24.08.23 Macro Morning
Chris Becker | Aug 24, 2023 10:50
Bad news is good news for risk markets as the latest PMI’s for US and Europe came in softer than expected, giving some further credence that rate hikes are working and will eventually – hopefully – stop rising soon. Wall Street had a big rally helped by tech stock earnings while European stocks played catchup. The USD remained stronger against most majors with a strong whipsaw in both Euro and Pound Sterling resulting in a minor drop while the Australian dollar finally got back above the 64 cent level again.
US bond markets saw another drop in yields with the 10 year Treasury losing more than 10 pips, down to the 4.2% level. Meanwhile oil prices moderated again with Brent crude back below the $83USD per barrel level as gold lifted as it built on it previous positive session with a solid move higher to the $1915USD per ounce level.
Looking at share markets in Asia from yesterday’s session with mainland Chinese share markets are falling going into the close with the Shanghai Composite down nearly 1.4% at 3078 points while in Hong Kong the Hang Seng Index has reversed course, up 0.3% to close at 17845 points.
The daily chart is now showing a near complete selloff that has gone below the May/June lows with the 19000 point support level a distant memory as price action stays well below the dominant downtrend (sloping higher black line) following the prevous month long consolidation. Daily momentum readings remain fully oversold as confidence disappears so watch for this rollover to possibly hit the 17000 point level next:
Japanese stock markets were relatively flat, initially unable to build on their previous positive session before rallying at the close with the Nikkei 225 finishing more than 0.5% higher at 32010 points.
Trailing ATR daily support had been paused for sometime now as the market went sideways after a big lift recently, with a welcome consolidation above that level but that has now turned into a proper dip. Daily momentum broke into the oversold levels but has now retraced as price action bounced back from the support zone with the potential for a swing building here:
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Australian stocks were looking to be the best performers but stumbled at the close, with the ASX200 closing more than 0.3% higher at 7148 points.
SPI futures are up more than 0.5% this morning given the upside volatility on Wall Street overnight, but that 7300 point level remains as short term resistance. Medium term price action is now moving sideways with the short term pattern looking like decelerating here:
European markets weren’t able to put in a second very positive session overnight although futures saw a better lift as the Eurostoxx 50 Index closed only 0.1% higher to finish at 4266 points.
While the daily chart shows weekly support at 4200 points barely defended, weekly resistance at the 4400 point resistance level has now pushed the point of control well below the 4300 point level. There are signs of stability returning here as daily momentum tries to get out of oversold mode but I remain cautious:
Wall Street was able to finally rally strongly overnight as the NASDAQ finished 1.5% higher while the S&P500 lifted more than 1% higher at 4436 points.
The four hourly chart is still showing price action well below the previous downtrend channel but short term ATR resistance has been definitively breached with this breakout. Recent deceleration had turned into a short term bottom here with a move above the 4400 point level but this still could prove risky going into the Jackson Hole meeting:
Currency markets tried to hold on to their recent gains versus USD with the release of the global PMI’s adding to the volatility as Euro flopped below the 1.08 handle for a new weekly low before rebounding to finish the session unchanged.
The union currency really needed to have a strong return above trailing ATR resistance just below the 1.10 handle in recent weeks but failed despite a mid week rally to decline back to the previous weekly lows just above the mid 1.09 level. Short term momentum is no longer oversold but price action remains below the August lows:
The USDJPY pair is no longer on a technical uptrend, with the overnight breakdown presaged by the start of week price action that had not been able to get above the previous high at the 146 level. Last night the pair broke well below the 145 level to unwind the last two weeks of upside action.
Four hourly momentum had retraced following the recent bounceback with a move back to neutral settings that looked like just taking some heat out of the two week uptrend. The 146 level then turned into short term resistance here as short term price action slid further down and now we are at a new weekly low:
The Australian dollar had been under the pump against King Dollar for sometime here although a possible bottom was brewing here at the 64 handle given no new session lows since Friday, with a fairly solid breakout almost above the 65 level overnight.
Four hourly momentum has switched to overbought mode in this move having built up all week but can the Pacific Peso keep on to these gains or will this be a swing move higher only?
Oil markets had been relatively quiet with some moderation recently with the potential for a top forming as Brent crude lost more ground overnight to retrace further below the $85USD per barrel level, just holdingl maintaining its three month high and current uptrend.
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 putting aside resistance at the $80 level. Daily momentum has retraced below previously overbought readings with price action rolling over – watch short term support at $80 to hold:
Gold was able to put in a second positive session to finally close above the key $1900USD per ounce level overnight.
The four hourly chart shows the attempt at getting back up to the psychologically important $2000USD per ounce level has been over for sometime now as the recent oscillations turn into a proper unwinding here below $1900. With the downtrend entrenched the potential for a reversal is building in the short term with four hourly momentum now extremely overbought as priece action bursts through trailing ATR resistance:
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