07.08.23 Macro Morning
Chris Becker | Aug 07, 2023 09:55
The USD finally reversed its strong upward course against everything with a weaker than expected US jobs report on Friday night. European stocks lifted but Wall Street stumbled at the end, capping off a poor week for equities despite from very strong earnings results.
US bond markets saw similar reversals after the 10 year Treasury hit a new five month high above 4.2% before tumbling down to the 4% level even while oil prices continued their ascent higher on more production cuts coming out of Russia with Brent crude pushing through the $86USD per barrel level. Gold had a reprieve against the weaker USD as it rebounded to the $1945USD per ounce level.
Looking at share markets in Asia from Friday’s session with mainland Chinese share markets weren’t able to maintain much momentum after the long lunch break with the Shanghai Composite closing just 0.2% higher at just under 3300 points while in Hong Kong the Hang Seng Index was able to bounce back somewhat, closing up 0.6% to 19539 points.
The daily chart was showing how the 19000 point level has become strong support as price action bursts above the dominant downtrend (sloping higher black line) following a month long consolidation. This breakout was supposed to have had further legs but daily momentum readings have now retraced back to a more sustainable level so watch for support to firm here at the 19500 point level before another leg up:
Japanese stock markets remained hesitant with the Nikkei 225 up just 0.1% at 32192 points.
Trailing ATR daily support has paused for sometime now as the market has been going sideways after a big lift recently, with a welcome consolidation above that level. Daily momentum has now gone oversold instead which is ominous as price action heads to the support zone, with a weaker Yen here not helping:
Australian stocks were unsteady throughout the session as the RBA signaled potential recession with the ASX200 eventually closing 0.2% higher to just over the 7300 point level at 7325 points.
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SPI futures are flat, currently down about 0.2% in line with the mild falls on Wall Street from Friday night, which again will test the 7300 point level to see if it has truly firmed as short term support instead of resistance. Medium term price action was slowly getting out of its downtrend with the daily chart showing a breakout here as the June highs are bested but watch daily momentum readings that have fully retraced from being overbought:
European markets were able to finally stabilise after selling off with the Eurostoxx 50 Index closing more than 0.6% higher but did not exceed resistance at the 4400 point level, finishing at 4332 points.
While the daily chart shows weekly support at 4200 points defended, weekly resistance at the 4400 point resistance level has now re-engaged as this little dip gains momentum with a probable return to the previous weekly lows as daily ATR support has been taken out:
Wall Street sold off however following the US jobs report and calls for more rate hikes besides with the NASDAQ losing 0.3% while the S&P500 finished more than 0.5% lower at 4478 points.
The daily chart was showing a sideways bent after the previous weekly uptrend that got a little out of hand recently with a consolidation that has now turned into a dip. The 4600 point zone was the area to watch going into last week’s NFP print but this retracement needs to get back above the 4550 area fast or could spread further below trailing ATR support at the 4500 point area:
Currency markets finally reversed the USD uptrend following the weaker than expected US NFP with the latest Fitch downgrade having been absorbed by bond markets. Euro was first out of the gate, zooming back up to the 1.10 level after declining following last week’s ECB meeting.
Euro needs to have a strong return above trailing ATR resistance here on the four hourly chart after halting its week plus long decline and hitting support just above the 1.09 handle Short term momentum has switched to slightly overbought but price action must re-engage to a new weekly high here above the 1.10 mid level soon or we will have another rollover:
The USDJPY pair was pulling back after engaging to the upside after last week’s BOJ meeting but this has turned into a dip with a fall back to the 141 handle following the NFP print and USD turnaround.
Four hourly momentum is now in oversold mode but not yet overextended with price action taking back all of last week’s reflation rally. There was room for more potential upside as the USD firmed into Friday’s US jobs report but a wider pullback is possible here:
The Australian dollar was also trying to gain some stability after getting pushed decisively down on ECB dovishness and then again on the US GDP print, keeping the Pacific Peso depressed at just above the 65 cent level as the RBA makes it the weakest of the majors going into Friday’s job report.
The subsequent price action looks fairly weak however, confirming the weak mantle for the Aussie as ATR resistance and 200 EMA (black line) are still quite far away in both short and medium term trends. Watch for a potential weekend gap higher at the 66 handle but I wouldn’t put much effort into it sustaining:
Oil markets are again re-engaging after more production cut news with Brent crude now up through the $86USD per barrel level, extending its three month high and current uptrend.
Price had been anchored around the December levels – briefly dipping to the March lows – with the latest move matching the small blip higher in May and now putting aside resistance at the $80 level. Daily momentum has picked up strongly into overbought readings with price action now clearing the last couple months of resistance and setting up for a new potential uptrend:
Gold was trying to get back after its mid-session rout last week following the Fed’s latest rate rise, but despite some stability before the US jobs report, the subsequent bounce is looking quite anemic at just above the $1940USD per ounce level.
The four hourly chart shows the attempt at getting back up to the psychologically important $2000USD per ounce level is likely over as a new two week low made swiftly cannot be returned as such without a lot more effort. Watch for a potential unwinding here down to $1900:
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