Daily Market Outlook, May 4, 2023
As widely expected the US Federal Reserve raised interest rates by 25bps at their meeting last night, in his press conference the Fed Chief Powell was reticent about the notion of any Fed rate cuts into the back of the year, Powell’s rhetoric during the press conference certainly hinted towards a pause in rate rises with the standard caveat of ‘data dependency’, Powell went to great lengths to assuage concerns regarding the regional banking sector in the US, however, post the press conference markets took a dive on news that PacWest Bancorp is set to consider strategic options and or an asset sale, this led to all US benchmarks ending the day in the red with losses just shy of 1%.
Asian equity markets are trading with a mixed tone. The Nikkei remains closed and as participants returned from Golden Week holidays offshore and onshore Chinese indices managed to carve out gains even in the light of disappointing PMI data and further liquidity reduction via the PBOC.
European investors will now focus on the European Central Bank (ECB) who take centre stage this afternoon with their latest interest rate policy announcement and press conference. Data of late would imply that the the single currency zone has managed to side step a technical recession in the first quarter of this year and business activity surveys are suggesting a further uptick in activity into the second quarter, while inflation data has nudged higher again to 7% it remains shy off record 10.6% levels seen last October. This week's lending data also confirmed a tightening in credit conditions as loan demand continues to decline. Taking all this into account it would appear that the ECB will stick to their strategy of incremental rate rises, having raised by 350bps since last summer, markets sense a smaller increase this time out of 25bps, 50bps isnt off the table but implied pricing favours 25bps at this point. ECB Chief Lagarde's press conference will be parsed for clues as to the future glide path for rates, having previously ran the central bank mantra of ‘data dependency’ she also added that there was ‘a lot more ground to cover’ suggesting the ECB would remain anchored to their hawkish stance for the foreseeable future, this has led markets to price further action at the June meeting, however, at the beginning of this year the general tone from ECB officials was that summer would see a conclusion to this cycle, markets will be keen for an additional colour on this perspective.
FX Options Expiries For 10am New York Cut
(In bold represent larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0920-25 (851M), 1.0940-50 (3.58BLN)
1.0965-85 (1.57BLN), 1.1000 (1.34BLN), 1.1015 (301M)
1.1050-55 (757M), 1.1075 (1.32BLN), 1.1100 (1.19BLN)
USD/JPY: 133.00 (263M), 133.77-80 (418M), 135.00-05 (400M)
135.50 (276M). EUR/JPY: 148.75 (240M)
GBP/USD: 1.2480-00 (459M). AUD/USD: 0.6515-20 (355M)
0.6680 (257M), 0.6725-35 (535M), 0.6740-50 (438M)
NZD/USD: 0.6250 (230M)
USD/CAD: 1.3590 (560M), 1.3625-35 (1.39BLN), 1.3665 (284M)
USD/JPY: 135.50 (240M)
CFTC Data As Of 21/04/28
USD net spec short near unchanged in Apr 19-25 period, Yen sellers most active
EUR$ +0.02% in period specs +5,039 contracts now long 169,400
EUR long largest since mid-Oct '20, $-equivalent more than 2x other pairs
$JPY -0.26% in period, specs -11,875 contracts, short grows to 68,744
GBP$ -0.11% in period, specs +4,537, now +5,839 as BoE-Fed diverge on rates
CAD specs +2.4k short now 43,791, AUD specs +2,894 contracts now -39,462
BTC -8.02% in period, specs +196 contracts now short 293 (Source RTRS)
Overnight News of Note
Futures Slip After Fed Hikes Rates, Bank Contagion Fears Return
Fed Raises Rates, Opens Door To A Pause In Tightening Cycle
Asia Markets Nervous About Fed Pivot And Banking Sector
Bond Traders Double Down On Cut Bets As Hike Risk Dwindle
PacWest Considering Strategic Options, Includes Possible Sale
SEC Not Weighing Short-Selling Ban Over Banking Sector Fear
Biden Picks Fed’s Jefferson For Vice Chair, Kugler For Governor
WH Economists Say Debt-Limit Breach To Cost Millions Of Jobs
Treasury’s First Buyback Scheme In Decades To Boost Liquidity
Recession Odds ‘Pretty Darn High’ Right Now, Gundlach Warns
China Factories Struggle In Further Sign Of Economic Imbalance
ECB To Raise Interest Rates For A Seventh Time In Inflation Fight
Euro, ECB Poised To Add To Dollar’s Woes, Deutsche Bank Warns
Qualcomm Slides After Forecast Signal Phone Slump Will Drag On
(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
Technical & Trade Views
SP500 Bias: Intraday Bullish Above Bearish Below 4060
Below 4050 opens 4030
Primary support is 4000
Primary objective is 4207
20 Day VWAP bearish, 5 Day VWAP bearish
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EURUSD Bias: Intraday Bullish Above Bearish below 1.10
Below 1.0990 opens 1.0910
Primary support is 1.07
Primary objective is 1.1128
20 Day VWAP bullish, 5 Day VWAP bullish
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GBPUSD Bias: Intraday Bullish Above Bearish below 1.25
Below 1.2475 opens 1.24
Primary support is 1.2250
Primary objective 1.2659
20 Day VWAP bullish, 5 Day VWAP bullish
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USDJPY Bias: Intraday Bullish above Bearish Below 135
Below 134.90 opens 134
Primary support is 133
Primary objective is 138.80
20 Day VWAP bearish, 5 Day VWAP bullish
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AUDUSD Bias: Intraday Bullish Above Bearish below .6685
Below .6620 opens .6560
Primary support is .6620
Primary objective is .6750
20 Day VWAP bearish, 5 Day VWAP bullish
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BTCUSD Intraday Bias: Bullish Above Bearish below 29300
Primary resistance 30000
Primary objective is 26000
Below 26000 opens 25800
20 Day VWAP bullish, 5 Day VWAP bearish
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!