Daily Market Outlook - Thursday, April 18

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Asian stocks rose on Thursday as authorities' resistance to a strengthening dollar helped stabilize exchange rates and restore public confidence in the region's financial systems. Following a joint statement by US Treasury Secretary Janet Yellen and the finance ministers of Japan and South Korea expressing concerns about the weakening of the two Asian currencies, the value of the yen and won increased against the dollar. A global measure of emerging market currencies was set for a second day of gains after hitting a low point for the year earlier in the week, indicating some stabilization. The dollar index fell for a second day, while Treasuries remained relatively unchanged after a rally on Wednesday. Equities in China and Japan saw gains. The oil price has retreated, with Brent crude falling below $88 per barrel, nearing its lowest level in three weeks. This reflects optimism that tensions between Iran and Israel will not escalate further. Additionally, more US Federal Reserve policymakers have cautioned that persistent US inflation could delay interest rate cuts.

Looking at the day ahead, economic data is light in the UK and the Eurozone. In the US, focus will be on the weekly jobless claims data, which has been trending at unusually low levels in recent weeks, indicating a resilient labor market. However, this may not reassure markets regarding potential interest rate cuts by the Federal Reserve. The release of existing home sales for March in the US will also be watched. While sales saw a significant rise in January and February, a modest decline is expected for March. Nonetheless, the overall trend suggests that the housing sector has stabilised , although rising bond yields could pose a threat to this recovery.The April Philadelphia Fed survey will offer insight into current economic conditions, although its volatility makes it challenging to discern underlying trends.

Global financial leaders continue to provide commentary at the International Monetary Fund and World Bank Spring meetings in Washington. ECB vice-president Luis de Guindos presents the bank's annual report, joined by colleagues Joachim Nagel, Isabel Schnabel, Mario Centeno, Gediminas Simkus, and Boris Vujcic at various venues. Megan Greene of the Bank of England has taken a hawkish tone in recent comments, warning of inflation risks from the Middle East and pushing back against expectations of quicker rate cuts compared to the United States. Later today US investors will parse earnings from Netflix and TSMC as tech earnings get underway.
 

Overnight Newswire Updates of Note

  • Traders Pile Into Contrarian Bet That Fed Will Front-Run Cuts
  • Fed's Bowman: Inflation Progress Slows And Possibly Halts
  • Mester Says Fed Can Hold Rates Steady, Not In a Hurry to Cut
  • Lagarde Says Euro-Zone Economy Is Showing Signs Of Recovery
  • ECB’s Nagel: Probability Of ECB June Rate Cut Is Increasing
  • ECB's Vasle Sees Rates Much Closer To 3% At Year-End
  • ECB’s Centeno Says It’s About Time To Change Monetary Policy
  • BoE’s Andrew Bailey Insists UK ‘On Track’ To Quell Inflation
  • BoJ's Noguchi: Short-Term Policy Rate Adjustment Likely To Be Slow
  • Australian Jobs Surprisingly Fall, Giving RBA Scope For Patience
  • Japan's Kanda: G7 Statement Reconfirmed Commitment On FX Stance
  • China Reiterates Need For Steady Yuan Amid Fragile Confidence
  • US Reimposes Oil Sanctions On Venezuela After Broken Election Promises
  • Israel Reportedly Considered Striking Iran On Monday But Decided To Wait

(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: 1.0625 (609M), 1.0635-40 (1.1BLN), 1.0650 (909M)
  • 1.0670-75 (623M), 1.0700 (910M)
  • USD/CHF: 0.9000 (928M), 0.9100 (200M).
  • EUR/CHF: 0.9700 (649M), 0.9725 (239M), 0.9750 (576M)
  • GBP/USD: 1.2390-1.2400 (1BLN), 1.2450 (705M), 1.2500 (230M), 1.2640 (720M)
  • EUR/GBP: 0.8490 (800M), 0.8535 (400M), 0.8590 (281M), 0.8650 (786M)
  • AUD/USD: 0.6370 (596M), 0.6435 (1.5BLN), 0.6500-15 (609M), 0.6540-45 (700M)
  • NZD/USD: 0.5900 (745M), 0.5995 (2.3BLN)
  • AUD/NZD: 1.0850 (304M), 1.0900 (302M). USD/CAD: 1.3750 (1BLN)
  • USD/JPY: 153.00 (6BLN), 153.80 (1BLN), 154.00 (755M), 154.50 (1BLN)
  • 155.00 (895M). EUR/JPY: 164.00 (500M), 164.95 (489M). AUD/JPY: 99.25 (505M)
  • Thursday saw a dominance of sellers in the FX option markets, leading to a significant increase in implied volatility amid geopolitical risks and policy divergence, despite demand coming from long-term lows. It was challenging to assess the amount of risk premium each party demanded, while realized volatility remained relatively low throughout the week. Risk experienced a modest recovery, accompanied by a weakening USD. Sellers of option implied volatility reappeared, particularly in shorter dates. Without further escalation in the Middle East, there's potential for increased downside volatility. USD calls, notably for EUR/USD, witnessed substantial premium gains, although the easing process was gradual. The expiration of significant strikes on Thursday amplified their influence in calmer markets.
     

CFTC Data As Of 12/04/24

  • Equity fund managers raise S&P 500 CME net long position by 9,236 contracts to 939,368
  • Equity fund speculators trim S&P 500 CME net short position by 32,395 contracts to 333,288
  • Japanese yen net short position is -162,151 contracts
  • Euro net long position is 32,723 contracts
  • British pound net long position is 28,252 contracts
  • Swiss franc posts net short position of -31,764 contracts
  • Bitcoin net short position is -153 contracts
  • Gold NC Net Positions climbed from previous $199.3K to $207.3K
     

Technical & Trade Views

SP500 Bullish Above Bearish Below 5104

  • Daily VWAP bearish
  • Weekly VWAP bearish
  • Above 5110 opens 5150
  • Primary resistance 5180
  • Primary objective is 5000

(Click on image to enlarge)

EURUSD Bullish Above Bearish Below 1.0720

  • Daily VWAP bearish
  • 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 1.25

  • Daily VWAP bearish
  • Weekly VWAP bearish
  • Above 1.2560 opens 1.2650
  • Primary resistance  is 1.2650
  • Primary objective 1.2350  

(Click on image to enlarge)

USDJPY Bullish Above Bearish Below 153.40

  • Daily VWAP bullish
  • Weekly VWAP bullish
  • Below 153.40 opens 152
  • Primary support 152
  • Primary objective is 155

(Click on image to enlarge)

XAUUSD Bullish Above Bearish Below 2395

  • Daily VWAP bullish
  • Weekly VWAP bullish
  • Below 2380 opens 2330
  • Primary support 2284
  • Primary objective is 2430 TARGET HIT NEW PATTERN EMERGING

(Click on image to enlarge)

BTCUSD Bullish Above Bearish below 66000

  • 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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