Daily Market Outlook, March 16, 2022

Overnight Headlines

  • Russia Bombards Kyiv As European Leaders Arrive In Ukraine's Capital
  • Ukrainian President: Positions Of Ukraine, Russia Sound More Realistic
  • Ukrainian Official: Talks Are Very Difficult, Sees Room For Compromise
  • Fitch: Russian Rouble Payment Of USD Coupons Would Be A Default
  • Fed Wrestles With Challenge Of How Quickly To Raise Interest Rates
  • Biden Signs $1.5 Trillion Government Funding Bill With Ukraine Aid
  • China Home Price Declines Deepen As Slump Shows No End In Sight
  • Japan March Manufacturers' Mood Up, Ukraine Crisis Clouds Outlook
  • Japan Posts Bigger-Than-Expected Trade Gap As Energy Imports Jump
  • Possible North Korea Ballistic Missile Fails Immediately After Launch
  • Oil Climbs As Russia-Ukraine Ceasefire Talks Stoke Volatile Trading
  • China Stocks Extend Rebound As State Council Vows Market Support

The Day Ahead

  • An afternoon surge in Chinese equities lifted a broad gauge of Asian shares on Wednesday on rising hopes Beijing will roll out more economic stimulus, while investors continued to watch Ukraine-Russia peace talks and the U.S. Federal Reserve. The Fed is expected to raise rates for the first time in three years later on Wednesday (1800 GMT) and give guidance on future tightening.
  • The rise in Asian shares came a day after mainland China and Hong Kong equity indexes had tumbled in reaction to spiking coronavirus infections in China and fading expectations for a rate cut by the People's Bank of China. Chinese market volatility continued on Wednesday, with a strong early rebound in China's CSI300 index evaporating by late morning. But it charged higher after Vice Premier Liu He indicated China plans to take measures to boost the economy and would also announce policies favourable to capital markets.
  • Investors are expecting the U.S. central bank to raise interest rates by at least 25 basis points amid surging prices. Traders will also be closely watching the Fed for details on how it plans to end its bond-buying program. U.S. bond yields fell in Asian trade, with the benchmark 10-year note yield at 2.1545%, after earlier rising to 2.169%, the highest since June 2019

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: 1.0750 (591M), 1.1000 (1.23BLN,, 1.1050 (728M) 1.1100 (823M), 1.1150 (2.6BLN), 1.1200 (1.14BLN)
  • USD/JPY: 115.75-815 (414M), 116.25 (225M) 117.95-05 (878M). EUR/JPY: 130.05 (600M)
  • GBP/USD: 1.3100 (248M), 1.3500 (747M)
  • USD/CHF: 0.9325 (770M), 0.9400 (540M)
  • USD/CAD: 1.2665-70 (843M), 1.2695-00 (1.4BLN) 1.2760 (298M), 1.2775-80 (855M)

Technical & Trade Views

EURUSD Bias: Bearish below 1.15 Bullish above

  • Firms in Asia as market looks forward to FOMC
  • EUR/USD opened +0.14% at 1.0955 after a choppy trading day
  • After trading 1.1948, it nudged higher as USD edged lower across the board
  • Heading into the afternoon it is trading just below the 1.0976 session high
  • It is above the 10-day MA @ 1.0958 and a close above would ease the pressure
  • More resistance around 1.1120 where the March 10 high converges with the 21-day MA
  • Support has formed around 1.0900 where buyers are tipped
  • EUR/USD will likely consolidate ahead of the FOMC meeting late in US session
  • The market is pricing in a "hawkish hike" so risk is for a dovish hike
  • Unless the Fed is very hawkish - EUR/USD has room to move higher

GBPUSD Bias: Bearish below 1.36 Bullish above.

  • +0.05% in a tight 1.3035-1.3053 range with only modest flow
  • Markets generally quiet ahead of the FOMC - will likely spark volatility
  • Ukraine president - peace talks more 'realistic', Russia quiet
  • Charts; mixed momentum studies - 5, 10 & 21 daily and weekly MA's fall
  • 21 day Bollinger bands slide - signals suggest downtrend remains strong
  • 1.3000 resilient, but no major support until 1.2831, 50% 2020-2021 climb
  • Close above the falling 1.3118 10 day moving average would end downside bias
  • NY 1.3022-1.3088 range is initial support and resistance

USDJPY Bias: Bullish above 114.50 Bearish below

  • USD/JPY holds relatively bid on 118 into FOMC, Asia 118.21-43 EBS
  • More upside possible on hawkish Fed, specs eyeing Dec '16/Jan '17 double top
  • Stops on break above presumed option KOs at 118.50, 118.61-66 double top
  • More option barriers tipped at 119.00, every 50 ticks up, 120.00 massive?
  • Option expiries today to downside, total $936 mln between 117.95-118.10
  • Support from 118.06 hourly Ichi kijun, 118.04 55-HMA, 117.34-118.08 cloud
  • Firm US yields supportive, Tsy 10s to 2.169% yesterday, now @2.139%
  • Asia, Tokyo mostly risk on, Nikkei +1.4% @25,703, E-Minis -0.2% @4246

AUDUSD Bias: Bullish above .7100 Bearish below

  • Lifts above 0.7200 as USD eases and commodities firm
  • AUD/USD recovering from morning slump to 0.7181 and is edging above 0.7200
  • Key commodities are perking up after starting the day moving lower
  • Brent crude is back above 100 after trading to below 99 earlier
  • USD/CNY is moving lower and underpinning AUD/USD for now
  • AUD/USD resistance is at yesterday's 0.7227 high and the 21-day MA at 0.7250
  • Support is at yesterday's 0.7165 low and a 61.8 fibo at 0.7148