Daily Market Outlook, November 8, 2024
Munnelly’s Macro Minute…
"Chinese Markets In The Red As Finance Minister Fails To Excite Investors On Stimulus”
Asian markets ex Japan sink as Chinese official once again fail to deliver on stimulus hopes, however, a miscommunication on wire reports regarding the scale of local debt reduction offers some minor relief as local markets recover from lows, the local hidden debt will be reduced from 14.3 trillion yuan to 2.3 trillion yuan,mainland markets trade just shy of 5% down on the session, According to a report by the Xinhua News Agency, China would increase the debt ceiling for local governments to 35.52 trillion yuan. This will enable them to issue six trillion yuan in additional special bonds over a three-year period in order to swap concealed debt. As China looks to reduce financial risks and support growth, the plan that was approved by the National People's Congress Standing Committee is mostly in line with what markets anticipated.
As expected, the Fed Funds target rate was lowered by 25 basis points to a range of 4.5 to 4.75% at the November meeting. What will happen next? The only important thing that changed in the FOMC statement was that everyone agreed to cut rates this time (last time, Bowman was against a 50bp cut and wanted only a 25bps cut). Powell's press conference gave a lot of hints that he wanted to ease again in December, but there is no "set path." In December, Powell was asked what would make the Fed stop raising rates. He replied with what would make the Fed cut rates. It was not a surprise that the answer was weak employment figures, but he would not say if they would wait if good news about the job market came out between now and then. Powell also said that they would be more likely to stop raising rates when they got closer to neutral, but his words showed that they did not think that point had been reached yet. The USD OIS market-implied odds of a ~55% chance of a 25bps December cut reflect both how uncertain the outcome really is and how slightly more likely it seems that something else will happen. Going back to watching info.
Following a hectic week that included important central bank meetings, the U.S. election, and the fall of the German government, euro zone bond rates dipped lower on Friday. This week, they were expected to climb slightly. Last week, Germany's 10-year yield was up by one basis point, down 2 basis points at 2.42%. The U.S. 10-year yield ended a tumultuous Thursday down 8 basis points and was slightly lower on Friday at 4.34%, suggesting that Friday's decline was partially a catch-up with U.S. treasuries. Italy's 10-year yield was 5 basis points lower at 3.69%, while Germany's two-year yield was 2 basis points lower at 2.41%.
Overnight Newswire Updates of Note
Japan Opposition Camp To Chair Lower House Budget Committee
Japan Intervened Twice Last Quarter To Bring Yen Below 160
Japan’s Household Cut Spending Once Again As Prices Rise
Hong Kong Follows Fed With Rate Cut In Boost For Economy
Dollar Winds Down After Volatile Week, China NPC In Focus
China Awaits Trump’s Approach To Tech Rivalry
Putin: Trump’s Ukraine Proposals Merit Attention
Powell: Won’t Step Down As Fed Chair If Asked By Trump
Fed Cuts Rates, Notes Job Market Easing, Solid Economic Growth
US House Control Battle Continues, Teeter On Uncounted Votes
BoE Cuts Rates But Sees Higher Inflation After Reeves's Budget
REC: UK Hiring Fell Most In Seven Months Ahead Of Budget
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0700 (971M), 1.0750 (1.0BLN), 1.0780-85 (1.7BLN)
1.0795-00 (2.2BLN), 1.0810-15 (406M), 1.0825-35 (851M)
1.0850-60 (1.23BLN), 1.0875-80 (547M), 1.0885-90 (1.9BLN)
1.0895-00 (875M), 1.0915-25 (2.0BLN)
USD/JPY: 151.00 (935M), 151.55 (210M), 151.75 (734M)
152.00 (724M), 152.90-00 (900M), 154.00 (973M)
EUR/JPY: 162.35-42 (1.55BLN). EUR/SEK: 11.6400 (387M)
USD/CHF: 0.8675-85 (500M), 0.8750-55 (831M)
EUR/CHF: 0.9300 (250M), 0.9590 (601M), 0.9710 (700M)
EUR/GBP: 0.8245-50 (595M), 0.8290-00 (520M), 0.8350 (654M)
GBP/USD: 1.2950 (215M), 1.3000 (219M), 1.3080-95 (675M)
AUD/USD: 0.6540-55 (1.4BLN), 0.6560-65 (2.83BLN)
0.6590-0.6600 (788M), 0.6660-65 (392M), 0.6695-0.6700 (624M)
AUD/JPY: 96.80 (389M), 99.70 (585M)
NZD/USD: 0.6000 (587M), 0.6070 (211M), 0.6200-15 (1.16BLN)
USD/CAD: 1.3750-55 (704M), 1.3800 (452M), 1.3825 (242M)
1.3850 (215M), 1.3885 (458M), 1.3900 (236M) 1.3920 (444M)
1.3975 (240M), 1.4000 (678M)
CFTC Data As Of 1/11/24
Net USD G10 long +$8.88bn to +$18.7bn in Oct 23-29 IMM period; $IDX +0.13%
EUR +0.17%: speculative positions decreased by 21.8k contracts, now at -50.3k, lower ECB view weighs on EUR
JPY +1.55%; speculative positions decreased by 37.6k contracts, now at +25k, on hawkish Fed, less dovish BoJ
GBP +0.27%; speculative positions decreased by 8.2k contracts, now at +66.4k; less-dovish BoE lends support. Note large sterling dip post-budget not accounted for in this report
CAD +0.62%; speculative positions decreased by 26.9k contracts, now at -168k; shorts eyes July ATH -196k
AUD -1.78%; speculative positions decreased by 163 contracts, now at +27.5k; for now RBA least dovish c.bank
Equity fund managers cut S&P 500 CME net long position by 20,435 contracts to 1,045,389
Equity fund speculators trim S&P 500 CME net short position by 12,576 contracts to 292,035
Speculators increase CBOT US 10-year Treasury futures net short position by 52,992 contracts to 901,183
Technical & Trade Views
SP500 Bullish Above Bearish Below 5880
Daily VWAP bullish
Weekly VWAP bullish
Below 5870 opens 5800
Primary support 5800
Primary objective 5950 - TARGET HIT NEW PATTERN EMERGING
EURUSD Bullish Above Bearish Below 1.09
Daily VWAP bearish
Weekly VWAP bearish
Above 1.09 opens 1.0950
Primary resistance 1.0950
Primary objective 1.0750 - TARGET HIT NEW PATTERN EMERGING
GBPUSD Bullish Above Bearish Below 1.3050
Daily VWAP bearish
Weekly VWAP bearish
Below 1.29 opens 1.27
Primary resistance 1.3050
Primary objective 1.27
USDJPY Bullish Above Bearish Below 151
Daily VWAP bearish
Weekly VWAP bullish
Below 150 opens 148
Primary support 148
Primary objective is 157.50
XAUUSD Bullish Above Bearish Below 2680
Daily VWAP bearish
Weekly VWAP bullish
Below 2590 opens 2530
Primary support 2600
Primary objective is 2800
BTCUSD Bullish Above Bearish Below 71500
Daily VWAP bullish
Weekly VWAP bullish
Below 70000 opens 68000
Primary support is 60000
Primary objective is 80000
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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!