Daily Market Outlook, September 30, 2024
Munnelly’s Macro Minute…
"Chinese Markets Surge, Japan Sinks. US Markets Await Powell Comments”
Chinese and Hong Kong stocks surged on Monday as Beijing took steps to address the country's housing market. Meanwhile, stocks in other Asian markets, particularly Japan, declined. Monday's trading on the Japanese stock market is drastically down, giving up all of the gains from the previous two sessions. With the markets pricing in the possibility of increased interest rates under new Prime Minister Shigeru Ishiba, the benchmark fell more than 4% to below the 38K handle. Since he has consistently criticised the ultra-accommodative policies of the Bank of Japan, investors believe he will not stand in the way of policy normalisation. But being in a position of leadership can change perceptions, and on the weekend he sounded more accommodating, saying that flexible policy is required given the status of the economy.
European and US stock futures showed mixed results. Investors are entering the fourth quarter with a more optimistic outlook as China implements stimulus measures and central banks worldwide are cutting interest rates to support economic growth. The Japanese yen pared its earlier gains, while the Australian and New Zealand dollars strengthened on expectations of Chinese stimulus. Oil prices remained stable as the market awaited Iran's response to the killing of Hezbollah’s leader over the weekend.
With Friday's volatile non-farm payrolls release the U.S. is in for a busy week. 4% According to a Reuters poll, 4% of US workers will be unemployed in September while 145,000 new positions will be created. FOMC Chair Jerome Powell's speech and the Chicago PMI kick off the week. This week, the market's expectations for U.S. policy will be further nuanced by the speeches of at least ten other Fed members. JOLTS job openings, the ADP employment report, weekly jobless claims, factory orders, and ISM manufacturing and non-manufacturing PMIs are some of the data highlights. July PMIs, August PPI, flash HICP, and unemployment are released by the euro zone. Prior to Christine Lagarde's speech to the European Parliament on Monday, German retail sales and CPI are scheduled to be released. In the UK investors will eye the UK's parliamentary hearings on the Monetary Policy Report, this hearing has the potential to garner a market response.
Today also represents month & quarter end which can also elicit some additional volatility on markets. Several Investment banks have published signals from their month-end FX rebalancing models, and the general consensus indicates that the U.S. dollar is in a relatively neutral to weak position. The month-end portfolio-rebalancing flows are likely to be neutral across the board, as suggested by Credit Agricole's model, which considers the under-performance of the USD in September and the overall movements in equity markets. This model is adjusted for market capitalisation and FX performance. In the context of the USD, the model's most potent sell signal is directed at the JPY. Nevertheless, the bank's corporate flow model indicates that EUR selling is likely. The month-end rebalancing model of Barclays suggests a neutral sign on EURUSD and a weak dollar-selling signal against the majority of currencies. The quarter-end rebalancing model of the bank suggests a moderate dollar-selling signal against the majority of currencies, with a weak signal on the EUR/USD and USD/JPY pairs. The month-end model of SEB suggests that there are minimal rebalancing requirements; however, the most significant transactions are USD/CHF and USD/JPY.
Overnight Newswire Updates of Note
China Manufacturing Gauge Signals Continued Weakness In Economy
China Moves To Cut Mortgage Rates To Revive Housing Marke
Japan’s Ishiba Taps Veterans For Cabinet As Early Election Looms
Japan Cabinet Secretary Hayashi: Continue To Work Closely With BoJ
Australia’s Second Consecutive Budget Surplus Larger Than Tipped
US Eastern Ports Prepare To Close With Labour Talks Stalled
Hezbollah Confirms Leader Hassan Nasrallah Is Dead
Israel Widens Assault On Iran-Backed Militants With Strikes Against Houthis
Nomura Excluded From Several Yen Bond Deals On Rule Breach
Yen Weakens After Surging Versus Dollar On Ishiba’s Surprise Win
Oil Steadies As Traders Assess Shifting Risks In Mideast Crisis
China Stocks Rally 4% As Manufacturing Contracts Less Than Feared
KT, Microsoft Sign Partnership Deal On Korean AI Model Development
(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: 1.1100 (734M), 1.1120-25 (1.1BLN), 1.1200 (1.1BLN)
1.1230-40 (642M)
USD/CHF: 0.8450 (540M)
EUR/GBP: 0.8300 (575M), 0.8365 (375M)
AUD/USD: 0.6990 (1.8BLN). AUD/NZD: 1.0920-25 (711M)
USD/JPY: 140.70 (274M), 142.00 (350M), 142.35 (453M), 143.00 (416M)
EUR/JPY: 157.00 (300M), 158.25 (200M)
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 bullish
Weekly VWAP bullish
Below 1.1120 opens 1.10
Primary support 1.1130
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 143.50 opens 146
Primary resistance 146
Primary objective is 138
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 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!