Daily Market Outlook, February 16, 2022

Overnight Headlines

  • China May Keep Loan Prime Rate Steady In February - Sec Journal
  • PBOC’s Yi Vows Supportive Policy As Growth Returns To Potential
  • Japan Manufacturers' Mood Sinks To 11-Month Low In Feb - Tankan
  • ECB Bond-Buying Could End In Third Quarter, Francois Villeroy Says
  • Risk Of Late Action On Prices Has Risen, ECB’s Schnabel Tells FT
  • Euro Holds Gains After Hopes Of Easing War Tensions In Ukraine
  • Oil Steadies As Investors Track Crisis In Ukraine, Inventories Levels
  • Asia Stocks Rally As Fears Of Russia Invading Ukraine Ease For Now
  • Australia's Fortescue Says H1 Profit Slumped By A Third As Costs Weigh
  • ViacomCBS Beats Quarterly Revenue Estimates On Streaming Strength
  • Airbnb Beats Wall Street Estimates And Gives Strong 2022 Guidance

The Day Ahead

  • Asian shares rallied on Wednesday as fears of a Russian invasion of the Ukraine this week dissipated after Moscow indicated it was returning some troops to base in an apparent de-escalation, delivering investors a measure of relief. The tension between world powers over the Ukraine situation, which has developed into one of the deepest crises in East-West relations for decades, has been front-and-centre of investors' minds.
  • MSCI's broadest index of Asia-Pacific shares outside Japan surged 1.1%, playing catch-up with a rally in U.S. and European stocks on Tuesday. Japan's Nikkei soared 2.2% to rebound from two days of falls, while Australia's S&P/ASX200 gained 1.1%. Elsewhere in the region, Hong Kong's Hang Seng Index jumped 1.3% and China's CSI300 Index was up 0.7%.
  • But while the immediate risk of a flare-up in tensions over Ukraine waned, some market watchers warned that safe-haven assets could find a renewed bid in the case of new escalations over the conflict.
  • Looking Ahead – Economic Data (GMT) • 07:00 GB Jan CPI MM -0.2% f’cast, 0.5% prev; YY 5.4% f’cast, 5.4% prev • 07:00 GB Jan RPI MM -0.4% f’cast, 1.1% prev; YY 7.5% f’cast, 7.5% prev • 07:00 GB Jan PPI Input MM 0.9% f’cast, -0.2% prev; YY 13.1% f’cast, 13.5% prev • 07:00 GB Jan PPI Output MM 0.6% f’cast, 0.3% prev; YY 9.1% f’cast, 9.3% prev • 10:00 EZ Dec Industrial Output MM 0.3% f’cast, 2.3% prev; YY -0.5% f’cast, -1.5% prev
  • Events, Auctions, Other Releases (GMT) • 18:30 BoC Lane speaks at University of Calgary event • 19:00 FOMC minutes from Jan. 25 – 26, 2022 policy meeting

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: 1.1100 (2.165BLN), 1.1200 (470M), 1.1215-25 (800M) 1.1250 (787M), 1.1290-00 (480M), 1.1315 (283M) 1.1345-55 (675M), 1.1375 (260M), 1.1395-05 (1.46BLN) 1.1425-30 (690M), 1.1450-60 (860M), 1.1465-75 (840M) 1.1550 (278M), 1.1700 (328M)
  • USD/JPY: 113.75-80 (420M), 114.00-10 (845M) 114.24-30 (470M), 114.40-50 (1.63BLN), 114.55-60 (355M) 114.95-00 (600M), 115.25 (500M), 115.40-50 (870M) 116.00-04 (640M)
  • GBP/USD: 1.3600 (328M), 1.3625 (279M)
  • USD/CAD: 1.2550-65 (560M), 1.2600 (710M), 1.2790-00 (460M)
  • AUD/USD: 0.6830 (328M). NZD/USD: (272M)
  • AUD/JPY: 83.50 (287M. USD/ZAR: 15.00 (225M), 15.25 (250M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.15 Bullish above

  • EUR off lows but Ukraine still simmers, situation touch – go
  • Ukraine remains in focus with no confirmation of Russia pull-backs
  • EUR complex off recent lows but upside limited, consolidation in Asia
  • EUR/USD 1.1345-60 EBS, holding below 1.1368 high yesterday
  • Resistance eyed at top of cloud and descending 100-DMA at 1.1404
  • 100-HMA also at 1.1367 above, supports at 1.1333 55-HMA, 55-DMA 1.1326
  • Nearby option expiries today - 1.1335-50 E828 mln, 1.1400-05 E1.3 bln
  • EUR/JPY 131.25-40 EBS after retracement up to 130.44 yesterday

GBPUSD Bias: Bearish below 1.36 Bullish above.

  • Steady near the top of a 1.3532-1.3549 range with only occasional interest
  • UK pay settlements hit highest since 2008 - XpertHR
  • UK inflation due today - RTRS poll shows - CPI M/M -0.2%, Y/Y +5.3%
  • BOEWATCH Feb 15th, 43.18pt implied rise Mar 17 and 73.56pt for May 5 meeting
  • Charts; momentum studies, 5, 10 & 21 day moving averages conflict
  • 21 day Bollinger bands contract - neutral setup favours range trading
  • Price continues to gravitate around 1.3554, 50% of the 2022 range
  • 1.3467 61.8% Jan-Feb bounce and 1.3657, 76.4% 2022 fall pivotal levels

USDJPY Bias: Bullish above 114.50 Bearish below

  • USD/JPY better bid, 115.53-74 EBS, recent dips increasingly shallow
  • Bias likely to remain up with risk mood improved, US yields high
  • Nikkei +2.1% on day @27,422 despite still simmering Ukraine tensions
  • US yield curve steeper, long rates up, Tsy 10s back above 2%, @2.025%
  • Option expiries today to help cap? $582 mln only above at 116.00
  • More below - total $1.9 bln between 115.00-50 strikes
  • EUR/JPY 131.25-40 EBS after retracement up to 130.44 yesterday
  • Bias here still down with Ukraine situation not resolved

AUDUSD Bias: Bearish below 0.7250 Bullish above

  • Offshore factors lead at mid point of 2022 range
  • Steady in a tight 0.7144-0.7161 range with average interest on D3
  • Asia cautious, as geopolitical events in Ukraine drive risk appetite
  • E-mini S&P -0.25%, as Russian troop pullback questioned
  • Regional stocks bid with Wall Street, 10yr UST -2bp to 2.0276%, Brent -0.16%
  • Charts; 5, 10 & 21 day moving averages coil, 21 day Bollinger bands contract
  • Neutral setup at familiar levels around the 0.7140 mid point of 2022 range
  • Key levels for the range are 70.74, 61.8% Jan-Feb bounce and 0.7248 Feb high