Daily Market Outlook, April 1, 2022

Overnight Headlines

  • White House: There Are No Current Plans For Biden And Putin To Speak
  • China Manufacturing Slumps To Lowest Since 2020, Caixin PMI Says
  • Morgan Stanley Slashes China GDP Forecast, Citi Warns Of Risks
  • Japan Business Mood Sours As Ukraine War, Rising Fuel Price Take Toll
  • Japan's March Factory Activity Speeds Up As Covid Impact Fades
  • Australia Tsy: Inflation Rate Is Expected To Tick Higher In The June
  • Australia’s House Prices Begin To Cool As Sydney, Melbourne Drop
  • Australia Manufacturing PMI Climbs To 57.7 In March From 57.0
  • Senate Closes In On $10B Covid Aid Deal Despite Dem Frustrations
  • Dollar Edges Higher Ahead Of Payrolls, Resumes Climb Versus Yen
  • US 2s/10s Treasury Yield Curve Inverts Again, Second Time In Hours
  • Russia Completed Buyback Of 2022 Eurobond, Holders Paid In Roubles
  • Oil Seesaws Ahead Of Consumer Nations' Meeting On Stocks Release
  • Asian Shares Slip On Gloomy Outlook As Ukraine, Recession Risks Weigh

The Day Ahead

  • The US economy is expected to have produced another stellar month of job creation in March as the labour market continues to recover from the Covid-19 pandemic. Economists forecast a 490,000 more non-farm payrolls versus February’s improvement of 678,000 when the latest report is released Friday by the US Bureau of Labour Statistics. The unemployment rate is seen falling by a tenth to a fresh post-Covid low of 3.7%. US non-farm employment is still down 2.1 mn or 1.9%, from its pre-pandemic peak, but the recovery looks set to continue in March as firms seek to reduce large backlogs of work.
  • EU Inflation Poised For Another Record As Prices Soar In Major Economies. Consumer price growth in the Eurozone appears sure to set yet another record after inflation this month increased significantly more than expected in the currency area’s largest economies.The surprising surges in prices at the national level have forced economists to raise their forecasts for inflation this month, with the annual headline rate now expected to jump to 6.7% from 5.8% in February. The core rate is projected to increase to 3.1% from the record 2.7% set last month. These compare with the European Central Bank’s inflation target of 2% over the medium term.
  • RBA To End Its Longest Easing Cycle In Q3; June Hike Possible. Australia’s central bank will end its longest easing cycle on record by the end of the third quarter, according to a Reuters poll in which a growing minority of economists expected a rate hike just weeks after a federal election in May. When several of its peers have already tightened policy, including the U.S. Federal Reserve, which is expected to deliver multiple 50-basis-point hikes this year, the Reserve Bank of Australia (RBA) has been waiting for signs wage inflation is picking up.
  • Russia’s $1.45 Billion Bond Buyback Has Investors Eyeing Monday. Russia bought back the bulk of a soon-to-mature $2 billion bond using rubles, leaving the nation with far fewer dollars to repay its holders on April 4. The Finance Ministry said it had repurchased the equivalent of $1.45 billion of the bond maturing on Monday, or 72% of the debt outstanding, according to a statement on Thursday. That leaves just $552.4 million of the security remaining in circulation, according to the ministry, which said it sent corresponding notifications to the paying agent, Citibank N.A.’s London branch

G10 FX Options Expiries for 10AM New York Cut

(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )

  • EUR/USD: 1.0975 (430M),1.1000-05 (445M), 1.1050 (290M) 1.1085 (318M), 1.1100-10 (1.01BLN), 1.1150 (372M) 1.1175 (292M), 1.1200 (265M)
  • USD/JPY: 119.75-00 (787M), 121.50-60 (1.17BLN), 121.67-70 (320M)
  • USD/CAD: 1.2480 (275M), 1.2500 (298M), 1.2635 (310M) 1.2650 (280M)
  • AUD/USD 0.7375 (322M), 0.7440 (280M), 0.7460 (600M) 0.7525 (578M), 0.7550 (595M), 0.7575 (268M) 0.7600 (551M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.12 Bullish above

  • EUR/USD does little in Asia, tight 1.1060-75 EBS range
  • Action likely to pick up into Europe, bias down with USD seen bid
  • Heavy pre-1.1100, option gamma sales, E1.1 bln expiries 1.1100-10 today
  • Ascending 100-HMA at 1.1068 pivot, hourly 1.1077-1.1151
  • Support noted from @1.1060, 200-HMA below at 1.1036
  • EUR/JPY supportive, from 134.53 in NY, 134.79 early Asia to 135.73
  • Cross up on broad JPY weakness, tepid jaw-boning on FX
  • EUR/GBP heavy after fall yesterday to 0.8420, indicated @0.8429
  • EUR/CHF also holding near 1.0208 low yesterday, Asia 1.0208-33

GBPUSD Bias: Bearish below 1.3350 Bullish above.

  • Firmer USD, soft jobs and energy squeeze weigh
  • -0.1% at base of a 1.3132-1.3148 range with bid USD, and moderate interest
  • UK's surging jobs markets shows signs of stabilisation
  • Cooling jobs growth may indicate the economic recovery could plateau
  • Soaring energy costs to hit broad household spending
  • Charts; positive momentum studies - 5, 10 & 21 DMAs edge gently lower
  • 21 day Bollinger bands contract - modest net negative signals
  • First major support is 1.3010 lower 21 day Bolli band, then 1.3000 2022 low
  • 1.3176 NY high, then this week's 1.3181 high are initial resistance

USDJPY Bias: Bullish above 120 Bearish below

  • USD/JPY and JPY crosses up in Asia on renewed Japanese importer buys
  • Good demand into Tokyo fix, thereafter, official jaw-boning actually helped
  • FinMin Suzuki talk very tepid, against sharp moves but direction OK?
  • USD/JPY from 121.28 in New York, 121.66 early Asia to 122.73 EBS in Asia
  • A number of upside tech levels pierced, now in 122.00-81 hourly Ichi cloud
  • Break back up above cloud projects tests towards 123.20 high Wednesday
  • Good support today on $1.5 bln option expiries between 121.50-70 strikes
  • JPY crosses up with USD/JPY, on official-speak, EUR/JPY NY 134.53 to 135.73
  • GBP/JPY 159.38 in NY to 161.08, AUD/JPY 90.72 late Asia yesterday to 91.77
  • MXN/JPY in play, 6.0766 in NY to 6.1605, on Tokyo carry, spec demand
  • BoJ Tankan better than eyed but looks to confirm Q1 economic slide, Q2?
  • Japan March factory activity speeds up

AUDUSD Bias: Bullish above .7300 Bearish below

  • Heavy with soft commodities and a firmer U.S. dollar
  • -0.1% at base of a 0.7475-0.7500 range with only modest interest on D3
  • Tight and quiet consolidation ahead of often volatile U.S. jobs not unusual
  • Australian house prices show signs of easing in major cities
  • Latest poll suggests the RBA will begin raising rates in Q3
  • 25bp hike would be 0.35% - RBA WATCH prices implied June rate at 0.3103%
  • Charts; momentum studies crest, as 21 day Bollinger bands rise
  • 5, 10 & 21 day moving averages conflict - uptrend has stalled
  • Break of this week's 0.7540 high or 0.7440 March 7th top likely directional