12.09.22 Macro Morning
Chris Becker | Sep 12, 2022 09:25
Not many direct market catalysts to push risk down on Friday night, with some hawkish Fed comments not able to subside the rebound on Wall Street, with a strong finish on European stock markets too as the Ukrainian counter-offensive gathers pace. The USD was the largest casualty, with the USD Index down over 0.6% with Euro surging above parity while the Australian dollar also returned back above the 68 cent level. On bond markets, 10 year Treasury yields lifted further above the 3.3% level with the next Fed meeting expectations firming again, now up to 80% chance of a 75bps rise. Crude oil lifted out of its depressed state with Brent up nearly 4% while iron ore gained more than 3% as gold can’t get out of its funk, remaining stuck just above the $1700USD per ounce level.
Looking at share markets in Asia from Friday’s session, where Chinese share markets had a late surge with the Shanghai Composite closing up 0.8% higher at 3262 points while the Hang Seng Index finally moved out of sell mode, closing 2.6% higher to bounce back above the 19,000 point level, closing at 19362 points. The daily chart was looking over bearish before the Friday session, with daily momentum extremely oversold and price action at the lower edge of the moving average channel. As I warned this looked over extended and may result in a sharp swing rally soon, but there’s a distinct lack of buying support here to follow through so watch the high moving average for signs of a proper breakout:
Japanese stock markets also added to their previous gains, with the Nikkei 225 closing 0.5% higher at 28214 points. The daily chart is showing a return back above previous trailing ATR support level at the 28000 point area as price heads back to the early August highs. Daily momentum has now inverted from extremely oversold to nominally negative settings, which is setting up nicely for a swing play here that should extend into to the start of the new trading week. Futures are suggesting more upside potential here:
Australian stocks also had modest gains, basically in line with overseas stocks despite lower commodity prices with the ASX200 closing 0.6% higher at 6894 points. SPI futures are up more than 1% on the rally on Wall Street from Friday night. The daily chart shows price action also bouncing back above previous trailing ATR support at the 6900 point level, with the potential rising to get back to the 7000 point former high:
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European stocks were broadly positive across the continent as risk sentiment improved following the ECB meeting. The Eurostoxx 50 Index eventually finished 1.6% higher at 3570 points as the daily chart turns a tentative deceleration in price falls to a significant swing higher, after price action slid down into the June lows at the 3300 level. Another market where daily momentum got slightly overextended and is now signally a good chance of a swing trade back up to the 3700 point level:
Wall Street had a third positive daily session in a row, bid from the open to the close as the NASDAQ gained more than 2% while the S&P500 finished 1.5% to build above the 4000 point level, closing at 4053 points. The daily chart has a similar picture to European and Japanese stocks with price deceleration now turning into a proper rebound, although notably price action is not yet above previous ATR trailing support. It still hard to discern if this is just selling exhaustion or a proper relief rally with daily momentum still nominally negative:
Currency markets are seeing much strong action against USD that started mid week, turning into a big return above parity for Euro in the wake of the ECB rate hike. While the USD is still in a strong medium term position against most of the currency pairs, this bounce has been quite good so far, almost hitting the 1.01 level after breaking through the short term downtrend line from the previous week’s highs. I still contend that parity is permanent resistance, but am watching for any breakout above that level:
The USDJPY pair continued its pullback and as expected retraced fully to below the trailing ATR support level at the 142 handle. This was not unusual given the very low volatile trading environment after a big blowoff early in the week as} price was unable to get back above the high moving average on the four hourly chart. Four hourly momentum had reverted from its overbought status and is now in negative but not yet oversold territory, so I expect price action to test around the 140 level that equates to the previous breakout level before the blowoff:
The Australian dollar also had a solid move higher after looking very weak against USD heading into the end of the trading week, finishing at the low 68 cent level to stave off a new weekly low. I still contend that resistance is just too strong at all the previous levels with the 68 handle the area to watch in the week ahead to see if it too becomes the next medium term resistance level:
Oil markets are getting some bottom feeders to step in here, possibly on the success of the Ukrainian counter-offensive but recession concerns still linger in the European risk complex. Brent crude gained just some 4% to get back above the $92USD per barrel level on Friday night but daily momentum remains nicely oversold as price action is still stuck below the recent weekly lows. This could turn ugly, so watch for further session lows as the $100 level becomes very strong resistance:
Gold still can’t get a break either, proving that the commodity proxies like Aussie and Loonie remain under the thumb of the USD, with the shiny metal still stuck under weekly resistance levels at around $1720USD per ounce. Short term resistance at the $1722 area is proving too strong, with the daily chart showing momentum readings no longer oversold but still deeply negative, so this could be setting up for another return to the $1700 level:
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