22.01.24 Macro Morning
Chris Becker | Jan 22, 2024 12:21
Much improved sentiment amid reduced inflation expectations pushed Wall Street to a new record high on Friday night, with US consumer sentiment surging as Fed officials start to think about when the time is right to ease up on the rate hikes. European shares did not join the party but futures suggest Asian equities will get a little bounce in the post weekend gap. Euro remains well below the 1.09 handle while the Australian dollar is dicing with the 65 cent level.
10 year Treasury yields lifted nearly 10 points again to extend through the 4% level with chances of a March rate cut starting to firm while oil prices were able to lift slightly as Brent crude headed above the $79USD per barrel level. Gold also bounced back after recently almost breaking below the $2000USD per ounce level but is still under the thumb of King dollar.
Looking at share markets in Asia from Friday’s session where mainland Chinese share markets are still pulling back as the Shanghai Composite fell nearly 0.4% to 2832 points while in Hong Kong the Hang Seng Index extended their recent losses to close 0.5% lower at 15308 points.
The daily chart amply shows the significant downtrend from the start of 2023 with the 19000 point support level a distant memory as medium term price action remained stuck in the 17000 point range before this new losing streak. Daily momentum readings are still in oversold settings as price action returns to the October lows, with little chance of stabilising here:
Japanese stock markets were able to put in a strong session after a two day retreat with the Nikkei 225 up more than 1% to 35963 points.
Trailing ATR daily support was being threatened by price action after this bounce went beyond the September highs at the 33000 point level with daily momentum remaining extremely overbought. Correlations with a stronger Yen are breaking down here with a selloff back to ATR support at 32000 points unlikely as the November highs are wiped out in this breakout but I’m cautious of a strong pullback here:
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Australian stocks also finally gained some positive momentum, with the ASX200 putting on exactly 1% to get back above the 7400 point level, closing at 7421 points.
SPI futures are up nearly 0.3% given the big rebound on Wall Street from Friday night. The daily chart is still looking somewhat mixed here despite the medium term uptrend with short term price action however still suggesting a possible reversal underway as daily momentum starts to wane and resistance at the 7600 point level builds. Watch for any continued dip below the low moving average and conversely with a breakout above the high moving average:
European markets were still a bit shaky despite finding some confidence mid week, with not much movement across the continent as the Eurostoxx 50 Index finished nearly 0.1% lower at 4448 points.
The daily chart shows weekly support breaking at the 4480 point level as a failure to make a new high above the early December 4600 point level is starting to drag overall momentum down with a full retracement. Futures however are indicating a stronger session as the new trading week goes ahead:
Wall Street was able to rally strongly across all the main markets with the NASDAQ pushing some 1.7% higher while the S&P500 gained nearly 1.3% to close at 4839 points.
Short term momentum is now well into overbought territory on the four hourly chart, with this solid breakout taking out trailing ATR resistance and the weekly highs overhead. Overall support has been strong at the 4700 point level proper but with those December highs as very strong resistance now breached we could see a swift run up to 5000 points:
Currency markets were somewhat subdued but King Dollar did have to take a slight backfoot against some of the majors with increased volatility around Euro seeing it nearly break out above the 1.09 handle proper.
The union currency had been still looking weak here after tracking sideways for nearly three weeks as short term momentum switched to negative as price action remains contained well below trailing ATR resistance. After being considerably oversold there is potential building for a swing trade higher here:
The USDJPY pair remains in a sideways bullish/consolidating mood after its recent big surge with the 148 level still proving strong short term support.
Four hourly momentum has calmly retraced from being extremely overbought and price firms here with support building at the 147 handle below. A welcome pause as there is potential for more upside here:
The Australian dollar is still the weakest undollar as traders await the February RBA meeting but there has been a small bounce off of the 65 handle with the 66 level almost taken out on Friday night as well.
The Aussie has been under medium and long term pressure for sometime with the latest rally just a relief valve being let off with short term momentum returning to oversold territory as traders still have another month for the RBA to come back from holidays. As I said previously, if you’d turn this chart upside down and you’d be bullish – but watch trailing ATR resistance in the short term:
Oil markets saw a mild uptick that could be the start of a potential breakout given the recent amount of low volatility with Brent crude almost breaching the $79USD per barrel level on Friday night before a late selloff kept it contained.
While still well contained below the key $80USD resistance level, daily momentum is now out of negative settings and setting up for a potential swing higher so watch carefully for a breakout soon:
Gold bounced back after almost falling through the $2000USD per ounce level in the previous session with a return to the previous weekly low just below the $2030 level on Friday night.
While a good start, this bounceback is not yet enough to get back above the dominant downtrend with support at the $2040 level still hovering overhead as resistance. Watch for a potential return to the previous lows just above the $2000USD per ounce level next:
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