Daily Market Outlook, April 30, 2024

Munnelly’s Macro Minute…

“Month End Positioning Expected To Drive Dollar Demand”

Asian stocks mostly gained ground, driven primarily by Japanese equities. Despite the yen holding above its recent 34-year lows, China's PMI data indicated economic expansion, particularly in the manufacturing sector. The Caixin manufacturing index climbed to 51.4, marking its highest level in over a year according to the survey. France reported Q1 GDP growth slightly exceeding expectations at 0.2%. Later today, Germany, Italy, and the Eurozone will release their GDP figures.

In the UK, the Lloyds Business Barometer survey revealed that business confidence remained steady at 42% in April, surpassing the survey's long-term average. Optimism about the economy rose to 39%, the highest since February 2022, while trading prospects remained robust but eased slightly to 45%. Staffing expectations rebounded, offsetting most of last month's decline, and own price expectations increased, indicating a broadening of upward price pressures among domestic firms. Later this morning, the Bank of England will release money supply and bank lending data for March, including the latest mortgage approvals figures, which are expected to show a sixth consecutive rise to 63.2k, reaching their highest level since September 2022.

Eurozone data will also be in focus, with the release of Q1 GDP and April CPI inflation figures. Quarterly GDP is expected to have improved to at least 0.1%, consistent with recent business surveys suggesting a stabilization in activity and growing confidence. Inflation is forecasted to moderately rise to 2.5% annually, driven by energy prices, while the core rate is anticipated to dip to 2.7% from 2.9%. This data may not deter the ECB from cutting interest rates in June but could provide some backing for more cautious policymakers.

Across the pond in the US, the Federal Reserve begins its two-day monetary policy meeting today, with an interest rate announcement scheduled for tomorrow. Although no rate changes are anticipated, market participants will closely monitor Chair Powell's post-meeting press conference, especially considering recent robust economic indicators. Today's focus will be on the Q1 employment cost index, expected to show a slight increase to 1.0% from 0.9% in Q4 2023, providing insight into wage growth trends.

Overnight Newswire Updates of Note

  • US Lifts Quarterly Borrowing Above Forecasts To $243 Billion

  • WH Beefs Up Economic Team As Biden Vies For Second Term

  • Diplomats Hope Of Hostage Breakthrough, Israel Ease Stance

  • China Factory Activity Holds Up, Signaling Recovery Has Legs

  • IMF Increases Asia Growth Forecast This Year On China, India

  • Japan’s Factory Output Records Weakest Quarter Since Covid

  • Yen Traders See Battle For Japan To Stopping Currency’s Slide

  • Australian Retail Sales Unexpectedly Decline, Currency Drops

  • ECB’s Guindos Says Inflation Outlook Faces ‘Substantial Risks’

  • ECB Rate Cut In June Realistic, Says Dutch Central Bank Chief

  • Deflation Reaches UK Stores As Non-Food Prices Drops 0.6%

  • Samsung’s Profit Surges After AI Boom Reverses Chip Losses

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

FX Options Expiries For 10am New York Cut

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

  • EUR/USD: 1.0615-25 (1.6BLN), 1.0650 (642M), 1.0700 (654M), 1.0750 (1BLN)

  • USD/CHF: 0.9150 (367M). GBP/USD: 1.2370 (255M)

  • AUD/USD: 0.6450-55 (849M), 0.6500 (279M), 0.6535 (262M), 0.6625 (519M)

  • AUD/NZD: 1.0950 (422M)

  • USD/CAD: 1.3570 (660M), 1.3675 (422M). AUDJPY: 99.65 (788M)

  • USD/JPY: 156.30 (273M), 157.00 (324M)

  • EUR/JPY: 166.50 (220M) . GBP/JPY: 195.00 (341M)

  • At the end of the FX Month, signals indicate a need for rebalancing flows.In April, global equity markets were down, and the USD performed well in the FX market.Credit Agricole's model takes into account market capitalisation and FX performance, suggesting that portfolio rebalancing flows at the end of the month will likely involve some buying of USD. This trend is expected across the board, with the strongest signal for buying USD versus the Canadian dollar. The bank's corporate flow model indicates selling of EUR at the end of the month. They plan to use combined signals to sell EUR in an equally weighted basket of USD and GBP.

CFTC Data As Of 26/04/24

  • Japanese yen net short position is -179,919 contracts

  • Euro net short position is -9,989 contracts

  • Swiss Franc posts net short position of -42,562 contracts

  • British Pound net short position is -26,233 contracts

  • Bitcoin net position is 0 contracts

  • Equity fund managers cut S&P 500 CME net long position by 16,969 contracts to 833,074

  • Equity fund speculators trim S&P 500 CME net short position by 9,927 contracts to 183,864

  • Gold NC Net Positions: $201.9K vs previous $202.4K

Technical & Trade Views

SP500 Bullish Above Bearish Below 5070

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 5060 opens 5020

  • Primary support 4987

  • Primary objective is 5150

EURUSD Bullish Above Bearish Below 1.0720

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Above 1.0730 opens 1.088

  • Primary resistance 1.850

  • Primary objective is 1.0550

GBPUSD Bullish Above Bearish Below 1.2450

  • Daily VWAP bullish

  • Weekly VWAP bearish

  • Above 1.25 opens 1.2570

  • Primary resistance  is 1.2710

  • Primary objective 1.26

USDJPY Bullish Above Bearish Below 152

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 154.40 opens 152

  • Primary support 152

  • Primary objective is 165

XAUUSD Bullish Above Bearish Below 2360

  • Daily VWAP bearish

  • Weekly VWAP bullish

  • Above 2360 opens 2400

  • Primary support 2260

  • Primary objective is 2560

BTCUSD Bullish Above Bearish below 62000

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 59900 opens 55900

  • Primary support  is 60000

  • Primary objective is 78000