Daily Market Outlook, July 05, 2023

Munnelly’s Market Commentary… 

Asian equity markets faced downward pressure as market participants digested the latest Chinese Caixin Services PMI data and ongoing geopolitical concerns. Nikkei 225 initially slumped but recovered slightly after holding above the 33k handle. Hang Seng and Shanghai Comp. remained subdued due to trade-related frictions and warnings of potential retaliatory measures against Western tech export controls. The Chinese Caixin Services PMI came in below forecasts, signalling the slowest pace of increase since January.

With US markets back from the holiday, attention turns to the Federal Reserve's potential interest rate hike at the next monetary policy update. The minutes of the Fed's June meeting, where interest rates were left unchanged, may provide some clues. Fed Chair Powell has indicated that the pause should be seen as a temporary break, and a majority of policymakers believe two more rate hikes may be necessary this year. Market expectations currently suggest an 85% probability of a rate hike on July 26th, but there is more scepticism about additional hikes afterward. While not much new information is expected from the minutes, the discussion details may shed light on the reasons behind the pause. Market participants will also be keen to identify the factors policymakers will consider when deciding on a potential July rate hike.

On the economic data docket, the UK and Eurozone will release second readings of their June PMI services outturns. These readings are not expected to deviate from the initial estimates, which showed a slight loss of momentum but still solid services activity. Inflationary pressures were mixed, but labour market pressures remained intense in the UK.

In the US, May factory orders data will provide insights into manufacturing trends. Over the past year, orders have been trending downward, indicating similar pressures in the US manufacturing sector as in other regions. However, there are positive signs, such as a bounce in durable goods orders in May, driven partially by the volatile transport sector. Additionally, there are tentative indications that President Biden's "green" incentives are starting to impact capital goods orders.

CFTC Data As Of 30-06-23

  • USD IMM net spec short in the Jun 21-27 reporting period; $IDX -0.02%

  • EUR$ +0.38% in period, specs stayed on sidelines +379 contracts now +145,028

  • $JPY rose 1.91%, specs -5,214 contracts now -112,870 as BoJ remains steady

  • Recent test of 145, tipped intervention area may stir long profit-taking

  • GBP$ -0.1%, specs +5,386 contracts now +51,994 on rising UK rate view

  • BTC rose 8.86%, specs sold 2,491 contracts into strength, flip to -2,094

  • $CAD -0.31% in period, specs +30,696 contracts short pared to -2,847

  • AUD$ -1.49% in period, specs +10,192 contracts now -39,424

  • BoC, RBA had been considering further rate hikes amid persistent inflation

  • Inflation stalling has weakened CAD and AUD since Jun 21, may see recent longs lighten(Source: Reuters)

FX Options Expiries For 10am New York Cut

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

  • EUR/USD: 1.0835-50 (701M), 1.0900 (2.7BLN), 1.0950 (385M), 1.1000 (1.5BLN)

  • USD/CHF: 0.9100 (400M)

  • GBP/USD: 1.2530 (736M), 1.2565 (466M), 1.2575 (687M)

  • EUR/GBP: 0.8625 (354M), 0.8700 (462M)

  • USD/JPY: 144.50 (230M), 145.00 (220M), 145.25 (680M)

  • EUR/NOK: 11.50 (600M)

Overnight News of Note

  • Asian Shares Fall On Growth Concerns, Focus Shifts To Fed Minutes

  • Caixin PMI: China's Services Activity Softens As Recovery Falters

  • China Ex Vice-Min Of Commerce: Chip Materials Export Controls Just A Start

  • Japan Labour Confederation Sees Biggest Average Wage Hike Since 1993

  • NZ Govt Debt Now NZ$5B Above Budget Fcst As Accounts Disappoint

  • Bank Of England Considers Clampdown On Foreign Bank Branches

  • Russia, Ukraine Accuse Each Other Of Plotting Attack On Nuclear Plant

  • Brazil Senate Committee Approves Lula's Picks For Central Bank Board

  • Dollar Steady Before Fed Minutes; Yen Hovers Below Intervention Zone

  • Oil Drifts Lower As Traders Take Stock Of OPEC+ Supply Curbs

  • Asian Shares Fall On Growth Concerns, Focus Shifts To Fed Minutes

  • Investors Slash Outlook For Asia Stocks On Fading China Optimism

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

Technical & Trade Views

SP500 Bias: Intraday Bullish Above Bearish Below 4412

  • Below 4400 opens 4370

  • Primary support is 4300

  • Primary objective is 4540

  • 20 Day VWAP bullish, 5 Day VWAP bullish

EURUSD Intraday Bullish Above Bearsih Below 1.0840

  • Below 1.0840 opens 1.08

  • Primary support is 1.07

  • Primary objective is 1.1050

  • 20 Day VWAP bullish, 5 Day VWAP bearish

GBPUSD Bias: Intraday Bullish Above Bearish Below 1.2650

  • Below 1.26 opens 1.2550

  • Primary support  is 1.26

  • Primary objective 1.2880

  • 20 Day VWAP bullish, 5 Day VWAP bullish

USDJPY Bullish Above Bearish Below 143.50

  • Below 143 opens 142.30

  • Primary support  is 141

  • Primary objective is 145.50

  • 20 Day VWAP bullish, 5 Day VWAP bullish

AUDUSD Bias:Intraday Bullish Above Bearish Below .6660

  • Below .6600 opens .6550

  • Primary support  is .6448

  • Primary objective is .6917

  • 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