Daily Market Outlook, November 8, 2023
Munnelly’s Market Commentary…
Asia - markets had a mixed performance following a similar trend from Wall Street, with the market activity being very limited in early APAC hours. Nikkei 225 initially gained from the strong earnings of Nintendo, which boosted the Electronics sector by over 6%, but the Oil sector dragged it down and the index eventually turned negative after BoJ governor Ueda said the Bank could exit YCC and negative rates without waiting for real wages to turn positive, if it expects them to do so in the future. Hang Seng and Shanghai Comp fluctuated between small gains and losses with little reaction to the comments from the PBoC governor, while markets awaited the meeting between Biden and Xi in San Francisco next week, although no major breakthrough was anticipated. China's inflation data for October will be released overnight. CPI inflation is expected to turn negative to -0.1% from 0.0% in September, showing weak domestic demand conditions. Producer price inflation is also expected to drop to -2.7% from -2.5%, indicating lower input costs for manufacturers.
Europe - Eurozone retail sales are projected to show a minor drop of 0.1% in September, after a bigger decrease of 1.2% in August. This implies that sales volumes have dropped in Q3 as a whole and have not increased in any quarter since the last quarter of 2021. The consumer expectations survey from the ECB, which comes out today, is also relevant for policymakers, especially for inflation expectations. Consumers' inflation expectations have gone down recently, which is comforting for policymakers. However, they are still fairly high, which makes policymakers careful about relaxing policy. The RICS residential survey from the UK, which is released overnight on Thursday, will reveal what surveyors are seeing in terms of prices and activity, and whether the sector is stabilising. In the last survey, the net balance for current prices kept falling, but the net price expectations and new buyer enquiries got better. European futures are hugging the flatline after closing with modest losses yesterday.
US - Stateside, the market focus is turning to when interest rates will be cut in 2024, and there will be more curiosity about what central bank speakers will say today. In particular, markets will seek their opinions on the market expectations for interest rates to be lowered by around mid-next year, especially for the ECB and the Fed. Some of the speakers today are Bank of England Governor Bailey and Fed Chair Powell, as well as NY Fed President Williams, ECB Chief Economist Lane and German central bank head Nagel. Bailey will talk at a conference about the financial system, while Powell will make opening remarks at a different conference. US futures continue to rotate just below the 4400 levels but retain a bid tone.
FX Positioning & Sentiment
Currencies have not yet adjusted to oil's sharp drop. Oil was supposed to rise due to the Middle East conflict, but it has plummeted to $81/bbl instead. Brent Crude is nearly $17/bbl lower than its September high. This implies less inflation and more urgency for central banks to loosen their policies. The likelihood of the first U.S. rate cut is shifting to May, after investors bought USD in September because of a surprisingly hawkish view. The scenario of higher for longer interest rates and the USD power are now in danger.
CFTC Data As Of 3-11-23
EUR net spec long 85,389 contracts vs 85,253 the previous week
JPY net spec short 103,848 contracts vs 99,629
GBP short 20,371 vs 18,636
AUD short 75,110 vs 83,081
CAD short 49,332 vs 48,639 Source (Reuters)
FX Options Expiries For 10am New York Cut
(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0600 (1.4BLN), 1.0650 (1BLN), 1.0670 (467M), 1.0700 (1.3BLN)
1.0720 (1.3BLN), 1.0800 (1BLN)
USD/CHF: 0.9100 (2BLN). EUR/GBP: 0.8660 (356M), 0.8765 (358M)
GBP/USD: 1.2215 (214M), 1.2250 (333M), 1.2345 (315M), 1.2400 (491M)
AUD/USD: 0.6390-0.6400 (1.3BLN), 0.6430 (477M), 0.6525-35 (2.2BLN)
AUD/NZD: 1.0800 (1.8BLN) . EUR/JPY: 160.55 (534M).
USD/JPY: 149.50-60 (1.8BLN), 150.00 (1.6BLN), 151.00 (2BLN)
Overnight Newswire Updates of Note
Fed’s Bowman Says She Expects Fed Will Need To Increase Rates Further
Fed's Logan: All Of Us Have Been Surprised By Resilience Of US Economy
Biden And Xi To Hold Summit On Nov 15, Says US Senior Official
ECB's Nagel Says ECB Must Remain ‘Vigilant’ Due To Uncertain Outlook
KPMG/REC Survey: Layoffs Lead To Slowdown In UK Jobs Market
BoJ Ueda Signals Chance Of Exit From Easy Policy Before Real Wages Rise
New Zealand Inflation Expectations Fall To Two-Year Lows In Q4
US Presses China For More Yuan Transparency As Yellen Meeting Looms
Oil Holds Near Three-Month Low As Bearish Demand Indicators Grow
EIA Lowers Their Price 2024 Outlooks For WTI And Brent Oil
Asian Stocks Muted As Investors Await To Hear More From Fed Officials
Occidental Petroleum Beats Q3 Estimates On Higher Production
eBay Projects Holiday Revenue That Falls Short Of Estimates
Apple Delays Work On Next Year’s iPhone, Mac Software To Fix Bugs
Nintendo Now Turns To ‘Zelda’ Movie After ‘Super Mario’ Success
Chaos As Optus Outage Disconnects Half Of Australia
(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
Technical & Trade Views
SP500 Bias: Bullish Above Bearish Below 4330
Below 4310 opens 4285
Primary support 4200
Primary objective is 4400
20 Day VWAP bearish, 5 Day VWAP bullish
EURUSD Bias: Bullish Above Bearish Below 1.0630
Below 1.06 opens 1.0540
Primary support 1.06
Primary objective is 1.0760
20 Day VWAP bearish, 5 Day VWAP bullish
GBPUSD Bias: Bullish Above Bearish Below 1.22
Below 1.22 opens 1.2150
Primary support is 1.2069
Primary objective 1.2450
20 Day VWAP bearish, 5 Day VWAP bullish
USDJPY Bias: Bullish Above Bearish Below 150
Below 149 opens 148.30
Primary support 147.30
Primary objective is 152.50
20 Day VWAP bullish, 5 Day VWAP bullish
AUDUSD Bias: Bullish Above Bearish Below .6450
Above .6475 opens .6525
Primary support .6380
Primary objective is .6620
20 Day VWAP bearish, 5 Day VWAP bullish
BTCUSD Bias: Bullish Above Bearish below 32000
Below 27100 opens 26500
Primary support is 30000
Primary objective is 37000
20 Day VWAP bullish, 5 Day VWAP bullish
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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!