Daily Market Outlook, October 17, 2023

Daily Market Outlook, October 17, 2023Munnelly’s Market Commentary… Asia – Asian stocks rebounded from yesterday's losses, following the US market's recovery. Japan's Nikkei-225 index rose by 1%, while other regional markets also gained. The Israel-Hamas conflict remains tense, but diplomatic efforts are underway to prevent further escalation. US President Biden will visit Israel tomorrow. China will release its GDP data for Q3 early tomorrow. The annual growth rate is expected to drop to 4.5% from 6.3%, due to base effects. The quarterly growth rate is expected to rise to 1.0% from 0.8%, indicating some stabilisation.Europe – UK wage growth slowed more than expected in August, easing inflationary pressures. Other labour market data will be released next week. UK CPI inflation for September will be out early tomorrow. Look for a fall to 6.5% from 6.7%, despite higher petrol prices. Core CPI is expected to fall below 6% for the first time since January (to 5.9%). The October inflation figures will reflect lower utility prices and likely see headline CPI drop below 5%. BoE's Dhingra will speak at the London School of Economics on "The future of monetary policy in a post-pandemic world". She is expected to discuss the challenges and opportunities for monetary policy in the aftermath of the Covid-19 crisis, as well as the implications of the UK's departure from the EU. She is also likely to comment on the recent inflation developments and the BoE's policy stance. The speech will start at 11:50 GMT and will be followed by a Q&A session. ECB's Luis de Guindos will speak at a dinner event hosted by the Frankfurt Finance Summit on "The inflation outlook and monetary policy in the euro area". He is expected to explain the drivers and dynamics of inflation in the euro area, as well as the ECB's inflation target and its implications for monetary policy. He is also likely to discuss the challenges and opportunities for monetary policy in a low interest rate environment.US – US retail sales and industrial production data for September will be out today. They are likely to show a slowdown in economic momentum in Q3, which could imply weaker growth in Q4. Fed's Barkin is scheduled to speak today on the economic outlook at the Greater Richmond Convention Center. He is expected to discuss the recent inflation developments and the Fed's policy stance. He will also reflect on the monetary policy and the economy in 2022 and share his thoughts on what’s ahead.FX Positioning & Sentiment FX option implied volatility measures the expected FX volatility/risk in the future. It spiked on Friday and Monday, reaching the recent highs for the 1-month expiry, as the Middle East conflict intensified. However, it has started to ease as the safe-haven currencies (USD, CHF and JPY) stopped rising and the FX market stabilised. The demand for call options on these currencies has also declined. Still, the implied volatility may remain high while the situation in the Middle East is unresolved. The US retail sales and the UK CPI data may also create some FX volatility in the short term. The 2-month expiry options are more focused on the central bank announcements in December, especially for USD/JPY, which has been very volatile lately.CFTC Data As Of 4-10-23The US Dollar Index ($IDX) declined by 1.2% in this period. The Euro (EUR/$) appreciated by 1.36% during the same period, leading to a reduction of -3,411 contracts in speculative positions. The total net long positions now amount to +75,532.The Japanese Yen (JPY/$) saw a minor decrease of -0.22%, resulting in an increase of +14,512 contracts in speculative positions. The total net short positions now stand at -99,476, and the pair is close to the key 150 level.The British Pound (GBP/$) strengthened by 1.75%, but speculative positions reduced by -3,368 contracts, mainly due to a dovish Bank of England.The Australian Dollar (AUD/$) gained 2% in the same period, with speculative positions increasing by +5,410 contracts, totaling -76,577. The AUD has been lower since Tuesday.Bitcoin (BTC) saw a modest increase of 0.04%, and speculative positions grew by +95 contracts, reaching +1,151. The expectation of ETF approval supports BTC.It's worth noting that the USD has rallied on a more hawkish Federal Reserve outlook since the period ended, and SOFR red contracts suggest an expectation of higher rates for a longer duration. (Source Reuters)FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0500 (1.3BLN), 1.0525 (807M), 1.0600 (8090M), 1.0665-80 (1.5BLN)USD/CHF: 0.8965 (690M), 0.9055 (493M). AUD/USD: 0.6325 (222M)GBP/USD: 1.2040 (932M), 1.2250-65 (550M), 1.2400 (1BLN), 1.2430-40 (935M)NZD/USD: 0.5910 (282M), 0.6000 (409M). USD/CAD: 1.3505 (1.BLN)USD/JPY: 148.00-10 (1.5BLN), 148.40 (320M), 148.65 (520M)150.00 (1BLN), 150.25 (505M)Overnight Newswire Updates of NoteThe RBA expresses low tolerance for persistent inflationPresident Biden's visit to Israel is on the horizon as efforts to open the Gaza crossing face obstaclesIsrael readies for a potential ground offensive as Gaza faces shortages of food and waterFed's Harker attributes rising home prices to higher interest ratesECB's Lane commits to maintaining high-interest rates for as long as necessaryThe ECB closely monitors oil prices for potential inflation risks, as conveyed by Lagarde to ministersThe UK's increasing interest payments leave minimal room for tax cuts, warns a think-tankLong-end Treasury securities experience their most significant fluctuations since the onset of the 2020 pandemicBlackRock adjusts its perspective on Treasuries after a substantial yield increaseQatar explores opportunities to secure LNG buyers amid energy supply concerns in EuropeRio Tinto reports a year-on-year increase in Q3 aluminium and copper outputAutomakers criticise the US plan to raise fuel efficiency regulationsVolkswagen's cost-cutting plan falls behind schedule for the brandThe EU intends to tighten rules governing airline mergers(Sourced from Bloomberg, Reuters and other reliable financial news outlets)Technical & Trade ViewsSP500 Bias: Bullish Above Bearish Below 4350Below 4300 opens 4270Primary resistance  is 4450Primary objective is 444620 Day VWAP bullish, 5 Day VWAP bullishEURUSD Bias: Bullish Above Bearish Below 1.06Below 1.0520 opens 1.0480Primary support is 1.05Primary objective is 1.068020 Day VWAP bearish, 5 Day VWAP bullishGBPUSD Bias: Bullish Above Bearish Below 1.22Below 1.22 opens 1.21Primary resistance  is 1.2410Primary objective 1.232020 Day VWAP bearish, 5 Day VWAP bearishUSDJPY Bias: Bullish Above Bearish Below 149.25Below 149 opens 148.50Primary support 144.50Primary objective is 150.2020 Day VWAP bullish, 5 Day VWAP bullishAUDUSD Bias: Bullish Above Bearish Below .6400Above .6475 opens .6525Primary resistance  is .6620Primary objective is .627020 Day VWAP bearish, 5 Day VWAP bullishBTCUSD Bias: Bullish Above Bearish below 27500 – 30k Target Hit New Pattern In PlayBelow 27100 opens 26500Primary support  is 26500Primary objective is 3120020 Day VWAP bullish, 5 Day VWAP bullish