Daily Market Outlook, November 14, 2024
Munnelly’s Macro Minute...
"Trump Trade & Treasury Yield Tensions”
While longer-term U.S. government yields and the dollar increased on Thursday as investors assessed the monetary policy and inflation outlook in the United States, weak Chinese markets drove down broader Asian shares. Donald Trump's return to the White House and the optimism that his administration will be good for cryptocurrencies helped Bitcoin stabilise above $90,000 after it had surpassed that mark in the previous session. Although Trump's return to office muddled the outlook for monetary policy in 2025 and beyond, traders in the broader market responded to a U.S. inflation report that matched forecasts by raising bets on a Federal Reserve rate drop next month. It is anticipated that Trump's tax cuts and tariff increases will increase inflation and limit the Fed's ability to lower interest rates. Additionally, Edison Research predicted Wednesday that when the president-elect assumes office in January, the Republican Party will control both chambers of Congress, allowing him to essentially implement his program without interference. Longer-dated U.S. bond yields increased Thursday in Asia trade, reflecting this uncertainty. The benchmark 10-year Treasury yield reached its highest level since July 1 at 4.483%.
Domestic policy and trade speculation about Trump are unlikely in the Fed's December estimates. This will change with the initial policies. Since tariff increases and tax cuts take time to execute and affect the real economy, their impact will be recognised after 2025. This will allow the Fed to alter its reaction function. As a proxy for near-term rate expectations, the two-year yield fell. An 83% possibility of a 25 basis point Federal Reserve rate drop next month has increased from 59% a day earlier. Expectations of Fed cuts next year have dropped since Trump's election last week. The dollar and longer-term Treasury yields gained on Thursday despite rising expectations for a December Fed cut, which would normally hurt the currency.
Markets in Europe will be watching the publication of the third-quarter flash employment statistics and the second estimate for GDP growth from the eurozone. Although the bloc grew more quickly than anticipated in the third quarter, preliminary data released in October indicated that it was still fragile because household spending hardly increased and industry remained in recession. Following the release of the U.S. October producer prices report, which contributes to the Fed's preferred inflation index, Fed Chair Jerome Powell will give a speech in Dallas. However, considering the uncertainties surrounding Trump's policies once he assumes office, Powell's remarks for 2025 and beyond will be limited. Trump has already appointed a number of people to his cabinet and other senior administration roles, including those in charge of trade, immigration, economic policies, defence, intelligence, and diplomacy. According to sources, investor Scott Bessent and billionaire banker Howard Lutnick are vying for the top Treasury position.
Overnight Newswire Updates of Note
PBoC Sticks With Yuan Support In Face Of Resurgent Dollar
China’s Economy Forecast To Show Modest Pick-up After Stimulus
China Arms Itself For Potential Trade War With Donald Trump
Japan Planning $87B Extra Budget To Fund Stimulus Package
RBA: Trump Policy Impact Hinges On How Other Nations Respond
Australia Hiring Gains Slow; Unemployment Is Steady
Bets On December Rate Cut Rise After US CPI Data
Asia Shares Wobble; Long-End US Bond Yields Rise With Dollar
Fed Officials Fret Over How Far They Can Lower Interest Rates
US October Budget Deficit Jumps To $257B, Handing Hole To Trump
Chancellor To Consolidate UK Council Pensions Into Eight Megafunds
UN Nuclear Watchdog Chief Grossi Arrives In Iran For Talks
Cisco Reports Fourth Straight Quarter Of Declining Revenue
(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: 1.0390 (300M), 1.0500 (355M), 1.0550 (1.1BLN)
1.0560-70 (733M), 1.0575-85 (815M), 1.0590-00 (1.9BLN)
1.0625-35 (694M), 1.0650 (2.5BLN)
USD/JPY: 154.50 (884M), 155.00 (593M), 156.50 (597M)
EUR/JPY: 163.00 (200M)
USD/CHF: 0.8650-60 (700M). EUR/CHF: 0.9380 (294M), 0.9475 (507M)
GBP/USD: 1.2550 (295M), 1.2645-50 (550M), 1.2665-75 (538M)
1.2700-10 (475M), 1.2725 (367M), 1.2800 (285M)
EUR/GBP: 0.8305-10 (300M)
AUD/USD: 0.6460-65 (551M), 0.6500 (479M)M). AUD/NZD: 1.1000-15 (491M)
USD/CAD: 1.4000 (825M), 1.4050 (298M)
CFTC Data As Of 8/11/24
USD net spec G10 long -$0.31bn
EUR +1.04% in period; specs +26.7k contracts now -21.7k
JPY -1.19%; specs sell 19.4k contracts now -44.2k; US-JP rate divergence
GBP +0.2%; specs sell 21.3k contracts long cut to 45.1k
CAD -0.63%; specs sell 7.7k contracts; BoC rate well below Fed in 2025
AUD +1.14%; specs +3.5k contracts now +31k; RBA seen as more hawkish c.bank
BTC -4.37% in period; specs +412 contracts, now -1,457
Equity fund speculators trim S&P 500 CME net short position by 97,351 contracts to 194,685
Equity fund managers cut S&P 500 CME net long position by 52,438 contracts to 992,952
Speculators trim CBOT US 10-year Treasury futures net short position by 82,913 contracts to 818,270
Technical & Trade Views
SP500 Bullish Above Bearish Below 5960
Daily VWAP bullish
Weekly VWAP bullish
Below 5550 opens 5820
Primary support 5800
Primary objective 6100
EURUSD Bullish Above Bearish Below 1.0750
Daily VWAP bearish
Weekly VWAP bearish
Above 1.0750 opens 1.0850
Primary resistance 1.0950
Primary objective 1.0490
GBPUSD Bullish Above Bearish Below 1.3050
Daily VWAP bearish
Weekly VWAP bearish
Below 1.29 opens 1.27
Primary resistance 1.3050
Primary objective 1.27
USDJPY Bullish Above Bearish Below 154
Daily VWAP bullish
Weekly VWAP bullish
Below 154 opens 152
Primary support 148
Primary objective is 157.50
XAUUSD Bullish Above Bearish Below 2600
Daily VWAP bearish
Weekly VWAP bearish
Below 2590 opens 2530
Primary support 2530
Primary objective is 2800
BTCUSD Bullish Above Bearish Below 85000
Daily VWAP bullish
Weekly VWAP bullish
Below 84000 opens 80000
Primary support is 64000
Primary objective is 100,000
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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!