Daily Market Outlook, September 13, 2024 

Munnelly’s Macro Minute…

"Bonds, Gold & JPY Bid On Reports That 50bps Cut Still On The Table”

With the odds for a massive half-point decrease back at almost a coin flip, markets are once again re-pricing the belief that a quarter-point Fed rate cut was a given for next week. The story began with articles in the Wall Street Journal and the Financial Times stating that the decision made on September 18 was still "a close call." Subsequently, the still-very-powerful former president of the New York Fed, Bill Dudley, stated at a Singaporean event that there is "a strong argument" for a 50 basis point drop. As a result, the dollar went into defensive mode and lost strength against the euro and retreated to its lowest point of the year against the yen. 

In Asian trading, two-year Treasury yields dropped back below 3.6%. At $2,570, gold reached an all-time high. Regional markets saw a range of reactions. Australian stocks and Hong Kong's Hang Seng saw gains of over 1%. But with the yen so much higher, a decline for the Nikkei was all but inevitable. Adding to the drag on the Nikkei was the Bank of Japan board's statement that the central bank needs to raise short-term rates to at least 1% through fiscal 2026 to consistently meet the 2% inflation target, which led to the Nikkei 225 testing the 36.5K handle down just over 1% on the session. Additionally, mainland Chinese equities suffered, as did South Korea's. Notably, all three of those markets are about to embark on an extended weekend vacation.

There is not much on Friday's European data schedule to divert attention from Fed-focused conjecture. Some CPI prints are still coming in, mainly from Greece and France. Data on the industrial production of the eurozone is also due.

There are no scheduled speeches by central banks because the Fed and the Bank of England are in blackout periods. The Bank of England will announce policy on Thursday, and no change is anticipated. After the widely anticipated rate decrease on Thursday, the ECB has mostly moved on, and President Christine Lagarde has not provided any firm indication as to when the next one will occur.

Despite the International Energy Agency's reduction of its oil demand forecast for the year, crude oil prices continue to gain,  amid reports of supply disruptions in facilities along the Gulf of Mexico as a result of Hurricane Francine. The West Texas Intermediate Crude oil futures for October closed at $68.97 per barrel, an increase of $1.66 or nearly 2.5%.

Overnight Newswire Updates of Note

  • The Fed’s Rate-Cut Dilemma: Start Big Or Small

  • US President Biden To Meet UK PM Starmer

  • CIBC: BoC To Start Jumbo Rate Cuts By December

  • China Poses Policy Challenge To Japan Leadership Hopefuls

  • China Sets 6G Standards, Next-Gen Communications

  • Hedge Funds Option Bets On Further Yen Rally

  • NZ House Prices Rise As Market Confidence Grows

  • UN: Libyan Yet To Reach Deal On Central Bank Crisis

          (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)

  • USD/JPY: 149.55 ($1.75b), 142.00 ($1.24b), 145.55 ($1.01b)

  • EUR/USD: 1.0975 (EU958.7m), 1.1030 (EU831.4m), 1.1120 (EU586.3m)

  • USD/CAD: 1.3695 ($906m), 1.3690 ($670.8m), 1.3600 ($490m)

  • AUD/USD: 0.6740 (AUD810.4m), 0.6800 (AUD532.5m), 0.6600 (AUD530.4m)

  • USD/CNY: 7.1000 ($895.4m), 7.2800 ($618.1m), 7.1500 ($603.9m)

  • USD/BRL: 5.5500 ($403.2m)

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 5600

  • Daily VWAP bullish

  • Weekly VWAP bearish

  • Above 5610 opens 5660

  • Primary resistance 5659

  • Primary objective is 5325

EURUSD Bullish Above Bearish Below 1.1140

  • Daily VWAP bullish

  • 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 bullish

  • 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