Asian equity markets generally strengthened, taking cues from the rally in the US driven by AI technology stocks. Additionally, reports surfaced indicating progress in resolving the US debt ceiling issue, with discussions revolving around raising the debt limit and implementing spending caps for the next two years. While the final details are yet to be determined, the indications of a potential agreement brought some optimism. In Japan, the Tokyo Consumer Price Index (CPI) inflation figures for May showed a larger-than-expected decline. Both the headline and core (excluding fresh food) CPI fell from 3.5% in April to 3.2% in May. This outcome raises the likelihood of the Bank of Japan maintaining its policy stimulus measures to support the economy at their upcoming policy meeting.

In the Eurozone, there is no tier one data on the docket today. However, a panel discussion at the Dubrovnik Economic Conference will include the participation of the European Central Bank's Vujcic and Chief Economist Lane. The discussion will focus on strategies to bring inflation back to target. Next week, the focus will shift to the preliminary flash estimate of Eurozone Consumer Price Index (CPI) for May, which will provide insights into inflation trends in the region.

Stateside, personal spending figures are expected to show a growth of 0.4% on a monthly basis, indicating that consumer outlays remain robust, supported by increases in personal incomes. The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) deflator, is expected to rise to 4.4% in April from 4.2%. However, it is likely to decline next month (May) due to lower energy prices, suggesting that the April inflation increase is temporary. The Federal Reserve appears more inclined to pause its interest rate hikes in June, but positive surprises in economic data and a more hawkish tone from policymakers could alter market expectations.

FX Options Expiries For 10am New York Cut 

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

• EUR/USD: 1.0700-10 (1.2BLN), 1.0720 (400M), 1.0750 (579M)

• 1.0765-70 (923M), 1.0785-90 (1.3BLN), 1.0795-1.0800 (1.8BLN)

• AUD/USD: 0.6560 (393M), 0.6600 (333M)

• NZD/USD: 0.6100 (325M), 0.6125 (225M)

• AUD/NZD: 1.0700 (234M), 1.0800 (297M)

• USD/CAD: 1.3565 (360M), 1.3635-40 (308M)

• USD/JPY: 139.00 (529M), 140.00 (1BLN)

• AUD/JPY: 92.00 (1.1BLN)

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

• McCarthy To Stay At Capitol This Weekend As Debt Talks Continue

• Treasury’s Cash Plunges Below $50 Billion As Debt-Limit Fight Drags On

• Fed Lending To Banks Lowest In Latest Week Since Crisis Began In March

• US And China Commerce Ministers Voice Trade Policy Concerns

• Inflation In Japan's Capital Slows Slightly In May, But Remains Elevated

• Japan Finance Minister: Markets Should Set FX Rates After Yen Weakens

• Australia Retail Sales Flat As Higher Rates Drag On Spending

• New Zealand Cyclone Was Less Inflationary Than Feared, RBNZ Says

• ANZ Bank Expects RBNZ Will Raise Cash Rate To 5.75% In November

• China's State Banks Seen Selling Dollars In Onshore FX Market

• China Easing Bets Climb To Highest This Year As Growth Sputters

• Yield-Hungry Investors Push US Money Market Assets To Record $5.4tn

• Oil Holds Decline As Investors Digest Moscow’s Message On OPEC+

• Stocks Limp Toward U.S. Debt Denouement; Japan Sparkles Friday

• Costco Misses Revenue Estimates As Shoppers Curb Non-Essential Spending

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

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4115 

• Below 4100 opens 4050

• Primary support is 4000

• Primary objective is 4230

• 20 Day VWAP bullish, 5 Day VWAP bearish

(Click on image to enlarge)

EURUSD Bias: Intraday Bullish Above Bearish below 1.08

• Above 1.0860 opens 1.0950

• Primary resistance is 1.09

• Primary objective is 1.0660

• 20 Day VWAP bearish, 5 Day VWAP bearish

(Click on image to enlarge)

GBPUSD Bias: Target Hit - New Pattern Emerging

• 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: Target Hit - New Pattern Emerging

• 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: Target Hit - New Pattern Emerging

• Below .6620 opens .6550

• Primary resistance  is .6680

• Primary objective is .6500

• 20 Day VWAP bearish, 5 Day VWAP bearish

  (Click on image to enlarge)

BTCUSD Intraday Bias: Bullish Above Bearish below 26000

• 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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