Image Source: Pixabay
 

Asian equity markets exhibited a mixed performance as the region adopted a cautious stance, lacking any fresh macroeconomic catalysts, and with market participants preparing for the release of U.S. Consumer Price Index (CPI) data scheduled for midweek. The Nikkei 225 index showed a gain of 0.6%. This increase was attributed to the strength in automaker stocks and early leadership from SoftBank. Notably, SoftBank's Arm unit IPO garnered significant attention, being oversubscribed by a factor of 10. However, the index's price action was somewhat volatile, with it nearly erasing all of its gains before revisiting session highs. The Hang Seng index remained flat, mirroring little change throughout the session. Early downward movements were offset by another strong liquidity injection by the People's Bank of China (PBoC), and after Country Garden Holdings received approval to extend the repayment period for six onshore bonds by an additional three years. Similarly, the Shanghai Composite Index also ended the session essentially unchanged. It displayed a lack of significant movement during the trading day.

The newly appointed Bank of England Deputy Governor, Breeden, is set to make an appearance before a House of Commons Committee today. Her role as a member of the Monetary Policy Committee, which sets interest rates, will begin in November. The financial markets will be closely watching this appearance for any hints or insights into her views on the future interest rate outlook. However, it's expected that she will be cautious in her comments ahead of the Bank of England's update next week. On Wednesday, early forecasts indicate that the UK's July Gross Domestic Product (GDP) data will show a monthly decline of 0.4%. This decline partly reflects a pullback from the 0.5% increase observed in June. Additionally, various temporary factors, such as adverse weather conditions and ongoing strike activities, may have affected economic activity. Nevertheless, the weak start to the quarter raises concerns about potential downside risks compared to the Bank of England's third-quarter GDP forecast. These developments indicate that there is a degree of uncertainty and caution in the UK's economic landscape, with policymakers and market participants closely monitoring incoming data and central bank updates for insights into the country's economic trajectory and potential monetary policy responses.

The German ZEW survey scheduled for today will offer early insights into the state of the Eurozone economy for September. In the previous month's survey, there was a slight improvement in the expectations component compared to July, but it still remained one of the weakest readings for the year. Both our own forecasts and the consensus among experts suggest that September may see a further decline in the ZEW survey data. This aligns with other recent indicators that suggest the Eurozone economy is facing challenges. If this decline indeed materializes, it will add to the concerns for the European Central Bank (ECB) as they prepare for their interest rate update on Thursday. A deteriorating economic outlook could influence the ECB's policy decisions, including those related to interest rates and monetary stimulus measures.

Stateside, the NFIB (National Federation of Independent Business) indicator, which focuses on the small business sector, will provide another economic reading for August. Thus far, there have been indications that economic activity in the U.S. has remained stronger than expected. However, some subcomponents of the NFIB data have shown signs of a weakening labor market, with job vacancies reaching their lowest point since February 2021, and a reduced percentage of firms planning to increase wages.
 

FX Positioning & Sentiment 

The USD/JPY currency pair has experienced a pullback from its recent highs, but many participants in Tokyo's financial markets remain sceptical about the weekend report from Yomiuri. The report suggested that Bank of Japan Governor Kazuo Ueda is considering shifting the central bank towards a more hawkish stance, which would involve a more cautious approach to monetary policy. While some degree of stability has returned to the markets, Tokyo investors and traders are likely to remain cautious and uncertain until they receive clearer guidance from the Bank of Japan at the upcoming BOJ Policy Board meeting scheduled for September 21-22. The news of Ueda's potential shift in policy stance had a significant impact on markets, with USD/JPY dropping to a low of 145.91 during London trading, down from Friday's closing rate of 147.84 in New York. Concurrently, the yield on 10-year Japanese government bonds saw a notable increase, rising from 0.667% to 0.715%. In the wake of these developments, the markets have since regained some stability, with USD/JPY trading within a range of 146.45 to 146.80 on the EBS trading platform. However, uncertainty prevails, and market participants are eagerly awaiting further insights and clarity from the Bank of Japan regarding its future monetary policy direction.
 

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: 1.0615-25 (303M), 1.0650 (452M), 1.0665 (227M)
• 1.0685 (395M), 1.0700 (463M), 1.0720-30 (772M)
• 1.0765-75 (496M), 1.0800 (952M), 1.0815-20 (292M)
• 1.0830-35 (336M), 1.0875-85 (784M)
• USD/JPY: 145.50 (401M), 146.65 (250M), 146.85 (400M)
• 147.55 (200M)
• USD/CHF: 0.8750 (612M), 0.8800 (376M)
• GBP/USD: 1.2350-55 (1.04BLN). EUR/GBP: 0.8500 (228M)
• 0.8620 (200M), 0.8670 (353M)
• AUD/USD: 0.6250 (786M), 0.6400 (210M), 0.6550 (301M)
• 0.6575 (255M). NZD/USD: 0.5835 (480M), 0.5950 (616M)
• 0.5965 (481M). USD/CAD: 1.3490 (397M), 1.3700 (293M)
   

Overnight Newswire Updates of Note

• Australian Business Conditions Brighten As Consumer Mood Sours
• Japan Finance Minister Suzuki: Expect BoJ To Steer Policy Appropriately
• Japan LDP’s Seko: Ueda Said Easy Policy Exit Will Be After Achieving 2% Target
• Japan PM To Keep His Chief Cabinet Secretary In Cabinet Reshuffle
• Analysts: China Could Cut RRR By Year-End
• PBoC Seen Having Ample Policy Tools To Safeguard Yuan
• Fed Is Done Raising Rates And Will Cut Them In 2024, Economists Say
• ‘Strong Case’ For Tough New Action Against China, Says Senior UK Minister
• Yen Stands Tall, Dollar Finds Floor Ahead Of US Inflation
• Country Garden Wins Approval To Extend Six Onshore Bond Repayments By 3 Years
• US Companies Opt For Short-Term Debt In Bet That Yields Have Peaked
• Oil Edges Higher As Attention Shifts To Outlooks From OPEC, US
• China Attracts Record ETF Flows Even As US And Europeans Pull Out
• Alibaba Will Focus On AI And Users In Business Revamp, CEO Says
• China Set To Overtake Japan As World’s Biggest Car Exporter
• Dimon Warns Investors Over Bank Stocks If US Capital Rules Enacted
• Disney And Charter Stocks Jump After Reports Of Deal To End Blackout
• Apple Renews Qualcomm Deal In Sign Its Own Modem Chip Isn’t Ready
• UPS To Pay 46% Of Wage Hikes In First Year Of Union Contract

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

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 4500

• Above 4500 opens 44540
• Primary resistance  is 4450
• 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

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

(Click on image to enlarge)

GBPUSD Bias: Bullish Above Bearish Below 1.2560

• 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 143.90
• Primary objective is 150
• 20 Day VWAP bullish, 5 Day VWAP bearish

(Click on image to enlarge)

AUDUSD Bias: Bullish Above Bearish Below .6450

• Above .6525 opens .6575
• 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 26175

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

(Click on image to enlarge)

More By This Author: