Daily Market Outlook, October 21, 2024
Munnelly’s Macro Minute…
"Trump Trade Gains Traction, While Geopolitical Tensions Rise”
Asian stock markets are trading with mixed results on Monday, following the generally positive performance on Wall Street on Friday, as traders have reduced their expectations for US Federal Reserve interest rate cuts this year in response to the largely upbeat set of US economic data released last week. A series of Chinese economic data released last week has reinforced calls for more stimulus measures to support the Chinese economy. Ongoing concerns about geopolitical tensions continue to weigh on the markets. Asian markets closed with mixed results on Friday. Last week, US retail sales increased slightly more than anticipated in September, and jobless claims unexpectedly declined, while industrial production decreased in September, reversing the growth seen in August, according to separate reports.
The focus on China's stimulus programme continues to overshadow data flow, but the picture these releases paint is still very real and will impact the efficacy of Beijing's belated push. GDP data was never expected to track at the official 5% growth target in Q3, but the +4.8% ytd reported in the release (and 4.6% y/y) shows what needs to be done in the final three months of the year to hit that level. Most will come from investment rather than consumption, which ought to be a mix of efforts to complete unfinished property projects (Sep real estate investment -10.1% y/y) while continuing to pump capacity (Sep manufacturing investment +9.2% y/y). But while that might meet the immediately prescribed target, it will do little to address the root causes of slowing growth and weak confidence. While we might see an uptick in retail too, consumers are unlikely to view government solutions centred around borrowing as completely reassuring. House price declines remain rapid and reductions to mortgage rates are unlikely to move that dial. The propensity to save will stay high and increasing domestic capacity will remain a deflationary force. At the same time, the export model remains vulnerable to increasing trade and geopolitical hostilities. Ideology needs to change to reshape macro direction, liquidity Kool-aid won't.
The relatively quiet U.S. data schedule is led by S&P Global flash PMIs, existing and new home sales, durable goods, the Federal Reserve's Beige Book, weekly jobless claims, and University of Michigan sentiment. The BoC is expected to lower its policy rate from 4.25% on Wednesday, with 19 of 29 economists in a Reuters poll expecting a chunky 50 basis-point cut. Japan has a low-key week for event risk, with flash PMIs, Tokyo October CPI and services PPI the main releases, ahead of the general election on Sunday. European Central Bank President Christine Lagarde will discuss Europe's economic outlook on Wednesday. The UK has flash PMIs on Thursday, while Bank of England Governor Andrew Bailey has three speaking engagements in the U.S.
Overnight Newswire Updates of Note
Chinese Banks Cut Lending Rates To Boost Economy
RBA’s Hauser Encouraged By Market Response
ECB’s Villeroy Expects Inflation To Be At 2% Early Next Year
Economist Of '08 Recession Warns Stocks In 'Mega-Bubble'
US Interest Burden Hits 28Y High, Escalating Political Risk
US Investigates Intelligence Leak About Israel’s Plans
US Budget Deficit Tops $1.8T FY24, Third-Largest On Record
XAU Climbs To Record As Mideast, US Election Drive Haven
Oil Edges Higher On Prospects Of Supply Disruptions
Bitcoin Flirts With $70,000 After $2.4B Inflow Into ETFs
(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: 1.0800 (490M), 1.0850 (400M), 1.0885-90 (1.81BLN)
1.0895-1.0900 (720M), 1.0910 (300M), 1.0940-50 (904M)
1.0970 (263M), 1.1000 (2.12BLN)
USD/CHF: 0.8575 (325M), 0.8600 (554M)
GBP/USD: 1.2910 (444M), 1.2945 (440M), 1.3240 (509M), 1.3285 (350M)0700
AUD/USD: 0.6590 (2.22BLN), 0.6640 (228M), 0.6700 (343M)
0.6825 (388M), 0.6840 (1.95BLN)
NZD/USD: 0.6030 (206M), 0.6385 (581M)
USD/CAD: 1.3600 (837M), 1.3800 (1.11BLN), 1.3850 (388M)
1.3900 (1.44BLN)
USD/JPY: 150.00 (580M)
CFTC Data As Of 18/10/24
Euro net long position is 1750 contracts
Japanese Yen net long position is 34,110 contracts
Swiss Franc posts net short position of -26,161 contracts
British Pound net long position is 85,802 contracts
Bitcoin net short position is -1,872 contracts
Equity fund managers raise S&P 500 CME net long position by 8,773 contracts to 1,050,355
Equity Fund speculators trim S&P 500 CME net short position by 4,760 contracts to 324,051
Speculators trim CBOT US 10-year Treasury futures net short position by 95,064 contracts to 865,065
Technical & Trade Views
SP500 Bullish Above Bearish Below 5750
Daily VWAP bullish
Weekly VWAP bullish
Below 5720 opens 5660
Primary support 5575
Primary objective 5760
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 - TARGET HIT NEW PATTERN EMRGING
GBPUSD Bullish Above Bearish Below 1.32
Daily VWAP bullish
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!