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Asian equity markets traded with a somewhat mixed performance as the region displayed caution ahead of the Federal Open Market Committee (FOMC) policy announcement. The Nikkei 225 index extended its gains by 1.5%, benefiting from recent currency movements and widespread anticipation that the Bank of Japan (BoJ) will maintain its accommodative monetary policy later in the week. The Hang Seng remained relatively flat, while the Shanghai Composite saw a modest increase. The PBoC's decision to cut rates for its Standing Lending Facility by 10bps and the National Development and Reform Commission's (NDRC) notice to reduce costs, including VAT exemptions and reductions for small businesses until the end of the year, providing support to these indices. Reports indicated that China is considering broad stimulus measures, including property support and rate cuts; however, Chinese stocks experienced limited gains due to softer-than-expected loan and financing data.

This evening, the much-anticipated monetary policy announcement from the US Federal Reserve marks the first of two significant updates this week, with the European Central Bank scheduled to follow on Thursday. Since the Fed hinted at the possibility during its previous update in May, it has been widely anticipated that the central bank would pause its rate hikes today. Although the data received since then has been mixed, it is unlikely to be strong enough to sway the Fed's decision. Yesterday's report showed a significant decline in annual headline inflation but a comparatively smaller decrease in the core rate. Historically, the Fed has been cautious about surprising the markets, and with the probability of a rate hike today being less than 30%, it appears that a pause is the likely outcome. Market participants will closely analyze both Fed Chair Powell's remarks during the post-meeting press conference and the updated 'dot plot' of policymakers' interest rate projections for any indications of whether this pause is a temporary measure or if further tightening of monetary policy is in store. Recent unexpected rate hikes by the central banks of Canada and Australia serve as a reminder that a pause does not necessarily imply that rates have reached their peak. Markets anticipate that the Fed's accompanying message will convey the possibility of future actions is necessary, and an upward revision to the dot plot, indicating the potential for an additional 25-50 basis points of rate increases by year-end, will further underscore this stance.
 

CFTC Data As Of 05-06-23

• USD net spec short in May 31-Jun 5 period, $IDX +0.08% in period
• Rates key driver of CCY moves, marts on edge ahead of Fed, ECB next wk
• EUR$ -0.36% in period specs -7,304 contracts long cut to 158,421 contracts
• $JPY -0.1% in period large short grew by 8,624 contracts, spec -104,817
• GBP$ +0.09%, specs -751 contracts long 12,484; GBP eyes 23 highs abv 1.26
• AUD$ +2.39% in period on hawkish RBA, specs -12,342 into rise now -56,468
• $CAD -1.45%, CAD bid on exp'd BoC hike; specs -8,415 now short 38,329 contract
• BTC -2.96% in period, specs buy 582 contracts on dip now long 769 (Source: Reuters)
   

FX Options Expiries For 10am New York Cut 

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

• EUR/USD: 1.0700 (1.3BLN), 1.0710-20 (755M), 1.0730 (1.1BLN)
• 1.0745-55 (668M), 1.0770 (443M), 1.0795-1.0810 (3.4BLN)
• USD/CHF: 0.8925 (462M), 0.9010-25 (340M), 0.9090 (480M), 0.9125 (578M),
• GBP/USD: 1.2450 (314M) 1.2675 (280M), 1.2700 (400M)
• AUD/USD: 0.6700 (1BLN), 0.6740 (337M)
• NZD/USD: 0.6080 (250M), 0.6300 (233M)
• USD/CAD: 1.3360 (280M), 1.3375 (750M)
• USD/JPY: 139.00 (726M), 139.50 (776M), 140.00 (568M), 141.00 (539M)
   

Overnight News of Note

• Federal Reserve Expected To Pause Aggressive Rate Rising Campaign
• China May Cut Key Policy Rate And LPR, Buoying Bonds - Newspaper
• Barclays Sees China Rate Cuts Every Quarter Through Early 2024
• Goldman Bumps Up Japan Price Forecasts To Widen Gap With BoJ
• New Zealand Annual Current Account Deficit Unexpectedly Narrows
• Le Maire Pledges To Put France’s Finances Back On Track With Spending Cuts
• USD Skids To 3 Week Low As US Inflation Data Reinforces Fed Pause View
• Bond Market Decrees Inflation Readings Will Let Fed Skip Rate Hike In June
• Ken Griffin Ramps Up Credit Trades, Anticipating US Recession
• Oil Holds Advance As Broad China Stimulus Plan Aids Sentiment
• API Shows U.S. Crude, Fuel Stocks Rose Last Week - Market Sources
• US Plans To Buy 12 Million Barrels Of Oil For Reserve This Year
• Asian Shares Up, Dollar Wobbly As US Inflation Data Reinforces Fed Pause Bets
• AMD Gives Peek At AI Accelerator Meant To Rival Nvidia Chips

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

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4345

• Below 4300 opens 4260
• Primary support is 4200
• Primary objective is 4384
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

EURUSD Bias: Intraday Bullish Above Bearsih Below 1.0750

• Below 1.0710 opens 1.0670
• Primary support is 1.0666
• Primary objective is 1.0856
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

GBPUSD Bias: Intraday Bullish Above Bearish Below 1.2550

• Below 1.2490 opens 1.2440
• Primary support  is 1.2430
• Primary objective 1.2680
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

USDJPY Bias: Bullish Above Bearish Below 139.60

• Below 139.50 opens 138.90
• Primary support  is 137.40
• Primary objective is 141.50
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

AUDUSD Bias:Intraday Bullish Above Bearish Below .6710

• Below .6650 opens .6610
• Primary support  is .6600
• Primary objective is .6818
• 20 Day VWAP bullish, 5 Day VWAP bullish

(Click on image to enlarge)

BTCUSD Bias: Intraday Bullish Above Bearish below 26000

• Below 2500 opens 24200
• Primary support is  25300
• Primary objective is 27500
• 20 Day VWAP bearish, 5 Day VWAP bullish

(Click on image to enlarge)

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