17.07.23 Macro Morning
Chris Becker | Jul 17, 2023 10:18
Stronger profit results as the US earning seasons gets underway, mixed with the potential for a general strike in the US put a stop to rising risk on Wall Street on Friday night. With Japanese markets closed today its likely to be a staid session as the trading week gets underway here in Asia.
Currencies pulled back slightly from their one way trade against USD again following the softer than expected CPI and PPI prints with Euro holding firm above the 1.12 handle while the Australian dollar was pushed back to the low 68 cent level.
US bond markets saw a slight jump in yields but still licking their wounds post the inflation print with the 10 year back to 3.85%, while oil prices also pulled back after putting in a new monthly high with Brent crude falling below the $80USD per barrel level. Gold held on to its bounceback to finish just below the $1960USD per ounce level.
Looking at share markets in Asia from Friday’s session with mainland Chinese share markets in hesitation mode in the final session as the Shanghai Composite finished only a handful of points higher at 3237 while in Hong Kong the Hang Seng Index also dragged along, up only 0.3% to 19413 points, but capping off a great week.
The daily chart is still showing how the 19000 point level as a point of control below the dominant downtrend (sloping higher black line) but as confidence is trying to clawback here after almost touching the May lows we are coming to a possible breakout:
Japanese stock markets were also flat across the board, with the Nikkei 225 closing 0.1% lower at 32391 points. Futures are not very indicative given another market holiday today.
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 retraced from overbought to slightly negative settings with a further retracement back down to that support zone possible here this week as uncertainty builds:
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Australian stocks were able to push through another key level with the {{!71|ASX200}} closing 0.8% higher at 7306 points.
SPI futures however are indicating a flat start to the week given the unease on Wall Street from Friday night with the 7300 point level possibly turning into short term resistance. Medium term price action remains on a downtrend however with the daily chart just oscillating further down despite this continued bounce. Resistance overhead at the 7200 to 7300 point zone is the area to really watch:
European markets have now been able to clawback most of their recent big losses but look like stalling again with the Eurostoxx 50 Index lifting just 0.2% on Friday night to close the week at 4400 points.
The daily chart showed this potential bull trap building even though weekly support at 4200 points had been continually defended, with weekly resistance at the 4350 points level the actual area to beat. Support has been broadly defended at 4200 points, touched three times now in as many months but the 4400 point resistance level is now firming so watchout below:
Wall Street struggled to translate recently found confidence on the back of softer inflation prints into a substantive session on Friday night with the NASDAQ and the S&P500 both losing 0.2% or so, the latter finishing just above the 4500 point level.
The daily chart showed robust support around the 4400 point level after the market continued to stall against the monthly downtrend from the 2021 highs (upper sloping black line). Another test of the 4500 point level is now probable as uncertainty of the Fed’s direction is cleared up but there’s a lot of intrasession selling pointing in the last daily candles that are pointing to a retracement:
Currency markets are still in an anti-USD mood but as I’ve been warning its usually a sustainable trend and we had a slight pause on Friday night as a result, with some undollars actually buckling and running. Euro however held fast at just above the 1.12 handle.
The union currency had been on a weekly downtrend with a small bounce but that has now turned into a new monthly high as the 1.10 is tested and found supportive for further upside. This move takes out all of the recent downside action, with short term momentum retracing out of extreme overbought mode but price action not moving – usually a sign another explosive move higher?
The USDJPY pair was in a deceleration phase after its before the Friday night session, having lost over 400 pips but managed to bounceback somewhat and finish the week just below the 139 handle.
Four hourly momentum was looking to get out of oversold mode with the return well below the June lows at the 140 level providing a possible support level and we’ve seen a small bounce here but short term ATR resistance at the 139 zone is not yet under threat. With Japanese traders away today expect little noise here:
The Australian dollar was able to match its June highs just below the 69 cent level versus USD but not hold on to them on Friday night with a small but welcomed retracement to below the mid 68 level.
Recent price action put ATR resistance and 200 EMA (black line) levels under threat but once the 67 handle was broken just before the CPI print this led the floodgates open, although short term momentum was overextended and the usual pullback has now transpired. Now we wait to see if the Pacific Peso can hold on or if it trends back to ATR support at the 68 handle proper:
Oil markets had been taking advantage of the weaker USD and potential OPEC+ production cuts with a soaring week that saw Brent crude lift straight through the $81USD per barrel level before a profit taking session on Friday night pulled back to $79 or so.
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 finally getting above overhead 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 but there’s an obvious overshoot happening here to bring it back:
Gold had been helped along by the weaker USD all week after recently threatening to rollover through the $1900USD per ounce level, now consolidating at just below the $1960 level as momentum stalls here.
The four hourly chart shows a new attempt at getting back up to the psychologically important $2000USD per ounce level, with the potential to return to short term ATR support on any blip higher in USD strength as momentum moderates:
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