Daily Market Outlook, October 22, 2024 

Munnelly’s Macro Minute…

"Asian Markets Muted As US Markets Mull Potential Election Outcomes”

Asian stock markets are mostly down on Tuesday, reflecting the mixed signals from Wall Street overnight as bond yields rise due to diminished expectations of US Federal Reserve interest rate cuts. Traders have also taken some profits after the recent market rally. The uncertainty surrounding conflicts in the Middle East and Europe, as well as the US presidential election, is weighing on market sentiment. Asian markets closed mixed on Monday. After the Fed's 50-basis-point rate cut last month, CME Group's FedWatch Tool currently indicates an 87.0% chance of just a 25-basis-point rate cut next month. Dallas Fed President Lorie Logan said she supported gradual rate cuts to help manage risks and achieve the goals.

The 10-year spread between Treasuries and bunds is now the widest since July, and the UST-gilts spread turned positive last week. The volatility is already showing signs of cooling primary debt markets, which have slowed down considerably in places such as Australia. Goldman Sachs believes a strong U.S. economy and a dovish central bank in Europe will open spreads wider, with a target of 205 basis points for the gap between bunds and Treasury bonds, and said the election—along with fundamentals—is in focus. A light calendar of economic releases—save for a U.S. jobs report on Nov. 1—leaves investors starting to hunker down ahead of the Nov. 5 polling day. Republican candidate Donald Trump is seen as negative for bonds since his tax, tariff and immigration policies are likely to be inflationary – though Democrat Kamala Harris is also likely to spend heavily. 

The Japanese stock market is experiencing another decline on Tuesday, building upon the modest losses from the previous session. The Nikkei 225 index has fallen slightly below the 38,500 level, reflecting the mixed signals from Wall Street overnight, with weakness across most sectors, particularly among index heavyweights and technology stocks. China's markets remained subdued, with traders awaiting further details and increased government urgency and spending to support the struggling economy. Hong Kong's Hang Seng and the Shanghai Composite indexes were flat.

U.S. Secretary of State Antony Blinken is visiting Israel on Tuesday as part of a broader Middle East tour intended to reinvigorate discussions on the Gaza ceasefire. However, oil prices surged significantly on Monday as hopes faded that the death of Hamas leader Yahya Sinwar could lead to a breakthrough in the peace process.

Overnight Newswire Updates of Note

  • NZ Records Smallest Trade Deficit In 30 Months

  • RBNZ: Cash System Shifting, Abundant To Ample

  • Fed’s Schmid Advocates Slower Interest-rate Cuts

  • Fed’s Daly: Policy Adjustments To Continue

  • Asia Markets Drop After US Indexes Slip

  • Dollar Holds Steady At August High, Election

  • Yen Rises Near 151.00 Despite Japan Risks

  • Aussie Rebounds From 0.6650 As USD Eases

  • Blackrock’s Fink: US Election Impact Minimal

  • SAP Cloud Sales Boosted By AI Demand

          (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: 1.0750 (737M), 1.0800 (377M), 1.0825-30 (330M), 1.0850 (2.1BLN)

  • 1.0880-85 (1.21BLN), 1.0900 (455M), 1.0935-40 (1.24BLN), 1.1000 (1.2BLN)

  • USD/JPY: 148.50 (1.3BLN). USD/CHF: 0.8750 (431M)

  • GBP/USD: 1.2965 (220M), 1.3175-90 (395M), 1.3280 (500M)

  • 1.3300 (210M). EUR/GBP: 0.8325 (480M), 0.8455 (202M)

  • EUR/NOK: 11.90 (504M), 11.9160 (453M)

  • AUD/USD: 0.6575 (1.91BLN), 0.6675 (1.6BLN), 0.6700 (294M)

  • 0.6800 (900M), 0.6815-20 (2.4BLN)

  • NZD/USD: 0.6120 (660M)

  • USD/CAD: 1.3715-20 (292M), 1.3725-30 (737M)

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 5660

  • Primary objective 5760

EURUSD Bullish Above Bearish Below 1.10

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Above 1.1030 opens 1.1120

  • Primary support 1.0750

  • Primary objective 1.0750

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 147

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 146.50 opens 144

  • 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 2800

BTCUSD Bullish Above Bearish Below 63000

  • Daily VWAP bearish

  • Weekly VWAP bullish

  • Below 62000 opens 59000

  • Primary support is 50000

  • Primary objective is 70000