Daily Market Outlook, March 1, 2022

Overnight Headlines

  • Russia, Ukraine Complete Peace Talks For Now, Will Hold Second Round
  • Ukraine Is ‘Not Ready To Surrender Or Capitulate’ To Russia
  • China’s Manufacturing Activity Beat Expectations, Expanded In February
  • China Warns Of 'Huge' Pressure On Foreign Trade As Eco Challenges Mount
  • BoJ Likely To Get Less Dovish Board With New Govt Nominees
  • The RBA Highlights Ukraine War Risks To Outlook As Key Rate Held
  • Australian PMI Manufacturing Returns To Expansion In February
  • Australia's Q4 GDP Looking Even Stronger As Trade Surprises
  • Sydney House Prices Fall But Home Loans For Investors At Record High
  • Fed’s Bostic Says Half-Point Move Possible If Inflation Persists
  • China Moves To Slow Yuan Gains After Rally To Highest Since 2018
  • BTC Breaks 43K As War Continues After Russia, Ukraine Hold Peace Talks
  • Oil Keeps Rising Even As US Mulls Strategic Reserves Release
  • EIA: US December Oil Demand Hits Highest Since Before Pandemic
  • Iran's Foreign Ministry: Key Issues Still Unresolved In Nuclear Talks
  • Canada PM Trudeau: Canada To Ban Imports Of Crude Oil From Russia
  • Asia-Pacific Markets Mostly Gain As Investors Weigh Russia-Ukraine

The Day Ahead

  • Asian stocks regained some composure on Tuesday as the massive selling that rocked financial markets after Russia's invasion of Ukraine last week paused for breath, while surging crude prices supported oil exporters in the region. Global stock markets have tumbled in recent days following Russia's invasion of Ukraine and Western sanctions, which include cutting off some of Russia's banks from the SWIFT financial network and limiting Moscow's ability to deploy its $630 billion foreign reserves.
  • High-level talks between Kyiv and Moscow on Monday ended with no agreement except to keep talking, but Asian markets stabilised on signs of no immediate escalation of sanctions.
  • MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.42% and Japan's Nikkei jumped 1.47%. The Russian rouble regained some footing after crashing to an all-time low, while the safe-haven dollar resumed its rise against major peers.
  • Australia's S&P/ASX 200 index rose 0.92%, paring earlier gains. The country's central bank decided to keep the official cash rate at a record low.The Reserve Bank of Australia said "the war in Ukraine is a major source of uncertainty," and that it would maintain "highly supportive monetary conditions" while monitoring inflation.
  • Key developments that should provide more direction to markets on Tuesday: Asia's factory activity grows but Ukraine crisis clouds outlook - Group of Seven finance ministers discuss the Ukraine crisis. - German Jan retail sales/prelim CPI/HICP -U.S. President Joe Biden delivers State of the Union address. - Fed speakers: Atlanta President Raphael Bostic - U.S. earnings: Baidu, Bank of Nova Scotia, Target, Autozone, Kohls, Wendy's, Man U, Domino’s, Salesforce, Nordstrom, Urban Outfitters, First Solar

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 - 115.70 539m. 115.10/30 669m. 114.70 507m.
  • EURUSD - 1.1360 627m. 1.1340/50 797m. 1.1320/30 481m. 1.1270/80 842m. 1.1250/60 725m. 1.1200/20 1.20bn (1.09bn P). 1.1100/10 572m. 1.0970 581m.
  • AUDUSD - 0.7210/20 489m. 0.7190/0.7200 710m. 0.7150/70 762m. 0.7120/30 481m. 0.7100/10 471m.
  • EURJPY - 134.00 961m.
  • EURSEK - 10.62 355m.
  • USDMXN - 20.70 1.47bn (1.05bn P).

Technical & Trade Views

EURUSD Bias: Bearish below 1.15 Bullish above

  • EUR/USD maintained a heavy tone in Asia after falling 0.46% Monday
  • It opened 1.1219 and eased to 1.1193 at one stage as USD broadly firmed
  • Heading into the afternoon session it is trading just below 1.1200
  • The 10-year US yield edged 3 BPs higher to 1.86% after falling 14 BPs Monday
  • EUR easing against all majors as Russia sanctions poses risks for EZ growth
  • EUR/USD support at last week's 1.1106 low with bids tipped ahead 0f 1.1100
  • A break below 1.1100 targets the 76.4 0f 1.10636/1.2349 move at 1.1040
  • Resistance is at the 10-day MA at 1.1290 and break would ease pressure

GBPUSD Bias: Bearish below 1.36 Bullish above.

  • GBP/USD respects Friday's high after vaulting Monday's top
  • Cable met headwind at 1.3437 after breaking above 1.3431 (Monday's high)
  • 1.3437 was Friday's peak, and high since Thursday's 1.3273 two-month low
  • Thursday's low was plumbed on Russia's invasion of Ukraine
  • 1.3537-1.3620 was last Wednesday's range (day before the invasion)
  • Monday's low was 1.3310, after safe-haven USD jumped on weekend SWIFT news

USDJPY Bias: Bullish above 114.50 Bearish below

  • USD/JPY eases back towards 115.00 into European open
  • USD/JPY easing back since moving up to 115.29 EBS into the Tokyo fix
  • Low so far in Asia PM trading 115.02, low late NY yesterday 114.87
  • Japanese still likely better buyers sub-115.00 despite Tokyo shutting down
  • Good tech support from 114.87 55-DMA, Ichi cloud 114.44-58, 100-DMA 114.42
  • Option expiries between 115.10-30 ($669 mln) contained action for a time
  • Some below today too, $507 mln at 114.70 strike
  • Soggy US yields helped cap upside today, Treasury 10s @1.857%
  • Tokyo risk-on, TSE closes +1.2% at 26,844.72, E-Minis around par @4393

AUDUSD Bias: Bearish below 0.7250 Bullish above

  • AUD/USD teases another leg higher with 200 DMA on horizon
  • AUD/USD recoiled early Tues but is back at Mon close 0.7265
  • May seek 200 DMA 0.7330 if it crosses 50% line 0.7275
  • Australia stocks +0.9% as investors cheer RBA holding rates
  • As-expected decision taken in context of Ukraine...
  • But external risk sentiment still shaky; S&P futures flat
  • Escalating sanctions against Russia fail to deter