Daily Market Outlook, December 16, 2024 

Munnelly’s Macro Minute...

"China Data Disappoints As Consumers Display Constraint”

China has started the week with underwhelming data, as November retail sales grew by just 3.0% year-on-year, missing the expected 4.6% growth. House prices continued their decline, while industrial output remained stable. Officials have been considering stimulus options, such as lowering bank reserve requirements; however, credit data suggests lower borrowing costs aren't effective amid a lack of investment interest. Consequently, Chinese bond yields hit another record low, prompting the central bank to consult with commercial banks on their positions. The yuan is also facing pressure, as 10-year yields underwent their largest weekly drop since 2018, coinciding with a notable rise in longer-dated Treasury yields this year. There are discussions about Beijing potentially letting the yuan depreciate to bolster the economy, but this has drawn criticism from President-elect Donald Trump's trade advisor, Peter Navarro. In South Korea, political stability has improved with Han Duck-soo temporarily replacing the impeached President Yoon Suk Yeol. Meanwhile, the Constitutional Court has started reviewing the impeachment case, with up to six months to decide whether to remove or reinstate Yoon. This pledge of stability has kept the KOSPI steady.

Attention is now focused on the Federal Reserve meeting on Wednesday. Considering market expectations, with 24 basis points already factored in, it may be wise to approach the December FOMC with some caution. Since the November meeting, demand data from the US has been consistently strong, and there has been a notable increase in firms' expectations following the election. This bodes well for both hiring and investment. On the other hand, inflation data has been somewhat disappointing, indicating that the disinflation trend observed earlier in the year has stalled. While there may be some seasonal adjustment issues contributing to this, the trend is evident across consumer, producer, and the Fed's preferred PCE price measures. There is insufficient evidence to suggest a decline in the price outlook, and mid-term forecasts should still allow the Fed to consider rate cuts this month. Powell still perceives policy as restrictive, but this should be coupled with a clear inclination towards a more gradual approach moving forward. Therefore, we anticipate a hawkish cut to conclude the year, along with stronger growth forecasts and an upward adjustment of the neutral rate in the Summary of Economic Projections. This should help moderate expectations for further easing throughout next year, which appear overly optimistic or unnecessary based on the current macroeconomic data.

Overnight Newswire Updates of Note

  • Economists Trim Fed Cut Estimates On Fear Of Trump Inflation Surge

  • Dollar’s Trump-Fueled Gains Face A Reality Check Late Next Year

  • Moody’s Downgrades France’s Credit Rating Over Political Turmoil

  • German Bonds Set For Another Strong Year, Economy Woes Deepen

  • German’s Scholz To Lose Confidence Vote, Putin Spins In Phone-In

  • London Stock Exchange Suffers Biggest Exodus Since Financial Crisis

  • China's Key Economic Gauges Slowed In November Despite Stimulus

  • NZ Economists Expect Nil Growth In 2024 - 2025

  • Big Oil Wants To Help Big Tech Power Artificial Intelligence Data Centers

          (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: 1.0450 (1.3BLN), 1.0470 (514M), 1.0500 (3.4BLN), 1.0530 (1.1BLN)

  • 1.0550 (2.2BLN),1.0570-80 (3BLN), 1.0600 (7.8BLN)

  • USD/CHF: 0.8800 (1BLN), 0.8900-05 (365M), 0.8950 (255M)

  • USD/NOK: 11.20 (450M)

  • EUR/GBP: 0.8300 (487M), 0.8320-25 (783M)

  • GBP/USD: 1.2625 (485M), 1.2700 (291M)

  • AUD/USD: 0.6350 (886M), 0.6400 (300M)

  • AUD/NZD: 1.1050 (1BLN), 1.1100 (1.3BLN)

  • NZD/USD: 0.5855-60 (940M). USD/CAD: 1.4300 (900M)

  • USD/JPY: 153.00 (971M), 154.00 (325M), 155.00 (545M)

CFTC Data As Of 13/12/24

  • Equity fund managers cut S&P 500 CME net long position by 10,616 contracts to 1.086,295

  • Equity fund speculators trim S&P 500 CME net short position by 61,936 contracts to 308,395

  • Speculators trim CBOT US 10-year Treasury futures net short position by 16,185 contracts to 875,716

  • Speculators trim CBOT US 5-year Treasury futures net short position by 70,670 contracts to 1,790,430

  • Speculators increase CBOT US 2-year Treasury futures net short position by 52,025 contracts to 1,254,924

  • Japanese yen net long position is 25,752 contracts

  • Swiss franc posts net short position of -34,992 contracts

  • British pound net long position is 27,125

  • Euro net short position is -75,573 contracts

  • Bitcoin net short position is -720 contracts

Technical & Trade Views

SP500 Bullish Above Bearish Below 6000

  • Daily VWAP bearish

  • Weekly VWAP bullish

  • Below 5990 opens 5930

  • Primary support 5795

  • Primary objective 6200

EURUSD Bullish Above Bearish Below 1.0450

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Above 1.0590 opens 1.0728

  • Primary resistance 1.0950

  • Primary objective 1.0728

GBPUSD Bullish Above Bearish Below 1.26

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Above 1.2760 opens 1.2859

  • Primary resistance 1.3050

  • Primary objective 1.2859

USDJPY Bullish Above Bearish Below 154

  • Daily VWAP bullish

  • Weekly VWAP bearish

  • Below 150 opens 148

  • Primary support 150

  • Primary objective is 157.50

XAUUSD Bullish Above Bearish Below 2600

  • Daily VWAP bearish

  • Weekly VWAP bearish

  • Below 2530 opens 2467

  • Primary support 2530

  • Primary objective is 2800

BTCUSD Bullish Above Bearish Below 92000

  • Daily VWAP bullish

  • Weekly VWAP bullish

  • Below 91000 opens 87500

  • Primary support is 85000

Primary objective is 100,000 TARGET HIT NEW PATTERN EMERGING