31.01.24 Macro Morning
Chris Becker | Jan 31, 2024 10:12
Overnight risk markets were again contained due to some further strong US economic data which saw bond markets selloff while the USD remained sanguine. Wall Street took back its start of week gains and while European markets had solid sessions, futures are indicating a gap lower for most Asian markets today. The Australian dollar remains just over the 66 cent level – but only just.
10 year Treasury yields lifted back above the 4.1% level with chances of a March rate cut firming while oil prices consolidated with Brent crude staying above the $82USD per barrel level. Meanwhile gold had a volatile session but eventually closed above the $2030USD per ounce level.
Looking at share markets in Asia from yesterday’s session where mainland Chinese share markets fell sharply in afternoon trade as the Shanghai Composite lost nearly 2% to 2851 points while in Hong Kong the Hang Seng Index also had another selloff, losing more than 2.3% to 15703 points.
The daily chart still shows the significant downtrend from the start of 2023 with the 19000 point support level a distant memory as medium term price action remains stuck below the 17000 point zone. The recent bounce which saw daily momentum readings almost reach positive settings is just another part of this down phase with a rollover imminent as the inability to reach former support at the 16000 point level is telling:
Japanese stock markets were only able to tread water with the Nikkei 225 closing up just 0.1% higher at 36065 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 on any volatility:
Australian stocks were able to advance slightly as the ASX200 closed 0.3% higher at 7600 points exactly.
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SPI futures are flat given the weak session on Wall Street overnight. The daily chart is looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. I would still watch for any continued dip below the low moving average and conversely with a breakout above the 7600 point level:
European markets played catchup from the previous bullish Wall Street session with some solid returns across the continent as the Eurostoxx 50 Index finished 0.5% higher at 4662 points.
The daily chart was showing price action meandering and not yet making a solid attempt at breaching the early December 4600 point highs before this surge with daily momentum now well overbought and price exceeding the highs from December. There are some signs of a slowdown however so watch for a mild retracement later tonight:
Wall Street stumbled throughout the session and was unable to advance on recent gains with the NASDAQ actually falling back nearly 0.8% while the S&P500 lost around 0.1% to close at 4925 points.
Short term momentum has returned to overbought territory on the four hourly and daily 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 remained somewhat contained without any return to strength in USD as volatiltiy around the latest flash GDP prints and strong consumer confidence saw Euro basically return to the its start of week phase at just below the mid 1.08 level.
The union currency is 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 was potential building for a swing trade higher, but the break below the low moving average has seen a new weekly low:
The USDJPY pair remains in a sideways bullish/consolidating mood after its recent big surge to the 148 level with a small uptick overnight keeping it above the mid 147 level.
Four hourly momentum has calmly retraced from being extremely overbought with price firming and support building but watch for any inversion at the 147 handle below:
The Australian dollar is still the weakest undollar as traders await the February RBA meeting but there is some support building here as the 66 cent level comes under threat yet again.
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. Watch trailing ATR resistance in the short term as I think another valve could be let off soon:
Oil markets are trying to stabilise after a solid breakout last week but remains somewhat stalled despite rising tensions in the Middle East as Brent crude held fast at just above the $82USD per barrel level overnight.
After clearing the key resistance level at the $80 level, daily momentum is now slightly overbought and ready to engage further to the upside, setting up for a potential swing higher so watch carefully for a bigger breakout:
Gold shot through short term resistance at the $2030USD per ounce level overnight but lost most of this in later trade to settle just below the $2040 level in what looks like a solid breakout opportunity after bouncing off the $2010 level.
Short term momentum had become overbought before going into last night’s session and remains so now with another attempt likely as USD weakens:
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