Daily Market Outlook, September 27, 2023
Munnelly’s Market Commentary…
Asian equity markets had a mixed performance, influenced by a rebound in Chinese Industrial Profits that offset the subdued sentiment from Wall Street. Major US indices continued to decline as the month-end approached, lacking significant catalysts. The Nikkei 225 underperformed, briefly slipping below 32,000 before recovering. Meanwhile, the Hang Seng and Shanghai Composite posted gains after the People's Bank of China (PBoC) pledged to enhance policy coordination in its Q3 monetary policy meeting, emphasising the need for macro policy adjustments. The positive sentiment was further supported by improved Industrial Profits in August, which returned to growth.
In terms of economic data docket, Eurozone M3 money supply figures for August stood out on an otherwise light calendar. Annual M3 growth had slowed from over 12% in early 2021 and nearly 4% at the end of 2022 to -0.4% as of July, reflecting the impact of higher interest rates. The latest figures were expected to show a further decline, reinforcing expectations that Eurozone interest rates may have peaked. Key European Central Bank policymakers had recently reiterated the message that rates might not be hiked again, although they emphasised that cuts were unlikely in the near future.
Stateside the data docket is also light, with August durable goods orders being the only notable data point. Orders had shown erratic patterns lately due to global manufacturing sector uncertainties. Despite a weak start to the year, orders appeared to have picked up modestly, and there were hopes that the government's green investment program would provide a boost. August's durable goods orders were expected to decline for the second consecutive month, primarily due to the volatile transport sector, while other orders were forecasted to show continued growth.
No scheduled speeches are expected from major central bank policy makers today as the market focus has shifted to speculation about how long interest rates will remain at current levels, with markets increasingly concerned that they might stay elevated for a longer period than previously assumed.
Negotiations to avoid a partial federal government shutdown in the US continue, with reports suggesting progress in the Senate but potential challenges in the Republican-controlled House of Representatives. Failure to reach an agreement before Sunday would lead to a government shutdown, affecting various sectors and potentially impacting economic growth.
FX Positioning & Sentiment
Institutional FX month-end rebalancing models are anticipating an increased demand for USD as month-end flows come into play. Credit Agricole's model suggests that the strongest USD buy signal is against CAD. However, their corporate flow model points to EUR buying at the end of the month. Barclays' model indicates strong USD buying against all major FX pairs. The USD has been on the front foot against all major currencies throughout the week, and FX options have seen raised risk premiums due to concerns of further USD gains and increased volatility. Morgan Stanley's outlook includes a projection of the DXY eventually reaching 1.0800 and EUR/USD dropping to 1.0300. These models and analyses reflect the ongoing dynamics in the foreign exchange market as traders assess various factors influencing currency movements.
CFTC Data As Of 22-09-23
USD net spec short flips to long $4.567 in Sept 13-19 period; $IDX +0.51%
EUR$ -0.67% in Sep 13-19 period, specs -11,099 contract, now +101,981
Hawkish Fed posturing at Fed hold Wednesday pushed EUR lower in current period
$JPY +0.55%, specs -2,906 contract as pair hovers near 2023 highs
Dogfight b/w bulls & bears as longs profit, new longs eye US-JY yield diffs
GBP$ -0.87% in period, specs -12,491 contracts on less-hawkish BoE rate view
Weak BoE data, recent hold hints at further GBP weakness
AUD$ (+0.54%), $CAD (-0.9%) sold aggressively despite higher commodity prices
BTC +4.29% in period, specs -635 contracts; higher Fed rate musing stir long unwind (Source: Reuters)
FX Options Expiries For 10am New York Cut
(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0500 (615M), 1.0510-15 (1.6BLN), 1.0550 (379M)
1.0575 (688M), 1.0600-05 (1.5BLN), 1.0630-35 (900M), 1.0640-50 (1.7BLN)
USD/CHF: 0.9100 (230M)
GBP/USD: 1.2200-10 (436M), 1.2300 (236M)
EUR/GBP: 0.8700 (369M)
AUD/USD: 0.6400 (216M), 0.6420-30 (1BLN), 0.6445 (404M)
NZD/USD: 0.5945 (1.3BLN)
USD/CAD: 1.3400 (300M), 1.3500 (658M)
USD/JPY: 148.00 (411M), 150.00 (393M)
EUR/NOK: 11.3600 (296M), 11.3670 (360M)
Overnight Newswire Updates of Note
Stocks Slump Further, With Amazon Lawsuit Adding To Recent Pressure
Senators Unveil Bipartisan Funding Deal To Avert Government Shutdown
Fed’s Bowman Says High Rent Burden Shows Need To Cool Inflation
ECB’s Holzmann Says Unclear Whether Rate Peak Has Been Reached
BoJ Members Differed On Hitting Price Target As YCC Was Tweaked
China Industrial Profits Jump Sharply As Economy Stabilises
China Growth Target Hangs In Balance As Economists Cut Forecasts
China's Central Bank To Keep Policy 'Precise And Forceful' To Support Recovery
Australia’s Inflation Accelerates, Keeping Rate Hike In Play
China’s Tight Grip On Yuan Crushes Trading Volume Before Holiday
Tech Stocks Enter A Correction As Fed Fear Dents Market Heroes
US Yields Mixed After 10-Year's Steep Climb, But Uptrend Intact
Stablecoin Issuers Risk Disrupting Funding Markets, JPMorgan Says
Oil Pushes Higher As Tightening Market Outweighs Risk-Off Tone
Asia Stocks Mixed As Investors Grapple With Higher Rates
China Puts Evergrande’s Billionaire Founder Under Police Control
Costco Tops Quarterly Revenue, Profit Estimates On Steady Grocery Demand
(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
Technical & Trade Views
SP500 Bias: Bullish Above Bearish Below 4300 - 4266 Target Hit, New Pattern Emerging
Above 4310 opens 4340
Primary resistance is 4400
Primary objective is 4266
20 Day VWAP bearish, 5 Day VWAP bearish
EURUSD Bias: Bullish Above Bearish Below 1.0610
Above 1.07 opens 1.0750
Primary resistance is 1.0945
Primary objective is 1.0550
20 Day VWAP bearish, 5 Day VWAP bearish
GBPUSD Bias: Bullish Above Bearish Below 1.2220 -1.2150 Target Hit, New Pattern Emerging
Above 1.2250 opens 1.2360
Primary resistance is 1.2750
Primary objective 1.2150
20 Day VWAP bearish, 5 Day VWAP bearish
USDJPY Bias: Bullish Above Bearish Below 148.50
Below 148 opens 147.50
Primary support 144.50
Primary objective is 150
20 Day VWAP bullish, 5 Day VWAP bullish
AUDUSD Bias: Bullish Above Bearish Below .6450
Above .6475 opens .6525
Primary resistance is .6620
Primary objective is .6320
20 Day VWAP bearish, 5 Day VWAP bullish
BTCUSD Bias: Bullish Above Bearish below 27500
Above 28200 opens 30000
Primary resistance is 28175
Primary objective is 23300
20 Day VWAP bearish, 5 Day VWAP bearish
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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!