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05.04.24 Macro Morning

Published 05/04/2024, 10:36 am
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Wall Street fell sharply overnight on very cool Fedspeak that indicated that the US Federal Reserve is still being quite patient when it comes to rate cuts, as inflation concerns remain high. The initial jobless claims before tonight’s all important non-farm payrolls aka US employment numbers were slightly cooler but not substantially higher, adding to the suggestion rate cuts are further away than expected. The USD fell further as a result, although some major currencies like the Australian dollar acted as risk proxies and fell alongside stocks.

10 year Treasury yields again eventually finished where it started on the macro volatility around the 4.4% loevel while Brent crude pushed higher, closing just above the $91USD per barrel level for another new monthly high. Meanwhile gold took a very minor pause after almost pushing through the $2300USD per ounce level, circling around the $2290 level this morning.

Looking at markets from yesterday’s session in Asia, where mainland and offshore Chinese share markets were closed for a mid week holiday and will reopen today.

The Hang Seng Index daily chart was starting to look more optimistic with price action bunching up at the 16000 point level before breaking out in the previous session trying to make a run for the end of 2023 highs at 17000 points with the downtrend line broken. However this has been thwarted as monthly resistance levels are kicking in, although support is firming at the 16400 point area:

Japanese stock markets put in a very strong rebound, with the Nikkei 225 closing nearly 1.4% higher at 39965 points.

Price action however is indicating a rounding top on the daily chart with daily momentum retracing away from overbought readings with the breakout last month above the 40000 point level almost in full remission. Short term resistance has been defended with short term price action now retracing to support at the 38000 point level:

Australian stocks were able to rebound with the ASX200 closing over 0.4% higher to 7817 points.

SPI futures however are down at least 0.8% on the breakdown on Wall Street overnight but this could accelerate further at the open. The daily chart was looking firmer with the medium term uptrend and short term price action coming together to take out the previous December highs. As I said previously, watching for any continued dip below the low moving average could see a significant pullback but watch ATR support which has been defended so far:

European markets were able to stay steady but it was again the German DAX not doing any heavy lifting as the Eurostoxx 50 Index finished deaf flat at 5070 points.

The daily chart shows price action still on trend after breaching the early December 4600 point highs but daily momentum retracing slightly out of an overbought phase. This was looking to turn into a larger breakout but futures are now indicating a larger pullback for tonight’s session:

Wall Street had a relatively calm session until near the end when everything sold off with the NASDAQ falling more than 1.4% while the S&P500 also lost 1.2% to eventually finish at 5147 points.

The four hourly chart previously shows a consolidation that now has turned into a proper reversal here as price action breaks below short term support as momentum becomes very oversold. As I said previously, a break below the 5240 point area has setup for further downside:

Currency markets are continuing their anti-USD phase but had a small reversal later in the session but still most major currency pairs were up against King Dollar overnight. Euro was able to maintain its uptrend through the 1.08 handle but stalled nearer the 1.09 level.

The union currency had bottomed out at the 1.07 level as medium term price action was always suggesting a return to or below that level but this reversal in price action momentum in the short term is likely to see the 1.09 level come under threat next:

The USDJPY pair was able to just hold on despite the lower USD with a brief taste below the 151 level as it again rejected overhead weekly resistance (horizontal black line on chart below).

The medium term picture remains somewhat optimistic as Yen sold off due to BOJ meanderings but momentum is now trying to get back into oversold mode while ATR support remains firm but under pressure at the 151 handle proper:

The Australian dollar was able to continue its bounce for most of the session and briefly touched the 66 handle before retracing later this morning, unable to break the two week high deadlock.

The Aussie has been under medium and long term pressure for sometime before the RBA and Fed meetings and while the previous temporary surge looked strong, it wasn’t overbought on the four hourly chart and had not surpassed support from last week’s consolidation phase. While this looks good in the short term, longer term resistance is likely to kick in at the 66 cent handle:

Oil markets are continuing their breakouts following the attacks on Russian refineries with Brent crude again pushing higher to soar above the $90USD per barrel level, actually closing at the $91 level this morning.

After retracing down to trailing ATR daily support at the $77 level, price had been bunching up around the February highs at the $84 level with short term momentum definitely overbought and signalling potential upside from here, although now well overextended:

Gold just keeps climbing to new highs through any volatility although this time it was more of a pause overnight despite the falls in USD keeping the shiny metal just below the $2300USD per ounce level, closing at $2290 this morning.

Last week daily momentum was nearly off the charts – never a good sign – with short term support at the $2100 level turning to what could be rock solid medium term support but still the critical area to watch ahead on a likely pullback due to excessive volatility. So far though just a small slowdown in this session:

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