Daily Market Outlook, December 6, 2024
Munnelly’s Macro Minute...
"Politics & Payrolls”
Risk in Asia declined on Friday amid renewed political tensions in South Korea, causing unease among investors ahead of the crucial U.S. nonfarm payrolls report, which could affect expectations for a Federal Reserve rate cut this month.The potential for another martial law declaration in South Korea triggered substantial selling pressure on the Korean won and the Seoul stock market. The won fell by as much as 1%, while the KOSPI index experienced a decrease of 1.8% at one point. Additionally, the Australian dollar, often viewed as a barometer of risk appetite, dropped by 0.5%. In response to the situation, South Korean officials acted quickly, with dealers suggesting that the foreign exchange regulator likely intervened by selling U.S. dollars to support the won. Authorities have committed to providing unlimited liquidity to stabilise the markets, a strategy that has proven effective so far. The commander of the country's special warfare unit alleviated concerns by announcing he would not accept any new orders for martial law. The outperformance in Asia came from Chinese stocks which experienced an uptick as traders heightened their expectations for increased growth stimulus, creating a positive development in a region largely characterised by caution in anticipation of important US employment figures. The CSI 300 index, which serves as China's benchmark, rose by as much as 1.9%, suggesting that investors are preparing for additional economic stimulus measures from a significant policy meeting scheduled for Wednesday. Equities in Hong Kong also saw a notable increase.
While monitoring developments in South Korea, the primary focus for the market is the upcoming U.S. payrolls data, expected to be released later on Friday (For an overview of JPMorgan's NFP Scenario Analysis click here). Forecasts suggest a 200,000 job increase in November, following a dip in October due to hurricanes and strikes. The unemployment rate is anticipated to rise slightly to 4.2% from 4.1%. Markets are hoping for a balanced outcome: not too strong to undermine the likelihood of a rate cut, nor too weak to spark concerns about economic health. Futures currently imply a 70% chance of a rate cut by the Fed on December 18, suggesting that a strong jobs report could provoke a significant market reaction, especially as recent softer data has led futures to incorporate another quarter-point cut for 2025. Dollar bulls are also wary of a considerable drop in job numbers, which could improve rate cut prospects and surprise a market heavily invested in the U.S. currency. The recent surge in Bitcoin appears to be slowing after it crossed the 100K level for the first time. The cryptocurrency dropped to as low as 91.463K before stabilising at 98k early on Friday, supported by former PayPal executive David Sacks being appointed as Trump's White House "artificial intelligence and crypto czar."
Overnight Newswire Updates of Note
Poll: ECB To Cut Faster In Bid To Revive Flagging Economy
Chinese Stocks Jump Ahead Of Key Meeting On Stimulus Bets
RBA Bucks Global Rate-Cutting Cycle By Doing Nothing
Aussie Stays Pressured Toward 0.6400; US NFP Awaited
Chicago Fed Chief: US Rate Cuts Could Slow Next Year
Nonfarm Payrolls To Show November Job Gains
Elon Musk Works Congress As He Eyes $2T Budget Chop
Trump Selects VC David Sacks To Be AI And Crypto ‘Czar’
Trump Picks David Perdue To Be Ambassador To China
Japan Eyes Talks With Trump That Include Cutting Auto Tariffs
FMR Japan PM Kishida Worried Upheaval In Seoul May Hurt Ties
S. Korean President Yoon To Face Weekend Impeachment Vote
HP Enterprise Beats Estimates On Strong AI Server Demand
Lululemon Jumps, Global Growth Offsets Slowing US Sales
(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: 1.0500 (EU2.36b), 1.0200 (EU1.09b), 1.0650 (EU889.4m)
USD/JPY: 138.10 ($1.3b), 138.00 ($997.5m), 165.00 ($802.6m)
USD/CNY: 6.8951 ($400m), 7.2870 ($329.4m), 7.2400 ($300m)
AUD/USD: 0.6700 (AUD695.6m), 0.6300 (AUD678m)
USD/CAD: 1.4200 ($912.3m), 1.4000 ($637.1m), 1.3715 ($420m)
GBP/USD: 1.2600 (GBP444.5m), 1.2700 (GBP343.6m)
USD/BRL: 6.0000 ($305m)
CFTC Data As Of 29/11/24
Equity fund managers raise S&P 500 CME net long position by 60 contracts to 1,079,539
Equity fund speculators trim S&P 500 CME net short position by 29,885 contracts to 258,924
Euro net short position is -42,557 contracts
Japanese yen net short position is -46,868 contracts
Swiss franc posts net short position of -37,071
British pound net long position is 40,315
Bitcoin net short position is -2,084 contracts
Speculators trim CBOT US Treasury bonds futures net short position by 6,123 contracts to 35,645
Speculators increase CBOT US 10-year Treasury futures net short position by 91,701 contracts to 907,502
Speculators increase CBOT US 5-year Treasury futures net short position by 113,816 contracts to 1,983,026
Speculators increase CBOT US 2-year Treasury futures net short position by 23,473 contracts to 1,447,344
Technical & Trade Views
SP500 Bullish Above Bearish Below 6000
Daily VWAP bullish
Weekly VWAP bullish
Below 5990 opens 5930
Primary support 5795
Primary objective 6100
EURUSD Bullish Above Bearish Below 1.0450
Daily VWAP bullish
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!