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Daily Market Outlook, February 18, 2022
Overnight Headlines
- Blinken Accepts Invitation To Meet Russia's Lavrov Late Next Week
- China's Top FinMin Vows More Fiscal Support Ahead Of Party Congress
- Japan’s Inflation Slows Toward Zero As Global Price Gap Grows
- Japan's Record Covid Deaths Mount In Wave Estimated To Last Till April
- New Zealand Q4 Producer Output Prices Rise 1.4% Q/Q In Jan
- Fed Traders Have Dialled Back Bets On A Supersized March Hike
- Fed's Mester: Rates Should Rise Faster Than After Great Recession
- Fed’s Bullard: Fed May Need To Raise Rates Above 2% To Curb Prices
- Senate Clears Three-Week Funding Bill To Avert Saturday Shutdown
- Europe Moves To Shield Economy From Possible Russia Sanctions
- China's Yuan Firms On Strong Demand, Ukraine Tensions In Focus
- JGB Super-Long Yields Retreat From 6-Yr Peaks On Ukraine Crisis
- Oil Rally Pauses As Traders Take Stock Of Ukraine Crisis, Iran
- Asia-Pacific Stocks Mixed On Russia-Ukraine Tensions
- US Stock Futures Steady On Hopes For Diplomacy In Ukraine
- Intel CEO: To Announce Megafab Location In Europe Soon
The Day Ahead
- U.S. and European stock futures bounced back on Friday and selling pressure on Asian shares eased after the U.S. Secretary of State agreed to a meeting with Russia's foreign minister, raising hopes of a solution to the standoff over Ukraine. S&P 500 futures jumped 0.7% and Nasdaq futures gained 0.8% following the news, while, in early trading, pan-region Euro Stoxx 50 futures were up 0.45%, and FTSE futures were 0.4% higher.
- The positive sentiment ranged across asset classes. Safe-haven currencies such as the Japanese yen and Swiss franc retreated a little in Asia trade having climbed to two-week highs on the dollar overnight, and gold lost 0.4%.
- U.S. Secretary of State Antony Blinken has accepted an invitation to meet with Russian Foreign Minister Sergei Lavrov late next week provided Russia does not invade Ukraine, the U.S. State Department said
- Concern about conflict in Ukraine comes with markets already rattled by a rates outlook that could hold as many as seven Federal Reserve increases in the year ahead.St. Louis Fed president James Bullard on Thursday reiterated his call for the Fed funds rate to be raised to 1% by July to combat stubbornly high inflation and Fed funds futures price about a 1/3 chance of a 50 bps hike next month to begin. Cleveland Fed President Loretta Mester said the pace of hikes will need to be faster than previous cycles.
- Looking Ahead – Economic Data (GMT) • 07:00 GB Jan Retail Sales MM, 1.0% f’cast, -3.7% prev; YY, 8.7% f’cast, -0.9% prev • 07:00 GB Jan Retail Sales Ex-Fuel MM, 1.2% f’cast, -3.6% prev; YY, 7.9% f’cast, -3.0% prev • 07:45 FR Jan CPI (EU Norm) Final MM, 0.1% f’cast, 0.1% prev; YY, 3.3% f’cast, 3.3% prev • 09:00 EZ Dec Current Account NSA,EUR, 25.95 bln prev; SA, EUR, 23.620 bln prev • 15:00 EZ Feb Consumer Confid. Flash, -8.0 f’cast, -8.5 prev
- Events, Auctions, Other Releases (GMT) • 10:00 German finance minister Lindner holds news conference after G20 meeting • 13:00 ECB’s Elderson speaks on climate-related and environmental risks
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 )
- USDJPY - 117.00/10 2.24bn (C). 116.00 441m. 115.40/60 1.04bn (795m C). 114.90/115.00 571m. 114.60/70 1.17bn (760m C). 114.40/50 1.78bn (1.12bn P). 114.20/30 1.03bn (649m C). 113.90/114.00 1.77bn (1.55bn P). 112.30/40 1.32bn (1.09bn P).
- EURUSD - 1.1600/10 2.62bn (1.52bn P). 1.1570/80 755m. 1.1520/30 1.08bn (C). 1.1500 590m. 1.1450/70 1.40bn (963m C). 1.1380/90 2.85bn (1.65bn P). 1.1360/70 1.37bn (712m P). 1.1340/50 2.63bn (1.68bn P). 1.1320/30 1.01bn (827m P). 1.1260/80 1.36bn (1.05bn P). 1.1220/30 638m. 1.1200 428m. 1.1170 984m.
- GBPUSD - 1.3550 811m. 1.3520/30 492m. 1.3450/60 849m.
- AUDUSD - 0.7290/0.7300 975m. 0.7200/10 537m. 0.7180/90 492m. 0.7090/0.7100 407m. 0.7040/50 714m. 0.7020 490m. 0.6950 427m. 0.6900 782m.
- AUDNZD - 1.0750 2.20bn (2.15bn C). 1.0730 556m.
- USDCAD - 1.2790/1.2800 1.07bn (951m C). 1.2740/50 965m. 1.2690/1.2700 852m. 1.2620/30 872m. 1.2600/10 697m. 1.2550/60 630m.
- EURGBP - 0.8450/70 981m. 0.8420/30 946m. 0.8400 595m. 0.8350 1.32bn (781m P). 0.8300 502m.
- USDCHF - 0.9280 560m.
- EURCHF - 1.0500/10 420m.
- EURJPY - 131.90/132.00 585m.
- USDZAR - 15.80 440m.
- USDCNH - 6.44 480m. 6.43 460m. 6.41 550m. 6.40 485m. 6.36 1.04bn (585m C). 6.35 1.76bn (1.41bn P). 6.33 646m. 6.30 450m.
Technical & Trade Views
EURUSD Bias: Bearish below 1.15 Bullish above
- Tight range as markets await events in Ukraine
- Steady in a tight low key 1.1258-1.1371 range, awaiting Ukraine news
- 1.1350/55 1.933 BLN - 1.1375-90 3.755 BLN strikes contained in Asia
- Ukraine leads, Blinken-Lavrov meeting next week a positive
- Charts - momentum studies, 5, 10 & 21 day moving averages conflict
- 21 day Bollinger bands edge higher - suggests further choppy consolidation
- 1.1264, 61.8% Jan-Feb rise and 1.1495 2022 high are the major levels
- Thursday's 1.1323 Asian low and this week's 1.1395 high initial sup/res
GBPUSD Bias: Bearish below 1.36 Bullish above.
- GBP/USD remains above 1.36 after UK retail sales beat
- Cable remains above 1.3600 after better than expected UK Jan retail sales
- Up 1.9% MM vs +1.0% f/c.... 1.3600 is a former resistance level
- GBP/USD vaulted 1.3600 en route to 1-week peak 5 pips shy of 1.3643 Thursday
- 1.3643 was three-week high on Feb 10 (before hawkish Bullard boosted USD)
- Bullard repeats call for cumulative 1% Fed rate rise by July 1
- UK warns of significant disruption due to Storm Eunice
USDJPY Bias: Bullish above 114.50 Bearish below
- USD/JPY rebounds off Cloud in encouraging sign for bulls
- USD/JPY bounces hard off Ichimoku Cloud support 114.83
- Encouraging for USD bulls if it manages to end Fri above Cloud
- But that very much depends on how events transpire in Ukraine
- Tentative positive news early Fri fueled US stock futures
- Russia supposedly moving troops cools tension
- But Ukraine rebels report artillery fire again
AUDUSD Bias: Bearish below 0.7250 Bullish above
- AUD/USD mounts another attempt on key chart impediment
- AUD/USD rallies tepidly to 0.7204 from close 0.7188
- Bumps into solid chart obstacle near 0.7208-0.7210
- Fibo resistance merges with Ichimoku Cloud to block rally
- Bulls need to push past Cloud top 0.7233 to gain ground
- Tentative positive news on Ukraine stokes S&P futures +0.7%
- Russia moves troops; Blinken to meet Lavrov.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!