Daily Market Outlook, September 22, 2023

Munnelly’s Market Commentary…

Asian equity markets showed a mixed performance overnight. The Bank of Japan (BoJ) made no changes to its monetary policy in its latest update. BoJ Governor Ueda's post-announcement comments did not signal an imminent rise in interest rates. Before the meeting, Japan's finance minister had issued a warning that action would be taken if the yen continued to weaken. Japanese annual CPI inflation fell slightly to 3.2% in August, down from 3.3% in July, while 'core' inflation remained unchanged.

In the UK, retail sales data for August indicated a 0.4% increase, following a 1.2% decline in July. This figure was in line with expectations and is unlikely to significantly alter perceptions of economic conditions. Additionally, the GfK consumer confidence indicator for September unexpectedly saw a sharp rise to -21, up from -25 in August. This marks its highest level since January 2022, with consumers showing increased optimism about their personal finances and the overall economic situation.

Today brings the release of the September purchasing managers' indices (PMIs) for the UK, Eurozone, and the US. In the UK, both the manufacturing and services PMI indices fell in the previous month. The decline in the services sector was notably significant, pushing the composite index below 50, indicating a contraction in activity for the first time since January. If this month's readings also show weakness, it may further heighten concerns about downside risks to economic growth and potentially reinforce the belief that interest rates have peaked. Notably, Bank of England policymakers had access to this data before deciding to keep rates unchanged yesterday. The September CBI industrial survey will also be published this morning.

In the Eurozone, both PMI indices declined in August, with the composite indicator remaining below 50 for a third consecutive month. These developments added to concerns about declining activity in the region and may have contributed to the European Central Bank's suggestion that interest rates have peaked. While there may be a modest rebound in the manufacturing sector this month, it is expected that services will continue to slide, keeping the composite indicator below the 50 threshold.

Stateside, PMI readings have garnered more attention recently, possibly due to the uncertain economic environment. Moderate increases in both readings are anticipated for September. Several Federal Reserve policymakers are scheduled to speak, and the market will be closely monitoring their remarks for further insights into the likelihood of another interest rate hike before the end of the year.

FX Positioning & Sentiment

Traders are increasing their bearish bets against most Asian currencies, with the Chinese yuan remaining the most shorted currency. Short bets on the Thai baht are near a three-month high, and the Indian rupee (INR) is witnessing its largest short position since November 2022. Additionally, there is a substantial bet against the Indonesian rupiah (IDR), the largest in over nine months. These developments come as the yuan's recovery reached a significant point last week, impacting traders' sentiment and positions in the region's currencies.

CFTC Data As Of 15-09-23

EUR net spec long drops to 113,080 contracts from 136,231
JPY short rises to 98,713 from 97,136
AUD short lower at 79,533 from 83,537
GBP long slightly smaller at 46,174 from 46,384 (Source: Reuters)

FX Options Expiries For 10am New York Cut

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

EUR/USD: 1.0600 (800M), 1.0650-60 (819M), 1.0700 (1BLN), 1.0730 (921M)
1.0750 (1.5BLN). USD/CHF: 0.8875 (443M), 0.8925 (324M)
GBP/USD: 1.2225 (370M), 1.2250 (1.1BLN),1.2285 (405M), 1.2300 (781M)
1.2325 (545M), 1.2350 (511M), 1.2375 (545M)
EUR/GBP: 0.8650 (406M), 0.8840 (611M)
AUD/USD: 0.6400 (277M), 0.6500 (446M), 0.6520 (230M), 0.6580 (341M)
USD/CAD: 1.3385 (916M), 1.3400 (727M), 1.3450 (584M), 1.3465 (320M)
USD/JPY: 147.00 (676M), 147.50 (627M), 148.00 (472M), 149.00 (515M)

Overnight Newswire Updates of Note

BoJ Keeps Ultra-Loose Policy, Dovish Guidance On Outlook
Japan's Factory Activity Shrinks, Service Sector Growth Slows In Sept
Japan’s Suzuki: Closely Watching FX Moves With High Sense Of Urgency
Australian Manufacturing PMI Contracts Further To A 4 Mth Low
Westpac Index Finds Consumer Confidence In NZ Plummets Further
ECB’s Lane Says Rates Will Be Restrictive As Long As Necessary
BoE’s Bailey: Noticeable Inflation Drop Due In November
UK Consumer Confidence Rises To Highest Level Since January 2022
US 10-Year Jumps Above Key 4.5% Level In Post-Fed Bond Rout
Yen Falls, Nikkei Futures Hold Losses As BoJ Stands Pat
Oil Prices Rise As Supply Concerns Outweigh Demand Fears
Chevron And Unions Agree On Deal To End Australia LNG Strikes

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

Technical & Trade Views

SP500 Bias: Bullish Above Bearish Below 4340

Above 4350 opens 4380
Primary resistance is 4465
Primary objective is 4266
20 Day VWAP bullish, 5 Day VWAP bearish

EURUSD Bias: Bullish Above Bearish Below 1.07

Above 1.860 opens 1.0945
Primary resistance is 1.1066
Primary objective is 1.06
20 Day VWAP bearish, 5 Day VWAP bearish

GBPUSD Bias: Bullish Above Bearish Below 1.2350

Above 1.2350 opens 1.2450
Primary resistance is 1.2750
Primary objective 1.23
20 Day VWAP bearish, 5 Day VWAP bearish

USDJPY Bias: Bullish Above Bearish Below 147.50

Below 147 opens 146.40
Primary support 144.50
Primary objective is 150
20 Day VWAP bullish, 5 Day VWAP bullish

AUDUSD Bias: Bullish Above Bearish Below .6450

Above .6475 opens .6525
Primary resistance is .6620
Primary objective is .6320
20 Day VWAP bearish, 5 Day VWAP bearish

BTCUSD Bias: Bullish Above Bearish below 27500

Above 28200 opens 30000
Primary resistance is 28175
Primary objective is 23300
20 Day VWAP bearish, 5 Day VWAP bearish