Daily Market Outlook, January 22, 2024

Daily Market Outlook, January 22, 2024Munnelly’s Market Minute…“Hang Seng Sinks To GFC Levels”Asian stocks were mixed as Chinese stocks weakened, despite last week's record levels on Wall Street. Nikkei 225 rallied and broke above 36.5K handle ahead of tomorrow's BoJ announcement. Hang Seng and Shanghai Comp underperformed due to notable weakness in tech and property, with the Hang Seng Mainland Properties Index hitting a record low and trading back to levels not seen since 2009. Sentiment remained pressured in the mainland amid ongoing economic concerns, and the benchmark LPRs were kept unchanged, as expected. The BoJ is expected to maintain its current monetary policy THIS week, but investors are watching for any indications from Governor Ueda regarding the negative effects of negative rates, as this could signal a future change in policy. Additionally, Tokyo's CPI is likely to have decreased in January, which could further undermine the BoJ's confidence in achieving its 2% inflation target.In the UK, despite the unexpected increase in December CPI, it still fell 0.6 percentage points below the Bank of England's forecast in the November MPR. With pay growth continuing to slow down, this should be sufficient for all MPC members to contemplate maintaining current interest rates at the February meeting. The upcoming PMI, CBI, and consumer confidence surveys next week will offer the last update on the economy before the February meeting.The January ECB meeting on Thursday is not expected to bring any policy adjustments or announcements, but rather focus on reflecting on the upcoming year. ECB watchers are looking for the first rate cut to be moved from December to September, but there is high uncertainty, which means that no cuts this year is also a possibility. The Governing Council may discuss the first outcomes of the operational framework review, to be published later in the spring. This week, there will be a release of January business surveys. The PMIs, which are still at low levels, are expected to gradually recover, while the Ifo and INSEE are anticipated to weaken slightly.Stateside, the upcoming 31 January FOMC meeting is the next major event for financial markets. Before that, this week's 4Q GDP and PCE inflation measures are important to consider. GDP is expected to be more resilient than previously thought after the surge in 3Q, with an estimated 1.9% growth rate, in line with potential growth. Core inflation is slowing down, but confidence in reaching and maintaining 2% is not high enough to warrant near-term rate cuts.Overnight Newswire Updates of NoteRon DeSantis Drops Out Of 2024 Presidential Race, Endorses Donald TrumpTim Scott Endorses Donald Trump In Blow To Nikki HaleyChina Leaves Lending Benchmark LPRs Unchanged As ExpectedJapan’s Baseline Forecasts Show Government Missing Budget GoalJapan Premier Slips In Polls After Disbanding Tarnished FactionFed's Daly: Policy In A 'Good Place,' Risks 'Balanced'EU Tackles New $20 Bln Plan To Boost Ukraine Military AidAll Parts Of UK Hit By Economic Stagnation Since 2010, Says Think-TankNetanyahu Rejects Conditions For Hostage Release, After Hamas ReportLibya Restarts Production, Exports From Biggest Oil FieldTSMC To Launch Chipmaking Plant In Japan, But US Plant To Face DelaysADM Places CFO On Leave, Cuts Earnings Forecast Amid ProbeExxonMobil Sues To Block Shareholder Climate Petition(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 (535M), 1.0850 (578M), 1.0900 (252M), 1.0935 (274M)1.0975 (300M), 1.1000 (840M)USD/CHF: 0.8530 (350M), 0.8660-70 (435M)GBP/USD: 1.2650 (440M). EUR/GBP: 0.8600-15 (300M)AUD/USD: 0.6535 (800M), 0.6575-80 (1BLN), 0.6600-05 (819M)USD/CAD: 1.3450-60 (521M)USD/JPY: 147.45-50 (628M), 148.00-10 (1.3BLN), 148.50 (873M), 149.50 (687M)FX option implied volatility is declining due to lower levels drawing demand for protection against increased risk of realized FX volatility from interest rate divergence and a potential Trump election win. Buyers are seeking FX volatility protection after the March 30 U.S. Federal Reserve policy announcement, with options expiring after the November 5 U.S. election also seeing increased demand. Lower implied volatility means cheaper options, reflecting the lack of conviction within recent FX ranges. There is a growing risk of a USD/JPY setback, leading to a preference for owning downside strikes. Dealers also highlight the pending U.S./Japan rate divergence as a potential volatility risk.CFTC Data As Of 12/01/24USD bearish decreasing -9,298CAD bearish increasing -992EUR bullish decreasing 14,150GBP bullish increasing 2,443AUD bearish increasing -3,151NZD neutral neutral -177MXN bullish neutral 2,370CHF bearish neutral -542JPY bearish neutral -4,803Technical & Trade ViewsSP500 Bullish Above Bearish Below 4810 – 4830 Target Hit – New Pattern In PlayDaily VWAP bullishWeekly VWAP bullishBelow 4800 opens 4750Primary support 4700Primary objective is 4830EURUSD 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 bearishWeekly VWAP bearishAbove  43590 opens 46000Primary support  is 40000Primary objective is 36097