Daily Market Outlook, July 17, 2023

Munnelly’s Market Commentary… 

Asian equity markets started the week on a subdued note as market participants digested mixed economic growth and activity data from China. The closure of markets in Japan due to a holiday and disruptions caused by a typhoon in Hong Kong further thinned trading conditions. The Shanghai Composite underperformed, as there were no Stock Connect flows due to the unscheduled closure in Hong Kong. Investors reflected on a mixed bag of tier one releases from China. The data indicated that economic growth was stronger than expected on a quarter-on-quarter basis, but it disappointed on a year-on-year basis (6.3% vs. expected 7.3%). Chinese Industrial Production exceeded estimates in June (4.4% vs. expected 2.7%), while Retail Sales fell short (3.1% vs. expected 3.2%). It was noted that the data could be distorted by the effects of the lockdowns in China last year. Additionally, market attention was focused on the People's Bank of China (PBoC), which maintained its one year MLF (Medium-term Lending Facility) rate at 2.65% and rolled over the maturing loan amount.

Last week, there was a notable reversal in market sentiment compared to the previous week, with a significant moderation in interest rate expectations. This shift began early in the week but gained momentum after the release of lower-than-expected US CPI inflation data on Wednesday. The data provided optimism that US interest rates may be approaching a peak. Expectations regarding the height of interest rates in other countries also moderated, although to a lesser extent. Despite the release of stronger-than-expected UK GDP and wage growth figures, market pricing for the peak in UK interest rates eased by approximately a quarter-point.

In the Eurozone, markets are still pricing in an additional 50bps of rate increases. Market participants will closely watch for comments from European Central Bank (ECB) officials today to gauge their views on the appropriateness of current market pricing, especially as the July policy meeting approaches. The release of the Minutes from the ECB's June meeting indicated that there was initial preference expressed for a 50bps hike before the committee settled on a quarter-point increase. Therefore, remarks from ECB President Lagarde and other officials such as Vasle, Elderson, and Vujcic will be closely monitored by market participants. In terms of data, it is a very quiet week with no significant releases scheduled across major economies. In the US, some attention may be given to the Empire State manufacturing survey for July, although it is known to be volatile.

CFTC Data As Of 14-07-23

  • USD net spec short fell a touch in the Jul 5-11 period as $IDX slid 1.37%

  • Fairly serious moves among majors w/hardly any position changes

  • Suggest a fair amount of position replacement as specs were getting stopped

  • EUR$ +1.2% in period, specs -2,675 contracts into strength now +140,162

  • $JPY -2.84% in period after breaching 145 last wk, specs buy 738 contracts

  • GBP$ +1.73% as BoE seen a cointoss for +50bp Aug 3, specs +7,798 now +58,063

  • CHF specs relatively active -4,503 contracts now short 7,907

  • $CAD +0.06%, Aussie -0.06% specs sell less than 1k contracts

  • BTC fell a scant 0.74%, specs +221 on dip now short 1,855 contracts(Source: Reuters)

FX Options Expiries For 10am New York Cut

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

  • EUR/USD: 1.1100 (350M)

  • AUD/USD: 0.6800 (389M), 0.6830 (250M), 0.6845 (230M)

  • AUD/NZD: 1.0670 (501M)

  • USD/CAD: 1.3075 (330M), 1.3225-35 (310M)

  • USD/JPY: 138.00 (325M), 140.00 (1BLN)

Overnight News of Note

  • China’s Economic Recovery Loses Steam as GDP Disappoints

  • PBoC Rolls Over Medium-Term Policy Loans, Rate Unchanged

  • Survey Shows China To Take More Measures To Boost Economy - Paper

  • Japan Will Tread Carefully In Likely Tightening, S&P Says

  • Australia Treasurer Expects Unemployment Rise As Inflation Eases

  • ECB To Bring Rates To 4% Peak In September, Economists Say

  • Transatlantic Inflation Gap Set To Hit Highest Level In Decades

  • French Government Lays Out 4 Bln Euro Spending Cut To Close Gap

  • UK Economy Is Likely To Fall Further Behind Euro Area Next Year

  • UK Joins Pacific Trade Deal, Sees ‘Very Low’ Chance Of US Pact

  • UK Property Sellers Cut Asking Prices For First Time This Year

  • Commodity Currencies Drop Monday On China GDP Data Miss

  • Morgan Stanley Says ‘Buy Any Dip In Bonds,’ Exit Dollar Longs

  • Oil Extends Decline As Major Libyan Field Resumes Production

  • China Stocks Lead Losses In Asia Monday On Growth Miss

  • GS: Japan Stock Drop On YCC Tweak Would Be Buy Opportunity

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

Technical & Trade Views

SP500 Intraday Bullish Above Bearish Below 4490

  • Below 4480 opens 4460

  • Primary support is 4370

  • Primary objective is 4630

  • 20 Day VWAP bullish, 5 Day VWAP bullish

EURUSD Intraday Bullish Above Bearsih Below 1.1150

  • Below 1.1150 opens 1.1050

  • Primary support is 1.10

  • Primary objective is 1.13

  • 20 Day VWAP bullish, 5 Day VWAP bullish

GBPUSD: Intraday Bullish Above Bearish Below 1.30

  • Below 1.2830 opens 1.2710

  • Primary support  is 1.26

  • Primary objective 1.3850

  • 20 Day VWAP bullish, 5 Day VWAP bullish

USDJPY Bullish Above Bearish Below 139.60

  • Above 139.60 opens 141.80

  • Primary resistance 142

  • Primary objective is 136.20

  • 20 Day VWAP bullish, 5 Day VWAP bearish

AUDUSD Intraday Bullish Above Bearish Below .6800

  • Below .6795 opens .6750

  • Primary support  is .6448

  • Primary objective is .7000

  • 20 Day VWAP bearish, 5 Day VWAP bullish

BTCUSD Intraday Bullish Above Bearish below 30000

  • Below 29400 opens 28600

  • Primary support  is 28400

  • Primary objective is 32750

  • 20 Day VWAP bullish, 5 Day VWAP bullish