Market Quick Take - January 13, 2022 Market Quick Take - January 13, 2022 Market Quick Take - January 13, 2022

Market Quick Take - January 13, 2022

Macro 6 minutes to read
Saxo Strategy Team

Summary:  Markets tried to extend their recent rally yesterday even as the US reported the hottest inflation levels in nearly forty years, though much of the gains yesterday were lost by the closing bell, and the mood was generally downbeat in Asia. Despite the hot US CPI data, the US dollar rolled over sharply and EURUSD finally broke out of the range that had capped the action since late November. And with US yields remaining tame, gold jumped toward an important resistance level.

What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) - Us technology stocks rallied yesterday led by e-commerce stocks with Nasdaq 100 futures touching 16,000 before retreating lower but ending the session higher. The US 10-year yield has stabilized and did not react to the US CPI figure December showing the highest inflation in 39 years as many market participants are still seeing signs that the inflation rate will begin to trend down again, but with the main question being to what level. US equities are now firmly in a trading range, and we believe it will require significant surprises on earnings (either way) or a breakout in the US 10-year yield to take US equities out of the trading range.

EURUSD - burst through very well-defined resistance at 1.1386 yesterday that had capped the action for the pair since late November as the US dollar weakened sharply in the wake of the December CPI release yesterday, clearly a sign that the bar is high for Fed hawkishness to support the US dollar. The next key resistance area looks like 1.1500-25, the prior range lows before a significant meltdown in November – ironically on a hot US CPI release that triggered a major reassessment of the potential for the Fed to hike more this year.

USDJPY – the pair reversed hard back below 115.00 in what so far looks like a bearish reversal and one that is likely to deepen as it appears difficult to take US yields higher at the long end of the curve after yesterday’s US CPI inflation number failed to boost US yields or the US dollar. If risk sentiment rolls over as well, the JPY could suddenly prove a strong performer across the board. For now, the 115.00 area is now resistance, and the next downside area of note is toward 112.50, near the range lows after the omicron variant outbreak.

Crude oil (OILUKMAR22 & OILUSFEB22) up almost ten percent since the start of the year on tightening supply and temporary disruptions may see some consolidation with data showing road traffic thinning across Asia as the fast-spreading omicron variant sweeps through the region, potentially hurting demand. Special focus on China with its zero-tolerance approach in dealing with outbreaks. Underlying, and longer-term fundamentals, however, remains supportive with an SP Global Platts survey showing 14 out of 18 OPEC+ members struggled to lift production in December, thereby leaving total output some 1.1 million barrels a day below target. Also supportive was the EIA weekly stock report showing a drop in US crude stockpiles to the lowest level since 2018.

Gold (XAUUSD) trades near key resistance in the $1830 area following another day of gains in response to a dollar breaking lower and after US inflation hit 7%, the highest in decades (see above and below comments). The recovery continues without support from real yields, which following last week’s 30 basis point surge remains elevated near a 7-month high. We have recently argued that with four 2022 rate hikes starting from March, and 7% CPI already priced in, the yellow metal has room for an upside surprise. Not least considering some emerging tailwind from silver (XAGUSD) which responded positively to yesterday’s rise in copper prices. In gold a break above $1830 could see it target $1850 ahead of the November peak at $1877.

Iron ore (SCOF2) continues to rise, up 1.7% overnight to a 3-month high at $133.50/t, a weekly gain of 4.9%. The rally was stoked by China announcing or starting 3 trillion yuan ($471 billion) in infrastructure projects and Brazilian iron ore giant, Vale, halting some operations due to heavy rains in a region that represents 40% of Vale’s output. The news helped send the ASX iron ore giants BHP:xlon and RIO:xlon up by about 4%. If iron ore closes above $133, the technical outlook may point to an extension towards to $150-160/t area, further supporting iron ore heavyweights.

US treasuries (IEF, TLT). Yesterday’s market reaction to the CPI readings and 10-year US Treasury auction show that it’s divided between higher rates and an economic slowdown. Yields dropped to 1.71% following the highest CPI read since 1982, indicating that the Federal Reserve might be committing a policy mistake. However, the 10-year auction was not as solid as yesterday’s 3-year note sales despite offering the highest yield since January 2020. It tailed 0.4bps and indirect bidders dropped to 65.5% from 70.5% in the past six auction average. It’s hard to predict how today’s 30-year auction will go, but it’s fair to assume that the long part of the yield curve will continue to remain well bid due to growth concerns. The rise in yields is likely to continue throughout the year, but at a slower pace than what we saw last week.

German Bunds (IS0L). European sovereigns rose together with US Treasury yields yesterday. However, 10-year yields remain close to 0%. The 30-year Bund auction was priced with a yield of 0.28%, and a bid-to-cover of 1.12x after the DMO closed the auction without selling the full tendered amount. It shows that demand for the safe haven continues to lag at current yield levels and that, as the ECB halves its stimulus this year, less support for Bunds will contribute to higher yields particularly after the PEPP ends in March.

What is going on?

US December CPI registers highest headline inflation in nearly forty years. The year-on-year headline figure was out at 7.0% as expected and vs. 6.8% in November, while the Ex. Food and Energy measure topped expectations by 0.1% at 5.5% year-on-year versus 4.9% in November. Both measures were higher than expected on a month-on-month basis at +0.5%/+0.6% vs. +0.4%/+0.5% expected, respectively.

US St. Louis Fed President and FOMC voter Bullard sees four Fed rate hikes this year and said in comments yesterday that it is important for the Fed to start hiking “sooner rather than later”. The market has priced a Fed funds rate of just under 1.00% through the December meeting of this year, so approximately three and a half hikes.

The industrial metal sector has, just like crude oil, has started 2022 with strong gains led by nickel and aluminum, and following months of sideways trading, copper (COPPERUSMAR22) is also breaking higher, and if successful in defending the breakout above $4.47 per pound, only $4.56, the 61.8% retracement of the October to December selloff stands in the way for a renewed upside attempt, initially towards the October high at $4.82/lb. The prospects for rising electrical vehicle demand, tight supplies and signs China are stepping up its policy response to a slowing economy have all helped reduce some of the macro risks that has weighed on the market in recent months, especially those stemming from China’s beleaguered property sector.

Chr Hansen reports better than expected Q1 earnings. The Danish-based producer of cultures and enzymes reports Q1 (ending 30 November) revenue of €268mn vs est. €257mn and adjusted EBIT of € 65mn vs est. €64mn, with the company seeing organic revenue growth of 5-8% in the current fiscal year.

Fast Retailing (parent company of Uniqlo) operating profit in Q1 beats estimates. Despite lower revenue and foot traffic due to Omicron the company surpassed expectations on operating profit, but it was not enough to please investors sending shares 2% lower in the Japanese session.

Jefferies fixed-income trading disappoints in Q4. The fixed-income trading revenue tumbled 50% due to lower volumes and subdued volatility. The result sent shares 10% lower and shares of Goldman Sachs and Morgan Stanley were also lower.

Hungary widens price controls on basic goods ahead of early April elections. Prime Minister Orban had previously ordered a cap on fuel prices and mortgage rates, but yesterday added caps on prices for basic foods, including sugar, flour, chicken breast, pork leg and some milk. This move comes ahead of elections in which a united opposition is polling only a few points below with Orban’s Fidesz party. The April 3 parliamentary election will include a referendum on LGBTQ rights.

What are we watching next?

US Fed Vice Chair nominee Lael Brainard to testify in hearings before US Senate today. Economist Lael Brainard has been on the Board of Governors at the Fed since 2014, heading four committees, including those for financial stability and consumer and community affairs. Long seen as one of the more dovish members of the Fed, she surprised many in highlighting inflation as the most significant challenge the Fed faces in her acceptance speech when nominated for the position of Vice Chair. The emphasis on fighting inflation is also at the top of her prepared remarks that she will deliver later today: “We are seeing the strongest rebound in growth and decline in unemployment of any recovery in the past five decades.....But inflation is too high and working people around the country are concerned about how far their paychecks will go.” She will replace Vice Chair Richard Clarida, who is retiring a week early in somewhat disgraceful fashion on accusations of inappropriate trading ahead of key Fed policy moves in 2020.

Earnings Watch – today’s earnings focus is on Delta Air Lines which is expected to deliver Q4 revenue of $8.5bn up 113% y/y and EBITDA of $990mn showing a healthy EBITDA margin of 10.5% despite Omicron impacting travelling in the US.

Thursday: Fast Retailing, IHS Markit, Delta Air Lines, Seven & I, Chr Hansen
Friday: Wells Fargo, BlackRock, First Republic Bank, JPMorgan Chase, Citigroup

Economic calendar highlights for today (times GMT)

0845 – UK Bank of England’s Mann to speak
1030 – ECB's Guindos to speak
1330 – US Dec. PPI
1330 – US Weekly Initial Jobless Claims
1500 – US Fed's Lael Brainard in nomination hearing for position as Fed Vice Chair
1530 – US Weekly Natural Gas Storage Change
1700 – US Fed’s Barkin (non-voter) to speak
1800 – US Fed’s Evans (non-voter) to speak

Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app:

Apple Sportify Soundcloud Stitcher

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (
- Full disclaimer (

Business Hills Park – Building 4,
4th Floor, office 401, Dubai Hills Estate, P.O. Box 33641, Dubai, UAE

Contact Saxo

Select region


Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.