Daily Market Outlook, September 26, 2024
Munnelly’s Macro Minute…
"China Doubles Down on Stimulus; Markets Pop. Will We See A Subsequent Drop?
Asian markets experienced a rebound on Thursday, defying the overnight volatility on Wall Street. The news of a potential capital injection into China's top banks provided a fresh impetus to optimism regarding the country's most recent stimulus packages. Bloomberg News reported that authorities are contemplating a $142 billion infusion to assist large lenders, just two days after policymakers announced a series of measures to rescue the nation from its deflationary state. The most recent actions suggest that the authorities are feeling a sense of urgency as Beijing's 5% economic growth objective for the year begins to elude them. Nevertheless, investors found cause for optimism. After months of market anticipation, the Chinese authorities are finally acknowledging the significant amount of work needed to relaunch the world's second-largest economy. After the most recent news report, China's blue-chip index recovered from its initial losses to trade higher, while Hong Kong's Hang Seng Index increased by approximately 3.5%. The MSCI, the broadest index of Asia-Pacific shares outside of Japan scaled new two and half year highs. The Japanese market is significantly higher on Thursday, reversing the losses from the previous session. Index heavyweights and technology equities are driving gains across most sectors, propelling the Nikkei 225 higher as of writing trading above the 38.7k handle.
Ex China headlines, the day was already anticipated to be an active one for global markets, as the Swiss National Bank (SNB) is scheduled to make a rate decision, in addition to a series of speeches by officials from the Federal Reserve including pre-recorded remarks by Fed Chair Jerome Powell. Interest rate spreads are being monitored as the catalyst for currency movement, as the Federal Reserve may continue to front load the easing cycle following the more substantial 50bp cut on September 18. However, the FOMC is not operating in a vacuum, and these relative changes cannot persist indefinitely. Similarly, the United States has a uniformly superior starting position, as evidenced by its speedier growth and higher policy rates. In addition, the likelihood of achieving a soft landing would appear to be greater than in other regions due to the more responsive central bank mandate, which effectively balances both the inflation objective and maximum employment. For instance, compare this to the Eurozone, where the central bank continues to be concerned about the excessively high wage growth that occurred previously, while adverse growth risks are exacerbated. Ultimately, a more substantial monetary policy response would be necessary if the economy were to continue to lag behind the trajectory (as it has done in the past). It may even heighten the likelihood of reverting to the "lowflation" period that existed prior to the pandemic, thereby extending the duration of that interval. The US dollar should be supported over time in a world where the US continues to manifest both an interest rate and growth premium (supported by superior productivity) over the policy laggards.
Overnight Newswire Updates of Note
China Considers $142B Cap Infusion Into Top Banks
BoJ Policymakers Divided On Future Rate Hike Pace
Aussie Inflation Within Range, Cuts Unlikely Soon
RBNZ: More Competitive Banking Is Desirable
Fed's Kugler: Strongly Supported Fed’s 50bps Cut
Fed’s Powell Emerges Stronger, Post Jumbo Cut
US Biden: Will Oppose Cuts That Would Increase Deficit
US Harris Casts Herself As Pro-Labour ‘Capitalist’
US, France Push 21-Day Mideast Ceasefire
Canada’s PM Survives Attempt To Force Snap Election
Swiss Central Bankers Poised For Year’s 3rd Cut
UK PM To Meet US Business Chiefs For UK Investment
President Putin Revises Nuclear Doctrine, Warns West
(Sourced from reliable financial news outlets)
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FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.1125-30 (1.5BLN), 1.1140-45 (465M), 1.1150 (2BLN)
1.1170-75 (677M), 1.1180-90 (4.5BLN), 1.1200-10 (1.4BLN)
USD/CHF: 0.8435-45 (606M), 0.8500 (537M), 0.8535 (285M), 0.8550 (1.1BLN)
EUR/CHF: 0.9525 (595M). EUR/SEK: 11.3300 (471M)
GBP/USD: 1.3215 (561M),1.3230 (230M), 1.3300 (390M)
1.3370 (364M), 1.3385-90 (290M)
AUD/USD: 0.6825-30 (937M), 0.6850-55 (651M), 0.6900-10 (1.6BLN)
EUR/AUD: 1.6150 (696M), 1.6400-05 (360M), 1.6425 (600M)
NZD/USD: 0.6225 (1.3BLN), 0.6330-40 (2.5BLN). AUD/NZD: 1.0870-80 (1BLN)
USD/CAD: 1.3460 (2.6BLN)
USD/JPY: 144.00-10 (1.2BLN), 144.25 (314M), 144.50 (863M)
144.65 (326M), 145.00 (1.4BLN)
EUR/JPY: 164.45-50 (1.4BLN). AUD/JPY: 99.60-70 (310M), 102.00 (600M)
105.00 (2BLN)
CFTC Data As Of 20/9/24
Equity fund managers raise S&P 500 CME net long position by 36,522 contracts to 1,021,562
Equity fund speculators increase S&P 500 CME net short position by 108,938 contracts to 362,306
Speculators increase CBOT US 10-year Treasury futures net short position by 71,921 contracts to 1,094,026
Euro net long position is 69,646 contracts
Japanese yen net long position is 56,840 contracts
Swiss franc posts net short position of -17108 contracts
British pound net long position is 62,979 contracts
Bitcoin net short position is -973 contracts
Technical & Trade Views
SP500 Bullish Above Bearish Below 5735
Daily VWAP bullish
Weekly VWAP bullish
Below 5720 opens 5680
Primary support 5475
Primary objective is 5750- TARGET HIT NEW PATTERN EMERGING
EURUSD Bullish Above Bearish Below 1.1180
Daily VWAP bearish
Weekly VWAP bullish
Below 1.1120 opens 1.1080
Primary support 1.1130
Primary objective 1.1220 -TARGET HIT NEW PATTERN EMERGING
GBPUSD Bullish Above Bearish Below 1.3230
Daily VWAP bearish
Weekly VWAP bullish
Below 1.32 opens 1.3140
Primary support is 1.2730
Primary objective 1.3390 - TARGET HIT NEW PATTERN EMERGING
USDJPY Bullish Above Bearish Below 142.50
Daily VWAP bullish
Weekly VWAP bullish
Below 142 opens 140.50
Primary resistance 146
Primary objective is 146
XAUUSD Bullish Above Bearish Below 2645
Daily VWAP bullish
Weekly VWAP bullish
Below 2610 opens 2580
Primary support 2430
Primary objective is 2680
BTCUSD Bullish Above Bearish Below 60000
Daily VWAP bearish
Weekly VWAP bullish
Below 54000 opens 50000
Primary support is 500000
Primary objective is 700000
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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!