Daily Market Outlook, January 6, 2024
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
Munnelly’s Macro Minute...
"Markets Return To Full Swing With A Data-Heavy Week Ahead”
Asian share markets showed a mixed performance on Monday, as investors anticipated a week filled with economic updates that are expected to highlight the United States' strong performance and bolster the dollar's continued upward trend. Meanwhile, political instability persisted, with reports indicating that troubled Canadian Prime Minister Justin Trudeau could potentially announce his resignation as soon as Monday. Japan's Nikkei index fell 1.8% after returning from a holiday, partly due to JGB yields reaching their highest level since 2011. Meanwhile, South Korean stocks increased by 1.6%, although the situation regarding President Yoon Suk Yeol remains uncertain. Chinese blue chip stocks decreased by 0.1%, despite a survey indicating that services activity grew at its fastest rate in seven months in December. For the first time since late 2023, China's onshore yuan has surpassed an important threshold, coinciding with news that the People's Bank of China plans to release the largest offshore yuan bonds in Hong Kong this month.
The first full trading week of 2025 is set to be a fascinating and potentially busy time for global markets, culminating with the release of U.S. December employment figures on Friday. Market participants will also be paying close attention to the minutes from the Federal Reserve's December meeting and remarks from Fed officials for insights into future policy directions. According to a Reuters poll, a rise of 150,000 in U.S. non-farm payrolls is anticipated, following an increase of 227,000 in November, while the unemployment rate is expected to hold steady at 4.2%. The U.S. economic calendar is packed with data releases, including the December ISM services PMI, final S&P Global PMIs, ADP employment figures, JOLTS job openings, November factory orders and trade data, weekly jobless claims, and preliminary January consumer sentiment and inflation expectations from the University of Michigan. The minutes from the Fed's December 17-18 meeting will be released on Wednesday, and Fed officials such as Thomas Barkin, Jeffrey Schmid, and Patrick Harker are scheduled to speak.
In Europe, a comprehensive array of data is expected, including final euro zone December services and composite PMIs, flash HICP, sentiment indices, consumer confidence, retail sales, and producer prices, which will offer a detailed overview of the economic landscape. Additionally, German inflation, industrial orders, and production figures are on the agenda. The UK will have a subdued start to 2025, with only the final December services, construction, and composite PMIs being released. Bank of England Deputy Governor Sarah Breeden is set to give a speech regarding the outlook for inflation and monetary policy.
Overnight Newswire Updates of Note
ECB Has Been Too Slow To Cut Rates, Eurozone Economists Warn
Fed's Kugler, Daly Say Job Not Done On Inflation
Canada PM Trudeau Likely To Resign This Week, Globe Reports
Bond Traders See Fraught Year Ahead As Trump Shadows Outlook
China Oil Refineries Face Reckoning As Beijing Tackles Overcapacity
China’s PBoC Vows More Support For Innovation And Consumption
China’s Xi Has A Plan For Retaliating Against Trump’s Gamesmanship
China Services Gauge Rises To Highest Since May On Stimulus
Japan's Service Activity Expands On Solid Demand, PMI Shows
Italy Plans $1.5B SpaceX Telecom Security Services Deal
Strive Files To Launch ‘Bitcoin Bond’ ETF
(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: 1.0250 (460M), 1.0275 (734M), 1.0300 (1.85BLN),
1.0320-25 (535M), 1.0350 (965M), 1.0380 (961M), 1.0400 (820M)
USD/CHF: 0.9100 (450M), 0.9200 (241M)
GBP/USD: 1.2400 (380M), 1.2450 (270M), 1.2500 (755M)
EUR/GBP: 0.8350 (201M)
AUD/USD: 0.6300-10 (401M)
USD/CAD: 1.4420 (660M), 1.4450 (480M), 145.00 (564M)
USD/JPY: 156.00 (1.36BLN), 157.50 (210M), 158.00 (207M)
CFTC Data As Of 3/1/25
Swiss franc has a net short position of -28,382 contracts.
The British pound shows a net long position of 19,323 contracts.
The euro has a net short position of -68,507 contracts.
The Japanese yen reflects a net long position of 2,311 contracts.
Bitcoin is in a net short position of -129 contracts.
Speculators have reduced the net short position in CBOT US Treasury bonds futures by 19,961 contracts, bringing it to 26,342.
The net short position in CBOT US ultrabond Treasury futures has been trimmed by 15,012 contracts to 204,292.
The net short position in CBOT US 2-year Treasury futures has decreased by 6,298 contracts to 1,252,975.
The net short position in CBOT US 10-year Treasury futures has been cut by 141,543 contracts to 591,374.
The net short position in CBOT US 5-year Treasury futures has been reduced by 1,895 contracts to 1,760,422.
Equity fund managers have increased the S&P 500 CME net long position by 2,531 contracts to 1,042,431.
Meanwhile, equity fund speculators have raised the S&P 500 CME net short position by 78,396 contracts to 347,102.
Technical & Trade Views
SP500 Sell Against 6045
Daily VWAP bullish
Weekly VWAP bearish
Seasonality suggests bearishness Into Jan 20th
Long above 6075 target 6165
Short Below 6045 target 5743
EURUSD Sell Against 1.0435
Daily VWAP bearish
Weekly VWAP bearish
Seasonality suggests bearishness into March 30th
Above 1.0505 target 1.0634
Below 1.0435 target 0.9758
GBPUSD Sell Against 1.2614
Daily VWAP bearish
Weekly VWAP bearish
Seasonality suggests bearishness into March 10th
Above 1.2685 target 1.2812
Below
USDJPY Buy Against 153.77
Daily VWAP bearish
Weekly VWAP bullish
Seasonality suggests bearishness into jan 23rd
Above 1.5377 target 165.50
Below 152.41 target 150
XAUUSD Sell Against 2692
Daily VWAP bullish
Weekly VWAP bullish
Seasonality suggests bearishness into Jan 15th
Above 2725 target 2762
Below 2692 target 2475
BTCUSD Sell Against 101,960
Daily VWAP bullish
Weekly VWAP bearish
Seasonality suggests bearishness into Jan 15th
Above 104,020 target 110,000
Below 101,942 target 90,600
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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!