24.05.23 Macro Morning
Chris Becker | May 24, 2023 09:26
More failed US debt ceiling negotiations pushed risk markets into selling territory overnight on both sides of the Atlantic as the wall of worry was too high to climb. Currency markets fled to the safety of both USD and Yen with Euro smacked down to its previous weekly low while the Australian dollar headed straight for the 66 cent level.
Meanwhile US Treasury yields were somewhat mixed with shorter term yields moving back to their March highs with the 10 year remaining above the 3.7% level while oil prices finally broke out of their recent funk with Brent crude lifting through the $77USD per barrel level. Gold was also able to put on some runs with a new daily high to the $1976USD per ounce level however it still remains decisively below the psychologically important $2000 level.
The daily chart has been showing resistance building above at the 20500 point level as price action wants to return to the start of year correction phase below 19000 points with a failure to make any new weekly highs since early April. This looks poised for another breakdown at the 19000 point level if it can’t clear those levels soon – watch trailing ATR support to come under pressure next:
Japanese stock markets finally took a day off after recent huge outperformance, with the Nikkei 225 down around 0.4% to close at 30957 points. Futures are indicating a strong pullback on the open however that could push back to the 30,000 point level due to correlated risk markets overnight.
Overall the trend remains unsustainable with price action nowhere near the low moving average area for several sessions, indicating that overall risk sentiment is very one sided and could result in a violent pullback. Trailing ATR support keeps ratcheting higher as the 30000 point level is breached with daily momentum extremely overbought here, which could result in a pullback soon on profit taking:
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Australian stocks were the best performers relatively speaking with the ASX200 closing dead flat at 7259 points.
SPI futures are down at least 0.5% on the turmoil on Wall Street overnight. Daily momentum barely remains positive as price action remains sideways at best.
The upside target in the medium term remains the April highs at 7400 points but if price action can’t break above the high moving average band and resistance at 7300 points watch for a sustained pullback to the 7100 point area next:
European markets were unable to get moving again with a large pulback due to the moves on Wall Street with the Eurostoxx 50 Index closing nearly 1% lower to remain above the 4300 point level at 4342 points.
The daily chart was showing a clear breakout here after price action was caught between strong trailing ATR support at the 4200 point level and weekly resistance at the 4350 points level, but a bearish engulfing candle is suggesting it may have been a once off false move. Daily momentum has retraced sharply from extremely overbought readings and as I said previously, any hiccups in the risk complex could see a strong pullback to the 4300 point level or lower:
Wall Street sold off across the board with the tech heavy NASDAQ playing catchup, losing more than 1.2% while the S&P500 also eventually lost more than 1% to close below the 4200 barrier level yet again, finishing at 4145 points.
The four hourly chart was looking bullish but showed a lot of hesitation built into price action and here we have it as confidence completely evaporated as it failed to return to its end of April 4200 point level. The failure to push through this resistance level has kept the market in check with a series of lower highs showing a lack of conviction while the debt ceiling negotiations drag on – this could get ugly:
Currency markets remain set on their dominant USD trend as the impasse on the US debt ceiling kept things moving to safe havens overnight. Euro was pushed back down below the 1.08 handle after its minor recovery evaporated with the daily trend never under threat.
Short term momentum on the four hourly chart shows a return to oversold settings as resistance has properly shifted to former support at the 1.09 level with more downside potential building:
The USDJPY pair saw a modicum of safe haven buying in Yen as it remains in complete correlation with Japanese stocks with the 138 level again maintained overnight.
This breakout had been getting quite unsustainable as price action moved further away from its own high moving average and short term momentum became nearly extremely overbought. A consolidation back down to trailing ATR support is over before it even started with price action almost back to the overbought highs and likely to extend further:
The Australian dollar in contrast remains totally depressed here, falling straight to the 66 cent level against USD with a tentative bounce that went nowhere on Friday night now forgotten as resistance builds again.
Last week’s higher than expected unemployment print plus continued strong comments from Fed Chair Powell can’t help the Pacific Peso, which continues to reject previous overhead resistance at 67 cents as this move could see a return or breach of the weekly lows below the 66 cent level:
Oil markets are trying to get out of their sideways funk with Brent crude moving up through the $77USD per barrel level overnight, finally making a new daily high.
This still keeps price around the December levels (lower black horizontal line) after breaching trailing ATR support previously with daily momentum getting out of oversold mode. A proper reversal will require a substantive close above the high moving average here on the daily chart before threatening a return to $70 or lower:
Gold is still in a major decline phase after failing to recover from its pullback following the US unemployment print with its breakdown below the psychological $2000USD per ounce level. A small bounce off terminal support overnight is pushing the shiny metal back up to the $1974 level, but this is likely to be temporary.
The keeps price action contained around previous weekly support levels at the $1980 level (lower black horizontal line) but short term momentum has bounced back out of oversold negative zone with the potential to get back to last week’s start of week position at the $2000 level on any bounce follow through. The medium term direction however is not in gold’s favour:
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