27th April - AUD CPI Dominates Headlines


Market Headlines

THE DOLLAR continued its upward ascent on Tuesday and posted a new 2022 YTD peak of 102.36, with technicians keeping an eye on 102.990, which is the March 2020 high.

The Buck was a beneficiary of the risk-aversion, which comes amid further concerns over COVID lockdowns in China and negative geopolitical commentary. Russia warned against NATO supplying military aid to Ukraine as there was a risk of the conflict escalating into World War Three.

As such, CAD and NZD sit in between the two. Firstly, (GBP/USD) Cable hit a low of 1.2582, a level not seen since July 2020, as the Pound continued to be a victim of the rising Greenback, alongside Russia accusing NATO of creating a severe risk of nuclear war by arming Ukraine.

Moreover, the risk-sensitive Sterling is already feeling the pressure from decreasing expectations for aggressive BOE rate hikes this year, and traders note should the BOE remain hesitant on rates, GBP/USDs fall could increasingly resemble USD/JPYs rise. Technicians note the next key support level for Cable is the June 2020 low of 1.2519. Loonie (cad) saw losses, despite the assistance from rising oil prices which saw help from reports that Russia has halted gas supplies to Poland from Wednesday.

FX Wrap

ANTIPODES were lower but coped better than the other activity currencies. AUD/USD saw lows of 0.7135, whilst NZD/USD bottomed out at 0.6570, as the general risk-aversion tone of trading, primarily due to continued China lockdown fears and rising Buck weighed. In terms of news flow, the Kiwi and Aussie may have received some respite from the partial bounce in commodity prices, but market participants will await the key Australian Q CPI and RBI inflation metrics on Wednesday.

JPY was the clear GIO outperformer and the only currency in the Green against the Buck. The near-term technical outlook for the Yen looks increasingly constructive or less bearish, and a close below resistance vs the Greenback in the form of the IODMA just under 127.50 could provide more recovery momentum as US Treasury yields continue to retreat.


Additionally, the USD/JPY low on Tuesday was 127.04, where techs note the cross has not yet breached the pivotal April 19th low at 126.98. Moreover, risk appetite is wavering again to the benefit of safe havens and Japanese PM Kishida said the Government will attempt to stabilise the currency via economic policies that stem the outflow of domestic income while boosting the inflow of funds after joining the ranks of those expressing disapproval of undesirably rapid moves.

EUR/USD hit lows of 1.0643, a low since late-March 2020, despite hawkish rhetoric from ECB's Kazaks. On this, the Governor said

two or three rate hikes priced by markets is quite reasonable and prefers the first-rate hike after APP ends, which is leaning

towards July.

Moreover, highlighting the hawkish rhetoric, he said there is no reason why rate hikes should pause at zero. ECB's heavy hitters Lagarde and Lane speak on Wednesday, ahead of a heavy data docket on Thursday.



Australian CPI

Australia QQ CPI:

For the QQ CPI, market consensus is expecting quite a jump with YY headline seen at 4.6% from 3.5%, with both the Trim and Weighted YY measures both seen comfortably above 3%. This supports the idea that the RBA will be looking raise rates at upcoming meetings.

Recall that the bank noted that recent inflation developments have brought forward the likely timing of a first hike. However, whether a beat or not, the most likely scenario for lift off remains in June. That doesn't mean that a bigger-than-expected beat won't impact short term interest rate markets though, and also means that a solid beat could spark additional expectations of a possible May hike from the bank.

After the RRR cut as well as additional supportive rhetoric from the PBoC, the AUD has not really seen the type of upside that one would have expected.

US Earnings Release

A big day ahead for earnings with mega-cap tech names likes Microsoft and Google reporting earnings tonight after the close, Facebook/meta reporting earnings this morning after the close and then we have Apple and Amazon reporting after close on Thursday.

The challenge with an earnings week like this is twofold:

Firstly, these big mega-cap tech names have a really big weighting in both the S&P and even more in the Nasdaq, which means big surprises (both positive and negative) can have sizeable reactions in the major indexes.

Secondly, with these names being so influential it also means that they can have exacerbated two-way volatility reactions on days where more than one of them report. For example, for today, we have two big names reporting, and the worst case scenario is a surprise miss for the one and then a surprise beat for the other, creating a lot of dangerous two-way volatility and

price action.

The best-case scenario for trade opportunities for these big names is a sizable beat for both of a sizable disappointment for

both.




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Jordan Praturlon

Senior Corporate Account Manager



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ACN: 615 699 888 | AFSL: 502711




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Disclaimer

This material is provided by Navigate Global Payments (Navigate) ACN 615 699 888, AFSL 502711.  The material contains general commentary only and does not constitute investment or any other advice.  Certain types of transactions, like futures, options and high yield securities can be risky, and not suitable for all investors.  This information has been prepared without considering your objectives, financial situation or needs.  Please seek your own independent legal or financial advice before proceeding with any investment decision.  The information is believed to be accurate at the time of compilation and is provided in good faith.  Navigate does not warrant the accuracy or completeness of any information contributed by a third party. The information is subject to change without notice and Navigate is under no obligation to update the information. The information contained in this material are opinions of the author at the time of writing and does not constitute an offer, recommendation to act, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract.  This information, including any assumptions and conclusions is not intended to be a comprehensive statement of relevant practise or law that is often complex and can change.  Past performance is not a reliable indicator of future performance. Any forecasts given in this material are predictive in character.Navigate Global Payments Pty Ltd nor its related parties or officers accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information contained or related to this site.