Daily Market Outlook, November 27, 2024

Munnelly’s Macro Minute...

"Markets Await Pre-Holiday Data Dump Stateside”

Asian stock markets displayed a mixed performance on Wednesday, mirroring the generally optimistic signals from Wall Street overnight. Investors are exercising caution in anticipation of a key U.S. inflation report, the upcoming Thanksgiving holiday in the U.S., and the ongoing uncertainty regarding Trump's tariff proposals. The announcement of a U.S.-brokered ceasefire agreement between Israel and Lebanon's Hezbollah has elicited a favourable response from the markets. China investors appear to be relieved that the threat of additional 10% tariffs on Chinese products is not the 60% levy that Trump campaigned on. They are confident that Beijing will increase stimulus to address any impact on trade. While the Yuan, Mexican peso, and Canadian dollar are still at or near multi-month or multi-year lows, the market consensus is that the tariff threats are likely a bargaining tactic and may not be implemented in January. Japan's Nikkei index underperformed on Wednesday, declining 0.9%. The automotive sector was the worst-performing industry group on the Tokyo Stock Exchange, dropping more than 3% as both the threat of tariffs and the impact of a stronger yen weighed on the profit outlook.

The FOMC minutes from November 6-7 appeared more dated than normal due to the market's forward-looking attention on the ramifications of Trump's election triumph. Nonetheless, there were at least a few important lessons learnt. Initially, participants perceived "the risk of an excessive cooling in the labour market as having lessened significantly" in relation to the labour market. This was supported by the employment component of yesterday's Consumer Confidence survey, which showed a second-month increase in "jobs plentiful minus jobs hard to get". Second, the Committee once again highlighted uncertainty over the "level of the neutral rate of interest" in order to signal a gradual approach to rate decreases and, presumably, to some extent, capture political issues without having to mention them directly. Be prepared for another upward revision in December, which will support the message of a shallow path of rate decreases since the estimate of the longer-run Fed Funds rate was still only 2.9% in the September "dot plot." Upside inflation risks were characterised as "little changed," but today that aspect of the tale is going to be called into question. It will be difficult to reconcile the October core PCE deflator's predicted 2.8% year-over-year increase with the September Fed's 2.6% forecast for Q4 overall.

The October PCE report will be released later today. Expect headline PCE to climb 0.2% m/m, or 2.3% y/y vs. 2.1% in September. Core prices to climb 0.3% m/m and 2.8% y/y from 2.7%. Both metrics are above the inflation objective, and core PCE would exceed the 2.6% Fed forecast in the latest Summary of Economic Projections for this year. That may be the Q4/Q4 change, so there is more wood to chop, but base effects suggest that core PCE will overshoot that forecast. Disinflation appears to have stopped according to recent forecasts. That would match market estimates that the Fed will suspend its easing cycle in December (only 40% probability of another 25bps drop). However, markets believe the Fed still views policy settings as too restrictive, and next year would be a better time to assess the outlook, supported by the FOMC's assumptions revisions at the December meeting and before Trump's inauguration. Trading activity is expected to decrease further as Thursday marks the beginning of a four-day Thanksgiving weekend for many in the United States.

Overnight Newswire Updates of Note

BoE’s Lombardelli: More Evidence Needed Before Next Cut
French Premier Warns Of Market ‘Storm’ If Budget Voted Down
Fed Consider Reverse-Repo Rate Cut To Control Benchmark
US Biden; Israel-Hezbollah Ceasefire Takes Effect On Wed
Oil Stabilizes Before OPEC+ Meeting As Cease-fire Cuts Risks
China Seeks Global Supply Chain Coop Amid Tariff Threats
China’s Industrial Profits 10% Fall In Oct; Deflation Linger
Australia CPI Lower Than Expected As RBA Set To Stand Pat
Aussie Treasurer Chalmers’ Hidden Spending Boom To Top $87B
New Zealand Cuts Rates By 50bps, Flags Further Easing
AUD/NZD Dives To Weely Low, After RBNZ’s Expected 50bps Cut
S. Korea Eyes $10B In Support For Chipmakers In 2025
Dell Shares Fall On Light Forecast Despite Growing AI Sales
HP Gives Lackluster Profit Outlook on Slow PC Market Recovery

(Sourced from reliable financial news outlets)

FX Options Expiries For 10am New York Cut

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

EUR/USD: 1.0400-10 (3.8BLN), 1.0450-60 (2BLN) 1.0475 (1.5BLN)
1.0485-90 (1.6BLN), 1.0500 (4.9BLN), 1.0525 (610M), 1.0550 (806M)
USD/CHF: 0.8900 (420M)
GBP/USD: 1.2500 (346M), 1.2600 (859M), 1.263.(300M), 1.2725 (278M)
EUR/GBP: 0.8320 (300), 0.8405-10 (793M)
EUR/NOK: 11.8300 (372M). EUR/SEK: 11.50 (513M)
AUD/USD: 0.6490 (440M), 0.6505 (200M), 0.6525 (280M), 0.6570-80 (864M)
NZD/USD:0.5835-40 (628M), 0.5865 (650M)
AUD/NZD: 1.1000 (444M), 1.1050 (247M)
AUD/JPY: 99.00 (225M). EUR/JPY: 15985 (296M)
USD/CAD: 1.4020 (352M), 1.4050-55 (486M), 1.4075-80 (451M), 1.4100 (228M)
USD/JPY: 151.00 (843M), 152.50 (1.1BLN), 153.00 (3BLN), 153.50-60 (757M)

FOR AN OVERVIEW OF FX MONTH END REBALANCING MODELS CLICK HERE

CFTC Data As Of 22/11/24

Equity fund managers raise S&P 500 CME net long position by 60 contracts to 1,079,539
Equity fund speculators trim S&P 500 CME net short position by 29,885 contracts to 258,924
Euro net short position is -42,557 contracts
Japanese yen net short position is -46,868 contracts
Swiss franc posts net short position of -37,071
British pound net long position is 40,315
Bitcoin net short position is -2,084 contracts
Speculators trim CBOT US Treasury bonds futures net short position by 6,123 contracts to 35,645
Speculators increase CBOT US 10-year Treasury futures net short position by 91,701 contracts to 907,502
Speculators increase CBOT US 5-year Treasury futures net short position by 113,816 contracts to 1,983,026
Speculators increase CBOT US 2-year Treasury futures net short position by 23,473 contracts to 1,447,344

Technical & Trade Views

SP500 Bullish Above Bearish Below 5990

Daily VWAP bullish
Weekly VWAP bullish
Below 5990 opens 5800
Primary support 5795
Primary objective 6100

EURUSD Bullish Above Bearish Below 1.05

Daily VWAP bullish
Weekly VWAP bearish
Above 1.05 opens 1.07
Primary resistance 1.0950
Primary objective 1.0380 - TARGET HIT NEW PATTERN EMERGING

GBPUSD Bullish Above Bearish Below 1.2750

Daily VWAP bullish
Weekly VWAP bearish
Above 1.26 opens 1.2750
Primary resistance 1.3050
Primary objective 1.25 - TARGET HIT NEW PATTERN EMERGING

USDJPY Bullish Above Bearish Below 154

Daily VWAP bearish
Weekly VWAP bearish
Below 150 opens 148
Primary support 150
Primary objective is 157.50

XAUUSD Bullish Above Bearish Below 2600

Daily VWAP bullish
Weekly VWAP bullish
Below 2530 opens 2467
Primary support 2530
Primary objective is 2800

BTCUSD Bullish Above Bearish Below 92000

Daily VWAP bearish
Weekly VWAP bullish
Below 91000 opens 87500
Primary support is 85000
Primary objective is 100,000