Daily Market Outlook, May 8, 2024
Munnelly’s Macro Minute…
“Japanese Officials Mute A Policy Shift Aimed To Support JPY”
Overnight, equity markets experienced a period of consolidation following recent increases, with the Asia-Pacific region showing a general softening. The absence of significant economic data releases yesterday led to attention being drawn to hawkish remarks from the Fed's Kashkari, who suggested that an uptick in policy interest rates might occur, although he also emphasized that such a move is not the most probable scenario.
Japanese stocks fell due to Toyota Motor's lower profit estimate and Nintendo's bleak outlook. Mainland Chinese and Hong Kong equities paused as investors awaited significant tech earnings next week. Treasury rates rose, boosting the dollar for a third day, despite warnings from the central bank governor. Governor Kazuo Ueda warned financial markets about a possible policy change, and Finance Minister Shunichi Suzuki stated that the administration is ready to take necessary action.
Today, there are no major UK data releases scheduled, but Thursday's overnight releases will include the RICS residential market and the S&P Global/REC jobs surveys. The RICS survey, alongside mortgage approvals data, suggests a recovery in the sector, with the net balance of respondents reporting higher prices reaching its least negative level since October 2022. The REC UK jobs report will be closely monitored by policymakers to gauge labor market trends and their potential impact on wage growth and inflation. The Bank of England's interest rate decision tomorrow is expected to maintain rates at 5.25%, with speculation centered on future policy signals, particularly regarding the possibility of a rate cut in June, which remains uncertain according to market sentiment.
European data highlights include March's industrial production figures for Germany, showing a 0.4% monthly decline following gains in the preceding two months. While there are signs that manufacturing activity in the Eurozone's largest economy is stabilizing, ongoing challenges persist due to its reliance on global demand and low-cost energy sources.
Stateside, the calendar is quiet this week, with attention likely shifting to scheduled speeches by Fed officials, notably Boston Fed President Collins.
Overnight Newswire Updates of Note
BoJ’s Ueda Tweaks Weak Yen Remarks In Possible Hint Of Rate Hike
Japan’s Suzuki: Watching FX Movement With A Sense Of Urgency
Fed's Kashkari: Fed Will Hold Rates Where They Are If We Need To
Mnuchin Says Strong Dollar Helps, For Now, In Financing US Debt
US Revokes Licences For Supply Of Chips To China’s Huawei
EUR/USD Edges Lower After Hawkish Remarks From A Fed Official
10-Yr Treasury Yield Falls As Investors Consider Fed Policy Path
Oil Slip On Rising US Stockpiles, Cautious Supply Expectations
(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: 1.0675-90 (858M), 1.0750 (945M), 1.0775-80 (746M), 1.0825 (1.1BLN)
USD/CHF: 0.8900 (1BLN), 0.9050 (319M), 0.9125 (460M), 0.9150 (338M)
GBP/USD: 1.2500 (460M). EUR/GBP: 0.8580-90 (865M)
AUD/USD: 0.6495-0.6500 (1BLN), 0.6600 (1BLN)
NZD/USD: 0.5900 (255M), 0.5950 (392M)
USD/CAD: 1.3745-60 (1BLN)
USD/JPY: 154.50 (489M), 155.00 (360M), 155.50-60 (1BLN)
The USD is still heavily positioned long against a basket of currencies, including the MXN. On the other hand, the EUR, JPY, CHF, GBP, and CAD are all heavily positioned short against the Dollar. It's important to note that stretched positioning doesn't always mean we should take the opposite side. Instead, we use positioning data to identify where markets might be most imbalanced and combine that with upcoming risk events to find opportunities where stretched positioning could be forced to adjust.
CFTC Data As Of 5/05/24
Japanese Yen net short position is -168,388 contracts
British Pound net short position is -28,990 contracts
Euro net short position is -6,777 contracts
Bitcoin net long position is 6 contracts
Swiss Franc posts net short position of -41,786 contracts
Equity fund managers cut S&P 500 CME net long position by 17,130 contracts to 815,943
Equity fund speculators trim S&P 500 CME net short position by 14,932 contracts to 168,931
Gold NC Net Positions increased to $204.2K from previous $202.9K
Technical & Trade Views
SP500 Bullish Above Bearish Below 5158
Daily VWAP bullish
Weekly VWAP bullish
Below 5120 opens 5045
Primary support 4987
Primary objective is 5258
EURUSD Bullish Above Bearish Below 1.0720
Daily VWAP bullish
Weekly VWAP bearish
Above 1.0730 opens 1.0843
Primary resistance 1.850
Primary objective is 1.0550
GBPUSD Bullish Above Bearish Below 1.2450
Daily VWAP bearish
Weekly VWAP bearish
Above 1.2590 opens 1.2640
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 63000
Daily VWAP bearish
Weekly VWAP bullish
Below 57500 opens 55900
Primary resistance is 63000
Primary objective is 53877
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Past performance is not indicative of future results.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!