Daily Market Outlook, May 3, 2023
Banking sector concerns once again dominated the headlines on Wall Street as regional banks took the brunt of the selling as the regional bank ETF closed out the day down over six percent. Asian equity investors took their lead from Wall Street's negativity as they mostly traded in the red this morning, this comes ahead of a widely expected interest rate increase from the FOMC this evening.
The European econ data docket is pretty scant this morning. The only data point of note will be the Eurozone unemployment rate which is expected to print circa 6.5% which is the final input prior to tomorrow’s European Central Bank rate decision.
Stateside, as mentioned the focus is squarely on this evening FOMC rate decision, however, ahead of the headline event, investors will get some insight into the employment landscape ahead of Friday’s Non Farm payrolls release, ADP employment data due this afternoon is expected to show a small uptick from 145k last month to circa 150k for April. US ISM services data is also due this afternoon with the March reading declining sharply to 51.2, investors will monitor the release as it teeters on the edge of the pivotal 50 level suggesting contraction below and expansion above, a print sub 50 today would heighten the sense of a recessionary environment in the US.
US investors will then brace for the Fed announcement, markets are currently pricing an 85% probability of a 25bps move today, the hope for equity bulls is that this move maybe the final rate increase in this cycle, recent rhetoric from Fed officials has encouraged this view, the first confirmation may come from the removal of certain references in the press statement, investors will parse the statement for a change of focus from the likelihood of additional hikes to a focus on future action becoming data dependant, this would provide the Fed with more optionality for another move should conditions meaningfully tighten, but the market implication of this change in focus would be a higher probability of rate stability, a plateau if not a pause, certainly it seems a stretch target at this juncture for the Fed to reference any potential rate cuts.
FX Options Expiries For 10am New York Cut
(In bold represent larger expiries, more magnetic when trading within daily ATR)
EUR/USD: 1.0885 (348M), 1.0910 (245M), 1.0950 (390M)
1.0995-1.1000 (762M), 1.1030-40 (718M), 1.1100 (833M)
1.1115 (319M)
USD/JPY: 136.00 (260M), 136.70-80 (788M)
GBP/USD: 1.2325 (250M), 1.2600-05 (355M)
USD/CHF: 0.8940 (251M):
EUR/CHF: 1.0100 (461M)
AUD/USD: 0.6650 (464M), 0.6675-80 (697M)
NZD/USD: 0.6325 (200M)
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
Fed Set To Hike Rates To 16-Year High And Debate A Pause
US Futures Fall Slightly As Traders Look Ahead To Fed Decision
Asian Stocks Decrease Into Fed Mode, Shorts Stalk Banks
WH: Fed Interest Rates Having Negative Effects On Banking
Failed Bank Executives, Regulators To Testify Before Senate
US Short-Term Fix Looks Likely As Debt-Limit Deadline Near
House Democrats Attempt To Force Votes Over Debt Ceiling
Australia’s March Retail Sales Gain Driven By Food Inflation
New Zealand Jobless Rate Hold Steady, Wage Inflation Rise
Morgan Stanley Pick Bonds Over Stocks On Recession Risk
Wall Street Rattled By Selloff, Two Small Banks Trading Halt
Morgan Stanley In Talks To US Resolve Block Trade Probes
Ford Beat On First Quarter Profit, Warns Of Opaque Outlook
AMD Slide After Tepid Forecasts Demand Remains Sluggish
(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
Technical & Trade Views
SP500 Bias: Intraday Bullish Above Bearish Below 4080
Below 4070 opens 4050
Primary support is 4000
Primary objective is 4207
20 Day VWAP bearish, 5 Day VWAP bullish
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EURUSD Bias: Intraday Bullish Above Bearish below 1.0990
Primary support is 1.07
Primary objective is 1.1128
Below 1.0700 opens 1.0660
20 Day VWAP bullish, 5 Day VWAP bearish
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GBPUSD Bias: Intraday Bullish Above Bearish below 1.2410
Primary support is 1.2250
Primary objective 1.2659
Below 1.22 opens 1.2010
20 Day VWAP bullish, 5 Day VWAP bullish
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USDJPY Bias: Intraday Bullish above Bearish Below 135
Primary support is 134
Primary objective is 138.80
Below 134.90 opens 134
20 Day VWAP bearish, 5 Day VWAP bullish
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AUDUSD Bias: Intraday Bullish Above Bearish below .6685
Primary resistance is .6750
Primary objective is .6565
Above .6775 opens .6825
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!