Daily Market Outlook - Monday, May 22

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Asian equities are mostly in the green as US President Biden's optimistic remarks at the G7 summit in Japan suggested a potential improvement in relations with China in the near future. Speculation arose regarding the lifting of certain sanctions previously imposed. Nevertheless, market sentiment remained constrained due to ongoing worries about a potential US debt default. Talks between Congressional Republicans and the White House on raising the debt ceiling encountered a setback on Friday, with disagreements arising over the magnitude of spending cuts. However, discussions are expected to resume today.

The primary focus for financial markets continues to be the developments surrounding the US debt ceiling negotiations. As a result, today's limited data slate is expected to attract minimal interest. However, speeches from ECB and Fed policymakers could provide additional insight into their monetary policy outlooks. Several Fed policymakers, including Bullard, Daly, Bostic, and Barkin, are scheduled to speak at various events. While the Fed is still expected to pause in June, positive data surprises and hawkish comments from policymakers could alter expectations. Recent increases in US Treasury yields have raised the likelihood of a June rate hike, although a pause remains the most likely scenario.

In the Eurozone, several ECB policymakers, including Vujcic, Guindos, Holzmann, Lane, Villeroy, and de Cos, are set to deliver speeches today. During the last meeting, the ECB signaled a reduction in the pace of rate hikes, indicating an approaching end to tightening measures. However, the ECB's current focus is on addressing inflation and is on track to raise interest rates again next month. ECB President Christine Lagarde reaffirmed over the weekend that the central bank is not yet finished with its actions. Regarding data, investor attention is on the Eurozone consumer confidence figure for May. It is expected that confidence weakened this month, with the headline measure declining from -17.5 to -18.0. This decline partly reflects the moderation in sentiment observed in other surveys such as the German ZEW and Sentix surveys.

FX Options Expiries For 10 am New York Cut 

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

  • EUR/USD: 1.0705-20 (2.2BLN), 1.0795-1.0800 (400M)
  • 1.0825-30 (2BLN), 1.0840-50 (1.3BLN)
  • GBP/USD: 1.2450 (254M), 1.2470 (158M), 1.2500 (160M)
  • AUD/USD: 0.6650 (230M) . NZD/USD: 0.6165 (300M)
  • USD/CAD: 1.3500-05 (350M)
  • USD/JPY: 136.00 (1.3BLN), 137.50 (880M), 138.00 (600M)
  • AUD/JPY: 89.00 (500M), 92.00 (350M)

FTC Data As Of 12/05/2023

  • IMM net USD short grew in May 10-16 period, specs sell into 0.8% $IDX rise
  • EUR$ fell 0.93% in period, specs bottom-fish +7,667 contracts now +187,089
  • EUR position remains elephant in room, for now holds w/in 1.07-1.11 range
  • A break out of EUR/USD's 1.07-1.11 range may see protracted move
  • $JPY rose 0.88% in period , spec -3,776 contracts short grows to -64,791
  • GBP$ -1.05% in period, specs buy weakness +8,065 contract now +12,593
  • AUD$ -1.66% in period. Specs -4,401 contracts now short 53,594
  • BTC -2.88% in period, specs buy dip add 588 contracts now long 1,011(Source RTRS)

Overnight News of Note

  • Biden Reiterates Will Talk Debt Limit With McCarthy Monday
  • Yellen Doubts US Could Still Pay All Of Its Bills By June 15
  • Fed’s Kashkari Open To Skipping Rate Hike In June
  • China Fails Micron's Products In Security Review, Bars Some Purchases
  • China’s Banks Keep Lending Rates Unchanged After PBoC’s Hold
  • US Says China Micron Restrictions Have `No Basis In Fact'
  • China, US Commerce And Trade Chiefs To Meet This Week
  • Japan March Core Machinery Orders Fall For 2nd Straight Month
  • ECB’s Lagarde: ECB Has More Ground to Cover to Tame Inflation
  • TD Changes RBNZ Call To 6% Peak Rates, 50bps Hike This Week
  • Dollar On Defensive After Dovish Powell, Debt Ceiling Setback
  • Goldman Sees Little Respite For Yuan Despite PBoC Pushback
  • Yuan Fluctuation To Have Limited Impact On Capital Markets- CSJ
  • Oil Slips As U.S. Debt Caution Offset Supply Concerns
  • EU Plans More Joint Purchasing After Success Of Common Gas Scheme
  • Markets Edgy Monday As US Debt Ceiling Talks Near Crunch Time

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

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4180 

  • Below 4170 opens 4090
  • Primary support is 4000
  • Primary objective is 4230
  • 20 Day VWAP bearish, 5 Day VWAP bullish

(Click on image to enlarge)

EURUSD Bias: Intraday Bullish Above Bearish below 1.0860

  • Below 1.0790 opens 1.0740
  • Primary support  is 1.07
  • Primary objective is 1.1128
  • 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

GBPUSD Bias: Intraday Bullish Above Bearish below 1.2430

  • Below 1.2370  opens 1.2310
  • Primary resistance  is 1.2540
  • Primary objective 1.23
  • 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

USDJPY Bias: Intraday Bullish above Bearish Below 137.50

  • Below 137.40 opens 136.10
  • Primary support  is 133
  • Primary objective is 140
  • 20 Day VWAP bearish, 5 Day VWAP bullish

(Click on image to enlarge)

AUDUSD Bias: Intraday Bullish Above Bearish below .6650

  • Below .6620 opens .6590
  • Primary resistance  is .6710
  • Primary objective is .6580
  • 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

BTCUSD Intraday Bias: Bullish Above Bearish below 26500

  • Below 26000 opens 25800
  • Primary support 26000
  • Primary objective is 34600
  • 20 Day VWAP bullish, 5 Day VWAP bearish

(Click on image to enlarge)

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