14.03.23 Macro Morning
Chris Becker | Mar 14, 2023 10:56
Bond market volatility overshadowed even that of share markets overnight, despite European stocks falling at least 3% across the board as the fallout from the SVB bank collapse continues. Interest rate expectations have been completely rewritten as US Treasury yields undergo a shock reversal with the 2 year having its biggest downward move in years while the 10 year yield pulled back over 17 points to the 3.5% level. Currency markets remain firmly anti-USD with the Australian dollar blipping back up to the mid 66 cent level while the commodity complex saw oil prices breakdown on the volatility as Brent crude finished barely above the $80USD per barrel level. Gold bugs are loving it however, sending the shiny metal ever higher, now above the $1900USD per ounce level for a new monthly high.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets surged following the long lunch break, with the Shanghai Composite finishing up 1.2% but still unable to break the 3300 point barrier at 3268 points while the Hang Seng has clawed back most of its Friday losses, closing nearly 2% higher to 19695 points. The daily chart was showing this rollover accelerating as price action retraced well below previous ATR support. This bounce could just be a short term reprieve but watch as momentum gets out of oversold territory to turn into a swing play here, or as part of another short setup and subsequent rollover. The key is to close above the high moving average next:
Japanese stock markets however remain caught in a Yen headwind with the Nikkei 225 down more than 1% to 27832 points. The previous bounceback looks like a bull trap, with futures indicating further losses on the open despite the bounce on Wall Street overnight. Daily momentum has crossed well below the overbought zone with support now coming up at the 27000 point area which had been previously defended, but watch the low moving average for any crossover action:
Australian stocks were unable to escape the selling with the ASX200 closing 0.5% lower to almost cross below the 7100 point level at 7108 points. SPI futures are down another 1.8% in the midst of all this volatility so we could the 7000 point level taken out as well. The daily chart was showing a clear downtrend after being unable to take out 7500 points, with a retracement below ATR support at 7200 points now in play. Price action looks really ugly here with a return to the Xmas lows on the cards:
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European markets not only failed to stabilise but have nearly collapsed across the continent with big losses in the physical session as the Eurostoxx 50 Index closed some 3% lower at 4096 points. Futures are indicating a further pullback as financial contagion spreads, wiping out this post Xmas uptrend with daily momentum now retracing fully from its recent overbought levels to hugely oversold. A higher Euro may create a worse headwind:
Volatility on Wall Street was equally as high but in the had been lacking confidence all week and the collapse of the SBV bank sent volatility skywards with a new monthly low in the process. The NASDAQ finished nearly 0.5% higher while the S&P500 only lost a handful of ground to retrace just 0.2% to close at 3855 points. The daily chart is still looking like a classic bearish head and shoulders pattern with the right shoulder fully formed as you can see here on the four hourly chart as price action hovers near the pre-Xmas 3800 point support area. Short term momentum is out of extremely oversold settings and there is some support building here but resistance overhead remains too high to clear for now:
Currency markets are staunchly moving in an anti-USD direction across the board, lead by Euro which had already begun bouncing back before this volatility, now lifting through the 1.07 level after recently making a two week low. Through the volatility overnight the union currency made new session highs again and again, pushing for a new weekly high here with the potential to continue higher all dependent on how the Fed reacts to the SVB collapse:
The USDJPY pair remains in the dumps as all things USD are sold off, with only a mild reprieve later in the session settling it above the 133 level late this morning. The 135 handle was the key support level that must hold but this swift reversal of the mid week fling up towards the 137 level shows there’s potentially more downside ahead. Short term momentum remains solidly oversold although price action wants to turn into a swing play there’s not enough indication yet of upside potential:
The Australian dollar is trying to get out of the dumps here with a bounce back up to the mid 66 cent level staving off any new daily or weekly lows after bottoming out last week. Overall price action had been quite weak following the previous local unemployment numbers that has not yet challenged interest rate expectations but with the Fed looking to ease off the throttle, pressure is now coming off the Pacific Peso. Short term momentum is back at mildly overbought settings which could provide more upside but the 67-68 cent zone has a lot of resistance:
Oil markets were in retreat mode again overnight amid the volatility with Brent crude touching the $77 mark and recent weekly lows before settling just above the $80USD per barrel level on a new daily low. Daily momentum had only been nominally positive previously with no new weekly high indicating only a little bit of buying support before this move. Overall however, price action has still failed to beat the $88 highs from January which is the short term target here so watch for a continued break below the low moving average next:
Gold is on an absolute tear amid the financial chaos with another surge beyond expectations overnight to clear the $1900USD per ounce level after recently clearing overhead short term resistance in the process. Former resistance on the daily chart at the $1850 level is a memory as interest rate expectations change drastically although this move could still prove too far, too fast with a possible retracement. Watch support to build at the former resistance level at $1850 closely:
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