Daily Market Outlook, January 24, 2024

Daily Market Outlook, January 24, 2024Munnelly’s Market Minute…“China Restricts Short Selling & PBoC Cut RRR BY 0.5%”Asian markets traded with mixed results, influenced by the performance of Wall St, corporate earnings, and recent statements from the Bank of Japan. The Nikkei 225 was under pressure due to rising Japanese bond yields and a more assertive stance from BoJ Governor Ueda. The Hang Seng and Shanghai Composite indices also had mixed performance, with Hong Kong outperforming due to support measures from Chinese authorities, while the mainland market was volatile and briefly erased earlier gains after the People's Bank of China continued to reduce liquidity through open market operations, but later recovered slightly. According to sources, Chinese authorities have requested certain hedge funds to limit their short selling activities in the stock index futures market. PBoC will reduce its RRR by 0.5 percentage points starting from Feb 5th and will keep using liquidity injection tools. PBoC Governor mentioned that RRR levels are still relatively high and the cut is intended to release CNY 1 trillion into the economy.Recent PMI data in the UK has shown a relatively positive outlook on economic activity. The composite index indicated expansion for the second consecutive month in December, staying above the key 50 level. This was driven by a rapid increase in the services measure, reaching its highest level since June, and lifting the composite measure to its highest since June as well. Conversely, the manufacturing index declined in December and remains below the expansion/contraction threshold. For January, expect a slight decrease in the services index to 51.7 from 53.4, while the manufacturing index is predicted to rise to 47.8 from 46.2. This would crucially mean that the composite indicator once again signals overall expanding activity. The January CBI industrial survey, expected soon, is likely to echo recent trends, indicating ongoing pressure on the manufacturing sector.Ahead of the European Central Bank's monetary policy update on Thursday, the January Eurozone PMIs will provide timely insights into economic conditions. Unlike the UK, the Eurozone composite index remained below 50 in December for the seventh consecutive month. Although we expect both the manufacturing and services indices to show improvement in January, they are still projected to be below 50. However, the survey's forward-looking components may provide optimism for improvement throughout the year.Stateside, PMIs usually receive less attention, but given the current focus on clues regarding the timing of interest rate cuts, this might not be the case this time. The US composite index remained above 50 in December for the eleventh straight month, reaching a five-month high. We anticipate another reading above 50 in January.Overnight Newswire Updates of NoteTrump Defeats Haley; Biden Sweeps Democrats In New Hampshire PrimaryJapanese Exports Hit Record In 2023 On Weak YenNew Zealand Inflation Slows More Than RBNZ ExpectedJapan Keidanren Biz Lobby Head Aiming For Wage Hikes To Outpace InflChina Says EU’s ‘Unfair’ EV Subsidies Probe Risks Damaging TiesUS Stages Retaliatory Airstrikes Against Iran-Backed Militias In Iraq, Officials SayOne-Month Gaza Truce Focus Of Intensive Talks, Sources SaySenior Tory Calls On Sunak To Resign To 'Give Party A Fighting Chance'Japan Bonds Fall On Growing View BoJ Is Step Closer To Rate HikeJapanese Banks Climb On Bets The BoJ Will Lift Rates This YearTexas Instruments Gives Weak Forecast as Chip Slump PersistsNetflix Is Preparing Investors And Users For More Price Hikes In 2024Boeing Woes Reach A New Low As Two Airlines Consider Abandoning 737 PlansFAA May Expand Boeing Probe Beyond Max 9, Agency Chief SayseBay To Cut 1,000 Jobs, Reduce Contractors To Sharpen FocusApple Dials Back Car’s Self-Driving Features And Delays Launch To 2028China Regulators Ask Funds To Restrict Short Selling Of Stock Index Futures(Sourced from Bloomberg, Reuters and other reliable financial news outlets)FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)EUR/USD: 1.0810 (379M), 1.0865 (446M), 1.0900 (2.1BLN), 1.0950 (487M)GBP/USD: 1.2500 (225M), 1.2525-35 (301M)AUD/USD: 0.6565 (1.4BLN), 0.6575-80 (3BLN), 0.6610-20 (1.7BLN)0.6625-30 (1.1BLN)AUD/NZD: 1.0775 (461M), 1.0850 (405M)USD/JPY: 147.50 (554M), 149.00 (554M), 149.50 (275M), 150.00 (600M)AUD/JPY: 95.00 (210M), 95.50 (225M), 97.50 (252M)One month expiry implied volatility is trading near two year lows in major G10 currency pairs due to lower realised volatility. This makes current levels more attractive before upcoming key events such as central bank meetings and potential policy outlook clues. Implied volatility for JPY fell after the Bank of Japan left policy unchanged, but the risk of a policy tweak on April 26 has increased. There is more demand and premium for options thereafter. Additionally, USD/CHF has seen more realised volatility than EUR/USD, lifting the implied volatility differential in 1-month to 0.75 for USD/CHF since December.CFTC Data As Of 12/01/24USD bearish decreasing -9,298CAD bearish increasing -992 EUR bullish decreasing 14,150 GBP bullish increasing 2,443 AUD bearish increasing -3,151NZD neutral neutral -177 MXN bullish neutral 2,370 CHF bearish neutral -542 JPY bearish neutral -4,803 Technical & Trade ViewsSP500 Bullish Above Bearish Below 4850 Daily VWAP bullishWeekly VWAP bullishBelow 4800 opens 4780Primary support 4700Primary objective is 4880 Target Hit, New Pattern EmergingEURUSD Bullish Above Bearish Below 1.0930 Daily VWAP bullishWeekly VWAP bearishAbove 1.10950 opens 1.10Primary resistance 1.10Primary objective is 1.0730GBPUSD Bullish Above Bearish Below 1.2750Daily VWAP bullishWeekly VWAP bearishAbove 1.28 opens 1.2870Primary resistance  is 1.2785Primary objective 1.2570USDJPY Bullish Above Bearish Below 146.40 Daily VWAP bullishWeekly VWAP bullishBelow 146 opens 145.50Primary support 143.50Primary objective is 149AUDUSD Bullish Above Bearish Below .6650Daily VWAP bullishWeekly VWAP bearishAbove .6680 opens .6550Primary support .6525Primary objective is .6933BTCUSD Bullish Above Bearish below 43600Daily VWAP bearishWeekly VWAP bearishAbove  43590 opens 46000Primary support  is 40000Primary objective is 36097