Daily Market Outlook - Monday, Oct. 23

Freepik

 

Asia

Asian equity markets saw declines, partially reflecting the losses in European and US markets from Friday. However, futures for European and US equities were trading higher. Meanwhile, both oil and gold prices decreased as investors continued to assess the ongoing volatile situation in the Middle East. Market participants have been monitoring the release of two hostages by Hamas and a delay in Israel's ground invasion of Gaza. Despite these developments, the risk of a broader escalation of the conflict, including potential concerns at Israel's northern border, is likely to keep markets on edge. 

 

Europe

Last week, financial markets experienced a lot of volatility, which could be attributed to various uncertainties. One of them was the fear that the Israel-Hamas conflict might escalate into a wider regional crisis, which pushed oil prices to their highest level in about three weeks. However, not all market movements were typical of risk-averse behaviour, and other factors also seemed to influence the markets. For example, stronger US economic data might have reinforced the worries about interest rates remaining high for a longer period. The European Central Bank (ECB) is anticipated to keep interest rates unchanged following a series of ten consecutive rate hikes and maintain a subtle tightening bias at the upcoming Thursday meeting. Unless any unexpected developments occur, this meeting is likely to be uneventful. The Eurozone's economic performance has faced challenges in recent months. As such, the release of flash Purchasing Managers' Indexes (PMIs) may influence expectations regarding the duration of the ECB's rate pause before any potential rate cuts. Additionally, the release of the Flash Eurozone consumer confidence data and the German Ifo business climate index will be significant data points to watch. In the United Kingdom, key data releases will include flash PMIs and employment figures, providing insights into the state of the British economy.

 

US

Stateside the most significant event to watch this week is the release of the core Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve's preferred inflation measure. Additionally, there will be the advance GDP figures for the third quarter. If the GDP growth meets or surpasses the projected 4.1% increase, it will underscore the Fed's belief that it can maintain "higher for longer" interest rates. Furthermore, the U.S. will see the release of S&P Global's flash Purchasing Managers' Indexes (PMIs), durable goods data, new home sales figures, and the final October reading of the University of Michigan consumer sentiment. It's important to note that during this period leading up to the October 31-November 1 Federal Open Market Committee (FOMC) meeting, there will be no comments from the Federal Reserve due to the blackout period..

 

FX Positioning & Sentiment 

The USD/JPY exchange rate saw minimal movement after facing resistance at the 150 level on Friday, marking the fourth consecutive week in which it approached but failed to close above this key threshold. Market participants are concerned about the potential return of intervention by the Ministry of Finance (MoF) to bolster the yen, which could impact the currency pair. The JPY has not received substantial support from the Bank of Japan (BoJ), despite its commitment to maintaining ultra-easy monetary policies. In terms of economic data, Japan's core inflation rate fell below 3%, reporting an overall figure of 3.0% compared to the previous 3.2%. To manage rising yields in the Japanese government bond (JGB) market, the BoJ has once again taken steps to intervene by providing loans. Meanwhile, the Federal Reserve is no longer the favoured candidate to raise interest rates further, with expectations for the next rate cut being pushed into the future. This dynamic is influencing the USD/JPY exchange rate and adding to its complexity.

 

CFTC Data As Of 10-20-23

  • USD net spec long remained steady in Oct 11-17 period, $IDX +0.42% in period

  • EUR$ -0.42% in period, specs +6,878 contracts bottom-fishing, now +82,410,

  • $JPY +0.77%, specs -3,182 contracts; bulls wary of MoF, pair holds near high

  • GBP$ -0.84% specs -1,161 now -11,209; low BoE rate/growth view weighs

  • AUD$ (-1.01%) specs -4,162 , $CAD (+0.49%) specs -2,050 on weak growth view

  • BTC +3.86% in period, specs -824 contracts now +327, BTC ending near weeks high on upbeat ETF outlook( Source Reuters)

 

FX Options Expiries For 10am New York Cut 

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

  • EUR/USD: 1.0535-40 (810M), 1.0550 (970M), 1.0600 (1.1B), 1.0660-65 (705M)

  • EUR/USD: 1.0670-75 (1.2B). EUR/GBP: 0.8650 (215M)

  • USD/JPY: 148.75-80 (1.9B), 149.00 (1.8B), 149.20-30 (2.1B), 149.50 (1.7B)

  • USD/JPY: 149.75-80 (540M), 150.00 (1.7B), 150.25 (1.2B), 150.50 (660M)

  • USD/JPY: 151.00 (535M). EUR/JPY: 156.10 (455M), 157.35 (625M)

  • USD/CHF: 0.8885-00 (1.0B), 0.9015-25 (575M), 0.9050 (890M)

  • AUD/USD: 0.6300 (490M), 0.6400-10 (530M). AUD/JPY: 0.9425-35 (2.2B)

  • NZD/USD: 0.5825 (735M), 0.5850 (480M). USD/CAD: 1.3600 (880M)

 

Overnight Newswire Updates of Note

  • Senior Israeli Official Says There Will Be “No Ceasefire” For Gaza Amid Hostage Talks

  • US Seeks Delay Of Israeli Ground Incursion For More Time For Hostage Talks

  • US Deploys Missile Defenses To Middle East Following Recent Attacks

  • BoJ Plans To Re-Revise Interest Rate Control As US Tightening Continues

  • In Blow To Kishida, LDP Loses One Of Two Seats In By-Elections

  • Japan PM Sets 3-Year Goal To Revive Inflation-Hit Economy As Wages Lag

  • Beijing Reviews Wine Tariffs Ahead Of Australian Prime Minister Visit

  • Republicans Unveil Nine Candidates To End House Speaker Deadlock

  • EU-Funded Report Calls For Wealth Of Super-Rich To Be Taxed, Not Income

  • Yen Breaches 150 Per Dollar Again, Raising Intervention Risk

  • Oil Declines As Israel Delays Gaza Invasion Amid Hostage Talks

  • EU Considers Price Cap Extension To Avert Winter Gas Crisis

  • Toyota Nears Mass Production Of Solid-State Batteries

  • Uber To Offer Hot Air Balloon Rides In Turkey In Tourism Push

  • S. Korean Regulator Gives Conditional Nod To Broadcom's Purchase Of VMware

  • Japan's FTC To Examine Google For Possible Anti-Monopoly Violations

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

 

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 4280

  • Below 4200 opens 4144

  • Primary resistance  is 4280

  • Primary objective is 4144

  • 20 Day VWAP bullish, 5 Day VWAP bearish

 

EURUSD Bias: Bullish Above Bearish Below 1.06

  • Below 1.0520 opens 1.0480

  • Primary support is 1.05

  • Primary objective is 1.0680

  • 20 Day VWAP bearish, 5 Day VWAP bullish

 

GBPUSD Bias: Bullish Above Bearish Below 1.21

  • Below 1.21 opens 1.1950

  • Primary support  is 1.21

  • Primary objective 1.24

  • 20 Day VWAP bearish, 5 Day VWAP bearish

 

USDJPY Bias: Bullish Above Bearish Below 149.25

  • Below 149 opens 148.50

  • Primary support 144.50

  • Primary objective is 150.20

  • 20 Day VWAP bullish, 5 Day VWAP bullish

 

AUDUSD Bias: Bullish Above Bearish Below .6400

  • Above .6475 opens .6525

  • Primary resistance  is .6620

  • Primary objective is .6270

  • 20 Day VWAP bearish, 5 Day VWAP bearish

 

BTCUSD Bias: Bullish Above Bearish below 29000

  • Below 27100 opens 26500

  • Primary support  is 26500

  • Primary objective is 31200

  • 20 Day VWAP bullish, 5 Day VWAP bullish

 

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