Daily Market Outlook, May 17, 2024

Munnelly’s Macro Minute…

“China Data A Mixed Bag, Property Developers Bid On Stimulus Talk”

Overnight the Asian equity market showed a mixed performance. China's April data revealed conflicting economic trends, with industrial production growth surpassing expectations while retail sales growth unexpectedly slowed. This divergence is unlikely to alleviate pressure on Chinese authorities to implement additional measures to stimulate the domestic economy. Chinese property developer stocks rose on Friday as investors anticipated more government measures to stabilize the crisis-hit sector. New data revealed the fastest decline in new home prices in over nine years. Vice Premier He Lifeng announced that China will allow local government authorities to purchase homes at "reasonable" prices to provide affordable housing during an online meeting on housing policy. In the US, Federal Reserve policymakers cautioned that despite this week's lower-than-expected inflation report, interest rates might need to remain high for a prolonged period. On the other hand, Bank of England policymaker Greene indicated evidence of a more balanced UK labor market, hinting at potential support for an interest rate cut.

Looking ahead, there are no significant releases in the UK today. In the Eurozone, the second reading of the April CPI is not expected to differ from the initial estimate, showing annual inflation at 2.4%, unchanged from March. Although both overall and core inflation rates in the Eurozone have decreased significantly from their peaks, they remain above the European Central Bank's target. The ECB's next policy update on June 6 may see interest rate cuts, as suggested by policymaker comments, but caution remains about future actions.

Stateside, the only notable release is the April update for the leading index, which predicts future economic trends based on various indicators. It has had little market impact recently, with a similar decline expected for April. This week, the U.S. consumer price index (CPI) showed a decrease, causing market participants to quickly anticipate at least two interest rate cuts this year. However, Federal Reserve officials have indicated that rates may need to remain higher for a longer period, and a report indicating a tight labor market has led to a change in expectations. Currently, markets are fully expecting one rate cut in November, with a 68% chance of a cut in September, bringing us back to where we were before the CPI data in terms of U.S. rate expectations.

Overnight Newswire Updates of Note

  • Fed Officials Suggest Interest Rates To Stay High For Longer

  • China Retail Sales Slow As Industrial Output Beats Forecasts

  • China Home Prices Fall At Faster Pace Despite Revival Efforts

  • BoJ Has No Immediate Plan To Sell ETF Holdings, Ueda States

  • BoJ Keeps Bond Buying Unchanged After Surprise Monday Cut

  • BoJ May Hike Rates As Soon As June, Ex-Chief Economist Says

  • ECB’s Schnabel: July Interest Rate Cut Doesn’t Look Warranted

  • Hunt Vows Conservatives Will Cut Taxes If They UK Win Election

  • Oil Set To Eke Out Weekly Gain As Supply And Inflation Set Tone

  • Applied Materials' Third-Quarter Forecast Disappoints Investors

(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: 1.0800-10 (1.4BLN), 1.0820-25 (1.2BLN), 1.0850 (3BLN)

  • 1.0875 (1.2BLN), 1.0915 (1.1BLN)

  • USD/CHF: 0.9000 (605M), 0.9040 (209M), 0.9050 (375M), 0.9060 (300M)

  • EUR/CHF: 0.9925 (403M)

  • GBP/USD: 1.2600 (235M), 1.2640-50 (354M), 1.2745 (200M)

  • AUD/USD: 0.6600 (524M), 0.6625-30 (1BLN), 0.6650-60 (1.3BLN), 0.6680 (318M)

  • NZD/USD: 0.5880 (1.5BLN), 0.5950 (948M), 0.6085-95 (427M)

  • USD/CAD: 1.3550 (381M), 1.3600 (508M), 1.3640-50 (509M), 1.3675 (887M)

  • USD/JPY: 154.00 (2BLN), 154.80 (500M), 155.00 (2BLN), 155.50 (891M)

  • 156.00 (790M), 156.35 (537M), 156.60 (475M), 157.00 (1.4BLN)

CFTC Data As Of 10/05/24

  • British pound net short position is -21,813 contracts

  • Euro net long position is 4,590 contracts

  • Japanese yen net short position is -134,922

  • Swiss franc posts net short position of -41,787

  • Bitcoin net short position is -783 contracts

  • Equity fund speculators increase S&P 500 CME net short position by 69,524 contracts to 238,456

  • Equity fund managers raise S&P 500 cme net long position by 44.751 contracts to 860,694

  • Gold NC Net Positions: $199.6K vs previous $204.2K

Technical & Trade Views

SP500 Bullish Above Bearish Below 5280

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 5258 opens 5200

  • Primary support 5160

  • Primary objective is 5258 TARGET HIT NEW PATTERN EMERGING

EURUSD Bullish Above Bearish Below 1.08

  • Daily VWAP bullish

  • Weekly VWAP bearish

  • Above 1.10 opens 1.11

  • Primary resistance 1.0981

  • Primary objective is 1.0550

GBPUSD Bullish Above Bearish Below 1.2630

  • Daily VWAP bullish

  • Weekly VWAP bearish

  • Above 1.27 opens 1.2750

  • Primary resistance  is 1.2889

  • Primary objective 1.2034

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 2376

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Above 2376 opens 2425

  • Primary support 2260

  • Primary objective is 2560

BTCUSD Bullish Above Bearish below 64000

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 57500 opens 55900

  • Primary resistance is 67648

  • Primary objective is 53877