Daily Market Outlook, June 28, 2023
Munnelly’s Market Commentary…
Asian equity markets traded in a mixed fashion overnight, failing to fully sustain the momentum from the gains on Wall Street. The Nasdaq outperformed due to strong data and a rebound in the tech sector. The Australian monthly CPI data, which came in softer than expected, further reinforced expectations that the Reserve Bank of Australia (RBA) would keep interest rates unchanged at its upcoming meeting. The Nikkei 225 gained supported by recent currency weakness and indications that Japan is leaning towards extending support measures for gas and electricity bills. These measures are set to expire at the end of September and aim to strengthen the economy. However, the Hang Seng and Shanghai Composite remained subdued as Chinese Industrial Profits continued to contract significantly. Additionally, concerns arose over the US considering new restrictions on AI chip exports to China amid fears of their potential use in weapons development and hacking.
During the ECB's annual forum on central banking in Sintra, Chief Economist Huw Pill and Governor Andrew Bailey of the Bank of England (BoE) will speak. Pill will participate in a panel discussing lessons from recent experiences in macroeconomic forecasting. The focus, however, will be on Governor Bailey's appearance on a panel with counterparts from the Federal Reserve, ECB, and Bank of Japan. They are expected to discuss the challenges of monetary policy in the current high-inflation environment. Unlike his peers, Governor Bailey has been less explicit in providing policy guidance. Notably, the BoE has not opposed market expectations of further policy tightening, which contrasts with its stance last year. Market participants will closely monitor comments from central bank heads, especially Federal Reserve Chair Powell, to determine if there are any indications of an imminent interest rate hike, possibly as early as next month.
Aside from Sintra, datawise investors will parse Italy's Consumer Price Index (CPI) data, which is anticipated to show a cooling trend. This release will offer a glimpse into the inflation situation in Italy and can serve as a preview for other Eurozone countries' inflation data, with Germany's CPI data scheduled for release on Thursday. The harmonised Eurozone CPI data will be released on Friday, which is important for assessing inflation trends across the region.
Stateside, market participants will closely watch for the release of MBA Mortgage Applications data, as the housing market has recently shown positive surprises in various metrics. Additionally, the advanced goods trade balance report is scheduled to be released before the equity market opens. These data releases will provide valuable insights into the current state of the US housing market and trade balance.
Citi Quants Month End Rebalancing Expectations
Citi has published its preliminary estimate for month-end FX rebalancing, indicating a preference for selling USD. According to their model, both hedge and asset FX rebalancing requirements align in this direction. The estimate suggests that negative flows from US equities will have a significant impact on equity rebalancing. It is worth noting that month-end flows typically influence FX markets in the days leading up to the end of the month.
CFTC Data As Of 23-06-23
(USD net spec short grew in Jun 14-20 period; $IDX -0.76%
EUR$ +1.15% in period, specs -7,173 contracts into strength, now +144,649
$JPY +1.31% in period, JPY soft amid rate divergence, specs -3,680 contracts
GBP$ +1.21%, specs get long ahead of CPI/BoE, +39,873 contracts now +46,608
Specs guessed right higher CPI, +50bp BoE but GBP$ -150 pips from weeks high
AUD$ +0.3% in period, specs +12,129 contracts on hawkish RBA, now -33.5k
BTC +8.96%, specs 346 contracts into strength, halved long to +397 contractsSource: Reuters)
FX Options Expiries For 10am New York Cut
(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0845-55 (2.3BLN), 1.0875-85 (1BLN), 1.0900-10 (3.2BLN)
1.0970-75 (1.4BLN), 1.1000 (1.2BLN), 1.1055 (678M)
USD/CHF: 0.8880-85 (1.1BLN), 0.8890-08900 (500M)
GBP/USD: 1.2550 (511M), 1.2650-65 (1.1BLN)
AUD/USD: 0.6550 (1BLN), 0.6650 (850M), 0.6705-15 (683M)
Overnight News of Note
Biden Says Thinks US Economy Will Avoid Potential Recession
US Considering New Restrictions On AI Chip Exports To China
Chinese Industrial Profits Slump On Weak Demand, Deflation
Japan FX Tsar: Take Appropriate Steps If Weak Yen Excessive
Australian Cooler Inflation Bolsters RBA Case To Stand Steady
Pimco Load Up On Aussie Bonds On Inevitable Recession Call
ECB's Wunsch: Rate Pause Needs 'Clear' Sign Of Core Easing
Discounts Jump As Rising Mortgages ‘Spook’ UK Housebuyers
UK House Price Cuts Point To Start Of Downturn, Zoopla Says
German Bond Market Signals Deep Eurozone Recession Fear
Google Violated Its Standards On Ad Deals, Research Reports
UBS Plans To Cut More Than Half Of Credit Suisse Workforce
(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
Technical & Trade Views
SP500 Bias: Intraday Bullish Above Bearish Below 4340
Below 4330 opens 4300
Primary support is 4300
Primary objective is 4580
20 Day VWAP bullish, 5 Day VWAP bullish
EURUSD Intraday Bullish Above Bearsih Below 1.0920
Below 1.0880 opens 1.0830
Primary support is 1.0666
Primary objective is 1.1050
20 Day VWAP bullish, 5 Day VWAP bullish
GBPUSD Bias: Intraday Bullish Above Bearish Below 1.2750
Below 1.27 opens 1.2650
Primary support is 1.2680
Primary objective 1.2880
20 Day VWAP bullish, 5 Day VWAP bullish
USDJPY Bullish Above Bearish Below 142.40 Target Hit, New Pattern Emerging
Below 141.90 opens 140.90
Primary support is 139.50
Primary objective is 144.50
20 Day VWAP bullish, 5 Day VWAP bullish
AUDUSD Bias:Intraday Bullish Above Bearish Below .6740
Below .6600 opens .6550
Primary support is .6648
Primary objective is .6917
20 Day VWAP bullish, 5 Day VWAP bearish
BTCUSD Intraday Bullish Above Bearish below 29500
Below 28000 opens 26900
Primary resistance is 27400
Primary objective is 32750
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!