Daily Market Outlook, August 2, 2023

Daily Market Outlook, August 2, 2023Munnelly’s Market Commentary… Asian equity markets are trading lower, following a negative lead from Wall Street. The sentiment has been dampened by higher yields and weak economic data. One of the factors affecting the market is Fitch's credit rating downgrade for the United States from AAA to AA+.The Nikkei 225 index is down 2.3% and has fallen below the 33K handle. The focus has shifted to corporate earnings despite comments from the Bank of Japan's Deputy Governor Uchida, who maintained a dovish tone and emphasised that last week's decision was a pre-emptive step to continue monetary easing without disruptions. The Hong Kong market is down 2.1%, following the overall risk aversion sentiment. The mainland Chinese market is down 0.8%, initially cushioned by policy support and jawboning from agencies like the People's Bank of China (PBoC). The PBoC has pledged to support the stable and healthy development of the real estate market, maintain reasonable liquidity, and promote a steady decline in financing costs for enterprises and interest rates for residents.In terms of the economic data docket for the rest of the day, there are no official data releases scheduled for the UK, Eurozone, or the US. This lack of economic data may lead to market speculation about the outcome of Thursday's Bank of England monetary policy update. Current market pricing indicates a high probability of another interest rate hike, with a 25-basis point increase seen as more likely than a second consecutive 50-basis point rise. A Bloomberg survey of 56 economists showed that 41 of them expect a 25-basis point hike.Stateside, the July ADP survey of private sector employment is being closely watched as an indication of the likely outcome of the official employment data due on Friday. The forecast for the ADP measure is a 190k rise in private sector employment. However, it's worth noting that despite a revamp, the ADP measure has not proved to be a reliable preview of the official payrolls series in recent months. Last month, it over-predicted payrolls by almost 350k, although prior to that, it had been an under-predictor more generally.CFTC Data As Of 25-07-23USD net spec short grew in Jul 19-25 period, $IDX +1.34% in periodRates remain key driver, after period close Fed, ECB lilted dovishBoJ adjusted YCC JGB 10-yr intervention lvl to 1%, yen whipsawedEUR$ -1.52% in period, specs -1,602 contracts now -177,230$JPY +1.34% in period, specs +12,487 into strength now -77,752GBP$ -1%, specs -4,734 contracts, now +58,995; after below f/c CPIAUD$ -0.3% in period, specs -800 contracts; $CAD +0.03%, specs +5,009BTC -1.86% in period specs +516 contract by trend lows now -645 contracts(Source: Reuters)FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0975-80 (877M), 1.0990 (817M), 1.1000 (301M)1.1050 (411M), 1.1065 (553M). Huge strikes ThursdayUSD/CHF: 0.8550 (600M), 0.8750 (265M)AUD/USD: 0.6660 (630M), 0.0.6675-85 (1.1BLN), 0.6700 (535M)NZD/USD: 0.6330 (1BLN). USD/CAD: 1.3150-65 (520M), 1.3270 (400M)USD/JPY: 142.00 (352M), 142.40-50 (638M), 143.00 (670M)Options Market PositioningOptions analysis suggests that the GBP/USD pair is susceptible to further gains in the USD and may face challenges from an underwhelming rate hike decision by the Bank of England on Thursday. However, the lack of premium or demand for downside versus upside strike options indicates that there might not be strong hedging activity or significant bets on downside moves.On the other hand, the AUD/USD pair is experiencing volatility premiums supported by a setback in the spot price after the Reserve Bank of Australia (RBA) meeting. This setback puts key support at 0.6595 at risk, meaning that the Australian dollar may face further downward pressure against the US dollar.In summary, the outlook for GBP/USD leans towards potential USD gains and a potentially underwhelming rate hike from the Bank of England, while AUD/USD is facing volatility premiums due to a post-RBA spot setback. Both currency pairs are influenced by their respective central bank actions and broader market sentiment.Overnight Newswire Updates of NoteFitch Downgrades US’ Long-Term Ratings To 'AA+' From 'AAA'; Outlook StableDollar Shaky After US Credit Rating Downgrade, US Tsy Yields Edge LowerBoJ Debated Inflation Overshoot Risk In June, Offering Insight Into July TweakBoJ's Uchida: Took Steps To Prepare For Future Economic ChangesChina Moves To Roll Out Pro-Growth Policies As Economy StrugglesFed’s Bostic Urges Caution With More Hikes As Inflation RecedesFed’s Goolsbee Wants To See More Inflation-Easing Data Before Sept DecisionTop Republican Candidates Split On Trump IndictmentUS Rejects Another Round Of Offers To Replenish Oil StockpileAMD Gains After Chipmaker Tops Estimates, Makes AI InroadsChesapeake Energy Profit Slides On Lower Natural Gas PricesStarbucks Misses Quarterly Sales Estimates, China Sales BuoyDan Loeb’s Third Point Laments Missing ‘Obvious’ Tech Rally, Pivots To AIGoldman’s Last Bearish Analyst Upgrades Stock As Risks Fade(Sourced from Bloomberg, Reuters and other reliable financial news outlets)Technical & Trade ViewsSP500 Intraday Bullish Above Bearish Below 4520Below 4520 opens 4500Primary support is 4370Primary objective is 463020 Day VWAP bullish, 5 Day VWAP bearishEURUSD Intraday Bullish Above Bearsih Below 1.1020Below 1.890 opens 1.0830Primary support is 1.830Primary objective is 1.1320 Day VWAP bullish, 5 Day VWAP bearishGBPUSD: Intraday Bullish Above Bearish Below 1.28Below 1.2750 opens 1.2650Primary support  is 1.26Primary objective 1.385020 Day VWAP bullish, 5 Day VWAP bearishUSDJPY Bullish Above Bearish Below 139.60Above 143.50 opens 145Primary resistance 143.40Primary objective is 136.2020 Day VWAP bullish, 5 Day VWAP bullishAUDUSD Intraday Bullish Above Bearish Below .6660Above .6750 opens .6820Primary resistance  is .6730Primary objective is .646620 Day VWAP bearish, 5 Day VWAP bearsihBTCUSD Intraday Bullish Above Bearish below 30000 Below 29400 opens 28600Primary support  is 28400Primary objective is 3275020 Day VWAP bullish, 5 Day VWAP bearish