Daily Market Outlook, September 8, 2023
Munnelly’s Market Commentary…
Asian equity markets faced downward pressure in response to declines in the technology sector on Wall Street, driven by concerns about Apple's performance in China. Additionally, markets were digesting disappointing downward revisions to Japanese GDP data for the second quarter. The Nikkei 225 index retreated, slipping below the 33k handle. This decline was attributed to a dampened risk appetite caused by the disappointing GDP revisions and slower wage growth in Japan. The Hang Seng index remained closed due to severe rainfall, while the Shanghai Composite index declined, influenced by ongoing tech-related tensions as China expands its iPhone ban and the US Commerce Department investigates "made in China" Huawei chips.
Although the past week had seen relatively active economic events, today's data docket is notably devoid of major releases.. The lack of significant releases in the Eurozone, the UK, and Stateside means that the Canadian labour market report for August becomes the primary point of interest for the day. Consensus forecasts predict a 17.5k increase in employment for August, following an unexpected decline of 6.4k in July. However, despite the anticipated rise, the unemployment rate is also expected to inch up from 5.5% to 5.6% in August.
Fed Vice Chair Barr is the sole central banker scheduled to speak today. It is unlikely that his comments will focus on the outlook for US monetary policy, as his scheduled topic is payments innovation.
Overnight, China is set to release its latest Consumer Price Index (CPI) report for August, with expectations leaning toward a return to positive territory after July's dip into deflation. Furthermore, producer price inflation data, which provides insight into price pressures further back in the supply chain, is expected to show a moderation in the rate of annual deflation.
FX Positioning & Sentiment
The proximity of oil prices to the $90 mark holds significant importance in the market. Brent crude oil has not closed above this level since the end of January, indicating a sustained period of trading below this threshold. In September, the price of oil reached a high of $91.15, meeting the target to correct a substantial drop that had been influenced by the Federal Reserve's actions. Specifically, the Fed accelerated its pace of tightening in June 2022 by implementing a 75 basis points (bps) interest rate hike. To provide context, the price of Brent crude oil had surged to $125.19 in June but experienced a sharp decline to $70.12 during a period of banking turmoil in March. If oil prices were to reach or surpass this peak level, it could have varying effects on currencies: currencies of countries that are net importers of oil, such as the Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Indian Rupee (INR), and Chinese Yuan (CNY), may benefit from lower oil prices. Reduced oil costs can lead to lower import bills and improved trade balances for these nations, which can strengthen their currencies. Conversely, currencies of countries that heavily rely on oil exports, like the Russian Ruble (RUB), Canadian Dollar (CAD), Norwegian Krone (NOK), and Mexican Peso (MXN), may experience a decline in value if oil prices drop significantly. Lower oil prices can negatively impact the revenues and trade balances of these oil-exporting countries, potentially weakening their currencies.
CFTC Data As Of 31-08-23
Tuesday close of Aug 30-Sep 5 spec IMM period saw $IDX +1.17%
Less-dovish Fed rate expectations stoke USD bid
USD rise hints Fri's spec data may show reduced USD short
EUR$ -1.42% in period amid EZ growth concerns, end of hike cycle
Euro net spec long well off May high +187k contracts, now +147k
$JPY +1.23% in period; US-JY rate divergence keeps yen on back foot
Yen net short may have diminished after Kanda's spec rebuke
GBP$ -0.68% in period, global growth concerns drag GBP lower
UK rate dominance in near-term tempers GBP$ decline
AUD$ -1.57%, China growth concerns, steady RBA view weighs on AUD (Source: Reuters)
FX Options Expiries For 10am New York Cut
(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0650 (601M), 1.0700 (1.3BLN), 1.0750 (701M)
1.0790-00 (679M), 1.0805-15 (804M), 1.0825-30 (813M)
USD/JPY: 146.10-25 (551M), 147.00 (385M), 148.00 (439M)
USD/CHF: 0.8700 (300M), 0.8750 (400M)
GBP/USD: 1.2490-00 (333M)
AUD/USD: 0.6300 (543M), 0.6400 (318M), 0.6450 (904M)
0.6500 (218M), 0.6600 (846M)
USD/CAD: 1.3465 (379M), 1.3480-85 (790M), 1.3495-00 (814M)
1.3730 (371M). USD/ZAR: 18.90 (265M)
Overnight Newswire Updates of Note
US Futures Little Changed As Traders Weigh Risk Of Rate Hikes
Asia Markets Fall Hong Kong Cancels Morning Trade On Storm
Federal Reserve Officials Support September Rate Rise Pause
Fed’s Williams: Policy In Good Place, Must Be Data Dependent
Logan Says Fed May Need To Hike Rates After September Skip
Fed's Goolsbee Poises Central Bank Almost Done Raising Rates
Biden Not Planning To Meet Chinese Premier Li At G20 Summit
Offshore Yuan Sinks Toward Record Low After China Cuts Fixing
Japan Economic Growth Revised Down As Consumers Cut Back
BoC’s Governor Macklem Says Victory Over Inflation Is ‘In Sight’
UK Job Recruiters Say Demand For Staff Falls To Three-Year Low
Wall Street’s Biggest Bear Ditches Call For 11% S&P Drop In 2023
Goldman See New Job Cull For Bankers Viewed Underperformers
(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
Technical & Trade Views
SP500 Bias: Bullish Above Bearish Below 4500
Above 4500 opens 44540
Primary resistance is 4450
Primary objective is 4266
20 Day VWAP bullish, 5 Day VWAP bearish
EURUSD Bias: Bullish Above Bearish Below 1.0810
Above 1.860 opens 1.0945
Primary resistance is 1.1066
Primary objective is 1.0660
20 Day VWAP bearish, 5 Day VWAP bearish
GBPUSD Bias: Bullish Above Bearish Below 1.2560
Above 1.2650 opens 1.27
Primary resistance is 1.2750
Primary objective 1.23
20 Day VWAP bearish, 5 Day VWAP bearish
USDJPY Bias: Bullish Above Bearish Below 146.50
Below 146 opens 144.90
Primary support 143.90
Primary objective is 150
20 Day VWAP bullish, 5 Day VWAP bullish
AUDUSD Bias: Bullish Above Bearish Below .6450
Above .6525 opens .6575
Primary resistance is .6620
Primary objective is .6320
20 Day VWAP bearish, 5 Day VWAP bearish
BTCUSD Bias: Bullish Above Bearish below 26175
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!