Daily Market Outlook, January 18, 2024

Daily Market Outlook, January 18, 2024Munnelly’s Market Minute…“ECB Minutes Eyed, Lagarde Speaks Later”Asian markets had mixed trading, with most markets showing negative trends after central bank rate cut expectations were reversed. The Nikkei 225 fluctuated between gains and losses, influenced by recent currency weakness and disappointing machinery orders. Japan is set to release the latest December Consumer Price Index (CPI) inflation data overnight. Expectations are for a moderation in the headline measure to 2.5% from November's 2.8%, while the core measure, excluding fresh food, is forecasted to decline to 2.3% from 2.5%. This data is likely to support the view that the Bank of Japan is in no hurry to depart from its ultra-easy policy settings. Hang Seng and Shanghai Composite indices had mixed performance, with the Hong Kong benchmark stabilizing after a significant drop yesterday, while the mainland index fell to its lowest level since 2020 due to recent data and disappointment over rate cuts before staging a late day recovery trade with gains of over 1% with market chatter suggesting potential official intervention was seen supporting the index.Market watchers are looking for a 1.0% decrease in the official retail sales data for December in the UK released tomorrow morning. The British Retail Consortium's recent figures suggest that retail spending during the festive period was restrained, partly due to the impact of wet weather on sales in October. The Bank of England predicts that the overall GDP growth for Q4 will be stagnant, which could help prevent a technical recession in the economy.Investors will closely examine the minutes of the latest European Central Bank (ECB) policy meeting held in December for insights into the potential next move on interest rates. The ECB maintained interest rates, including the deposit facility rate at 4%, for the second consecutive meeting, aligning with expectations that rates have likely reached their peak. While President Lagarde stated that the Governing Council did not discuss rate cuts, market speculation about the timing and extent of rate cuts in the coming year persists. Lagarde, speaking at the World Economic Forum in Davos today, hinted that policy could be eased by the summer.Stateside, economic data will shed further light on Q4 economic activity's strength. Housing starts are anticipated to decline after a robust increase in November, although overall Q4 GDP growth is expected to be solid. US survey indicators will also be monitored for early 2024 prospects. The NY Fed manufacturing survey for January, released earlier this week, showed weakness, but the Philadelphia Fed manufacturing survey today provides an alternative regional perspective. Additionally, Fed's Bostic is scheduled to speak twice today, the Atlanta Fed President, will speak on the economic outlook. He mentioned last week that rates should remain on hold until at least summer to prevent further price rises, with the first rate cut expected in Q3. He also previously stated that the current pace of balance sheet normalization was appropriate earlier in the year.Overnight Newswire Updates of NoteFed’s Beige Book Shows Robust Consumer, Cooling Labour MarketUS Treasury Team Set For Beijing Talks On Economic Co-OperationUS Unleashes Further Yemen Strikes While Houthi Strikes ContinueUBS Lifts China Growth Forecast To 4.6%, Sees Property StabilisingChinese Downplays Big Stimulus In 2024, Testing Investor PatiencePoll: BoJ Governor Remarks Douse Chance Of Policy Tweak In JanAustralia Dec Jobs Unexpectedly Slump, Boosting Rate-Cut WagersECB Interest Rate Cut Expectations In Q2 Grow Stronger, Poll SeesBruised PM Sunak Survives Key Vote On His UK Immigration PolicyRICS: Lower UK Mortgage Rates Ease Slowdown In Housing SectorSurging Debt Supply To Boost Global Yields, Goldman Sachs PositsBayer Set To Slash Manager Jobs In Effort To Exit ‘Difficult Situation’(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: 1.0850 (584M), 1.0880-85 (838M), 1.0915-20 (850M), 1.0950 (472M)1.0975 (1.2BLN), 1.0990 (853M)USD/CHF: 0.8600-05 (320M), 0.8720 (1.2BLN). EUR/CHF: 0.9400-15 (604M)GBP/USD: 1.2640-50 (485M), 1.2670-75 (420M)EUR/GBP: 0.8540-55 (446M), 0.8595-0.8600 (300M)AUD/USD: 0.6490 (548M), 0.6550 (363M), 0.6650 (1.1BLN), 0.6675 (587M)NZD/USD: 0.6050 (435M), 0.6160 (386M), 0.6200-05 (866M), 0.6280-90 (400M)USD/CAD: 1.3380-90 (1.2BLN), 1.3500 (373M)USD/JPY: 147.00 (1.5-BLN), 147.40-50 (500M), 148.00 (611M), 148.95 (436M)The price action in FX options signals a potential near term peak in the USD. The implied volatility in FX options increased alongside the USD this week, reaching new recovery highs after Fed's Waller made comments on Tuesday. When implied volatility is higher, it usually adds premium to standard options. However, it quickly decreased as the USD declined on Thursday. The implied volatility for the one-month expiry option returned to the lows seen on January 12th.CFTC Data As Of 12/01/24USD bearish increasing 12,192 CAD bearish decreasing -551 EUR bullish neutral 16,243 GBP bullish increasing 1,647 AUD bearish decreasing -2,158 NZD neutral neutral -110 MXN bullish neutral 2,606 CHF bearish neutral -644 JPY bearish neutral -4,841Technical & Trade ViewsSP500 Bullish Above Bearish Below 4750Daily VWAP bearishWeekly VWAP bullishBelow 4700 opens 4675Primary support 4670Primary objective is 4830EURUSD Bullish Above Bearish Below 1.0930 Daily VWAP bearishWeekly VWAP bearishAbove 1.10950 opens 1.10Primary resistance 1.10Primary objective is 1.0730GBPUSD Bullish Above Bearish Below 1.2750Daily VWAP bearishWeekly VWAP bullishAbove 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 14AUDUSD Bullish Above Bearish Below .6650Daily VWAP bearishWeekly VWAP bearishAbove .6680 opens .6550Primary support .6525Primary objective is .6933BTCUSD Bullish Above Bearish below 45200Daily VWAP bearishWeekly VWAP bullishBelow 45000 opens 44600Primary support  is 40000Primary objective is 50000