Daily Market Outlook, April 7, 2022

Overnight Headlines

Asian shares retreated on Thursday, in line with a global selloff, as markets were spooked by more aggressive noises from U.S. policymakers about the need for tighter monetary policy, which also kept the dollar near a two-year peak. MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.17% to its lowest level in a week, while Japan's Nikkei dropped 1.9%. European and U.S. share futures also fell. EUROSTOXX 50 futures eased 0.2%, S&P 500 futures fell 0.37% and Nasdaq futures fell 0.35%.

Fed Governor Lael Brainard’s comments on Tuesday gave us fair warning for what to expect in the minutes to the March FOMC meeting that have just been released. Brainard, who continues to await confirmation as vice chair of the Federal Reserve, is often viewed as being on the more dovish wing of FOMC members. For her to endorse “a series of interest rate increases” plus the promise to “reduce the balance sheet at a rapid pace as soon as our May meeting” underscores the Fed’s desire to “catch up” to regain control of inflation and inflation expectations. In the end though the FOMC minutes don’t appear to go any further than what Lael Brainard outlined. They show one or more 50bp rate hikes “could be appropriate” at upcoming meetings (“many” would likely have voted 50bp in March had it not been for the Russian invasion of Ukraine). Note many in the market (ourselves included) expect three consecutive 50bp hikes from the Federal Reserve.

Canada’s employment report is expected to reflect another solid month of hiring across the nation, moderating to a gain of 79.9K jobs following last month’s surge. The labour market blew past expectations last month after restrictions meant to contain the spread of the omicron variant were lifted. The country added 336.6K jobs in February, which more than made up for losses the previous month. The unemployment rate is expected decline to 5.4% from 5.5%, near a five-decade low, and further below its pre-Covid level.

(Hedging effect can often draw spot toward strikes pre expiry if nearby (P) Puts (C) Calls )

EUR/USD: 1.0875 (900M), 1.0900-05 (2.4B), 1.0910-15 (980M), 1.0920-25 (1.6B) 1.0930-35: (1.7B), 1.1000-05 (1.7B), 1.1020-25 (2.1B) 1.1050 (550M). GBP/USD: 1.3150-55 (455M), 1.3200-15 (545M)
USD/JPY: 123.50 (440M). EUR/JPY: 134.50 (675M), 136.00 (520M)
EUR/GBP 0.8375 (430M). EUR/NOK: 9.6000 (450M), 9.7500 (445M)
USD/CAD: 1.2500 (685M), 1.2575-80 (855M). AUD/USD: 0.7575 (450M)

626S3F9zmwubGd9BtUGbrMcSjxd8Nkv3aRes-MT-c0bSFVINDpBhLrFdHDDbCwIk_vaY5aZh_kVgTGfyDQa0OJYo9GaJ_LiT1rUf14I_E8HCSdbRHKyNCY0KlVjgd8GD1P2ecxV8

EURUSD Bias: Bearish below 1.12 Bullish above

Modest bounce in Asia on cross short – covering
EUR/USD opened 1.0895 after easing from highs following Fed minutes
It traded to 1.0912 on talk of EUR/AUD short-covering with cross rising 0.5%
Heading into the after noon the EUR/USD settled just below 1.0910
Support is at March 7 trend low at 1.0806 with buyers tipped ahead of 1.0850
Resistance is at 1.1000 where the 10 & 21-day MAs converge
A break above 1.1000 would ease the downward pressure
Sentiment is bearish due to hawkish Fed outlook and prospect of more Russia sanctions

GBPUSD Bias: Bearish below 1.3350 Bullish above.

USDJPY Bias: Bullish above 120 Bearish below

AUDUSD Bias: Bullish above .7300 Bearish below