Daily Market Outlook, December 11, 2024
Munnelly’s Macro Minute...
"Dollar Bid On China Comments Regarding Yuan Managed Weakness”
Asian markets declined as investors awaited key US inflation figures to assess whether the Federal Reserve will lower or maintain interest rates in the upcoming week. China's top policymakers are currently engaged in discussions regarding the potential decision to permit the yuan to depreciate in the year 2025. This consideration arises in the context of the impending tariffs imposed by former President Trump, which are expected to have significant implications for trade and economic relations. According to sources familiar with the matter, the weakening of the yuan could be a strategic move to mitigate the adverse effects of these tariffs on China's economy. The policymakers are weighing the benefits and risks associated with such a move, as a weaker yuan could enhance the competitiveness of Chinese exports but may also lead to increased tensions with the United States and other trading partners.
Stocks in Hong Kong and mainland China fell on Wednesday, coinciding with the start of an annual economic conference in Beijing. Markets in Taiwan and Australia also saw declines, while South Korean stocks rose for a second consecutive session, recovering from last week’s brief period of martial law that led to political turmoil. Additionally, the two-day Central Economic Work Conference in China is expected to outline policies for the upcoming year, with markets encouraged by signs of stimulus from top officials. Economists forecast that China’s budget deficit will reach its highest level in thirty years, with interest rates expected to be reduced to their lowest since 2015. At least seven Chinese brokerages anticipate that next year’s fiscal deficit will be 4% of GDP, marking the highest level since a major tax reform in 1994. Historically, Beijing has kept its budget deficit at or below 3%.
U.S. consumer prices have shown a level of consistency, with month-to-month inflation rates reverting to levels seen before the summer. This pattern is expected to continue in November, with economists predicting a year-over-year CPI of 2.6% and a core rate of 3.3%, remaining steady from the previous month. Ongoing discussions about seasonality and the rising shelter costs further reinforce this trend, although the overall momentum is notable. Markets anticipate that the Federal Reserve will take a cautious stance at next week’s rate meeting, as the FOMC still views monetary policy as restrictive, and there are few signs that inflation expectations have changed. Nevertheless, with economic growth exceeding potential and confidence improving since the election, the price outlook appears more balanced. This holds true even when considering strong productivity and data indicating that the labor market is now more stable.
Overnight Newswire Updates of Note
US Inflation Data Likely To Support Fed’s Cautious Stance
US Trsy Sec Yellen Warns Tariffs Could ‘Derail’ Inflation Progress
Bond Traders Trim Long Bets Before CPI Data Seen As Key For Fed
US Considers New Russian Oil Sanctions To Weaken Putin
Xi Readies Bargaining Chips For US Trade War After Biden Curbs
China’s Politburo Pledges ‘Escalated’ Fiscal Spending, Support
Japan’s PPI Tops Estimates During Rate Hike Bets
Yen, Swaps Traders Left Guessing By BoJ Signals Before Meeting
ADB Trims Asia's Growth Forecast, Flags US Policy Risks
BoC Poised For 50bps Cut Amid Economic Crosswinds
ECB Set To Cut Rates For Third Time In Four Months
Swiss Central Bank Poised For Fourth Straight 25bp Cut
XRP Rises As Its Stablecoin Gets Regulatory Approval
(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: 1.0490-1.0500 (3.8BLN), 1.0510-15 (825M), 1.0525-30 (606M),
1.0550-55 (1.6BLN), 1.0565 (704M), 1.0600 (700M)
USD/CHF: 0.8900 (202M). EUR/GBP: 0.8240 (200M)
GBP/USD: 1.2725 (880M), 1.2745-50 (626M), 1.2875 (337M)
EUR/NOK: 11.6000 (387M), 11.9350 (527M)
AUD/USD: 0.6300 (450M), 0.6350 (1BLN), 0.6450 (753M), 0.6475 (416M)
NZD/USD: 0.5735 (510M), 0.5800 (460M), 0.5900 (655M)
USD/CAD: 1.4100 (226M), 1.4185 (406M)
USD/JPY: 151.25 (550M), 151.60 (890M), 152.00 (398M), 152.65-70 (500M)
CFTC Data As Of 6/12/24
Equity fund managers cut S&P 500 CME net long position by 7,148 contracts to 1,096,911
Equity fund speculators increase S&P 500 CME net short position by 59,926 contracts to 370,331
Speculators increase CBOT US Treasury Bonds futures net short position by 11,361 contracts to 58,775
Speculators trim CBOT US 2-year Treasury futures net short position by 31,747 contracts to 1,202,899
Speculators increase CBOT US 5-year Treasury futures net short position by 95,529 contracts to 1,861,100
Speculators trim CBOT US 10-year Treasury futures net short position by 34,702 contracts to 891,901
Euro net short position is -57,489 contracts
Japanese yen net long position is 2,334 contracts
Swiss franc posts net short position of -41,094 contracts
British pound net long position is 19,326 contracts
Bitcoin net short position is -1,595 contracts
Technical & Trade Views
SP500 Bullish Above Bearish Below 6000
Daily VWAP bearish
Weekly VWAP bullish
Below 5990 opens 5930
Primary support 5795
Primary objective 6100 - TARGET HIT NEW PATTERN EMERGING
EURUSD Bullish Above Bearish Below 1.0450
Daily VWAP bearish
Weekly VWAP bearish
Above 1.0590 opens 1.0728
Primary resistance 1.0950
Primary objective 1.0728
GBPUSD Bullish Above Bearish Below 1.26
Daily VWAP bullish
Weekly VWAP bearish
Above 1.2760 opens 1.2859
Primary resistance 1.3050
Primary objective 1.2859
USDJPY Bullish Above Bearish Below 154
Daily VWAP bullish
Weekly VWAP bearish
Below 150 opens 148
Primary support 150
Primary objective is 157.50
XAUUSD Bullish Above Bearish Below 2600
Daily VWAP bullish
Weekly VWAP bearish
Below 2530 opens 2467
Primary support 2530
Primary objective is 2800
BTCUSD Bullish Above Bearish Below 92000
Daily VWAP bullish
Weekly VWAP bullish
Below 91000 opens 87500
Primary support is 85000
Primary objective is 100,000 TARGET HIT NEW PATTERN EMERGING
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Past performance is not indicative of future results.
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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!