Daily Market Outlook, August 18, 2023

Daily Market Outlook, August 18, 2023Munnelly’s Market Commentary… Asian equity markets traded on the back foot, following the downward trajectory observed in both US and European markets the previous day. Asian stocks, as measured by an index, have now experienced a continuous decline for six consecutive sessions. This trend is shaping up to result in the poorest weekly performance in the past eight weeks. The driving forces behind these market movements include persistent concerns about the situation in China and apprehensions that global interest rates might remain elevated for an extended period. In Japan, the annual Consumer Price Index (CPI) inflation for July has remained steady at 3.3%, maintaining the same level as observed in June. Moreover, when excluding the impact of fresh food and energy prices, inflation rose from 4.2% in June to 4.3% in July. This increase could potentially bolster the argument for a shift in Japan's policy of ultra-loose monetary measures.Today's economic data docket is relatively light. The second reading of the Eurozone Consumer Price Index (CPI) for July is not anticipated to deviate from its initial estimate. The initial estimate indicated an annual headline inflation rate of 5.3%, a decrease from June's 5.5%. However, this is only half of the peak inflation rate of 10.6% observed in the recent past, which occurred in October. Meanwhile, core inflation, excluding certain volatile components, remained unchanged at 5.5% compared to June.  These inflation figures continue to significantly surpass the European Central Bank's target of 2.0% inflation. This reinforces market expectations that the ECB might implement another interest rate hike in the upcoming month. Even if there are minor revisions to today's data, their impact on the markets is expected to be limited. Market attention is now primarily directed toward the forthcoming August flash CPI release, scheduled for August 31, just two weeks before the ECB policy update. The day's only other notable data release pertains to Eurozone construction output. While not generally considered a significant market influencer, it remains of interest due to its sensitivity to interest rate changes. It serves as an indicator of whether increasing rates are beginning to have an impact. The previous reading for May displayed a marginal annual increase of 0.1%.Looking ahead to the coming week, a quiet start is anticipated. Early on Monday, the UK Rightmove house price index for August will be released. In the previous reading for July, there was a decline of 0.2%, with only a 0.5% increase compared to the previous year. Given the prevailing trend in interest rates, there might not be much improvement in this month's news either.. FX Positioning & Sentiment The MSCI world equity index has fallen below the 100-day moving average (DMA) at 669. This bearish breakdown suggests a more substantial correction for the upward movement seen from March to July. The next target on the downside is 657, marking a 50% retracement of the March to July ascent. Simultaneously, Bitcoin has experienced a decline, closing below the 200-day moving average, and subsequently trading within a range well below that level. A decisive close below 26,422 is likely to trigger more extensive losses, potentially revisiting the low recorded in June. As this risk-averse sentiment takes hold, foreign exchange (FX) traders might find encouragement to make parity bets. The prevailing market sentiment seems to favour short positions on the USD and JPY, while holding long positions on EUR, GBP, and MXN as the most significant positions being taken.CFTC Data As Of 15-08-23EUR$ -0.47% in Aug 9-15 period hints at further reduction in EUR longEUR specs have sold 27k contracts last 2-wks as Fed seen high-for-longer$JPY +1.55% in period; pair hits new 2023 high amid steady BoJ viewFri's data will hint at degree of intervention fear as yen approaches 150GBP$ -0.36% in period, support at rising daily cloud baseWell-above target UK inflation to keep BoE hiking, even as Fed haltsAUD$ -1.29%, $CAD +0.59%; China econ woes weigh on commod-centic pairsBTC -2.7% in period; higher rate view capping BTC gains even as more fin'l firm seek to gain ETF approvals (Source: Reuters)FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0850 (1.4B), 1.0900 (1.7B), 1.0925 (700M), 1.0950 (515M)EUR/USD: 1.1000 (1.1B). GBP/USD: 1.2500 (450M), 1.2600 (435M)GBP/USD: 1.2675 (370M), 1.2785 (445M), 1.2975 (580M)USD/JPY: 142.00 (530M), 142.50 (530M), 143.00 (1.2B), 145.00 (1.3B)USD/CAD: 1.3100 (1.2B), 1.3550 (590M), 1.3600 (480M)EUR/NOK: 11.20 (950M), 11.50 (1.5B).Overnight Newswire Updates of NotePowell To Speak Aug. 25 At Jackson Hole Economic SymposiumJapan's Core Inflation Eases, Bolstering View BoJ Will Stand PatRBNZ’s Silk Sees Housing Recovery As Reason To Keep Rates HighDollar Set For Fifth Winning Week On Fed Bets, PBoC Supports YuanChina Targets Yuan Bears With Most Forceful Fixing Guidance EverBofA’s Warning Of A ‘5% World’ Sinks In With Yields Pushing HigherSEC Set To Greenlight Ether-Futures ETFs In Win For Crypto IndustryOil Set To Snap 7-Week Winning Streak On China Woes, Fed Rate OutlookAsian Shares Head For Third Week Of Losses On China Woes, US RatesChina Evergrande Group Files Chapter 15 Bankruptcy In New YorkApplied Materials Gives Strong Forecast As Chip Slump EasesMeta’s Next AI Attack On OpenAI: Free Code-Generating SoftwareUS Hedge Funds Snap Up Nvidia, AMD While Exiting Google, AlibabaGoldman Plans Hiring Spree To Fix Lapses After Increased Fed Scrutiny(Sourced from Bloomberg, Reuters and other reliable financial news outlets)Technical & Trade ViewsSP500 Intraday Bullish Above Bearish Below 4400 – 4380 Target Hit, New Pattern EmergingAbove 4410 opens 4440Primary resistance  is 4510Primary objective is 433520 Day VWAP bearish, 5 Day VWAP bearishEURUSD Intraday Bullish Above Bearsih Below 1.10Below 1.890 opens 1.0830Primary support is 1.830Primary objective is 1.1320 Day VWAP bearish, 5 Day VWAP bearishGBPUSD: Intraday Bullish Above Bearish Below 1.28Below 1.2680 opens 1.2620Primary support  is 1.2590Primary objective 1.385020 Day VWAP bearish, 5 Day VWAP bullishUSDJPY Bullish Above Bearish Below 145Below 144.90 opens 143.90Primary support 141.90Primary objective is 147.2020 Day VWAP bullish, 5 Day VWAP bullishAUDUSD Intraday Bullish Above Bearish Below .6450Above .6500 opens .6600Primary resistance  is .6670Primary objective is .620020 Day VWAP bearish, 5 Day VWAP bearsihBTCUSD Intraday Bullish Above Bearish below 29300 -27000 Target Hit, New Pattern EmergingAbove 29000 opens 30000Primary resistance  is 28750Primary objective is 2475720 Day VWAP bearish, 5 Day VWAP bearish