Market Spotlight: July FOMC Rates Pricing Increases Following June CPI Beat

July FOMC Pricing Favours 1% HikePricing for the upcoming July FOMC has swung in favour of a fullpercentage point hike following yesterday’s US CPI report. June CPI was seenrising to 9.1% annually, marking the hottest US inflation reading in 40-years. Looking at the monthly data, headline CPI wasseen coming in at 1.3% in June, up from 1% prior and well above the 1.1% themarket was looking for. Additionally, core CPI was seen at 0.7% on the month,up from 0.6% prior and, again, well above the 0.5% the market was looking for.With the latest US inflation data putting rest to any idea ofconsumer prices cooling near-term, the pressure on the Fed has increased. Withthe Fed opting for a larger .75% hike last time, the market is now anticipatingthe Fed to take further action this month, opting for a larger 1% hike, such aswe saw from the BOC yesterday. With this in mind, USD is seeing renewed demandinto the end of the week. Traders will now be looking to tomorrow’s retail salesdata for the next key insight into the US economy. If retail sales are seeingrising on the month, as forecast, this should keep USD higher into the FOMCmeeting.Technical ViewsNASDAQThe NASDAQ has been grinding steadily lower this year in awell-defined bear channel. Price is currently sitting on support along the11240.8 level, capped by resistance at 12269.1. With the channel the broaderfocus, the preference is for a downside break towards the channel lows and9801.1 level next. To the topside, bulls need to see a break of 12269.1 toshift momentum higher.

from Tickmill Expert Blog - Forex Traders Blog https://www.tickmill.com/blog/market-spotlight-july-fomc-rates-pricing-increases-following-june-cpi-beat"
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JAPANESE YEN FUTURES (6J1!), H4 Potential For Bearish Momentum

Type: Bearish MomentumKey Levels:Resistance: 0.007362Pivot: 0.007296Support: 0.007126Preferred Case:On the H4, with price moving below the ichimoku cloud and in a descending trend channel and trendline, we have a bearish bias that price will continue to drop from the pivot at 0.007296 in line with the pullback resistance, 61.8% fibonacci projection and -27.2% fibonacci expansion to the 1st support at 0.007126 in line with the -61.8% fibonacci expansion and 100% fibonacci projection .Alternative Scenario:Alternatively, price may reverse off the pivot and rise to the 1st resistance at 0.007362 at the overlap resistance in line with the 50% fibonacci retracement .Fundamentals:Japanese Finance Minister Suzuki said that the Japanese government is concerned about the Yen’s recent rapid weakening, giving us a bearish bias on the Japanese Yen.

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Market Spotlight: BOC Announces Largest Rate Hike in 24 Years

BOC Raises Rates 1%The Bankof Canada took markets by surprise yesterday, announcing a full percentagepoint increase in interest rates. Taking its headline cash rate from 1.5% to2.5%, the BOC surpassed expectations for a .75% hike, marking the largest ratesincrease among G10 central banks over this current tightening cycle. Along withthe rate hike, which was the largest by the BOC in over 20 years, the bank alsosignalled the likelihood of further hikes to come."Exceptional Circumstances"Commenting on the move during the post-meeting press conference,BOC governor Macklem told reporters "We had indicated we wereprepared to be more forceful. Today was more forceful." Questioned overwhether the move was unusual for the bank, Macklem said "Yes, it is a veryunusual move to increase by 100 basis points at one decision and that reallyreflects the very unusual, exceptional circumstances that we find ourselvesin."Looking ahead and answering questions over-growth prospects inCanada, Macklem said "Our forecast is for soft landing. As I said, thepath to that soft landing has narrowed, and that is an important reason why wetook stronger action today to front-load policy interest rates."Technical ViewsEURCADDespite the move, CAD is weaker today, mostly due to lower oilprices. EURCAD failed to break lower yesterday and price is now moving higheroff the 1.3031 level. While this level holds as support, the focus is on a retestof the broken 1.3384 level next and the bear channel top, which should offerbears a better short entry.

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The Crude Chronicles - Episode 144

Oil Traders Scale Back LongsThelatest CFTC COT institutional positioning report shows that oil traders reducedtheir net long positions by almost 20k contracts last week. Taking total upsidebets from 299.5k down to 280k contracts, this was the sharpest pairing ofupside exposure we have seen in months and well reflects the growing concernover the demand outlook for oil.Recessionary FearsCrudeprices have been under steady pressure recently as mounting global recessionconcerns have begun to weigh on demand projection into year end. With inflationstill soaring globally, as evidence yesterday by 40-year highs in US June CPI, andcentral banks pressing ahead with aggressive tightening, growth forecasts arebeing sharply reduced across the board. Just this week we saw the IMF downgradingits global growth forecasts for the year ahead as a result of the conditions mentioned.Weaker Demand OutlookA slower pace of global economic activity isexpected to translate into weaker demand for fuel products. Additionally, thereturn of lockdowns in China this week, as well as fears of further lockdownsto come, is also weighing on demand expectations for oil. While oil prices havebeen well supported by the rebound in demand from the aviation sector thisyear, there is growing speculation around the risk of travel restrictionsreturning post summer in response to surging COVID cases in Europe, againcontributing to weaker demand expectations.Higher US DollarThe freshupside in the US Dollar this week is also weighing on oil prices. With US CPIcoming in well above forecasts for June, any likelihood of the Fed easing up onrate hikes after this month has been heavily reduced. With the Dollar likely tocontinue higher near term, oil prices are vulnerable to further downside in theshort-term. This is especially true given that over this month and next OPEChas stepped up its production output from around 400k extra barrels a month to roughly650k extra barrels per month. The additional supply coming at a time of reduceddemand expectations is further surpassing oil prices currently.EIA SurplusThelatest report from the EIA this week added further pressure to oil prices. TheEIA reported an almost 4-million-barrel inventory surplus last week, in starkcontrast to forecasts for a 1.5 million barrel drawdown. Potentially a sign ofthe growing supply/demand imbalance, the data has created further headwinds foroil into the end of the week.TechnicalViews Crude oilThebreakdown in oil prices below the rising trend line from YTD lows has seen themarket advancing steadily lower. Price has blown through several key supportlevels and is currently sitting on support at the 95.93 level. With both MACDand RSI bearish here, the focus is on a further break lower and a test of the83.75 level next.

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Earnings Season: CitiGroup & BlackRock

CitiGroup Inc.

Citigroup is a bank with a capitalization of 91,498 mln. CitiGroup Inc is expected to report its Q2-22 earnings and EPS results on Friday, July 15, before the market opens. Zacks ranks CitiGroup a Rank 3 “Hold” at #160 in the Regional Major-Bank Industry. For this earnings data an EPS of $1.63-$1.65 is expected with an ESP of 0.78% and earnings of $18.29B. In the last 3 months there have been 3 upward revisions and 8 downward revisions.

Due to the pandemic and global shrinkage, CitiGroup shares have fallen 23.5% so far this year.

Technical analysis

Citigroup is coming off a downtrend since July of last year, falling over 70% from a high of 80.28 to a price of 45.55 today. Support is at the 78.6% Fibo at 42.33 until the psychological level of 40.00, then until the 88.6% Fibo level at 37.50 and until the April 20 low at 36.66 and to close the cycle it would need to reach the March 20 lows right at the psychological level from 32.00. Resistance is at the latest highs at 54.24, then the psychological level of 58.00 and until the low of July last year at 64.36 to go to the highs of February this year at 69.10.

ADX at 24.79 with bullish bias, DI+ at 12.23 DI- at 29.51 possible bearish continuation.

---

BlackRock Inc.

BlackRock, which has a capitalization of 93,432 mln, is the world’s largest asset management company and a leading provider of financial technology with assets under management exceeding $10B.

BlackRock Inc. is expected to report its Q2-22 earnings and EPS results on Friday, July 15, before the market opens. The company has beaten estimates for the last 8 quarters with an average of 7.7%, despite the company’s increased expenses as it wants to improve its workforce and operational efficiency. However, this quarter is expected to see an increase in revenue year-over-year but a cut in earnings.

Zacks positions BlackRock a Rank 5 “Strong Sell” at position #218 in the Finance-Investment Management Industry. For this key earnings data an EPS of $7.72-$8.83 is expected with an ESP of -12.57% and earnings of $4.73B. In the last 3 months there have been 9 downward revisions and no upward revisions.

The company’s investment advisory performance fees are forecast at $190M, an increase of 93.9% q/q. Total income from investment advice, administration fees and securities lending stands at $3.86B giving a marginal sequential increase. The outlook for distribution rates is $394M, this being an increase of 3.4% q/q.

BlackRock said in a public note on Monday that the company cut its exposure to developed market stocks, following central banks and their aggressive inflation control.

“Right now, we think the Fed has boxed itself in responding to political pressures to control inflation.”

“Eventually, the damage to growth and jobs from fighting inflation will become apparent, in our view, and central banks will live with higher inflation.” -Jean Boivin, BlackRock Strategist

In addition, a quarterly cash dividend of 4.88 per common share has been declared payable on 23/09/22 to shareholders according to Zacks.The company has been a leader in the ETF market given its iShare. iShares is a collection of exchange-traded funds (ETFs) managed by BlackRock, which acquired the brand and business from Barclays in 2009. iShare inflows have been strong which would increase the company’s AUM balance giving a positive impact.

Technical analysis

BlackRock has been in a strong downtrend since Nov. 21, when the price started to fall from its highs at 972.63. YTD has given a close to Fib. 61.8% discount at 570.15 and it is currently trading at 596.36. Supports are set at the low of September 20 at 530.00, followed by the psychological level of 500.00, the Fib. 78.6% at 460.73 until the low of May 20 at 488.01, and the cycle would close after the psychological level of 400.00. Resistances are at the latest Fib. 50% highs at 647.00 followed by previous highs at 689.10-700.00 assuming it breaks the channel’s downtrend.

ADX at 25.49 with bullish bias, DI+ at 11.06 DI- at 33.47, downtrend resumption after pullback.

 

Sources: 

1. https://www.zacks.com/stock/quote/BLK
2. https://www.zacks.com/stock/quote/C
3. https://www.zacks.com/research/get_news.php?id=b4vgqbaadb
4. https://www.zacks.com/stock/news/1951263/blackrock-blk-to-report-q2-earnings-whats-in-store?art_rec=quote-stock_overview-zacks_news-ID03-txt-1951263

Click here to access our Economic Calendar

Aldo Zapien

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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Market Update – July 14 – Focus on PPI & Earnings

It was all about June CPI and the report did not disappoint. Risk was for a hot report and the Administration warned of rising pressures. The most dramatic movers were the hot CPI report and the BoC’s 100 bp hike. Those open the door for an outsized Fed move and in turn heightened risk for a recession. A bearish curve inversion play as the data nail the coffin for a 75 bp hike on July 27, with nontrivial risk of more aggressive action, either with a 100 bp increase which the BoC just effected, or with consecutive 75 bp moves in July and September. USD sustained gains, Oil settled at 200 DMA and the Stocks traded mixed. Stocks were up 0.6% and 0.4% in Japan and Australia, the latter helped by a record low unemployment report (50-year low) while Chinese imports continue to linger as the country’s Covid policy keeps a lid on activity. The AUD rallied on the numbers, as traders boosted speculations for a 75 bp rate hike from the RBA in August.  

• USDIndex held above 108.00 level, but failed to break 3-day resistance.
• Yields: the 10-year ended over 7 bps lower at 2.89%, reflecting credibility in the FOMC’s policy stance. Fed funds futures priced in a 54% chance for a 100 bp rate hike on July 27 with rising odds for 170 bps in hikes from here.
• Stocks: USA100 tumbled -0.15%. The USA500 is off -0.45%, and the USA30 has slid -0.67%.
• USOIL traded at $95 holding above 200-day SMA.
• Gold found a bid but gains were trimmed. Currently down to $1,706.
• FX Markets: EURUSD hold fractionally above parity 1.0002, USDJPY skyrocket to 139.28, Cable fell to 1.1856. AUD and to a lesser extend the NZD gained. 
• Today – US calendar has jobless claims and PPI, but the earning releases are in the spotlight with JPMorgan Chase & Co., Morgan Stanley, First Republic Bank, Cintas etc.

Biggest FX Mover @ (06:30 GMT) NZDJPY (+1.62%) breacked 85.20. MA’s aligned higher, MACD histogram & signal line extend further northwards, RSI above 701 but falling. H1 ATR 0.193, Daily ATR 0.975.

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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Investment Bank Outlook 14-07-2022

INGUS Inflation Shows Fed Has More to DoJune US inflation came in at 1.3%MoM/9.1% YoY for headline and 0.7%MoM/5.9% for core. Both readings are 0.2pp higher than the consensus was expecting and should all but confirm a 75bp hike on July 27th following the firm June jobs print. This is the fastest rate of headline inflation since November 1981 with the only crumb of comfort being that it didn’t come in as high as the fake report doing the rounds yesterday suggesting a 10% headline reading.While the core rate did at least slow from 6% to 5.9%, there is not much here that will relieve the pressure on the Federal Reserve to do more to get a grip on inflation. Food prices rose another 1% month-on-month (10% year-on-year), gasoline was up 11.2% MoM (59.9% YoY) while shelter, the biggest component of CPI with a weight of 32%, is up 0.6% MoM. There were also upside surprises from apparel (+0.8% MoM) and used cars (+1.6%), which we thought might have actually dipped marginally. The only major component to see a fall was airline fares (-1.8%), but this does follow three consecutive months of double-digit monthly rises.We are hopeful that this marks the peak for headline inflation, especially with gasoline prices down around 5% from their June peak, but we can’t rule out another supply shock. In any case we suspect the descent will be slow given the ongoing upward pressure on food prices and the long time it takes for turning points in house price appreciation to feed through into the shelter components of CPI. There is still a lot of pent-up demand in the economy, especially around leisure, hospitality and tourism, as people appear prepared to run down accumulated savings and pay higher prices to do things they missed out on over the past couple of years. Hence why service sector inflation is looking so strong right now.Pressure on RBA Following Aussie Unemployment DropUnemployment rate falling to new all-time low heaps pressure on the Reserve Bank of Australia (RBA) to "go large" with upcoming rate hikesIn the accompanying statement to its 5 July Monetary policy meeting, the RBA noted that "...The size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market".2Q22 inflation is due on 27 July, but in the meantime, this latest labour data suggests that the RBA will not be able to drop back to the 25bp hikes it started this cycle with, and may even have to consider hikes above 50bp.A drop in the unemployment rate was expected this month, but not of the magnitude recorded. The previous all-time low was 3.8%, so a drop to 3.5% really does look quite alarmingly tight.On the employment side of the report, the gains were also higher than expected. An 88,400 gain in employment was mainly (52,900) driven by full-time jobs, which implies a greater impact on disposable incomes than part-time jobs (p-t jobs rose 35,500). But part-time jobs often convert to full-time jobs, so we certainly are not ruling out their relevance for the outlook for wages growth and inflation.

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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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