Daily Market Outlook, June 5, 2024

Munnelly’s Macro Minute…

“Bank of Canada On Deck Ahead Of ECB & NFP’s”

Wednesday saw a general rise in Asian stocks, with the dollar holding steady, driven by increasing expectations of a Federal Reserve interest rate cut in September due to signs of a weakening U.S. labor market. Investors are eagerly awaiting the upcoming crucial payrolls report, but concerns about a slowing U.S. economy have tempered risk appetite. Indian markets are receiving significant attention, with Indian stocks being volatile following a sharp decline in the previous session, as voting results indicated a narrower-than-expected victory margin for Prime Minister Narendra Modi.

Looking ahead to tomorrow’s ECB meeting, the Governing Council is widely expected to lower interest rates for the first time since September 2019, reducing the deposit rate to 3.75%. Today's focus shifts to the Bank of Canada's policy decision, with the likelihood of a quarter-point cut surging to over 80%. Should the Bank of Canada proceed with a rate cut, immediate attention will turn to their future plans, which remain uncertain as Governor Macklem and the rate-setting committee have provided little guidance on the pace of future cuts. Currently, the market is pricing in between two and three quarter-point cuts this year, with the second cut expected by the October meeting. Therefore, today's communication, including comments from Governor Macklem during the press conference, will be closely watched.

Conversely, markets are postponing their expectations for U.S. interest rate cuts, with the first quarter-point reduction not fully priced in until November, whereas a June cut was previously deemed likely. This shift reflects persistent inflation and a resilient, though slowing, economy and labor market. Today's U.S. ADP private payrolls report is expected to support the Federal Reserve's stance to maintain current interest rates, with a forecasted increase of 180,000 in private sector payrolls. Additionally, the ISM non-manufacturing report is projected to provide further insight in to the strength of the services sector Stateside.

Overnight Newswire Updates of Note

  • China Caixin PMI Signals Fastest Services Activity Growth In 10 Months

  • Australia Economy Remains Weak On Household Spending Squeeze

  • Australian Treasurer Chalmers: Q2 GDP To Be Similarly Difficult'

  • RBA Won’t Hesitate To Act if Inflation Is Stickier, Bullock Says

  • US Seeks EU Sanctions Guarantee To Back $50Bln Ukraine Loan

  • Bank Of Canada Prepares For Interest-Rate Cut Pivot

  • Sunak ‘Beats’ Starmer In Debate By Narrow Margin, Snap Poll Claims

  • Bitcoin Posts Longest Winning Run Since March On Rate-Cut Wagers

  • New Texas Stock Exchange Takes Aim At New York’s Dominance

  • HPE Jumps After Reporting Strong Sales On AI Server Demand

  • Intel To Sell 49% Of Irish Venture To Apollo For $11 Billion

  • Bayer’s Weedkiller Payout Slashed To $400M From $2.25B

  • Samsung Stock Gains As Nvidia Works To Certify Its HBM Chips

  • Chinese AI Chip Firms Downgrading Designs To Secure TSMC Prod.

(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: 1.0775-85 (1.5BLN), 1.0790-00 (1.5BLN)

  • 1.0810-20 (538M), 1.0835-45 (836M), 1.0850-60 (2.06BLN)

  • 1.0870-80 (1.83BLN), 1.0890-00 (2.2BLN)

  • 1.0910-20 (1.52BLN)

  • USD/JPY: 154.25 (350M), 154.60 (970M), 154.70-75 (411M)

  • 154.95-00 (464M), 155.30 (1.15BLN), 156.60 (509M)

  • 157.00 (353M), 157.00-10 (775M)

  • USD/CHF: 0.8950-60 (340M)

  • EUR/CHF: 0.9590-00 (861M), 0.9700 (400M)

  • GBP/USD: 1.2695-00 (480M)

  • AUD/USD: 0.6580-85 (585M), 0.6590-00 (1.23BLN)

  • 0.6710-20 (523M). USD/ZAR: 19.00 (214M)

  • 19.20 (270M). EUR/SEK: 11.40 (280M)

  • USD/CAD: 1.3500 (290M), 1.3590-00 (544M)

  • 1.3625-35 (306M), 1.3655 (446M), 1.3675-90 (638M)

CFTC Data As Of 31/05/24

  • Japanese yen net short position is -156,039 contracts

  • Euro net long position is 57,572 contracts

  • Swiss franc posts net short position of 44,366 contracts

  • British pound net long position is 25,402 contracts

  • Bitcoin net short position is -756 contracts

  • Equity fund managers raise S&P 500 CME net long position by 31.431 contracts to 978,007

  • Equity fund speculators increase S&P 500 CME net short position by 12,145 contracts to 330,057

  • Gold NC Net Positions increased to $236.6K from previous $229.8K

Technical & Trade Views

SP500 Bullish Above Bearish Below 5303

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Above 5310 opens 5379

  • Primary resistance 5303

  • Primary objective is 5146

EURUSD Bullish Above Bearish Below 1.0860

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Above 1.880 opens 1.0940

  • Primary resistance 1.0981

  • Primary objective is 1.0550

GBPUSD Bullish Above Bearish Below 1.2750

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 1.2700 opens 1.2640

  • Primary support  is 1.2590

  • Primary objective 1.2850

USDJPY Bullish Above Bearish Below 156

  • Daily VWAP bearish

  • Weekly VWAP bullish

  • Below 156 opens 154.50

  • Primary support 152

  • Primary objective is 165

XAUUSD Bullish Above Bearish Below 2360

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Above 2365 opens 2390

  • Primary support 2300

  • Primary objective is 2239 Below 2300

BTCUSD Bullish Above Bearish below 68000

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 67000 opens 65500

  • Primary support is 65000

  • Primary objective is 73400