Daily Market Outlook, Thursday, Oct. 26

FreepikAsiaAsian stocks experienced a decline, reaching 11-month lows, while U.S. futures also dropped. The surge in the dollar and rising Treasury yields contributed to the downturn, amidst concerns that U.S. interest rates will remain high. The MSCI’s broadest index of Asia-Pacific shares outside Japan fell by 1.5%, and Japan’s Nikkei saw a 2% decline, with chip-related shares leading a broad selloff. After-hours trading saw a 2% drop in Alphabet shares, which, in turn, pushed Nasdaq futures down by 1.49%. In China, earlier gains stemming from news that China would issue a trillion yuan ($137 billion) in sovereign debt quickly diminished, leading to a reversal of fortunes in mainland and Hong Kong indexes. EuropeToday’s monetary announcement from the European Central Bank (ECB) is expected to be uneventful. The ECB hinted in its last policy update that interest rates may have reached their peak. Given subsequent developments, including evidence of economic activity slowing or even declining and signs of decelerating inflation, it would be surprising if the ECB changes its stance. Therefore, it’s anticipated that interest rates will remain unchanged. ECB President Christine Lagarde is likely to reiterate that rates have peaked unless there is a sustained rise in oil prices, but she is unlikely to signal an imminent rate cut.One area where there may be some new developments is in the ECB’s asset purchases. The ECB has already stopped reinvesting proceeds from maturing bonds in its main program, but it continues to do so with the emergency pandemic program, committed to this until at least the end of 2024. There is a possibility that this date could be brought forward, but given current uncertainties and the weakness in bond markets, such a decision may be delayed until at least December. USStateside, GDP data is expected to depict continued strong economic activity. Recent reports for September, including retail sales and industrial production, confirmed robust Q3 GDP growth, with a forecasted annualized rise of 4.3%, the fastest since Q4 2021. This reflects strong final demand, led by consumer spending, and some inventory accumulation. Additionally, September data for durable goods orders and international trade are expected to show momentum at the end of the quarter. Weekly jobless claims are also expected to indicate a healthy labor market through October. FX Positioning & Sentiment USD/JPY reached as high as 150.77 as trading in Tokyo concluded. Earlier in the day, the pair reached a low of 150.04, following a surge to 150.32 late in the New York session. It appears that Tokyo is seeing USD/JPY on a higher plane, and there might be potential consolidation around the 150 level. There are numerous option expiries in the area today, which could help contain price action. These include options at 150.00 worth $1.8 billion, and between 150.20 and 150.75 totaling $2.4 billion, along with options at 151.00 worth $549 million. Tomorrow, there are massive expiries at 150.00, totaling $4.2 billion, suggesting that this level could serve as a significant support level. Additionally, there are $1.3 billion in expiries above at the 151.00 strike.Firm long-end US yields have been supportive of the USD, with the Treasury 10-year yield at 4.98%. CFTC Data As Of 20-10-23

 FX Options Expiries For 10am New York Cut (1BLN+ represent larger expiries, more magnetic when trading within daily ATR)

 Overnight Newswire Updates of Note

(Sourced from Bloomberg, Reuters and other reliable financial news outlets) Technical & Trade ViewsSP500 Bias: Bullish Above Bearish Below 4200

 EURUSD Bias: Bullish Above Bearish Below 1.0550

 GBPUSD Bias: Bullish Above Bearish Below 1.22

 USDJPY Bias: Bullish Above Bearish Below 149.25

 AUDUSD Bias: Bullish Above Bearish Below .6400

 BTCUSD Bias: Bullish Above Bearish below 32000

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