Daily Market Outlook, June 21, 2023

Munnelly’s Market Commentary… 

Asian equity markets experienced subdued trading as they reacted to the negative performance on Wall Street and lacked positive macroeconomic drivers. Market participants eagerly awaited the testimony of Fed Chair Powell in Congress, adding to the cautious sentiment. Initially, the Nikkei 225 index faced pressure but managed to recover losses, primarily driven by gains in SoftBank shares during its Annual General Meeting. SoftBank’s CEO, Son, highlighted the explosive growth potential of artificial intelligence (AI) and emphasised the need to adopt an offensive strategy. Additionally, comments from the Bank of Japan’s Adachi reiterated a dovish stance, emphasising the need to maintain easy monetary policy and continue monetary easing under the Yield Curve Control (YCC) framework. The Hang Seng index and the Shanghai Composite index declined. Hong Kong’s underperformance was attributed to losses in the technology sector, while sentiment in the mainland remained dampened by a weaker economic outlook. HSBC’s reduction of China’s GDP forecast from 6.3% to 5.3% contributed to the downbeat sentiment. Despite the People’s Bank of China’s ongoing liquidity efforts and the recent US-China rhetoric, risk appetite remained subdued in the region.

UK Consumer Prices Index (CPI) data for May indicates that inflation remains persistent. The annual headline CPI inflation remained unchanged from April, standing at 8.7% in May. However, core inflation experienced a notable increase for the second consecutive month, rising to 7.1% from 6.8%. On a positive note, significant declines in both the output and input producer price indices suggest a reduction in some pipeline pressures. Despite these developments, the data is unlikely to alleviate market expectations of a significant increase in UK interest rates before the end of the year. Additionally, it will likely add further pressure on Bank of England policymakers as they approach tomorrow’s monetary policy update. Later this morning, market attention will be focused on the release of the UK’s June CBI industrial survey, which will provide an update on the struggling sector. Last month’s survey results indicated a continued decline in factory orders, with particularly weak export orders. Considering the challenges faced by manufacturing sectors worldwide, it will be intriguing to see if today’s survey brings any better news.

Stateside, the primary focus will be on statements made by central bank policymakers. Federal Reserve Chair Powell is scheduled to deliver his semi-annual testimony to a House of Representatives Committee today, followed by a testimony to the Senate tomorrow. His remarks will likely face close scrutiny, especially regarding last week’s signals from the Fed suggesting the possibility of raising US interest rates again in July, despite the decision to leave them unchanged this month. Additionally, the Fed’s Goolsbee is also scheduled to speak. Given that he is viewed as one of the more dovish policy makers within the Fed, his insights on the likelihood of a rate hike in July will be of particular interest.

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: 1.0775-80 (1.92BLN), 1.0790 (521M)

  • 1.0800-10 (763M), 1.0825-30 (546M), 1.0865-75 (1.05BLN)

  • 1.0900 (530M), 1.0920-25 (724M), 1.0945-50 (784M)

  • USD/JPY: 140.00 (420M), 140.85 (400M), 141.00 (952M)

  • 142.00 (869M)

  • EUR/JPY: 150.00 (468M), 152.20 (449M)

  • USD/CHF: 0.8750 (818M), 0.8900 (261M), 0.8945-55 (965M)

  • 0.9000 (837M)

  • GBP/USD: 1.2750 (250M). EUR/GBP: 0.8700 (648M)

  • USD/CAD: 1.3275 (631M)

  • AUD/USD: 0.6700 (256M), 0.6865 (437M)

  • NZD/USD: 0.6000 (1.05BLN), 0.6200 (200M), 0.6250 (218M)

Overnight News of Note

  • Asia Stocks Slip As Suspense Builds For China, Fed News

  • BoJ Debated Risk Of Being Too Late In Raising Rates At April Meeting

  • BoJ’s Adachi Says It’s Premature To Tweak Ultra-Loose Policy

  • Japan PM Kishida Eyes Cabinet Reshuffle As Soon As Summer

  • Yuan Drops To Key 7.2 Level On Slow Stimulus, PBoC’s Greenlight

  • China State Media, Government Advisers Call For Economic Support

  • Biden Calls Chinese President Xi A Dictator

  • Fed Nominees Say Their Focus Is On Beating Inflation

  • China Extends Tax Breaks For New Energy Vehicles Until 2027

  • SoftBank To Shift To ‘Offense’ In Investments, CEO Says

  • FedEx Quarterly Sales Fall 10% As Shipping Struggles Continue

  • Musk Looking To Bring Tesla And Starlink To India After Meeting Modi

  • Bitcoin Has Its Eyes On $30K Amid Steadfast Institutional Interest

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

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4365

  • Below 4360 opens 4330

  • Primary support is 4300

  • Primary objective is 4580

  • 20 Day VWAP bullish, 5 Day VWAP bullish

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

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

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

AUDUSD Bias:Intraday Bullish Above Bearish Below .6720

  • Below .6720  opens .6680

  • Primary support  is .6660

  • Primary objective is .6917

  • 20 Day VWAP bullish, 5 Day VWAP bearish

BTCUSD Bias: Intraday Bullish Above Bearish below 28000

  • Below 28000 opens 26900

  • Primary resistance is 27400

  • Primary objective is 30000

  • 20 Day VWAP bullish, 5 Day VWAP bullish