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Asian equity markets posted gains as they followed the positive global trend driven by robust U.S. economic data, a dovish rate hike by the European Central Bank (ECB), and the People's Bank of China's (PBoC) cut in the Reserve Requirement Ratio (RRR). Additionally, better-than-expected Chinese economic data provided further support. The Nikkei 225 index increased by 1.1%, benefiting from the strong performance of power companies. SoftBank also saw a boost after its subsidiary, Arm, saw a 25% increase in its U.S. debut. Meanwhile, the Hang Seng index gained 1.7%, and the Shanghai Composite rose by 0.3%, both lifted by encouraging Chinese activity data. Industrial Production and Retail Sales in China exceeded expectations. The PBoC had recently reduced the RRR but maintained its 1-year Medium-Term Lending Facility (MLF) rate at 2.50%.

Following the ECB's interest rate hike, ECB President Lagarde will hold a press conference after the Eurogroup meeting of finance ministers in Spain. Following the ECB decision, Lagarde mentioned that the focus is shifting towards the duration for which restrictive interest rates will be maintained, indicating that rates may have peaked.

Market attention now shifts to updates from the U.S. Federal Reserve and the Bank of England next week. The release of the BoE/Ipsos Inflation Attitudes Survey today will provide insights into the latest inflation expectations. In the previous survey, 1-year ahead inflation expectations had fallen to 3.5%, the lowest level since late 2021. Despite generally softer data at the start of Q3, the BoE is still expected to raise interest rates next Thursday, especially with the August CPI inflation report anticipated to remain well above target.

Stateside, August industrial production is forecasted to show marginal growth of 0.1% in August, consistent with ISM and PMI surveys. The Empire manufacturing survey will provide insights into September's economic activity. The University of Michigan's U.S. consumer sentiment survey for September is expected to slightly decrease to 69.1 from 69.5, reflecting consumer caution. Retail sales data from August softened compared to July, and market watchers will closely monitor the survey's inflation expectations, especially as oil prices continue to rise.
 

FX Positioning & Sentiment 

Sentiment in the foreign exchange (FX) markets could face seasonal headwinds in the near future. The S&P 500 is approaching what is historically considered one of its weakest seasonal periods. It's important to note that seasonality should not be the sole factor considered when making trading decisions. There are several risk events on the horizon, including the possibility of a U.S. government shutdown and the resumption of student loan repayments. In light of these uncertainties, traders may lean towards defensive positions, with the Japanese Yen (JPY) being a potential safe haven should U.S. yields decline. Speaker McCarthy has so far been unsuccessful in preventing a potential government shutdown, which could have significant implications. Additionally, the resumption of student loan repayments, set to begin in October, is another factor contributing to market uncertainty.
 

CFTC Data As Of 08-09-23

• USD net USD G10 short -$3.4bn in Aug 30-Sep 5 period, $IDX +1.17% in period
• Fed high for longer versus whiff of steady ECB, less austere BoE lifts USD
• EUR$ -1.42% in period, specs -10,448 contracts now +136,231
• Sellers overwhelm bottom-fishers as king USD reigns, pair flat since Tuesday
• $JPY +1.23% in period, specs +1,337 contracts now -97,136
• Longs sell USD ahead of expected intervention area near 150
• GBP$ -0.68% in period, specs sell 2,017 contracts now long 46,384
• Traders sense dovish BoE shift, high BoE rate path tempers GBP weakness
• CAD & AUD shorts rise 9k & 13k respectively amid weak China growth view
• BTC -6.79% in period, specs buy 532 contracts long grows to 2,039 contracts (Source: Reuters)
   

FX Options Expiries For 10am New York Cut 

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

• EUR/USD: 1.0600 (270M), 1.0700 (244M), 1.0800 (673M)
• 1.0850 (239M)
• USD/JPY: 145.00 (260M), 146.75 (2.03BLN), 147.00 (230M)
• 148.00 (210M)
• GBP/USD: 1.2620 (900M)
• AUD/USD: 0.6610 (300M), 0.6630 (723M)
• USD/CAD: 1.3490 (210M), 1.3500 (670M), 1.3510-25 (814M)
   

Overnight Newswire Updates of Note

• China Retail Sales Suggest Start Of Bounce Back, But Property Sector Still In Distress
• PBoC Boosts Liquidity Further With MLF Policy Tool, Rate Unchanged
• Another Rate Cut From PBoC, 14 Day Reverse Repo To 1.95% From 2.15%
• Japan Considers Extending Gasoline Subsidy Beyond 2023
• ECB Hawks Warn Of December Rate Rise If Inflation And Wages Stay Hot
• Trudeau Cuts Tax On Rental Builds, Pushes Grocers On Food Costs
• Chinese Developer Sino-Ocean Suspends Offshore Debt Payments
• Country Garden Delays Yuan Bond Extension Vote To Monday
• Arm Climbs 25% In Nasdaq Debut After Pricing IPO At $51 A Share
• UAW Strikes At Plants Owned By GM, Ford, Stellantis
• Adobe Offers Tepid Sales Outlook Despite Growing AI Optimism
• Disney To Cut Target For Disney+ Streaming Subscribers
• Byron Allen Makes $10 Bln Bid For ABC, Other Disney Networks

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

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 4490

• Above 4500 opens 4540
• Primary resistance  is 4550
• Primary objective is 4266
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

EURUSD Bias: Bullish Above Bearsih Below 1.0810 - 1.0660 Target Hit - New Pattern Emerging

• Above 1.860 opens 1.0945
• Primary resistance is 1.1066
• Primary objective is 1.0660
• 20 Day VWAP bearish, 5 Day VWAP bullish

(Click on image to enlarge)

GBPUSD Bias: Bullish Above Bearish Below 1.25

• Above 1.2650 opens 1.27
• Primary resistance  is 1.2750
• Primary objective 1.23
• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

USDJPY Bias: Bullish Above Bearish Below 146.50

• Below 146 opens 144.90
• Primary support 144.50
• Primary objective is 150
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

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

(Click on image to enlarge)

BTCUSD Bias: Bullish Above Bearish below 27000

• Above 28200 opens 30000
• Primary resistance  is 28175
• Primary objective is 23300
• 20 Day VWAP bearish, 5 Day VWAP bullish

(Click on image to enlarge)

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