03.05.24 Macro Morning
Chris Becker | May 03, 2024 09:44
Anxiety and fear over what could or could not happen at last night’s FOMC meeting was met with relief as the Fed didn’t really change signalling on its interest rate trajectory. Bond markets pulled back slightly and the USD also gave up a lot of its recent gains in the aftermath, helped by the lack of traders in Europe as they had a Labour Day holiday. Wall Street had minor wobbles and combined with some Chinese markets closed today should see a subdued response in Asian share markets. That can’t be said for currency markets however with more intervention in Yen seeing epic volatility overnight while the Australian dollar has spiked back above the 65 cent level.
10 year Treasury yields moved nearly 5 points lower back down to the 4.6% level, while oil prices rolled over further, with Brent crude down to the $83USD per barrel level. Meanwhile gold was able to take advantage of the FOMC non result to launch back above the $2300USD per ounce level.
Looking at markets from yesterday’s session in Asia, where mainland and offshore Chinese share markets are again looking listless with the Shanghai Composite down 0.3% while the Hang Seng Index was closed.
The Hang Seng Index daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session as it tried to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. Price action looks way overextended here so I expect a small retracement back to the 17000 point level:
Japanese stock markets slipped back again with the Nikkei 225 down 0.3% to 38724 points.
Price action had been indicating a rounding top on the daily chart with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level almost in full remission. Short term resistance has been defended with short term price action now retracing to support at the 39000 point level. Watch the 38000 level for signs of a true breakdown:
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Australian stocks were the worst performers with the ASX200 closing more than 1.2% lower at 7569 points.
SPI futures are down only slightly on the wobbles on Wall Street overnight. The daily chart shows a potential bearish head and shoulders pattern forming with ATR daily support now broken, taking price action back to the February support levels. Notably momentum is failing to get out of its oversold condition which is setting up for more downside:
European markets were mainly closed for the Labour Day holiday as the Eurostoxx 50 Index finished dead flat at 4921 points.
The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. This was looking to turn into a larger breakout but this retracement below short term support is likely to turn into a larger reversal with a clear break of support at the 4900 point level:
Wall Street started the new trading month with some wobbles post the FOMC meeting and press conference with the NASDAQ down 0.3% or so while the S&P500 fell the same, closing at 5018 points.
The four hourly chart was showing a fairly wide trend channel forming after bottoming out at support at 5000 points but lost significant momentum following Friday’s rebound, and thus a full retracement through trailing ATR support at the 5100 point level. Watch short term support at the 5050 area very closely next:
Currency markets in the main came back against USD overnight in the wake of the FOMC meeting with Euro rebounding back to the mid range it was in prior to the meeting last week, settling just above the 1.07 handle this morning.
The union currency had previously bottomed out at the 1.07 level at the start of April as medium term price action with a reprieving reversal in price action back towards the 1.09 level before last week’s inflation print. Short to medium term support at the 1.0630 level has been respected so far:
The USDJPY pair is having a wild ride, with even wilder spreads as the BOJ seemingly can’t stay out of the marketplace, sending it down nearly 500 pips overnight following the FOMC meeting!
This is not looking good in the short term for a lot of traders but looking through the volatility we should see some stability return around the 155 handle, hopefully – stay clear for now!
The Australian dollar came back to life overnight as inflation fears in the US overshadowing ones locally with the Pacific Peso able to just get back above the 65 cent handle.
The Aussie has been under medium and long term pressure for sometime before the RBA and Fed meetings and while the previous temporary surge looked strong, it wasn’t overbought on the four hourly chart and had not surpassed support from last week’s consolidation phase. With short term support respected here it still has some road to climb before getting back to the near 66 level from last week:
Oil markets have seen increasing intrasession volatility after topping out during the latest round of Middle East conflicts with downside volatility accelerating overnight as Brent crude was pushed below the $84USD per barrel level.
After breaking out above the $83 level last month, price action has stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Watch daily ATR here carefully which is now broken:
Gold failed to get back on trend after the minor retracement earlier in the month with what looked like a complete rollover down through the $2300 level before the FOMC meeting overnight. A strong spike thereafter has seen it return to the $2320 level this morning.
Notably however that is not enough to get over shorter term ATR resistance or indeed the late April highs at the $2350 level with momentum marginally neutral here:
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