Daily Market Outlook, September 11, 2024
Munnelly’s Macro Minute…
"Yen Pops, Trump Odds Drop, Markets Await US Inflation Data”
On Wednesday, Asian markets experienced a decline as a result of the increase in bond prices and mixed signals from Wall Street, driven by economic concerns in anticipation of the US inflation data. The Yen reached its strongest level against the Dollar since January as BoJ policymaker Nakagawa declared that the central bank will continue to adjust the level of easing. The BoJ decision is expected to be made next week, with the majority of economists predicting that it will delay the next rate hike until December or January. Benchmarks in Japan and Hong Kong led declines for the third consecutive session. The Nikkei 225 is trading below the 35.9K handle, with index heavyweights and financial equities leading the way lower.
The dollar was under pressure following a contentious presidential debate between Republican Donald Trump and Vice President Kamala Harris in the United States, which kept investors on alert. During their first debate, the presidential candidates engaged in a heated discussion regarding abortion, the economy, immigration, and Trump's legal issues. President Joe Biden's withdrawal in July has resulted in Harris' late entry into the presidential contest, which has tightened the race and prompted a reversal of trades that were established in anticipation of a second Trump presidency. The candidates' fiscal policies and economic plans are the primary concern of investors; however, the debate was devoid of specific details; however, betting markets shifted in Harris' favor following the event.
The UK experienced a sluggish start to Q3, with no growth in July. However, the MPC is unlikely to be overtly concerned by the data. The third quarter began with a subpar performance, as evidenced by a 0.0% m/m increase in July, which was below the anticipated 0.2% m/m increase. The manufacturing sector was notably weak, with a contraction of -1.0% m/m. Construction activity also experienced a decline, albeit at a more moderate rate of 0.4% m/m. The services sector, which is more significant, did experience a 0.1% m/m growth rate, although it fell slightly short of the 0.2% m/m expectation.
Stateside, the headline inflation rate is anticipated to decrease from 2.9% y/y to 2.5% y/y. However, there are potential hazards. Energy price base effects are favorable for the August US CPI release, and the same should be true for this month. Consequently, a decrease in the annual headline inflation rate is anticipated. Expect a decrease to 2.5% y/y, which is a decrease from the 2.9% y/y rate observed in July. Therefore, it is anticipated that the rate will be marginally lower than the consensus of 0.2% m/m. However, markets anticipate an unchanged rate of 0.2% m/m and 3.2% y/y for the ex-food and energy metric in the absence of these energy price dynamics. It appears that the overall narrative will not advance significantly with this release, at least on paper. However, as we have recently observed, even apparently modest data surprises have elicited more significant market reactions. The Fed's preference for a 25bp move to initiate the rate reduction cycle next week remains significantly more probable than the 50bp alternative, which has been assigned a one-in-three chance by the market. One potential risk for those who are inclined to position for a more aggressive cut is that certain volatile components, such as airfares and used vehicle prices, have contributed to the softening of the market over the past few months, thereby increasing the likelihood of a partial snapback.
Overnight Newswire Updates of Note
Trump And Harris Clash In Fiery Debate
Traders Expect At Least Two Big Fed Cuts Soon
ECB Expected To Cut Rates As Fed Prepares To Do Same
RBA ‘Surprised’ By Limited Easing In Job Gauges, Hunter Says
BoJ’s Nakagawa Ready For Rate Hike If Inflation Steady
Yen Gains To Strongest Since Jan 2 After BoJ Official Speaks
Aussie Recovers Above 0.6650, As Focus Shifts To US CPI
Brent Oil Tumbles Below $70 Due To Oversupply Fears
NatGas Prices Rise 3%, Output Cuts Before Storm Francine
Warren Buffett’s BofA Stock Sales Slow After Price Declines
China's Auto Sales Dip 5% In August, 3rd Straight Month
JPMorgan Shares Fall After Warning On Earnings Outlook
Australia REA: Rightmove Board Rejected £5.6B Proposal
Israel Still Wants Integration With Arab States
(Sourced from reliable financial news outlets)
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.1000 (1.3BLN), 1.1020-25 (1.2BLN), 1.1050 (833M)
1.1075 (725M), 1.1100 (400M)...
USD/CHF: 0.8600 (750M). GBP/USD: 1.3050-60 (247M), 1.3100 (200M)
NZD/USD: 0.6065 (2.2BLN), 0.6100 (300M), 0.6120-25 (707M)
AUD/USD: 0.6610 (1.1BLN), 0.6625 (750M), 0.6700 (365M)
USD/CAD: 1.3495-1.3510 (1.3BLN), 1.3625-30 (917M)
USD/JPY: 140.00 (272M), 142.00 (354M), 142.50 (912M), 142.75 (544M)
EUR/JPY: 157.00 (236)
CFTC Data As Of 6/9/24
Bitcoin net long position is 108 contracts
Swiss Franc posts net short position of -21,882 contracts
British Pound net long position is 108,078 contracts
Euro net long position is 100,018 contracts
Japanese Yen net long position is 41,116 contracts
Equity fund managers raise S&P 500 CME net long position by 1,368 contracts to 991,219
Equity fund speculators trim S&P 500 CME net short position by 85,360 contracts to 271,561
Speculators increase CBOT US 10-year Treasury futures net short position by 88,390 contracts to 1,002,827
Technical & Trade Views
SP500 Bullish Above Bearish Below 5490
Daily VWAP bullish
Weekly VWAP bearish
Above 5510 opens 5550
Primary resistance 5555
Primary objective is 5325
EURUSD Bullish Above Bearish Below 1.1140
Daily VWAP bearish
Weekly VWAP bullish
Below 1.09 opens 1.0850
Primary resistance 1.1150
Primary objective 1.0950
GBPUSD Bullish Above Bearish Below 1.3190
Daily VWAP bearish
Weekly VWAP bullish
Below 1.3050 opens 1.2960
Primary support is 1.2730
Primary objective 1.3390
USDJPY Bullish Above Bearish Below 143.70
Daily VWAP bearish
Weekly VWAP bearish
Above 146 opens 150
Primary support 140
Primary objective is 139.60
XAUUSD Bullish Above Bearish Below 2500
Daily VWAP bullish
Weekly VWAP bullish
Below 2450 opens 2400
Primary support 2300
Primary objective is 2598
BTCUSD Bullish Above Bearish Below 54000
Daily VWAP bullish
Weekly VWAP bearish
Below 50000 opens 444400
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!