Daily Market Outlook, October 16, 2024
Munnelly’s Macro Minute...
"When The Chips Are Down...”
Asian stock markets are trading mostly lower on Wednesday, as some traders take profits after recent gains, and concerns over tensions in the Middle East and China's drills around Taiwan weigh on sentiment. While expectations for a 50bps rate cut by the US Fed next month have faded, there is still optimism the central bank will cut rates by 25bps.
Chip stocks worldwide plummeted after ASML, the leading chipmaking equipment manufacturer, forecast weak 2025 sales and noted that while AI-related chips are thriving, other semiconductor market segments are not, causing many of its customers to be cautious. ASML's gloomy outlook prompted a series of chip stock sell-offs across Europe, the U.S., and Asia.
Following LVMH's announcement of a quarterly revenue fall for the first time since the pandemic due to a weakening of Chinese consumer demand, investors will be intently watching the performance of luxury equities. This has exacerbated investor apprehensions over a highly reliant industry on China and tempered the recent surge in luxury stocks subsequent to the announcement of Chinese stimulus plans. The chief financial officer of LVMH claims that Chinese consumer confidence has fallen back to its lowest points during the COVID-19 pandemic. Additionally, investors doubt that China would implement comprehensive plans and robust fiscal stimulus measures to boost the faltering economy. Another theme for ASML was China, which accounted for 47% of its overall sales in the most recent quarter but is predicted to reduce that percentage to 20% by 2025. On Thursday, investors will be watching a news conference in Beijing, this time to talk about encouraging the "steady and healthy" growth of the real estate industry. With markets pointing to a rate decrease, the Bank of England's probable course at next month's policy meeting will be shaped by the UK September inflation data, which is expected later today.
The growing number of ECB officials indicating in favour of consecutive rate cuts following last meeting's easing was accompanied by an opening of long positions in Euribor futures for much of September, as shown by the Open Interest Indicator of White contracts. However, this positioning dynamic eased around the turn of the month and for the past week short positions have been opened – the strongest indication of new shorts since May. This is despite the market still pricing in two further 25bp cuts in each of the last two policy meetings of the year. The new shorts may reflect doubts about the magnitude of cuts next year, though the economic outlook in the Euro Area remains weak especially when compared to the US. That said, the indicator shows the longs that were built up last month have not been cut, which is justifiable at this comparatively early stage of the easing cycle. However, to prompt a resumption in new long positions a further ECB rate cut tomorrow will likely have to be accompanied by guidance of more easing to come – this would probably prompt some short covering as well.
Overnight Newswire Updates of Note
World Bank Boost Lending Capacity By $30B Over 10Y
NZ Annual Inflation Hits 2.2%, Within Target
BoJ Board Member Urges Gradual Approach Rate Hikes
HK Economy Set To Be Focus Of John Lee’s Policy Speech
RBA Reviewing And Gauging China Stimulus Impact
RBNZ: Higher Rate Was Needed To Offset Bank Liquidity
Fed’s Bostic: US Jobs And Growth To Stay Robust
Trump Pledges To Impose Sweeping Car Import Tariffs
UK Chancellor Faces Unease Of £40B Budget Gap
UK Inflation Set To Resume Slide After Summer Stall
Asian Currencies Mixed; Amid Risk-Off Sentiment
US Dollar Continues Uptrend As Fed Policy Provides Lift
United Airlines Sees Profit Growth, Launches Buyback
(Sourced from reliable financial news outlets)
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FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0850 (335M), 1.0875-85 (537M), 1.0950-55 (3BLN), 1.0975 (1.3BLN)
USD/CHF: 0.8550 (375M), 0.8600 (519M). EUR/CHF: 0.9360 (407M)
EUR/SEK: 11.350 (320M). EUR/NOK: 11.8200 (456M)
AUD/USD: 0.6750 (903M). AUD/NZD: 1.1100 (950M)
NZD/USD: 0.6000 (285M), 0.6050 (245M), 0.6065-75 (340M), 0.6120 (340M)
USD/CAD: 1.3690-1.3700 (732M), 1.3800 (236M), 1.3850 (438M)
USD/JPY: 148.50 (300M), 149.25 (250M), 150.00 (708M)
CFTC Data As Of 11/10/24
Japanese Yen net long position is 36,528 contracts
British Pound net long position is 93,135 contracts
Euro net long position is 39,098 contracts
Bitcoin net short position is -1,282 contracts
Swiss Franc posts net short position of -22,459 contracts
Equity fund speculators increase S&P 500 CME net short position by 26,533 contracts to 328,810
Equity fund managers cut S&P 500 CME net long position by 6,124 contracts to 1,041,583
Speculators trim CBOT US 10-year Treasury futures net short position by 183,760 contracts to 960,129
Technical & Trade Views
SP500 Bullish Above Bearish Below 5750
Daily VWAP bullish
Weekly VWAP bullish
Below 5720 opens 5660
Primary support 5575
Primary objective 5820 - TARGET HIT NEW PATTERN EMERGING
EURUSD Bullish Above Bearish Below 1.11
Daily VWAP bearish
Weekly VWAP bearish
Above 1.1030 opens 1.1120
Primary support 1.0850
Primary objective 1.0850
GBPUSD Bullish Above Bearish Below 1.3230
Daily VWAP bearish
Weekly VWAP bearish
Below 1.31 opens 1.29
Primary support is 1.29
Primary objective 1.29
USDJPY Bullish Above Bearish Below 144
Daily VWAP bullish
Weekly VWAP bullish
Below 141.50 opens 138
Primary resistance 152
Primary objective is 152
XAUUSD Bullish Above Bearish Below 2645
Daily VWAP bullish
Weekly VWAP bullish
Below 2600 opens 2550
Primary support 2550
Primary objective is 2720
BTCUSD Bullish Above Bearish Below 57000
Daily VWAP bullish
Weekly VWAP bullish
Below 57000 opens 52000
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!