Daily Market Outlook, January 29, 2024

Daily Market Outlook, January 29, 2024Munnelly’s Market Minute…“China Winds Up Evergrande, Middle East Tensions Rise”Over the weekend, news emerged that China's securities regulator would halt the lending of certain stocks for short selling starting today. Initially, this led to a rise in equities across China and Asia. However, optimism quickly faded, and stocks eased back, with Chinese markets mostly in the red with worries about the real estate industry front and center, as China's decision to wind up Evergrande has raised the prospect of contagion risk. Concurrently, US and European stock futures edged lower amid rising tensions in the Middle East.Speculation surrounding the near-term trajectory of interest rates remains the primary driver of financial market movements. This week, the probability of interest rate cuts in early 2024 has been particularly volatile, initially falling but then rising again. European Central Bank President Lagarde emphasized in last Thursday’s update that decisions on interest rates were data-dependent and that the Board had not yet discussed cuts. However, markets interpreted her lack of strong pushback against suggestions of rate cuts starting in April as a signal. Consequently, expectations of a first reduction in April have risen to almost 90%. Lagarde highlighted wage trends as a key signal for when the ECB might be prepared to act, making them closely watched over the next few months.In the upcoming week, the US Federal Reserve and Bank of England will deliver their first policy updates of the year. While no rate changes are expected, the focus will be on any signals regarding future intentions. The US economic activity remains robust, despite decreasing inflation measures, indicating a less urgent need for rate cuts. The Bank of England has been more cautious than its counterparts in signaling a turnaround in interest rate policy and is likely to reiterate its previous message. Although it may lower rates later in the year, the Monetary Policy Committee is likely to consider it too early to signal such an intention.Ahead of these key events, today's docket lacks significant data releases. The US will see the Dallas Fed manufacturing survey for January, while Japan will release its December labor market report. Comments from ECB policymaker Guindos will also draw interest. Overnight, the British Retail Consortium (BRC) will release its January shop price index update. Following the December uptick in UK CPI, markets will closely monitor this report for confirmation of domestic disinflationary trends.Overnight Newswire Updates of NoteChina Evergrande Receives Winding-Up Order From Hong Kong CourtChina Tightens Securities Lending Rule To Support Stock MarketBiden Vows To Retaliate After Strike Against American Forces In JordanUS To Reportedly Announce Billions Of Dollars In Subsidies For Advanced ChipsHints Of Early ECB Rate Cut Highlight Divisions In CouncilECB’s Knot Says Wage Data Needed Before Rate Move PossibleECB’s Villeroy Says ECB Could Cut Rates At Any Time This YearKemi Badenoch Tells Tory Plotters To Back Rishi SunakOil Jumps After Separate Attacks Escalate Middle East TensionsChina To Merge Three Major Asset Managers Into China Investment CorpFirst Boeing 737 Max Jet Delivered To China Since 2019 LandsADM Postpones Some Exec Bonuses Amid Accounting Probe(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 (631M), 1.0815-25 (617M), 1.0840-50 (851M)1.0890-1.0900 (1.3BLN), 1.0910-10 (1BLN)USD/CHF: 0.8750 (1.4BLN). EUR/CHF: 0.9285 (425M), 0.9450 (200M)GBP/USD: 1.2600-15 (716M), 1.2665-70 (505M), 1.2700 (672M)AUD/USD: 0.6570 (260M), 0.6585 (373M), 0.6630-40 (564M)USD/JPY: 146.75 (420M), 148.50 (450M)There are significantly fewer long positions in the EUR/USD market, but it remains the largest foreign exchange bet. Traders have reduced an $8 billion bet on the euro rising out of a total $20.5 billion wager to just $12 billion. Despite the reduction, it is still double the size of any other individual foreign exchange bet. The quieter foreign exchange markets may lead to further reduction in long positions. With fewer long positions, there is less resistance to the underlying upward trend. It is possible that the rise of EUR/USD may continue before the US begins its easing cycle in May.CFTC Data As Of 12/01/24USD bearish increasing -9,298 CAD bearish increasing -992 EUR bullish decreasing 14,150 GBP bullish increasing 2,443 AUD bearish increasing -3,151 NZD neutral neutral -177 MXN bullish neutral 2,370 CHF bearish neutral -542 JPY bearish neutral -4,803 Technical & Trade ViewsSP500 Bullish Above Bearish Below 4875 Daily VWAP bullishWeekly VWAP bullishBelow 4800 opens 4780Primary support 4700Primary objective is 4910EURUSD Bullish Above Bearish Below 1.0930 Daily VWAP bullishWeekly VWAP bearishAbove 1.10950 opens 1.10Primary resistance 1.10Primary objective is 1.0730GBPUSD Bullish Above Bearish Below 1.2750Daily VWAP bullishWeekly VWAP bearishAbove 1.28 opens 1.2870Primary resistance  is 1.2785Primary objective 1.2570USDJPY Bullish Above Bearish Below 146.40 Daily VWAP bullishWeekly VWAP bullishBelow 146 opens 145.50Primary support 143.50Primary objective is 149AUDUSD Bullish Above Bearish Below .6650Daily VWAP bullishWeekly VWAP bearishAbove .6680 opens .6550Primary support .6525Primary objective is .6933BTCUSD Bullish Above Bearish below 43600Daily VWAP bullishWeekly VWAP bearishAbove  43600 opens 46000Primary resistance  is 43600Primary objective is 36097