Daily Market Outlook - Friday, April 26

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Asian equities saw gains today following strong US tech earnings, rebounding from yesterday's sell-off in both US equities and bonds triggered by Q1 GDP data showing slower growth and stronger inflation than anticipated. Overnight, the Bank of Japan kept short-term interest rates unchanged, as expected, maintaining them in the 0%-0.1% range after shifting them out of negative territory last month.

UK GfK consumer confidence for April was released earlier, with the headline index rising to -19 from -21, slightly surpassing forecasts. This uptrend over the past year suggests modest improvements in consumer fundamentals, supported by peaking interest rates and real wage growth. Eurozone money supply and credit growth data, expected to confirm subdued credit dynamics due to past monetary policy tightening, will be released alongside the ECB's consumer expectations survey, offering insights into household inflation expectations.

Stateside, the focal point of the day will be the US PCE inflation figures for March, following yesterday's Q1 GDP report, which revealed weaker-than-expected growth but stronger core PCE inflation, indicating potential upside risks to March's inflation data. This may also entail upward revisions to January and February figures. Consequently, look for the March core PCE deflator at 0.4%m/m, higher than the consensus of 0.3%m/m. Despite disappointing GDP growth, this inflationary pressure suggests the Fed may hesitate to implement interest rate cuts.
 

Overnight Newswire Updates of Note

  • Bank Of Japan Holds Rates Steady, Expects Inflation To Stay Around 2%
  • Tokyo Inflation Slows Sharply On Education Subsidy Impact
  • UK Consumers Get Spring In Step As Confidence Mounts
  • Trump Allies Draw Up Plans To Blunt Fed’s Independence
  • ECB Will Need More Rate Cuts If Fed Holds Back, Says Policymaker
  • China Warns Blinken ‘Negative Factors’ Building In US Relations
  • Yen Drops To Fresh 34-Year Low As BoJ Keeps Key Rate Unchanged
  • Oil Prices On Track To Snap Two-Week Losing Streak
  • Microsoft Sales And Profit Beat Expectations On Robust AI Demand
  • Alphabet To Pay Its First Dividend After Strong Quarterly Revenue
  • Intel Slides After Tepid Forecast Shows Comeback Challenges
  • There is increased demand for USD/CNH FX option strikes, with buyers showing interest in topside strikes around 7.5000 at the start of the week. Implied volatility for 1-month expiry was paid at 3.0 on a good size. There was also good demand for 1-month expiry 7.2000 strikes on Friday, with trading between 3.425 and 3.55 implied vol on over $500 million. Currently, 1-month expiry implied volatility is trading around 3.3. Additionally, 1-month risk reversals rallied to neutral to 0.7 USD calls/CNH puts in mid-April but have since settled around 0.35 USD calls/CNH puts, indicating that the market is still wary of further USD gains/CNH losses.

(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
 

FX Options Expiries For 10am New York Cut 

(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

  • EUR/USD: 1.0675-85 (1.9BLN), 1.0700 (1BLN), 1.0725-30 (1.4BLN)
  • 1.0750 (1.7BLN), 1.0785 (1.1BLN), 1.0800 (548M)
  • USD/CHF: 0.9100-10 (765M), 0.9200 (276M). EUR/CHF: 0.9775 (357M)
  • GBP/USD: 1.2430 (1.1BLN), 1.2490-1.2505 (1.1BLN)
  • AUD/USD: 0.6500 (469M), 0.6515-25 (390M), 0.6540-50 (556M), 0.6570 (377M)
  • NZD/USD: 0.5905 (329M), 0.5925 (229M), 0.5940 (385M)
  • USD/CAD: 1.3560-65 (600M), 1.3650 (259M), 1.3770-85 (1.1BLN)
  • USD/JPY: 155.00 (1.5BLN), 156.00 (376M), 156.25 (320M), 156.50 (530M)
  • The overnight option expiry has been extended to 10 am New York time on Friday, April 26, and this includes the Bank of Japan (BoJ). There has been a significant increase in the implied volatility of JPY-related FX options. Implied volatility is used to assess the risk of FX realized volatility when determining the premium. The overnight USD/JPY implied volatility is currently at 10.0 to 25.0, the highest since the December BoJ meeting. The premium/break-even for a vanilla straddle is now at 162 compared to 65 JPY pips in either direction. The market is showing a high level of nervousness about potential intervention and the possibility of further weakening of the JPY. Additionally, the Tokyo CPI data is also a factor, along with the U.S. CPI data later on Friday.
     

CFTC Data As Of 19/04/24

  • Japanese yen net short position is -165,619 contracts
  • Swiss franc posts net short position of -36,212 contracts
  • British pound net long position is 8,619 contracts
  • Euro net long position is 12,224 contracts 
  • Bitcoin net short position is -363 contracts
  • Equity fund managers cut S&P 500 CME net long position by 89,326 contracts to 850,042 
  • Equity fund speculators trim S&P 500 CME net short position by 139,497 contracts to 193,791
     

Technical & Trade Views

SP500 Bullish Above Bearish Below 5070

  • Daily VWAP bullish
  • Weekly VWAP bearish
  • Below 5020 opens 5000
  • Primary support 5010
  • Primary objective is 5150

(Click on image to enlarge)

EURUSD Bullish Above Bearish Below 1.0720

  • Daily VWAP bullish
  • Weekly VWAP bearish
  • Above 1.0730 opens 1.0760
  • Primary resistance 1.0740
  • Primary objective is 1.0550

(Click on image to enlarge)

 

GBPUSD Bullish Above Bearish Below 1.24

  • Daily VWAP bullish
  • Weekly VWAP bearish
  • Above 1.25 opens 1.2570
  • Primary resistance  is 1.2650
  • Primary objective 1.2350 TARGET HIT NEW PATTERN EMERGING

 

(Click on image to enlarge)

USDJPY Bullish Above Bearish Below 154.60

  • Daily VWAP bullish
  • Weekly VWAP bullish
  • Below 153.40 opens 152
  • Primary support 152
  • Primary objective is 155 TARGET HIT NEW PATTERN EMERGING

(Click on image to enlarge)

XAUUSD Bullish Above Bearish Below 2379

  • Daily VWAP bearish
  • Weekly VWAP bullish
  • Above 2420 opens 2460
  • Primary support 2300
  • Primary objective is 2310 TARGET HIT NEW PATTERN EMERGING

(Click on image to enlarge)

BTCUSD Bullish Above Bearish below 62000

  • Daily VWAP bearish
  • Weekly VWAP bullish
  • Below 59900 opens 55900
  • Primary support  is 60000
  • Primary objective is 78000

(Click on image to enlarge)


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