Daily Market Outlook, November 6, 2023

Daily Market Outlook, November 6, 2023Munnelly’s Market Commentary… Asia –  stocks traded higher across the board, benefiting from post-NFP momentum from Wall Street on Friday. Additionally, South Korea's announcement of a short-selling ban provided a significant boost, causing the KOSPI index to surge by up to 4% at one point. The Nikkei 225 comfortably maintained levels above 32,500, reaching heights last observed at the end of September. The gains were primarily led by the industrial sectors, and there were upward revisions in the Final PMI figures from the Preliminary data. Both the Hang Seng and Shanghai Composite joined the broader regional gains, supported by weekend statements from the Chinese Premier, who mentioned China's forthcoming plan to promote high-standard institutional opening in the Shanghai Free Trade Zone. China's Finance Minister also expressed the intention to accelerate the issuance and utilisation of government bonds. Traders are keeping a close watch on the upcoming Chinese Trade Balance data scheduled for release tomorrow. China's October data takes the spotlight following the resurgence of doubts about the economic recovery spurred by weak PMIs last week. The upcoming trade data, scheduled for Tuesday, is anticipated to reveal reduced declines in both exports and imports, potentially signalling an improved global trade environment. Furthermore, close attention will be paid to the CPI (Consumer Price Index) and PPI (Producer Price Index) data, as they might indicate a reduction in deflationary pressures, offering relief from concerns about an impending economic slowdownEurope – The Bank of England's Monetary Policy Committee (MPC) recently cast its votes, and a 6-3 majority decided to maintain the current interest rates. However, the forecasts and policy signals indicated that the next rate adjustment is more likely to be a reduction rather than an increase. Despite this, the MPC emphasised that such a rate cut was still a considerable time away, and they intend to keep interest rates at a restrictive level for an extended period. Governor Bailey stated that it's "much too early to be thinking about rate cuts." The decision to hold interest rates steady is partly due to ongoing signs of economic slowdown, both in the UK and across the Eurozone. In the Eurozone, PMI survey data suggests that manufacturing activity remained sluggish at the beginning of Q4, and today's final reading of the October services PMI will likely confirm a third consecutive month of contraction. In the UK, the construction Purchasing Managers' Index (PMI) for October is due for release this morning, in September, the headline measure dipped below the critical 50 level for the first time in three months, registering 45.0, indicating that the sector's activity was declining at its fastest pace since May 2020. The report's new orders component will be of particular interest as it can provide insights into the future outlook for the sector. Additionally, there are scheduled speeches by ECB's Guindos, Nagel, and BoE's PillUS – Stateside, The US Federal Reserve, in its recent policy meeting, decided to keep interest rates unchanged. Although this decision was widely expected, it provided further reassurance to the markets that US interest rates might have reached their peak. Of particular note was Federal Reserve Chair Powell's observation that the earlier increase in Treasury bond yields had tightened financial conditions. He also emphasised that the rate-setting committee is proceeding with caution. Ahead of the Fed's update, bond yields had already started to decline, influenced by some weak economic data, such as the drop in the ISM manufacturing report. The trend of falling yields was further solidified at the end of the week following a disappointing US labour market report. This report revealed that nonfarm payrolls increased by 150,000, falling short of the consensus expectation of 180,000. Additionally, the unemployment rate rose to 3.9%. The U.S. economic calendar is notably subdued following a week filled with significant events, including the FOMC meeting and the release of U.S. non-farm payrolls. The noteworthy data for the week includes weekly jobless claims, international trade figures, and the release of the University of Michigan's November consumer sentiment. However, the most anticipated event will be Fed Chair Powell's speech on an IMF policy panel scheduled for November 9. Investors will closely watch this speech to discern whether Powell aligns with the interpretation of last week's FOMC decision as a 'dovish hold.'FX Positioning & Sentiment The USD/CNY fix is under close observation, as it may indicate whether the People's Bank of China (PBOC) is willing to allow more movement in the exchange rate. The estimated neutral fix is at 7.2744, particularly after the significant plunge in the US Dollar (DXY). There is a possibility that the PBOC might permit the fix to shift more as the US Dollar weakens. Consequently, the actual fix could edge up from its current position at 7.1800 closer to the neutral estimate. If the USD selloff persists, there could be a convergence between the actual fix and the estimated rate. The recent sharp drop in the US Dollar was triggered by below-forecast US Non-Farm Payrolls (NFP) data, further reinforcing the belief that the Federal Reserve is unlikely to pursue further interest rate hikes.CFTC Data As Of 3-11-23EUR net spec long 85,389 contracts vs 85,253 the previous weekJPY net spec short 103,848 contracts vs 99,629GBP short 20,371 vs 18,636AUD short 75,110 vs 83,081CAD short 49,332 vs 48,639 Source (Reuters)FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0600 (1BLN), 1.0625 (730M), 1.0675 (334M), 1.0700 (800M)1.0725 (580M), 1.0740-50 (356M), 1.0780-85 (1BLN). USD/CHF: 0.8900 (400M)GBP/USD: 1.2280 (532M), 1.2375 (329M)AUD/USD: 0.6400 (1.2BLN) NZD/USD: 0.5870 (305M), 0.5925 (253M)AUD/NZD: 1.0795-1.0800 (481M)USD/JPY: 149.00 (260M), 149.50 (412M), 150.00 (1.2BLN), 150.50 (950M)Overnight Newswire Updates of NoteBarclays Sees Fed Hiking Rate 25Bps In January Rather Than DecemberHouse GOP Pushing Ahead With Stopgap Funding Plan, Johnson SaysTrump Leads In 2024 Polls As Fears Over War And Economy Hurt BidenLagarde Says ECB Will Get Inflation Down To 2% Target In 2025BoJ’s Ueda Reiterates Gradual Progress Toward Price Goal SeenBoJ Members Saw No Need For New YCC Tweaks In Sept MinutesRBA’s Gov Bullock Set For First Rate Hike As Inflation LingersMelbourne Inst. Inflation Gauge Throws Spanner Into RBA MachineryPentagon Confirms Presence Of Ohio-Class Submarine In Middle EastIran Says US Will Be ‘Hit Hard’ If It Doesn’t Secure Cease-Fire In GazaIsraeli PM Reprimands Minister Over Gaza ‘Nuclear Option’ CommentOil Edges Higher After Saudis And Russians Reaffirm Supply CutsAsia Shares Rise As Markets Look For Early Rate CutsBig Tech’s Growth Status In Doubt With Weaker Sales OutlooksiPhone Maker Foxconn’s Sales Decline As China Begins ProbeWestpac Launches A$1.5Bln Buyback As Profit Jumps 26%(Sourced from Bloomberg, Reuters and other reliable financial news outlets)Technical & Trade ViewsSP500 Bias: Bullish Above Bearish Below 4320Below 4310 opens 4285Primary support 4200Primary objective is 440020 Day VWAP bearish, 5 Day VWAP bullishEURUSD Bias: Bullish Above Bearish Below 1.07Below 1.07 opens 1.0650Primary support 1.06Primary objective is 1.076020 Day VWAP bearish, 5 Day VWAP bullishGBPUSD Bias: Bullish Above Bearish Below 1.23Below 1.23 opens 1.2250Primary support  is 1.2069Primary objective 1.245020 Day VWAP bearish, 5 Day VWAP bullishUSDJPY Bias: Bullish Above Bearish Below 150Below 149 opens 148.30Primary support 147.30Primary objective is 152.5020 Day VWAP bullish, 5 Day VWAP bullishAUDUSD Bias: Bullish Above Bearish Below .6450Above .6475 opens .6525Primary support .6380Primary objective is .662020 Day VWAP bearish, 5 Day VWAP bullishBTCUSD Bias: Bullish Above Bearish below 32000Below 27100 opens 26500Primary support  is 30000Primary objective is 3700020 Day VWAP bullish, 5 Day VWAP bullish