Daily Market Outlook, October 1, 2024
Munnelly’s Macro Minute…
"Thin Asian Session Buyoed By Quarter End Rally In The US”
Asian stock markets are trading mostly higher on Tuesday in thin trade, buoyed by the positive performance of Wall Street overnight. The Japanese stock market has bounced back from the significant declines in the previous trading session, with the Nikkei 225 index now trading well above the 38,500 level. The yuan remained unchanged at seven per dollar in offshore trading, with Chinese markets closed and holidays in Hong Kong and South Korea further reducing activity in the Asian session. The three main US benchmark stock indices finished the day higher thanks to a late-day end-of-quarter rally in stocks that saw gains of 0.04–0.4%. Following Fed Chair Powell's speech, the market initially fell sharply but quickly recovered as investors saw a decrease in the likelihood of a 50 basis point cut in November. Powell reiterated his previous position, saying that there is no need to rush to lower rates because labour conditions are good and choices will be made meeting-by-meeting using data. Rate cuts in November and December now have lower futures pricing—34bps and 70bps, respectively—than they had earlier (previous 39bps and 77bps).
European inflation data is scheduled for release on Tuesday; preliminary September Eurozone HICP data is expected to show improvement on Tuesday (median 0.0% m/m, 1.8% y/y from 2.2%), following the trend of improvement observed in all four of the major country releases, where inflation dropped below the 2% line (Germany and France joining Italy and Spain, which were already there). It has to be stressed that these are the headline readings; the ECB hawks are more interested in the development of stickier core prices, which is where those pressures from services are hidden. However, given the improvement in Spain, it seems that the core number has finally started to decline, and the market is only expecting the Core HICP to increase by a tenth, to 2.7% year over year. Fears over persistence in core have given the hawks power, despite President Lagarde's repeated warning on Monday that headline inflation was expected to creep back up towards year-end due to energy base effects. This report should verify that. When considering the unfavourable European poll results, the market has now assigned a 90% chance that the ECB will lower interest rates once again in October.
Stateside U.S. yields rebounded after Federal Reserve Chair Jerome Powell stated that the policy committee was not in a rush to cut rates, but this could quickly change if the data released on Tuesday and throughout the rest of the week indicates weakness. The U.S. manufacturing ISM has remained in contractionary territory for months, even as the economy has continued to perform well, but the focus will be intense on the employment index and the August job openings figures. If there are signs of weakness, traders will be ramping up bets on a 50-basis-point Fed cut for November.
Overnight Newswire Updates of Note
Israeli Military: 'Limited' Operation Against Hezbollah In Lebanon Has Begun
US Dockworkers Launch Strike At Ports From Maine To Texas
Japan Business Mood Remains Firm, Keeping BoJ On Hike Track
Australia’s Retail Sales Jump In August As Weather Turns Warmer
NZ Treasury Says Economy At Or Near Bottom Of Cycle
Fed Drives Global Push To Cut Rates Despite Questions Over 2025
Japanese Yen Declines Following BoJ Summary Of Opinions, Economic Data
Oil Steadies As Mideast Tensions Vie With Libyan Supply Outlook
Gold Edges Higher, Supported by Safe-Haven Demand
Asia-Pacific Markets Mixed After Powell Signals Smaller Rate Cuts
Qatar Airways To Buy 25% Stake In Virgin Australia From Bain
CVS Board Conducts Strategic Review Of Company
Bitcoin Ends Historic Month With a Dip, Breakout Unlikely Before US Election
(Sourced from reliable financial news outlets)
As the US elections draw near, the financial markets are bracing for potential volatility, presenting both opportunities and challenges for traders. To help navigate this crucial period, we have launched the US Elections - Traders Hub, a comprehensive resource tailored to meet the needs of traders at every level.
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.1080-85 (1.7BLN), 1.1100-05 (3BLN), 1.1125-30 (578M)
1.1155-60 (692M), 1.1175 (590M), 1.1200 (1BLN)
GBP/USD: 1.3200 (246M), 1.3400 (346M)
EUR/GBP: 0.8280 (511M), 0.8300 (355M), 0.8350 (300M), 0.8375 (262M)
AUD/USD: 0.6810 (1.5BLN), 0.6850 (398M), 0.6900 (300M)
0.6945-50 (483M), 0.7000 (341M)
AUD/NZD: 1.0825 (250M), 1.0900 (500M)
USD/CAD: 1.3480 (444M), 1.3525 (938M)
USD/JPY: 143.40 (930M), 143.80 (409M), 143.90 (468M), 144.00 (510M)
CFTC Data As Of 27/9/24
Japanese Yen net long position is 66,011 contracts
Swiss Franc posts net short position of -19,290 contracts
British Pound net long position is 86,992 contracts
Euro net long position is 71,698 contracts
Bitcoin net short position is -1,546 contracts
Equity fund managers raise S&P 500 CME net long position by 45,709 contracts to 1,067,272
Equity fund speculators trim S&P 500 CME net short position by 33,670 contracts to 328,635
Speculators trim CBOT US 10-year Treasury futures net short position by 68,748 contracts to 1,025,278
Technical & Trade Views
SP500 Bullish Above Bearish Below 5735
Daily VWAP bullish
Weekly VWAP bullish
Below 5720 opens 5680
Primary support 5575
Primary objective 5820
EURUSD Bullish Above Bearish Below 1.1180
Daily VWAP bearish
Weekly VWAP bullish
Below 1.1120 opens 1.10
Primary support 1.10
Primary objective 1.1250
GBPUSD Bullish Above Bearish Below 1.3230
Daily VWAP bearish
Weekly VWAP bullish
Below 1.32 opens 1.3140
Primary support is 1.32
Primary objective 1.36
USDJPY Bullish Above Bearish Below 142.50
Daily VWAP bearish
Weekly VWAP bearish
Above 141.50 opens 138
Primary resistance 148
Primary objective is 148.38
XAUUSD Bullish Above Bearish Below 2645
Daily VWAP bearish
Weekly VWAP bullish
Below 2600 opens 2550
Primary support 2550
Primary objective is 2720
BTCUSD Bullish Above Bearish Below 60000
Daily VWAP bearish
Weekly VWAP bullish
Below 54000 opens 50000
Primary support is 500000
Primary objective is 700000
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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!