Daily Market Outlook - Tuesday, May 23

10 and 20 us dollar bill

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Asian equities traded with uncertainty as investors assessed the latest updates on the debt limit negotiations. While the meeting between US President Biden and House Speaker McCarthy was described as productive, there were no significant breakthroughs. The Nikkei 225 initially climbed to its highest level since August 1990 and seemed poised to match its longest winning streak in four years. However, it eventually declined during afternoon trade as profit-taking emerged. The Hang Seng and Shanghai Composite both experienced subdued performance. Hong Kong failed to sustain the early tech-led momentum from China's approval of 86 domestic online games in May. Meanwhile, the mainland market faced pressure after Chinese press reports indicated expectations that the People's Bank of China (PBoC) would keep its benchmark lending rates unchanged for the foreseeable future. Additionally, the US denied any plans to lift sanctions on China's defense minister, contributing to the cautious sentiment in the market.

Today's release of the May Purchasing Managers' Index (PMI) readings for the Eurozone, the UK, and the US will provide crucial insights into the strength of economic activity, while the question of future interest rates continues to occupy market attention. In the UK, the April survey indicated a rise in the composite PMI measure to its highest level in a year, and we anticipate only a modest decline in May. This suggests that growth may not be slowing sufficiently to alleviate domestic inflationary pressures. Likewise, the US and Eurozone PMI readings are expected to reveal ongoing growth at a faster pace than initially anticipated this year. However, the surveys indicate uneven growth patterns, with services outperforming manufacturing across all three regions.

Bank of England Governor Bailey and several members of the Monetary Policy Committee are scheduled to testify before a House of Commons Committee today. The focus will be on the BoE's May Monetary Policy Report and the MPC's decision to raise interest rates by 25 basis points. This session precedes the release of the latest inflation data. Market participants will be particularly interested in any indications regarding the likelihood of further interest rate hikes in June, given the Report's concerns about inflation proving more persistent than expected.

Stateside, the Richmond Fed release will provide insights into regional economic activity. Additionally, market participants will closely watch the New Home Sales data for April, following a significant increase of over 9% in March. The consensus anticipates a slight decline, and attention will also be given to the months' supply figure, which decreased from 8.4 to 7.6 months' worth previously. These data points are expected to shed light on the state of the housing market and provide further indications of economic trends. Federal Reserve member Logan, who is a voter in 2023, is scheduled to deliver remarks today. Last week, her hawkish commentary caused a market reaction. However, after Chair Powell's comments on Friday, the market's threshold to anticipate additional hawkishness is higher. Powell's remarks have been interpreted as signaling a likelihood of a pause at the June FOMC meeting. The market will closely monitor Logan's remarks for any potential insights into the future direction of monetary policy.

FX Options Expiries For 10 am New York Cut 

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

  • EUR/USD: 1.0800 (306M), 1.0825 (214M), 1.0865-80 (600M), 1.0900 (434M)
  • USD/CHF: 0.8850 (840M), 0.8975 (1.3BLN)
  • EUR/CHF: 0.9600 (275M), 0.9700 (350M), 0.9830 (200M), 0.9850-60 (300M)
  • NZD/USD: 0.6300 (430M)
  • USD/CAD: 1.3400 (475M) 1.3525 (464M), 1.3545 (324M), 1.3600 (1.1BLN)
  • USD/JPY: 138.00 (758M), 138.25 (225M), 139.00 (207M)

CFTC 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, McCarthy Meeting Ends With No Deal On Debt Ceiling
  • Yellen: Debt-Limit Measures Could Still Run Out Soon As June 1
  • Japan's Nikkei Drops From 33-Year Peak As Profit-Taking Emerges
  • Japan’s Factory, Service Activity Signal Strengthening Recovery
  • NZ Treasury Says Strong Immigration Is Upside Risk To Economy
  • Fed's Kashkari Cautions Against All-Clear On Banking Woes
  • Fed's Barkin: Won't Prejudge Outcome Of June Meeting
  • Fed's Bostic: Comfortable "Waiting A Little Bit" Before Any More Rate Moves
  • Fed's Daly: Expects Unemployment Rise As Price Of Controlling Inflation
  • ECB's de Cos Still Sees 'Some Way To Go' On Policy Tightening
  • Asian Currencies Tepid As Fed's Rate-Hike Talk Boosts Dollar
  • Big Investors Rush Into Bonds After ‘Cataclysmic’ Year
  • Oil Prices Rise On Outlook For Higher Gasoline Demand, Tighter Supply
  • Asia Stocks Drift Lower Tuesday, US Futures Eye Debt Talks
  • Disney Begins Third Round Of Layoffs, Cutting More Than 2,500 Jobs

(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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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to ...

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