Daily Market Outlook - Thursday, March 23

10 and one 10 us dollar bill

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Powell Giveth, Yellen Taketh… Bailey Up Next

Asian equities took their lead from Wall Street souring in risk sentiment, as all US benchmarks closed in the red, nursing 1%+ losses on the session as markets sought to make sense of the dueling narrative. On the one hand, FOMC Chair Powell pretty much stuck to the script raising rates by the expected 25bps while reducing near-term expectations for further imminent raises. Powell pushed back against the market pricing rate cuts, stating that this wasn't a baseline expectation for 2023 and that the Committee was prepared to do more on rates if needed. The fly in the ointment and the catalyst for the sharp reversal in gains seen during Powell’s press conference came from Treasury Secretary Yellen's testimony, as she stated that the Treasury is not considering insuring all uninsured bank deposits, flip-flopping on initial posturing that a backstop for all deposits was in the offing. This led to investors dumping risk exposure into the close of trading.

Today’s European session will be dominated by the UK’s Bank of England (BoE) the next major central bank to deliver a policy update later today. Investors had been cautiously optimistic that given the global backdrop of the banking turmoil having a direct impact in the UK with HSBC taking over SBV UK’s operations that this would lead to a pause from the BoE. However, this optimism has been thwarted given yesterday's UK CPI printing an upside surprise, ticking up to 10.4% in February from 10.1% in January. Market watchers were eyeing the potential for a print sub 10%. After its last meeting in February, the BoE had stressed that further rate moves would be heavily data-dependent, hence, markets have rapidly repriced the potential for another move north in rates today for a further hike. It appears that another raise today won't occur without dissent from doves on the committee with committee member Cunliffe believed to be shifting his stance towards a more dovish tilt. Heading into today’s meeting markets are pricing over 80% probability of a 25bp hike pushing the headline rate to 4.25%.

FX Options For 10am New York Cut 

  • USD/JPY: 131.50 ($1.5b), 130.50 ($980.5m), 70.00 ($856m)
  • EUR/USD: 1.0580 (EU927.1m), 1.0800 (EU874.4m), 0.9935 (EU754.9m)
  • AUD/USD: 0.7500 (AUD333.3m), 0.7100 (AUD325.4m), 0.7300 (AUD301.4m)
  • USD/CNY: 6.7500 ($1.27b), 6.9500 ($575.5m), 6.4700 ($440m)
  • USD/CAD: 1.5175 ($360m), 1.3850 ($312.6m)
  • EUR/GBP: 0.8900 (EUl.Oób), 0.8705 (EU350m)
  • USD/BRL: 4.7500 ($690m), 4.8000 ($400m)   
  • Benchmark 1-month expiry G10 FX implied volatilities are edging closer to levels seen ahead of the March banking crisis. USD/JPY implied volatility has proved a reliable FX fear gauge over recent weeks and took an ominous pre Fed hit on Wednesday. One-month was sold at 12.5 – the low end of its 11.8-15.5 March crisis range, which helps to reinforce the recovering risk appetite as bank worries fade. (RTRS)

Overnight News of Note

  • Asian Shares Subdued After Fed Hints At Rate Pause
  • Dollar Slips As Fed Outlook Shifts
  • Treasury Sec Yellen: Not Considering ‘Blanket’ Bank Deposit Insurance
  • US Futures Little Changed As Investors Weigh Fed Outlook
  • Gold Gains As Fed Hints At Pause In Rate Hikes
  • Citigroup CEO Jane Fraser: There Are 'Isolated Problems' In Banking Industry
  • FDIC Delays Bid Deadline For Silicon Valley Private Bank - Bloomberg News
  • China’s Australia Ambassador Says Threat of War Not ‘Realistic’
  • BofA Lowers Peak US Interest Rate Forecast To 5-5.25% From 5.25-5.5%
  • Brazil Central Bank Leaves Interest Rate Unchanged At 13.75%
  • RBNZ Chief Economist Conway: Incredibly Determined To Get Inflation And Inflation Expectations Back To Target
  • Coinbase Gets SEC Notice Signalling Intent To Sue Over Crypto Offerings
  • Oil Drops After Three-Day Rise As Investors Assess Fed’s Message 

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 3985

  • Primary resistance is 4078
  • Primary objective is 3804
  • Above 4040 opens 4078
  • 20 Day VWAP bullish, 5 Day VWAP bearish

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EURUSD Bias: Intraday Bullish Above Bearish below 1.0830

  • Primary support  is 1.0730
  • Primary objective is 1.1000
  • Below 1.0805 opens 1.0730
  • 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

GBPUSD Bias: Intraday Bullish Above Bearish below 1.2280

  • Primary support  is 1.2265
  • Primary objective 1.2411
  • Below 1.2170 opens 1.2100
  • 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

USDJPY Bias: Intraday Bullish above Bearish Below 132.50

  • Primary resistance  is 135.15
  • Primary objective is 130.00
  • Above 136 opens 137.90
  • 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

AUDUSD Bias: Intraday Bullish Above Bearish below .6696 

  • Primary resistance is .6740
  • Primary objective is .6950
  • Below .6560 opens .6450
  • 20 Day VWAP bearish, 5 Day VWAP bullish

(Click on image to enlarge)

BTCUSD Intraday Bias: Bullish Above Bearish below 26500

  • Primary support 23000
  • Primary objective is 30000
  • Below 23000 opens 22400
  • 20 Day VWAP bullish, 5 Day VWAP bearish

(Click on image to enlarge)

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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to ...

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