Daily Market Outlook, May 31, 2023

Most Asian equity markets traded lower as they took cues from a mixed handover from Wall Street. Investor sentiment was clouded by opposition to the debt ceiling bill from hardliners, leading to subdued risk appetite ahead of the first vote in the House later today. Additionally, market participants digested a series of data releases ahead of the month-end, including disappointing Chinese official PMIs. The Nikkei 225 index declined by 1.4% as data releases added to the negative sentiment. Industrial production unexpectedly contracted, while retail sales missed forecasts. Early concerns were also influenced by North Korea’s failed satellite launch. The Hang Seng and Shanghai Composite index fell. Hong Kong’s market was weighed down by notable weakness in local blue-chip tech stocks. Both markets were further impacted by disappointing manufacturing and non-manufacturing PMI data. The manufacturing PMI showed contraction for the second consecutive month, marking its weakest reading so far this year.

In the Eurozone, market participants will closely monitor the May inflation data from several major economies to gain insights into Thursday’s overall regional inflation figure. Recent data from Spain revealed a larger-than-expected decline in overall inflation and an unexpected decrease in core inflation. Similarly, France reported a downside surprise in its inflation figures this morning. Today, updates for Germany and Italy are also anticipated. Comments from policymakers indicate a strong likelihood of the European Central Bank (ECB) raising interest rates again in June. However, the path beyond that remains uncertain. Therefore, if there are further downward surprises in core inflation data, it could potentially lower expectations for future rate increases.

The US data docket for today is relatively light, with two notable releases. First, the JOLTs survey will offer detailed information on the employment market developments in April, providing valuable insights into job openings, hires, and separations. Secondly, the Federal Reserve will release its Beige Book, which compiles anecdotal reports from various sectors of the economy. This report offers qualitative information on economic conditions across different regions of the United States. It provides further insight into the effectiveness of previous rate hikes and allows policymakers to gauge the overall state of the economy. Federal Reserve officials, including Governor Michelle Bowman (a voting member known for her hawkish views) and Lael Brainard (a non-voting member known for her dovish stance), will be participating in a ‘Fed Listens’ event. This event allows policymakers to engage with the public and gather perspectives on economic issues. Additionally, Patrick Harker, a voting member of the Federal Open Market Committee (FOMC) in 2023, will be delivering a speech on monetary policy. Nominee Phillip Jefferson, who has been nominated for the role of Fed vice chair, will also be speaking on the topic of financial stability. His comments will shed light on his perspective regarding the stability of the financial system and potential regulatory measures. As the end of the week approaches, the Federal Reserve will enter a blackout period ahead of its policy meeting on June 13-14th. Market expectations are currently divided between the possibility of an unchanged outcome and a 25 basis points rate hike. The decision of the policy meeting holds significant importance for the markets, and investors will closely monitor any developments leading up to the meeting.

FX Options Expiries For 10am New York Cut

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

  • EUR/USD: 1.0600 (383M), 1.0675-85 (1.7BLN)

  • 1.0700-10 (313M, 1.0725 (304M), 1.0750 (2.3BLN)

  • 1.0800 (451M)

  • USD/JPY: 137.50 (305M), 138.00-10 (1.73BLN)

  • 138.60 (250M), 139.35 (225M), 139.95-00 (1.95BLN)

  • 140.45-50 (765M). EUR/JPY: 149.20 (230M)

  • EUR/GBP: 0.8665-75 (402M). GBP/USD: 1.2350 (266M)

  • 1.2450 (238M)

  • AUD/USD: 0.6375 (505M), 0.6400 (210M), 0.6450 (571M)

  • 0.6465-75 (420M), 0.6490-00 (478M), 0.6540-50 (1.26BLN)

  • USD/CAD: 1.3445-50 (695M), 1.3585-00 (570M)

Overnight News of Note

  • US Futures Little Changed As Traders Await Debt Ceiling Progress

  • Asia Stocks Slump To Monthly Loss As China Data Disappoints

  • Fed’s Barkin Says Seeking Evidence Demand Is Coming Down

  • Debt Deal Clears Crucial Hurdle, Wednesday House Vote Set

  • McCarthy Confident On Vote Despite Hard-Line Ouster Threat

  • CBO: Debt Ceiling Bill Cuts $1.5Tln From Deficit Over Decade

  • US Accuses China Of Risky Encounter Over South China Sea

  • China’s Factory Slump Worsens. Fears Mount Over Recovery

  • BoJ’s Ueda: Era Of Low Global Interest Rates May Be Closed

  • Japan Factory Output Drops In Weak Start To Second Quarter

  • RBA’s Lowe Warns Of Inflation Risks, Households Pain Ahead

  • Australia Monthly Inflation Jumps To 6.8%, Ups Rate Pressure

  • UK Business Confidence Drops For First Time In Three Months

  • HP Sales Decline Worse Than Expected, PC Slump Continues

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

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4175

  • Below 4170 opens 4140

  • Primary support is 4100

  • Primary objective is 4268

  • 20 Day VWAP bullish, 5 Day VWAP bullish

EURUSD Bias: Bullish Above Bearsih Below 1.0750

  • Above 1.0765 opens 1.0830

  • Primary resistance is 1.0830

  • Primary objective is 1.06

  • 20 Day VWAP bearish, 5 Day VWAP bearish

GBPUSD Bias: Bullish Above Bearish Below 1.2440

  • Below 1.2290 opens 1.2234

  • Primary resistance  is 1.2540

  • Primary objective 1.2234

  • 20 Day VWAP bearish, 5 Day VWAP bearish

USDJPY Bias: Bullish Above Bearish Below 139.60

  • Below 139.50 opens 138.90

  • Primary support  is 137.40

  • Primary objective is 141.70

  • 20 Day VWAP bearish, 5 Day VWAP bullish

AUDUSD Bias:Intraday Bullish Above Bearish Below .6580

  • Below .6490 opens .6450

  • Primary resistance  is .6680

  • Primary objective is .6450

  • 20 Day VWAP bearish, 5 Day VWAP bearish

BTCUSD Bias: Intraday Bullish Above Bearish below 26000

  • Below 26000 opens 25800

  • Primary support 26000

  • Primary objective is 34600

  • 20 Day VWAP bullish, 5 Day VWAP bearish