2.5%, as policymakers focus on combating inflation. The Bank of Korea stepped up the pace of tightening with a 50bp increase in interest rates to 2.25%, the highest level for eight years. Data released this morning showed UK GDP in May rose by 0.5%m/m stronger than the consensus forecast. It was the biggest increase since January but is likely a reflection of the extra working day in May because one of the month’s usual bank holidays was moved to June for the Queen’s Platinum Jubilee. There were solid rises in industrial production and construction output, and a smaller rise in services. However, June GDP (due next month) will likely fall due to the two Jubilee bank holidays and will probably result in a contraction in Q2 GDP growth overall. US CPI inflation for June is the key data release today. Expect annual headline CPI to rise again to 8.8%, a new four- decade high reflecting rising energy and food prices. Annual core inflation is expected to ease for a third straight month to 5.8%. Base effects, however, mean that annual core CPI could pick up again in Q3 to offset any downward pressures on headline inflation from the recent fall in the oil price. Today’s CPI data, together with Friday’s retail sales and the University of Michigan consumer sentiment survey, could have a significant impact on Federal Reserve’s decision about how much to raise interest rates. Markets are currently almost fully priced for the Fed to increase interest rates by another 75bp to a 2.25-2.50% range later this month. The Bank of Canada is expected to increase interest rates today by 75bp to 2.25%, the highest level since 2008. Financial markets have fully priced that outcome and anticipate Canadian policy rates rising to 3.5% by year-end. Eurozone industrial production figures for May will receive limited attention. Expect a 0.5%m/m rise, flattered by a strong rebound in Ireland. The monthly data for the largest Eurozone countries showed broadly flat output in Germany and France and falls in Italy and Spain. Yesterday’s German ZEW survey of finance professionals showed a decline in their expectations for the economic outlook to the weakest level since 2008 on concerns about energy supplies, ECB rate rises and the Covid situation in China.FX Options Expiring 10am New York Cut EUR/USD: 1.0195-00 (1.04BLN), 1.0235 (256M) USD/JPY: 136.00 (860M), 137.35 (400M), 138.00 (600M) EUR/JPY: 137.00 (936M), 138.00 (661M), 139.00 (823M) GBP/USD: 1.1710 (252M), 1.2035 (1.15BLN) EUR/GBP: 0.8470 (220M), 0.8570 (294M) EUR/CHF: 0.9975 (200M) AUD/USD: 0.6800 (329M). NZD/USD: 0.6180 (794M) USD/CAD: 1.3000 (1.57BLN)Technical & Trade ViewsEURUSD Bias: Bearish below 1.05 Remains offered just above parity Today’s CPI next catalyst and could drive a sustained break of parity Energy price and supply concerns seen as principle driver Upside capped by US Yields on increasing Fed rate hike bets ECB/FED policy divergence remains in focus Bids eyed below parity .9950 offers sitting above 1.0050 20 Day VWAP is bearish, 5 Day bearishGBPUSD Bias: Bearish below 1.2150 GBP catches small bid on GDP beat Huge 1.15Bln options at 1.2035 roll off today BoE seen as sidelined in August adding to downside pressure on sterling Energy price inflation, recession fears and political unknowns weigh on GBP Offers seen at 1.20 Bids 1.1720 20 Day VWAP is bearish, 5 Day bearishUSDJPY Bias: Bullish above 134 USDJPYbid in Asian session supported by Importer buying Market awaits US CPI traders betting on a hot print Japanese importer bids seen just below 137 Traders see range expansion 135/140 US10Y trade back below 3% Offers seen at 138.60 bids 136.30 20 Day VWAP is bullish, 5 Day bullishAUDUSD Bias: Bearish below .7050 AUD recovers as shorts cover ahead of CPI headline risk AUD supported on steadying risk sentiment, China markets break a three day loss Fresh Covid concerns out of China still a headwind Commodity losses likely cap upside Copper, Oil and Iron Ore remain soft Offers seen at .6830’s with bids tipped at .6685 20 Day VWAP remains untested confirming downside 20 Day VWAP is bearish, 5 Day bearishBTCUSD Bias: Bearish below 22k BTC falls for third day, better risk tone adds some support US inflation data likely to drive the next leg BTC continues to trade lower setting up a pivotal test of 19k 20 VWAP band contracting ready for next directional drive, currently pointing south Trend remains down 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 leave BTC vulnerable Additional pressure seen from BTC miners liquidating positions on declining profitability 20 Day VWAP is bullish, 5 Day bearish

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/daily-market-outlook-july-13-2022"
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GBPUSD , H4 | Potential Bearish Drop

Type: Bearish BreakoutKey Levels:Resistance: 1.19183Pivot: 1.1878Support: 1.17651Preferred Case:On the H4, with prices moving below the ichimoku indicator and within the descending channel, we have a bearish bias that price will drop to our pivot at 1.1878 where the pullback support and 38.2% fibonacci retracement are. Once there is downside confirmation of price breaking pivot structure, we would expect bearish momentum to carry price to our 1st support at 1.17651 where the 61.8% fibonacci projection and 161.8% fibonacci extension are.Alternative Scenario:Alternatively, price could rise to 1st resistance at 1.19183 in line with the pullback resistance.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/gbpusd-h4-or-potential-bearish-drop13"
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AUDUSD, H4 | Potential Bearish Continuation

Type: Bearish BreakoutKey Levels:Resistance: 0.68527Pivot: 0.67646Support: 0.66034Preferred Case:On the H4, with price moving below the ichimoku cloud and in a descending trendline, we have a bearish bias that price will continue to drop from the pivot at 0.67646 in line with the 100% projection to the 1st support at 0.66034 in line with the 161.8% fibonacci extension and 78.6% fibonacci projection .Alternative Scenario:Alternatively, price may reverse off the pivot and rise to the 1st resistance at 0.68527 in line with the overlap swing high and 100% fibonacci projection

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/audusd-h4-or-potential-bearish-continuation13"
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The best debit and credit cards to use when travelling abroad

With the summer holiday season getting under way amid a cost of living crisis, it's more important than ever to get the best deal on foreign exchange fees. Here, Saloni Sardana picks the best pre-paid cards, debit cards and credit cards to use when on holiday abroad.

from Moneyweek RSS Feed https://moneyweek.com/403573/best-debit-and-credit-cards-for-travelling-abroad
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10-YEAR T-NOTE FUTURES (ZN1!), H4 Potential For Bullish Bounce

Type: Bullish BounceKey Levels:Resistance: 120'30'5Pivot: 118'07'0Support: 116'17'0Preferred Case:On the H4, with price moving in an ascending trend channel and moving above the ichimoku cloud , we have a bullish bias that price will bounce off the pivot at 118'07'0 in line with the overlap support to the 1st resistance at 120'30'5 at the swing high.Alternative Scenario:Alternatively, price may break the support structure at the pivot and drop to the 1st support at 116'17'0 at the overlap swing low in line with the two 61.8% fibonacci projections.Fundamentals:US indexes moved moderately higher with better-than-expected US economic reports. Hence, we have a bullish view on the 10-year t-note futures.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/10-year-t-note-futures-zn1-h4-potential-for-bullish-bounce12"
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DAX FUTURES (FDAX1!), H4 Potential For Bullish Rise

Type: Bullish RiseKey Levels:Resistance: 13373Pivot: 12616Support: 12383Preferred Case:On the H4, with price moving in an ascending trendline on the RSI and price recently breaking the descending trendline, we have a bullish bias that price will rise from the pivot at 12616 at the pullback support at the swing low in line with the 78.6% fibonacci projection to the 1st resistance at 13373 at the overlap resistance in line with the 61.8% fibonacci projectionAlternative Scenario:Alternatively, price may reverse off the pivot and drop to the 1st support at the swing low at 12383 in line with the 61.8% fibonacci projection.Fundamentals:No Major News

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/dax-futures-fdax1-h4-potential-for-bullish-rise12"
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BRITISH POUND FUTURES (6B1!), H4 Potential For Bearish Drop

Type: Bearish MomentumKey Levels:Resistance: 1.1953Pivot: 1.1895Support: 1.1783Preferred Case:On the H1, with price moving below the ichimoku cloud and along the descending trendline, we have a bearish bias that price will rise and drop from the pivot at 1.1895 in line with the pullback resistance to the 1st support at 1.1783 where the 161.8% fibonacci extension and 100% fibonacci projection are.Alternative Scenario:Alternatively, price may break pivot structure and rise to the 1st resistance at 1.1953 where the pullback resistance is.Fundamentals:With no major news events ahead, and the dovish sentiment across the UK and the Eurozone, further downside can be expected, which gives us a bearish bias on the British Pound.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/british-pound-futures-6b1-h4-potential-for-bearish-drop"
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LIGHT CRUDE OIL FUTURES (CL1!), H4 Potential For Bearish Drop

Type: Bearish MomentumKey Levels:Resistance: 105.23Pivot: 101.59Support: 95.13Preferred Case:On the H4, with price moving below the ichimoku cloud and within the descending channel , we have a bearish bias that price will drop from the pivot at 101.59 in line with the pullback support to the 1st support at 95.13 where the 61.8% fibonacci projection and swing low support are.Alternative Scenario:Alternatively, price may break rise to the 1st resistance at 105.23 where the swing high resistance and 100% fibonacci projection are.Fundamentals:Due to the fears of a recession in the United States, we have a bearish view on crude oil.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/light-crude-oil-futures-cl1-h4-potential-for-bearish-drop"
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RBOB GASOLINE FUTURES (RB1!), H4 Potential For Bearish Drop

Type: Bearish MomentumKey Levels:Resistance: 3.6525Pivot: 3.5009Support: 3.1892Preferred Case:On the H4, with price moving below the ichimoku cloud and along the descending trendline, we have a bearish bias that price will rise and drop from the pivot at 3.5009 in line with the overlap resistance to the 1st support at 3.1892 where the 61.8% fibonacci projection and swing low support are.Alternative Scenario:Alternatively, price may break pivot structure and rise to the 1st resistance at 3.6525 where the pullback resistance, 100% fibonacci projection and 78.6% fibonacci retracement are.Fundamentals:U.S. gasoline demand is down roughly 4.5% from last week, giving us a bearish bias on gasoline.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/rbob-gasoline-futures-rb1-h4-potential-for-bearish-drop"
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NZDUSD, H4 | Potential Bearish Continuation

Type: Bearish ReversalKey Levels:Resistance: 0.61959Pivot: 0.61082Support: 0.60072Preferred Case:On the H4, with price moving below the ichimoku cloud and in a descending trendline, we have a bearish bias that price will continue to drop from the pivot at 0.61082 in line with the 127.2% fibonacci extension to the 1st support at 0.60072 in line with the 161.8% fibonacci extension and 100% fibonacci projection.Alternative Scenario:Alternatively, price may reverse off the pivot and rise to the 1st resistance at 0.61959 in line with the overlap swing high and 100% fibonacci projection.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/nzdusd-h4-or-potential-bearish-continuation12"
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