Daily Market Outlook, September 6, 2024 

Munnelly’s Macro Minute…

"Markets On Edge Ahead Of US Payrolls Release”

Overnight investors seem on edge as they anticipate the release of U.S. employment data, which could determine the extent and timing of future rate cuts in the world's largest economy. Asian markets maintained their tight ranges, and the dollar suffered losses. Japan’s Nikkei experienced a further 1.8% decline, resulting in a near 5% decline for the week. The Hang Seng in Hong Kong and China's mainland markets traded lower as trading was suspended ahead of the expected typhoon. Oil prices are on the brink of their most challenging week in over a year, as they continue to float just above a critical $69 handle. The near-term trajectory of oil prices is likely contingent upon the payroll data. 

The market conundrum is whether the dismal 115,000 employment increase from last month can be attributed to weather-related fluctuations? The official BLS statement is that it did not believe that Hurricane Beryl had any impact on either this number or the household survey, which saw the unemployment rate increase by 0.2 percentage points to 4.3%. Nevertheless, there was a substantial number of workers who withdrew from the labor force last month and could potentially return. The unemployment rate is expected to decrease to 4.2%; market chatter is for a headline employment gain of circa 190,000 and a rebound from transitory factors last month. Following the ADP report earlier in the week and the weak news on job openings, an outcome consistent with these expectations would be circa 25k above consensus and a significant challenge to market expectations of a 50bp cut from the Fed in September, rather than a 25bp initial move. Nevertheless, it appears that a significant number of market participants will continue to seek rationales for downplaying the importance of modest upside surprises, given the strong performance of bonds and the nervy sentiment in equities. The market will experience a near-instantaneous reaction as influential Fed governor Christopher Waller and New York Fed President John Williams deliver speeches directly after the employment data.

According to Goldman Sachs S&P’s reaction function to headline NFP print in a vacuum...

>250k:               S&P rallies 50 – 100bps

200k – 250k: S&P rallies at least 100bps

150k – 200k: S&P rallies 25–50bps

100k – 150k: S&P sells off 0–50bps

<100k:             S&P sells off at least 100bps

Overnight Newswire Updates of Note

  • US Jobs To Show Bounce In Hiring, Labour Steadies

  • PBoC To Keep Monetary Policy Accommodative

  • China Ex-Central Bank Governor Deflation Worries

  • Ex-BoJ Official Foreses Faster Hiking Pace Than Expected

  • Japan PM Contender Hayashi Hopes For Nippon Steel Deal

  • APAC Markets Fall, HK Shuts For Typhoon

  • Japan’s Household Spending Flat In Signs Of Tepid Growth

  • Australia Investor Housing Loans Rise 5.4% In July

  • US Blinken: To Present Gaza Proposal ‘In Coming Days’

  • Fitch Upgrades Ukraine Post Debt Restructuring

          (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 (2.8BLN), 1.1015 (450M), 1.1030 (1BLN), 1.1050 (900M),

  • 1.1085 (4823M), 1.1095-1.1100 (1.8BLN), 1.1110 (402M), 1.1125 (569M)

  • 1.1150-60 (2BLN), 1.1175 (1BLN), 1.1200 (1BLN)

  • EUR/GBP: 0.8450 (200M).

  • GBP/USD: 1.3075 (300M), 1.3095-1.3100 (373M), 1.3200 (360M), 1.3300 (323M)

  • AUD/USD: 0.6700 (527M), 0.6800 (351M)

  • USD/CAD: 1.3475-85 (1.4BLN), 1.3500 (1.1BLN), 1.3550-55 (769M)

  • 1.3565-80 (1.8BLN), 1.3600 (873M)

  • USD/JPY: 142.00 (537M), 142.75 (425M), 143.00 (1.2BLN) 143.75-80 (1.2BLN)

  • EUR/JPY: 161.50 (280M)

CFTC Data As Of 4/9/24

  • Swiss Franc posts net short position of -24,612 contracts

  • British Pound net long position is 89,931 contracts

  • Euro net long position is 92,838 contracts

  • Japanese Yen net long position is 25,868 contracts

  • Bitcoin net short position is -166 contracts

  • Equity Fund Managers raise S&P 500 CME net long position by 15,425 contracts to 989,851

Technical & Trade Views

SP500 Bullish Above Bearish Below 5550

  • Daily VWAP bearish

  • Weekly VWAP bullish

  • Below 5510 opens 5470

  • Primary support 5460

  • Primary objective is 5375

EURUSD Bullish Above Bearish Below 1.1140

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 1.09 opens 1.0850

  • Primary support 1.0850

  • 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 bearish

  • Weekly VWAP bearish

  • Below 54000 opens 50000

  • Primary support is 50000

  • Primary objective is 70000