Daily Market Outlook - Tuesday, April 16

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On Tuesday, Asian stock markets experienced widespread declines, mirroring the sell-off on Wall Street the previous day. This was driven by a surge in bond yields after a report revealed stronger-than-expected U.S. retail sales growth in March. The data raised concerns that the US Fed may delay lowering interest rates in June. Additionally, traders remained wary of geopolitical tensions in the Middle East. Most Asian markets ended Monday with lower closing prices. In light of the latest data, CME Group's FedWatch Tool currently suggests only a 21.6 percent likelihood of a quarter point rate cut in June. In China, Q1 GDP growth came in at 5.3% year-on-year, surpassing forecasts, although March retail sales and industrial production fell short of expectations.

Turning to the UK, recent labor market data showed a mixed picture. While the unemployment rate rose to 4.2% in the three months to February, exceeding predictions, annual wage growth remained steady at 5.6%, defying expectations of a slight decrease. Underlying wage growth, excluding bonuses, declined less than anticipated to 6.0% from 6.1%. These wage figures, alongside expected continued CPI inflation decreases, may impact the timing and magnitude of potential Bank of England rate adjustments. Tomorrow morning, the UK will release March CPI data. Headline inflation is anticipated to edge closer to the 2% target, with a projected decrease to 3.1% from February's 3.4%. This aligns with expectations of a drop below 2% in April figures, factoring in Ofgem price reductions. Service sector price pressures appear weaker compared to the previous year, while moderation in food price inflation and softer retail prices, such as clothing and footwear, are expected due to adverse weather conditions. However, petrol prices saw an increase in March compared to the previous year.

The German ZEW survey of professional investors will also be released today, with anticipation of further improvements in the expectations index for economic activity, while the current economic situation index is expected to remain weak.

Later today, market focus will shift to US housing data and industrial production, following recent positive surprises in economic indicators, including stronger-than-expected retail sales. Consequently, expectations for Federal Reserve rate cuts this year have been scaled back.

This week will see several central bank speakers, partly due to the IMF/G-20 meetings. Bank of England Governor Bailey is set to speak later today, with markets assigning roughly even odds to the possibility of the first rate cut occurring as early as June. Federal Reserve Chair Powell will participate in a moderated Q&A session.

Overnight Newswire Updates of Note

  • China First-Quarter GDP Grows 5.3%, Beating Estimates
  • Israel’s Military Chief: Will Respond To Iran’s Weekend Attack
  • US, Europe Seek To Dissuade Israel From Striking Back Against Iran
  • US Speaker: House Will Vote On Ukraine And Israel Aid This Week
  • Fed’s Daly Says No Urgency To Cut, Policy In A Good Place
  • Japan's Yen Hits A Fresh Three-Decade Low Of 154
  • China Loosens Grip On Yuan By Weakening Fix Amid USD Strength
  • Tesla Plans To Lay Off More Than 10% Of Workforce
  • Lockheed Wins US Missile Defence Contract Worth $17 Bln

(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: 1.0610-20 (1.2BLN), 1.0650 (801M), 1.0660-70 (2.6BLN)
  • 1.0700 (1.2BLN, 1.0750 (1.5BLN), 1.0800 (2.7BLN), 1.0820-25 (1.8BLN)
  • USD/CHF: 0.9050 (350M), 0.9140 (476M)
  • GBP/USD: 1.2450 (321M). 0.8530 (200M),0.8550 (225M)
  • AUD/NZD: 1.0900 (594M)
  • AUD/USD: 0.6500 (1.1BLN), 0.6600 (740M)
  • USD/CAD: 1.3700 (890M), 1.3715-25 (800M)
  • USD/JPY: 153.00 (510M), 153.50 (310M), 154.05-10 (480M)
  • AUD/JPY: 97.60 (805M)
  • FX option risk premiums are trading at January highs, with implied volatility showing a risk premium compared to realised volatility. The premiums have increased for all currencies and expiration dates, with the 1-month expiry being the benchmark. G10 implied volatility for 1-month expiry has reached new highs since January, compared to 2+year lows in mid-March. There has been a significant increase in volatility premium for USD and JPY calls compared to puts, indicating risk aversion and the potential for further USD gains, as well as potential JPY intervention. Key barrier levels are at EUR/USD 1.0600 and USD/JPY 155.00.

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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