Daily Market Outlook, September 9, 2024

Munnelly’s Macro Minute…

"September Slump Gathers Steam As Jobs Data Disappoints”

Amidst economic uncertainties, investors began September in a "risk-off" stance as the S&P 500 snaps a three-week winning streak and drops 4.2%, There is fear in almost every industry: technology is the most nervous, defensive players are a little happier, and tech is down 7.1%. In a widespread selloff of stocks on Tuesday, Nvidia, a leader in AI, saw a historic $279 billion fall in market value. Last week, NVDA had a decline of about 14%.

Following Friday's generally negative signals from global markets, Asian stock markets are basically down on Monday as traders respond to China's softening inflation statistics. The Nikkei benchmark in Japan experienced a decline of over 2%, with technology stocks being among the most significant decliners. The Nikkei experienced its first dip below the psychologically significant 36K threshold since August 13th. However, it later recovered to reclaim the 36K handle and trade in positive territory for the session as bargain hunters stepped in.

Investors seem to be expressing concern that the US Federal Reserve may have waited too long to intervene in order to save the economy from entering a recession in response to a report that shows US employment increased less than anticipated in August. According to the CME FedWatch tool, following the data, the likelihood of a 25 basis point decrease by the Fed this month dropped to 59% from almost 70% a week earlier, while the likelihood of a larger 50 basis point cut increased to 41% from 30% last week.

This week's event risk is primarily driven by the European Central Bank's rate decision and critical data from the world's two largest economies. It appears that an ECB rate cut of 25 basis points to 3.5% on September 12 is a done deal, as markets are pricing a reduction at 98% as inflationary pressures subside. Investors will concentrate on the tone and outlook of ECB President Christine Lagarde during the press conference to anticipate her subsequent actions.

Employment data on Tuesday, the July GDP estimate, industrial output, and trade on Wednesday all contribute to the substantial event risk in the United Kingdom. The figures will influence the expectations for the Bank of England's rate decision on September 19.

The Federal Reserve's rate expectations will be further influenced by the activity data week in the United States. Key releases for Wednesday include the August Consumer Price Index (CPI), Producer Price Index (PPI), weekly jobless claims, preliminary consumer sentiment from the University of Michigan, and inflation expectations for September. The Federal Reserve is currently in a blackout period prior to its decision on September 18.

The data schedule for Japan is relatively quiet, with August corporate product prices on Thursday. Markets may be affected by speeches and news conferences delivered by Bank of Japan board members Junko Nakagawa and Naoki Tamura.

Overnight Newswire Updates of Note

Fed To Decide If 25bps Cut Will Be Enough For Workers
History Suggests 20% Correction Ahead Of Fed’s Cuts
Labour’s ‘Blame The Tories’ Strategy Won’t Last Forever
UK Reveal Concerns About Winter Fuel Payment Cut
BoE Grapples With Pace Of Gilt Wind-down, Budget Issue
France Asks The EU To Push Deadline To Prevent Deficit
Italy Pushes To Reverse EU’s 2035 ICE (Engines) Ban
China's Central Bank Halts Gold Purchases In 4th Month
Japan’s Q2 GDP Lower On Weak Consumption
China Deflation Risk Rises, Threatening Growth Target
Companies Issue Record US Debt: Market, Election Risks
Poll: Trump And Harris Tied After Summer Upheaval
White House Doubts Presenting New Gaza Deal - Axios
Russia Drones In NATO Territory; Claims Another Town
Iran Admits Sending Missiles To Russia

(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 (1.1BLN), 1.1025 (960M), 1.1050 (2.4BLN), 1.1100 (1.3BLN)
1.1150-60 (1.1BLN), 1.1175 (2.1BLN), 1.1200 (3.8BLN)
GBP/USD: 1.3150 (389M), 1.3175 (954M)
EUR/GBP: 0.8400 (224M), 0.8450 (233M)
AUD/USD: 0.6700 (428M), 0.6750-55 (320M)
NZD/USD: 0.6125 (260M), 0.6175 (400M)
AUD/NZD: 1.0780 (458M). USD/CAD: 1.3500-10 (1BLN)
USD/JPY: 141.50 (1.2BLN), 142.00 (1.2BLN), 142.50 (416M), 143.00 (351M)
143.45-50 (330M), 144.00 (1.1BLN)
EUR/JPY: 159.11 (240M). EUR/NOK: 11.77 (632M)

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 bearish
Weekly VWAP bearish
Above 5510 opens 5555
Primary resistance 5525
Primary objective is 5375 - Target Hit New Pattern Emerging

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 bearish
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