Daily Market Outlook, December 18, 2023

Daily Market Outlook, December 18, 2023Munnelly’s Market Minute… Last week, a notable theme in the markets was a divergence in messaging from the Federal Reserve (Fed), Bank of England (BoE), and European Central Bank (ECB). The Fed adopted a somewhat dovish tone and did not resist market expectations for significant rate cuts in 2024. In contrast, both the BoE and ECB signalled their intent to maintain current interest rates for an extended period. Despite these contrasting stances, futures contracts softened across the board. Market expectations are currently pricing in rate cuts of approximately 150 basis points (bps) in the US and Eurozone, and 115 bps in the UK for the coming year.In addition to central bank communications, a series of tier one data releases influenced investor sentiment throughout the week. Notably, US Consumer Price Index (CPI) inflation eased further in November. In the UK, there was a slowdown in average earnings growth, and GDP contracted in November. Flash Purchasing Managers' Index (PMI) data for December revealed increased activity in the UK and US but contraction in the Eurozone.The holiday week starts quietly, with only the German Ifo report being notable. ECB's Schnabel and Lane will discuss fiscal policy and EMU governance. BoE's Broadbent will speak at the London Business School.The only economic data scheduled for release in the US today is the NAHB Housing Market Index for December. Fed's Goolsbee (2025 voter) is set to make an appearance on CNBC, despite already conducting interviews over the weekend. In those interviews, he mentioned that while inflation has shown improvement and unemployment remains low, it is premature to claim victory. He also stated that the Fed's rate decisions will be influenced by incoming data and that the focus may need to shift back to the employment aspect of its mandate.FX Positioning & SentimentUSD/JPY options are on high alert for potential BoJ action on Tuesday, Dec 19. FX dealers are not ruling out policy action, as the overnight option expiry now includes the policy decision. Overnight implied volatility is now at 35.0, the highest level since July 28 for BoJ. Implied volatility gauges actual volatility risk when determining the premium, and the 35.0 implied vol has a premium/break-even of 208-JPY pips in either direction.CFTC DataNet speculative positions in the futures market for various currencies as of Tuesday are as follows:- Long positions for the US dollar decreased to 147,327 contracts from 152,360 the previous week- Short positions for the Japanese yen decreased to 81,131 from 104,956- Short positions for the Australian dollar decreased to 52,340 from 57,681- Long positions for the British pound increased to 21,581 from 11,665- Short positions for the Swiss franc decreased to 14,474 from 17,852FX Options Expiries For 10am New York Cut(1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0825-30 (1BLN), 1.0850 (862M), 1.0900-10 (1.8BLN)1.0950-60 (945M), 1.1000-10 (1BLN)EUR/CHF: 0.9455 (300M)GBP/USD: 1.2650-55 (535M), 1.2670 (200M), 1.2685-90 (360M), 1.2700 (308M)EUR/GBP: 0.8600 (200M), 0.8625-30 (500M), 0.8700 (1.4BLN)AUD/USD: 0.6685 (466M), 0.6740 (1.3BLN). NZD/USD: 0.6115 (414M)USD/JPY: 141.00 (791M), 142.50 (600M), 143.00 (754M)Overnight Newswire Updates of NoteN.Korea Fires Another Missile Into Sea In Resumption Of Weapons TestingN.Korean Missile Can Reach Anywhere In The US, Japan SaysAustralia Says China’s Wine Tariffs Could End Early Next YearKishida’s Support Tanks After Replacing Scandal-Hit CabinetFed’s Goolsbee Says Too Early To Declare Victory Over InflationEU Strives To Make Orbán Realise ‘Full Costs’ Of Isolation After Ukraine VetoIsrael Pushes Back On Increasing European Calls For Cease-FireYen Cedes Some Ground Ahead Of Critical BoJ TestLong-Dated Treasuries Enter Bull Market As Fed Pivot Feeds RallyFTX Files Plan To End Bankruptcy, Pay Crypto Creditors BillionsRussia Eyes Additional Oil Export Cuts Of About 50K Bpd In DecemberChina's iPhone Ban Accelerates Across Government And State FirmsCarrefour Makes Offer For Casino’s Local SupermarketsRolls-Royce In Talks To Build Mini-Nukes In Ukraine(Sourced from Bloomberg, Reuters and other reliable financial news outlets)Technical & Trade ViewsSP500 Bias: Bullish Above Bearish Below 4675Below 4600 opens 4560Primary support 4600Primary objective is 475020 Day VWAP bullish, 5 Day VWAP bullishEURUSD Bias: Bullish Above Bearish Below 1.09Below 1.0840 opens 1.0780Primary support 1.0650Primary objective is 1.105020 Day VWAP bullish, 5 Day VWAP bullishGBPUSD Bias: Bullish Above Bearish Below 1.2690Below 1.2650 opens 1.2550Primary support  is 1.2185Primary objective 1.2820 Day VWAP bullish , 5 Day VWAP bullishUSDJPY Bias: Bullish Above Bearish Below 143Above 143.50 opens 146Primary resistance 146.50Primary objective is 14020 Day VWAP bearish, 5 Day VWAP bearishAUDUSD Bias: Bullish Above Bearish Below .6660Below .6660 opens .6620Primary support .6525Primary objective is .677520 Day VWAP bullish, 5 Day VWAP bullishBTCUSD Bias: Bullish Above Bearish below 42500Below 40000 opens 38500Primary support  is 36800Primary objective is 4600020 Day VWAP bullish, 5 Day VWAP bearish