Daily Market Outlook, October 2, 2024
Munnelly’s Macro Minute…
"China Remains Bid Amid Divergence With Rising Geopolitical Risk”
On Wednesday, traders and investors in Asia paid attention to the growing tensions in the Middle East. As worries about the potential for a bigger conflict continued, Iran launched about 180 ballistic missiles and declared that, barring further provocation, its attack is done. But Israel has promised a reaction and is fully supported by the US. Gold was trading close to an all-time high, crude oil prices were still rising, and demand was high for safe-haven assets like Treasury bonds and the US dollar. Nonetheless, some markets—especially in Hong Kong—were prepared to ignore the dangers, as seen by the Hang Seng index rising more than 4% as the market's enthusiasm for China's stimulus announcements did not seem to be abating. Given the extensive list of measures included in China's stimulus plan, it is not a surprise that markets have remained robust even with geopolitical uncertainty rising rapidly. However, this push for liquidity still seems too narrowly orientated, depending on greater capital for state-owned banks, swap facilities, softer lending criteria, and lower interest rates. It remains to be seen how successful that is in an already heavily indebted economy.
Domestically, UK Premier Keir Starmer's initial discussions with European Commission President Ursula von der Leyen in Brussels on matters like trade and security could impact the direction of Britain's relationship with the EU. A "reset" has been discussed by both parties. Wednesday's schedule of speakers from the ECB includes Vice President Luis de Guindos and Chief Economist Philip Lane. However, given the recent trend of low inflation data and signals from ECB Chair Christine Lagarde, a quarter-point rate reduction this month seems extremely plausible.
When it comes to monetary policy, the Fed will probably be given more emphasis. The monthly payroll data that is released on Friday will be important in deciding whether policymakers in the United States decide to reduce interest rates by 25 or 50 basis points the following month. Later today, the ADP employment report for the private sector will also provide some clues. Job opportunities saw a spike in the August JOLTS data yesterday, with an 8040k reading following an upwardly revised 7711k (7673k previously reported) figure. That brings openings to a three-month high and marginally reprofiles the recent (falling) trend. The report contained nothing particularly concerning either. The rate of resignations decreased even more, supporting the widely held belief that the employment market is no longer too tight. However, there are no indications of stress in terms of job losses, layoffs are staying at the same level, and the employment-to-unemployment ratio has actually increased again to 1.1 (i.e., there are more jobs than workers). The Fed will find that to be encouraging reading, supporting Powell's claim that the labour market is still strong. This aligns with more timely metrics like unemployment claims, which have also indicated a little improvement in labour market conditions in recent weeks. With the September ADP data coming out on Wednesday, we should have further proof on whether that has affected hiring. An increase of 123k is now the median projection, up from 99k in August.
With no signs of active negotiations over the weekend, a speedy resolution to the enormous dock worker strike that is blocking half of the nation's cargo seemed improbable. The strike may cost as much as $5 billion a day and damage everything from cars to maize.
Overnight Newswire Updates of Note
Iran Attacks Israel With Missiles, Drawing Vows Of Retaliation
China’s Defaulted Developers Soar 200% in Speculative Frenzy
Japan’s Ishiba Isn’t Necessarily Pro-BOJ Hike, New Minister Says
Vance Seeks To Temper Trump’s Policies, Walz Casts Trump As Dangerous
Eurozone Bond Yields Drop, Inflation Bolsters ECB October Rate Cut Bets
Yen Weaker Following Remarks From Economy Minister Akazawa
Oil Extends Surge As Israel Vows Retaliation After Iran Strike
Gold Holds Near Record As Mideast Escalation Stokes Haven Demand
Hong Kong Stocks Rally More Than 6% In Return From Public Holiday
Nike Seeks To Wipe Slate Clean For New CEO, Withdraws Guidance
Oracle To Invest $6.5 Billion In Malaysia AI, Cloud Services Hub
Bitcoin Crumbles To $60K, Giving Up Most Post-Fed Rate Cut Gains
(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: 1.0940-50 (336M) 1.0965 (210M), 1.1000-10 (930M)
1.1025 (2.6BLN), 1.1050-60 (1.0BLN), 1.1090-00 (2.4BLN)
1.1115-25 (2.9BLN), 1.1150-55 (300M), 1.1200 (726M)
USD/CHF: 0.8475 (654M), 0.8485-90 (415M), 0.8600 (477M)
GBP/USD: 1.3360 (773M), 1.3475 (410M)
AUD/USD: 0.6800 (680M), 0.6875 (522M), 0.6900 (304M)
0.6950 (495M)
NZD/USD: 0.6230 (582M), 0.6300 (638M), 0.6350 (551M)
USD/JPY: 141.50 (550M), 144.00 (883M), 145.00 (1.12BLN)
145.25 (557M)
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 bearish
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!