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Daily Market Outlook, April 9, 2024

On Tuesday, Asian stock markets are experiencing a mix of trading, influenced by the varied signals from Wall Street the previous night. This is due to the rise in bond yields in anticipation of the release of important U.S. inflation data, along with the ECB monetary policy meeting later in the week. The inflation data is expected to have a substantial effect on the forecast for interest rates, as officials from the US Fed have emphasized the need for more assurance that inflation is decreasing before considering rate cuts. Building on the momentum from the previous day, the Japanese stock market has seen a significant increase on Tuesday, as the Nikkei 225 index has surpassed the 39.5K handle. This rise follows a combination of signals from Wall Street, driven by a resurgence in technology stocks. The British Retail Consortium's latest retail sales monitor, unveiled overnight, offered an initial insight into March's activity. The report surpassed expectations, with nominal like-for-like sales growth rising to 3.2% year-on-year, up from 1.0% in February. The uptick in growth was primarily driven by increased grocery sales, partly attributed to this year's early Easter. However, non-food sales were dampened by adverse weather conditions. Official retail sales data for March are slated for release next week. This week's primary focus in the UK will be on the monthly GDP figures for February, due on Friday, signaling the anticipated emergence from last year's brief 'technical' recession. For the remainder of today, there's little else on the data docket to ignite market excitement. The ECB's latest quarterly bank lending survey, set for release this morning, is of interest regarding the impact of policy changes on credit conditions in the broader economy. Despite indications of weakening credit demand in response to tighter conditions, the ECB is expected to maintain interest rates unchanged this Thursday but may signal a rate cut at its June meeting, awaiting further evidence of cooling inflationary pressures. Stateside, the NFIB small business optimism survey is scheduled, though it typically doesn't heavily influence markets. Nonetheless, last week's ISM manufacturing and services reports led to significant market volatility, suggesting any new information impacting Fed policy expectations will be closely monitored. Markets anticipate a slight improvement in the NFIB survey. Overnight The Reserve Bank of New Zealand is expected to keep rates at 5.50% in its upcoming meeting. The focus will be on the forward guidance from the central bank, which is often unpredictable. The market has already priced in a 25 basis-point cut at the August meeting and there's nearly a 50% chance of a cut as early as July, according to LSEG. Overnight Newswire Updates of Note BoJ's Ueda Signals Scope To Reduce Monetary Stimulus BoJ’s Timing For Next Hike In Focus As Ueda Starts Second Year Japan's Suzuki: Excess FX Volatility Is Undesirable Australian Consumer Confidence Slumps As Prices, Rates Take Toll Australia Business Conditions Steady In March, Price Pressures Ease Fed's Kashkari: The Bank Cannot Stop Short On The Inflation Fight Bullard Says Three Fed Rate Cuts This Year Is ‘Base Case’ Yen Remains Confined In A Range Near Multi-Decade Low Against USD Oil Prices Turn Higher As Middle East Ceasefire Hopes Wane (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: 1.0800 (700M), 1.0825-30 (546M), 1.0850-60 (528M), 1.0875 (446M) 1.0900 (485M), 1.0910-15 (368M), 1.0925-30 (539M) USD/CHF: 0.9080 (396M) GBP/USD: 1.2650 (317M), 1.2750-55 (592M) EUR/GBP: 0.8535 (300M), 0.8575 (186M) AUD/USD: 0.6495 (794M), 0.6550-55 (387M), 0.6615-20 (1.5BLN) EUR/AUD: 1.6450 (500M). NZD/USD: 0.5900 (300M) USD/JPY: 151.00 (375M), 151.50 (1.2BLN), 153.00-05 (800M) AUD/JPY: 96.97 (540M), 100.50 (901M) The overnight expiry implied volatility for USD/JPY has experienced a significant increase, largely due to its strong correlation with risk. It has risen from 7.5 on Monday to 12.0 following the CPI data release. This has resulted in the premium/break-even for a simple vanilla straddle increasing from 47 JPY pips to 76 JPY pips in both directions. Similarly, AUD/USD, which also has a high correlation to risk, has seen its premium rise from 10.5 to 14.5 since the CPI data release. This translates to a premium/break-even of 40 USD pips from 29 USD pips in either direction. In contrast, EUR/USD, despite being a highly liquid and heavily traded currency pair, has seen more modest gains in its overnight expiry implied volatility. Initially increasing from 6.5 to 9.5 (29 USD pips to 43 USD pips), it has now settled back to 7.5, resulting in only 34 USD pips in either direction. CFTC Data As Of 29/03/24 Bitcoin net long position is 160 contracts Swiss Franc posts net short position of -22,370 contracts British Pound net long position is 43,414 contracts Euro net long position is 16,794 contracts Japanese Yen net short position is -143,230 contracts Equity fund managers cut S&P 500 CME net long position by 26,140 contracts to 930,132 Equity fund speculators trim S&P 500 CME net short position by 83,217 contracts to 365,684 Technical & Trade Views SP500 Bullish Above Bearish Below 5230 Daily VWAP bullish Weekly VWAP bullish Below 5140 opens 51180 Primary resistance 5230 Primary objective is 5118

EURUSD Bullish Above Bearish Below 1.0877 - Daily VWAP bullish - Weekly VWAP bearish - Below 1.0690 opens 1.0630 - Primary support 1.0690 - Primary objective is 1.0685

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 bearish - Below .6460 opens .6420 - Primary support .6477 - Primary objective is .6700

BTCUSD Bullish Above Bearish below 70000 - Daily VWAP bearish - Weekly VWAP bullish - Below 64000 opens 59588 - Primary support is 52800 - Primary objective is 78000

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Publication date:

2024-04-09 11:25:04 (GMT)

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