Daily Market Outlook, June 20, 2023
Munnelly’s Market Commentary…
Most Asian equity markets experienced a decline in the absence of guidance from Wall Street, as the Juneteenth holiday and the People's Bank of China's (PBoC) reduction in benchmark lending rates influenced market sentiment. The release of Reserve Bank of Australia (RBA) Minutes from the June meeting, which indicated a delicate balance between a 25bps hike and maintaining steady rates, influenced market dynamics. Currently, money markets are leaning towards unchanged rates for the next month. The Nikkei 225 index faced a slight decrease of 0.2%, although losses were limited as the index remained above the 33k handle. Several major Japanese trading houses, supported by Berkshire Hathaway's increased stake in five of them, were among the top performers. On the other hand, the Hang Seng index and the Shanghai Composite index declined despite the PBoC's efforts to boost liquidity and reduce the benchmark Loan Prime Rates by 10bps. While a 1-year LPR reduction was widely anticipated following similar cuts to short-term funding rates, the market was disappointed by the absence of a deeper 15bps cut for the 5-year LPR, which serves as a reference for mortgages. As a result, Hong Kong-listed mainland developers experienced pressure.
For Uk investors the next twenty-four hours centres around the release of UK CPI inflation early tomorrow at 07:00 BST, which precedes the Bank of England's policy announcement at midday on Thursday. Markets expect a slight decrease in headline inflation from 8.7% to 8.4% in May. Regardless of the specific figure, the outcome will underscore the relative persistence of UK inflation compared to other regions such as the US (4.0%) and the Eurozone (6.1%). Policymakers are particularly concerned about the upward trend in UK core inflation, which excludes energy and food and predominantly consists of services prices. Last week's unexpected rise in wage growth only adds to these concerns. Consequently, it is widely expected that the Bank of England will raise interest rates by 0.25% to 4.75% this week, with financial markets anticipating further hikes later in the year.
Today, there is no significant data on the docket for the UK or the Eurozone. However, there are several speeches by European Central Bank (ECB) officials following their decision last week to raise interest rates by 25 basis points. ECB President Lagarde has strongly indicated the likelihood of another hike next month, while there is some debate regarding the possibility of a further rate increase in September.
Stateside, investor attention will be drawn to housing data today, specifically housing starts and building permits, ahead of Fed Chair Powell's semi-annual testimony to Congress Wednesday. His comments will provide additional insights into the Fed's decision to skip a rate hike last week and offer further discussions on the prospects of Fed policy, including the conditions necessary to support or dismiss the policymakers' "dot plot" projections, which currently indicate expectations of 50bps of additional hikes in the second half of the year.
CFTC Data As Of 16-06-23
MM net spec USD short dipped in Jun 7-13 period, $IDX -0.75%
EUR$ +0.94% in period, specs -6,599 contracts now +151,822
$JPY +0.48% in period, specs +841 contracts now -103,976
GBP$ +1.54% in period, specs -5,749 contracts now +6,735
AUD$ +1.45%, specs -5,277 contracts now -61,745; $CAD -0.63% specs +1,661
BTC -4.1% in period specs -26 contracts now long 743 contracts
Positioning data pre-Fed, ECB, BoJ meetings, no surprises by c.banks
Post-meetings Fed pause weighed on USD vs EUR, GBP; JPY tumbles on ultra-soft BoJ guidance(Source: Reuters)
FX Options Expiries For 10am New York Cut
(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0775-85 (1BLN), 1.0800-10 (380M), 1.0815-25 (309M)
1.0830 (275M), 1.0840-50 (353M), 1.0980 (401M), 1.1000 (934M)
USD/JPY: 140.65-75 (914M), 141.00 (1.82BLN), 141.50 (991M),
141.75-80 (505M), 142.00 (1.96BLN), 142.25 (250M), 142.50 (250M)
USD/CHF: 0.8850-60 (380M), 0.8875 (250M), 0.8950 (942M)
0.9100 (526M)
GBP/USD: 1.2575 (2.1BLN). EUR/GBP: 0.8565-75 (375M
AUD/USD: 0.6740-45 (451M), 0.6760 (308M), 0.6775 (675M)
0.6900 (365M)
NZD/USD: 0.6120 (310M). USD/ZAR: 18.15 (230M)
EUR/NOK: 11.66 (325M)
USD/CAD: 1.3230 (220M), 1.3270-75 (644M), 1.3350-55 (440M)
Overnight News of Note
Asia Markets Mixed As China Cuts Key Lending Rates
Chinese Banks Disappoint With Modest Cut To Five-Year Rate
Dollar Buoyant; Yuan Wobbles After China Cuts Lending Benchmarks
RBA: Arguments Between Rate Hike, Rate Pause `Finely Balanced’
RBA’s Bullock: Jobless Rate Will Lift To Help Bring Down Inflation
Japan FinMin Says No Change In FX Policy After US Report
NZ Announces Banking Inquiry Amid Profit Concerns
Blinken Says US 'Does Not Support Taiwan Independence' During China Visit
Biden Says US-China Relations Are On The 'Right Trail'
Biden Says Threat Of Putin Using Tactical Nuclear Weapons Is 'Real'
ECB’s Guindos Says Slowdown In Core Inflation May Be Limited
ECB’s Stournaras Says Hikes May End In 2023, Warns On Recession
SoftBank's Son Says He Is 'Heavy User' Of ChatGPT
Warren Buffett's Big Bet On Japan Trading Firms Helps Push Analyst Targets Up
US Lawmakers To Press Auto CEOs Over China Supply Chains
(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
Technical & Trade Views
SP500 Bias: Intraday Bullish Above Bearish Below 4395
Below 4370 opens 4340
Primary support is 4300
Primary objective is 4580
20 Day VWAP bullish, 5 Day VWAP bullish
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EURUSD Bias: Intraday Bullish Above Bearsih Below 1.09
Below 1.0880 opens 1.0830
Primary support is 1.0666
Primary objective is 1.0995
20 Day VWAP bullish, 5 Day VWAP bullish
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GBPUSD Bias: Intraday Bullish Above Bearish Below 1.2750
Below 1.27 opens 1.26
Primary support is 1.2680
Primary objective 1.2880
20 Day VWAP bullish, 5 Day VWAP bullish
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USDJPY Bias: Bullish Above Bearish Below 141
Below 140.90 opens 140.30
Primary support is 139.50
Primary objective is 143.49
20 Day VWAP bullish, 5 Day VWAP bullish
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AUDUSD Bias:Intraday Bullish Above Bearish Below .6740
Below .6740 opens .6680
Primary support is .6660
Primary objective is .6917
20 Day VWAP bullish, 5 Day VWAP bullish
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BTCUSD Bias: Intraday Bullish Above Bearish below 26000
Above 26300 opens 26900
Primary resistance is 27160
Primary objective is 23300
20 Day VWAP bearish, 5 Day VWAP bullish
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!