Daily Market Outlook, January 9, 2024

Daily Market Outlook, January 9, 2024

Munnelly’s Market Minute…“Snapback In Risk Sentiment”

Stocks in Asia traded higher, taking cues from the positive performance of Wall Street. The tech sector stood out, driven by a growing appetite for risk in a low-yield environment and a decline in oil prices. Fedspeak contributed to positive sentiment as Governor Michelle Bowman shifted from her consistently hawkish stance, now viewing policy as “sufficiently restrictive” and signalling support for potential rate cuts. Atlanta Fed President Raphael Bostic maintained a preference for tight policy but reiterated the likelihood of rate cuts this year. 

The Nikkei 225 reached its highest level since March 1990, rallying close to the 34k handle before facing resistance. Initially, the Hang Seng and Shanghai Composite benefited from the overall positive sentiment as anticipation was building in Beijing following a statement from a PBOC official, who was quoted by state media as saying that policy tools would be utilised to bolster the credit growth within reasonable limits. However, the upside was limited after the PBOC reduced liquidity, and Chinese oil companies came under pressure due to the recent declines in oil prices.

Overnight, UK retail sales for December were reported by the British Retail Consortium, providing insights into the Christmas shopping season’s strength. The report showed a 1.9% year-on-year growth in ‘like-for-like’ sales, a decrease from November’s 2.6%. It’s important to note that these figures are not adjusted for inflation. The BRC noted that consumers were cautious about making larger purchases. No other UK data releases are scheduled for today, with the next release on Friday by the Office for National Statistics, providing November’s monthly GDP data and offering a clearer view of Q4 economic growth.

Germany has reported a 0.7% monthly increase in industrial production (including construction) for November, following a 0.3% decline in October earlier. However, compared to a year ago, output was down by 4.8%. The report suggests that the sector continues to be affected by previous increases in energy prices and interest rates, as well as weaker global demand. Surveys indicate an improving outlook for future activity. The Eurozone unemployment rate for November is set to be released this morning. The latest October data showed the unemployment rate remaining at its historical low of 6.5%. Surveys indicate a cooling labour market in the single currency area, with policymakers hoping for a moderation in wage growth. The unemployment rate is forecast to remain unchanged at 6.5%.

Stateside, today’s focus includes the NFIB small business optimism index and monthly trade data. The small business optimism index is anticipated to show a slight increase to 91.0 in December from 90.6, while the November trade deficit is predicted to widen slightly. However, market attention is expected to shift to Thursday’s CPI inflation report as the major macro catalyst for the week.

Overnight Newswire Updates of Note

• Fed’s Bowman Says Policy Rate Appears ‘Sufficiently Restrictive’

• Atlanta Fed’s Bostic Says Bias Remains For Policy To Stay Tight

• US Consumer Borrowing Surges On Jump In Credit-Card Balances

• Yellen Says Extending Trump Tax Cuts Would Worsen Deficit

• Tokyo Inflation Slows As Thrifty Consumers Curb Some Outlays

• Australian Retail Sales Jump In November On Black Friday Offers

• Weak Consumer Confidence Holds Back UK Retail Spending In Dec

• Dollars Best Start In Decade Falters Before Key Inflation Data

• Investors Warn On Government Debt Levels In Crucial Election Year

• Oil Prices Flat As Markets Debate Middle East Crisis And OPEC Supply

• Asian Stocks Lose Momentum As China Gains Fade Tuesday

• Samsung Profit Tumbles 35% As Chip Weakness Persists

• United And Alaska Airlines Find Loose Parts On Boeing 737 Maxes

• Hewlett Packard Enterprise Near Deal to Buy Juniper Networks

• Airbus Nearing Significant Widebody Order From Delta

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

FX Options Expiries For 10am New York Cut

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

• EUR/USD: 1.0825 (664M),1.0875 (949M), 1.0900 (1.03BLN)

• 1.0975 (896M), 1.0925-35 (523M), 1.0950-60 (630M)

• 1.0975-80 (1.1BLN), 1.0990-00 (980M)

• USD/JPY: 142.00 (473M), 142.65 (506M), 142.90-00 (720M)

• 143.20-30 (395M), 143.60 (1.6BLN), 144.00-15 (478M)

• 144.35-40 (528M), 144.60-80 (700M)

• USD/CHF: 0.8475 (203M). EUR/CHF: 0.9315 (400M)

• AUD/USD: 0.6600 (2.3BLN)

• USD/CAD: 1.3275-90 (364M), 1.3315 (230M)

CFTC Data As Of 05/01/24

• USD bearish increasing-1,674

• CAD bearish decreasing +1,045

• EUR bullish neutral +138

• GBP bullish neutral  +78

• AUD bearish decreasing +601

• NZD neutral neutral +198

• CHF bearish increasing -262

• JPY bearish neutral -157

• Traders who are confident in the potential rise of EUR/USD are receiving a buy signal. Since September 2022, traders who have held onto the euro are once again making purchases. Following profit-taking in December, traders have been increasing their long positions for three consecutive weeks. The current net long position is equivalent to $16.3 billion. The highest bullish bets were recorded at $25 billion in July 2023 when the pair reached 1.1276.

Technical & Trade Views

SP500 Bullish Above Bearish Below 4730

EURUSD Bullish Above Bearish Below 1.1000

• Daily VWAP bullish

• Weekly VWAP bullish

• Above 1.1030 opens 1.1130

• Primary resistance 1.1130

• Primary objective is 1.0850

GBPUSD Bullish Above Bearish Below 1.27

USDJPY Bullish Above Bearish Below 143.50

AUDUSD Bullish Above Bearish Below .6750

BTCUSD Bullish Above Bearish below 46000