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Daily Market Outlook, April 4, 2024

By Patrick Munnelly Asian stock markets are mostly trading higher on Thursday, following the positive cues from global markets overnight. This comes as traders react to the latest remarks from US Fed officials, which have helped to alleviate concerns about the outlook for interest rates. Fed Chair Jerome Powell reiterated during remarks at Stanford University that the central bank is not in a rush to start lowering interest rates, but he also affirmed his belief that they will probably cut interest rates this year. It's worth noting that Asian Markets closed mostly lower on Wednesday. Making up for the previous session's losses, the Japanese market is seeing a significant increase on Thursday, in line with the mostly positive trends in global markets overnight. The Nikkei 225 has surpassed the 40.1K handle, with gains seen in most sectors, particularly driven by technology and financial stocks, which are among the index heavyweights. The final updates for today's UK and Eurozone services PMIs for March are expected to remain unchanged upon revision. In the UK, the initial March headline measure decreased to 53.4 from February's 53.8, marking the second consecutive monthly decline since January's eight-month high. Despite this, the data still indicates a rebound in economic activity from late 2023's recession. With the March manufacturing PMI showing an upward revision earlier this week, attention is drawn to whether a similar trend will be observed in services. In the Eurozone, the initial March services reading rose to 51.1 from February's 50.2, surpassing the key 50 threshold for the second consecutive month, suggesting a stabilization in activity. These factors will impact the European Central Bank's upcoming decision on interest rates next Thursday. The release of minutes from its last meeting today will be analyzed for hints regarding the likelihood of an interest rate cut next week. However, ECB policymakers have consistently indicated that while a cut is foreseeable as inflation converges towards target, the April meeting may be premature, with action more likely in June. It would be surprising if the minutes challenged this consensus. The highly anticipated monthly US labor market report tomorrow prompts attention towards weekly jobless claims data for any signs of deviation from the consistently low levels, indicating a tight labor market. The Challenger Job Cuts release will provide further insights into the job market's state. Additionally, already released trade in goods data suggests a slight increase in the overall trade deficit for March. Overnight Newswire Updates of Note Powell maintains Fed's cautious approach to rate cuts Fed's Kugler predicts continued disinflation Kugler notes new businesses as major contributors to unprecedented job growth Yellen open to further protection for US clean energy in response to Chinese overcapacity Survey shows US dollar expected to remain strong as markets delay bets on Fed rate cuts Bridgewater Karniol-Tambour sees anomalies in rise of US dollar and gold Japanese sell Y233.6 billion in foreign stocks, Y1.6605 trillion in bonds, and Y25.1 billion in bills in the week ending March 30 Foreigners sell Y441.3 billion in Japanese stocks, buy Y842.2 billion in JGBs, and sell Y2.7824 trillion in bills Survey indicates Aussie and kiwi dollar expected to gain ground around mid-year (Sourced from Bloomberg, Reuters and other reliable financial news outlets) FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR) EUR/USD: 1.0785-90 (1.8BLN), 1.0800-05 (925M), 1.0850-60 (1.2BLN) 1.0865-75 (876M), 1.0880-95 (1.9BLN), 1.0920 (547M) USD/CHF: 0.9000 (600M). EUR/CHF: 0.9775 (224M) GBP/USD: 1.2595 (448M), 1.2660 (604M), 1.2720-25 (315M), 1.2760 (430M) EUR/GBP: 0.8615 (453M). AUD/NZD: 1.0815 (250M), 1.0980 (250M) AUD/USD: 0.6500 (739M), 0.6510-15 (1BLN), 0.6525-30 (1BLN) 0.6575-80 (582M), 0.6605 (333M). NZD/USD: 0.6090-95 (484M) USD/CAD: 1.3560 (324M), 1.3595-1.3600 (1.3BLN), 1.3650-55 (875M) USD/JPY: 150.00 (1.6BLN), 150.50-55 (1BLN), 151.50 (1.1BLN) 151.75-80 (1.3BLN), 151.85-90 (704M), 152.00 (1.1BLN), 153.00 (2BLN). EUR/JPY: 162.65 (310M). AUD/JPY: 99.00 (865M), 100.00 (340M) Japanese companies require foreign exchange (FX) intervention to meet their FX targets. As of 09:07, it seems that Japanese companies are disconnected from reality when it comes to the value of the yen. These companies anticipate the EUR/JPY to have an average of 151.86 and USD/JPY to have an average of 141.42 for the fiscal year 2024/25. These predictions have not changed much since December, despite being proven significantly inaccurate. At the end of the fiscal year 2023/24, USD/JPY was at 151.38 and EUR/JPY at 163.40. FX intervention will only benefit companies if they choose to sell yen during a rally. The Bank of Japan's policy is expected to have an impact on the value of the yen following any intervention. Recent FX movements may indicate preparations for intervention. CFTC Data As Of 29/03/24 Japanese Yen net short position is -129,106 contracts. Euro net long position is 31,194 contracts. British Pound net long position is 35,170 contracts. Swiss Franc posts net short position of -21,968 contracts. Bitcoin net short position is -1,075 contracts. Technical & Trade Views SP500 Bullish Above Bearish Below 5220 Daily VWAP bullish Weekly VWAP bullish Below 5190 opens 5160 Primary support 5160 Primary objective is 5300

EURUSD Bullish Above Bearish Below 1.0865 Daily VWAP bullish Weekly VWAP bearish Below 1.0690 opens 1.0630 Primary support 1.0690 Primary objective is 1.0685 (Potential Objective Change Developing)

GBPUSD Bullish Above Bearish Below 1.27 Daily VWAP bullish Weekly VWAP bearish Below 1.2570 opens 1.2510 Primary support is 1.2500 Primary objective 1.29

USDJPY Bullish Above Bearish Below 150.25 Daily VWAP bullish Weekly VWAP bullish Above 151 opens 152 Primary support 145.85 Primary objective is 153

AUDUSD Bullish Above Bearish Below .6570 Daily VWAP bullish Weekly VWAP bullish Below .6460 opens .6420 Primary support .6477 Primary objective is .6700

BTCUSD Bullish Above Bearish below 65000 Daily VWAP bearish Weekly VWAP bullish Below 64000 opens 59588 Primary support is 52800 Primary objective is 78000

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Publication date:

2024-04-04 12:44:23 (GMT)

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