Daily Market Outlook, May 20, 2024

Munnelly’s Macro Minute…

“Iranian President’s Reported Death Reignites Middle East Concerns ”

Asian equity markets are mostly higher to start the week, potentially lifted by hopes that Chinese authorities will soon announce additional economic stimulus. Although Chinese banks kept their long-term prime interest rates unchanged today, speculation is growing that an official signal of easier monetary policy could come in the next few weeks. Meanwhile, reports of the Iranian President's death in a helicopter crash today may lead to increased market speculation about Middle East stability.

The upcoming week in the U.S. is divided between Federal Reserve speakers early on and data releases later. FOMC members such as John Williams, Christopher Waller, Raphael Bostic, and Thomas Barkin are scheduled to speak, offering varying perspectives on the recent dip in U.S. CPI. The overall consensus suggests that the Fed remains cautious and reliant on data for future policy decisions. Additionally, the FOMC minutes for the April 30-May 1 meeting will be released, along with S&P flash manufacturing and services PMIs, new home sales, durable goods, and University of Michigan consumer sentiment data.

In China, it is anticipated that one-year and five-year loan prime rates will remain unchanged despite sluggish loans and credit data.

In Japan, a busy week for data includes machinery orders, trade figures, flash PMIs, and nationwide April CPI. There are no scheduled events from the Bank of Japan.

The Eurozone's data calendar includes trade figures, flash PMIs, consumer confidence data, and a video message from European Central Bank President Christine Lagarde.

UK investors will be watching  Bank of England Governor Andrew Bailey’s speech, followed by UK data releases, particularly Wednesday's inflation report, which is expected to show a significant decrease in annual headline CPI inflation. Core inflation is also anticipated to decrease but remain higher than the headline rate.

Overnight Newswire Updates of Note

  • Asking Prices For UK Homes Hit Record High, Rightmove Says

  • China’s Benchmark Lending Rates Held Steady This Month

  • RBNZ Shadow Board Recommends OCR Stay At 5.5% At May Decision

  • Japan’s 10-Year Bond Yield Hits Decade-High Amid BoJ Policy Bets

  • Asian Stocks Rise As Copper, Gold Climb To New Records

  • BHP Debates Improved Anglo Bid As Time Runs Out In Takeover Saga

  • Japan And ASEAN To Craft Auto Strategy To Counter China's EVs

  • Israel War Cabinet Member Sets Ultimatum, Threatens To Quit

  • "No Survivors" Found At Crash Site Of Helicopter Carrying Iran's President

(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: 1.0850-55 (1.7BLN), 1.0875 (1.2BLN), 1.0885-1.0900 (2.6BLN)

  • USD/CHF: 0.9050 (610M), 0.9080 (381M)

  • GBP/USD: 1.2600-10 (464M), 1.2625 (259M), 1.2645 (458M), 1.2725 (230M)

  • AUD/USD: 0.6590-0.6605 (1.5BLN), 0.6705-10 (506M), 0.6780 (1.1BLN)

  • NZD/USD: 0.6100 (1.3BLN), 0.6145-50 (528M)

  • USD/CAD: 1.3535 (721M), 1.3600 (335M), 1.3730 (734M)

  • EUR/NOK: 11.61 (568M), 11.775 (322M)

  • USD/JPY: 155.00 (789M), 156.00 (596M), 156.45-50 (1.4BLN), 157.00 (820M)

  • There is limited tier one data expected to impact the EUR/USD exchange rate this week. However, significant FX option strike expiries and associated hedging flows could once again have a dominant influence. Cash hedging may be utilized to attract or contain the FX spot rate near the strike levels. On Monday, expiries totaling 5.5 billion euros are spread across three areas between 1.0850 and 1.0900. On Tuesday, 2 billion euros of strikes are set to expire between 1.0840 and 1.0850, followed by 1.1 billion euros at 1.0900 on Thursday. The most notable expiries occur on Friday, with 4 billion euros at 1.0865-75 and another 4 billion euros at 1.0885-1.0900.

CFTC Data As Of 17/05/24

  • Japanese yen net short position is -126,182

  • British pound net short position is -20,075

  • Euro net long position is 17,155 contracts

  • Swiss franc posts net short position of -41,107

  • Bitcoin net short position is -177 contracts

  • Equity fund managers raise S&P 500 CME net long position by 60,168 contracts to 920,863

  • Equity fund speculators increase S&P 500 CME net short position by 40,882 contracts to 279,337

  • Gold NC Net Positions: $204.5K vs $199.6K

Technical & Trade Views

SP500 Bullish Above Bearish Below 5280

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 5258 opens 5200

  • Primary support 5160

  • Primary objective is 5379

EURUSD Bullish Above Bearish Below 1.08

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Above 1.10 opens 1.11

  • Primary resistance 1.0981

  • Primary objective is 1.0550

GBPUSD Bullish Above Bearish Below 1.2630

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Above 1.2710 opens 1.2750

  • Primary resistance  is 1.2710

  • Primary objective 1.2111

USDJPY Bullish Above Bearish Below 152

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 154.40 opens 152

  • Primary support 152

  • Primary objective is 16

XAUUSD Bullish Above Bearish Below 2376

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 2330 opens 2240

  • Primary support 2260

  • Primary objective is 2560

BTCUSD Bullish Above Bearish below 64000

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Above 70500 opens 78500

  • Primary resistance is 67648

  • Primary objective is 54000