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11.04.24 Macro Morning

Published 11/04/2024, 09:20 am
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Wall Street tumbled and the USD soared back to strength on the back of a way too hot CPI print overnight, pushing the risk complex into dangerous territory. With the inflation genie nowhere near back in the bottle, bond yields spiked and the USD pushed all the undollars over, including gold which had been robust up to this point. The Australian dollar lost over a 100 pips to fall straight back to the 65 cent level.

10 year Treasury yields bounced up to a new 2024 high, finishing above the 4.5% level while Brent crude solidified above the $90USD per barrel level. Meanwhile gold finally had a pause with a small retracement back below the $2340USD per ounce level.

Looking at markets from yesterday’s session in Asia, where mainland and offshore Chinese share markets are again diverging with the Shanghai Composite down 0.7% while the Hang Seng Index is rebounding even further, closing more than 1.8% higher to 17139 points.

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 as it tried 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 however failed to continue its previous rebound with the Nikkei 225 down nearly 0.5% at 39581 points.

Price action had been 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 39000 point level. Watch the 38000 level for signs of a true breakdown:

Australian stocks had another fairly solid session with the ASX200 closing some 0.3% higher to 7848 points.

SPI futures however are down at least 0.8% due to the slump on Wall Street overnight. 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 lifted slightly across the continent but still without a solid push as oil prices and macro concerns remain high as the Eurostoxx 50 Index finished just 0.2% higher at 5000 points.

The daily chart shows price action off trend after breaching the early December 4600 point highs but daily momentum retracing well out of an overbought phase. This was looking to turn into a larger breakout but a retracement back to short term support could give the market some breathing room. Futures are indicating another small tumble due to Wall Street’s slump:

Wall Street’s struggles are turning into a reversal across the board as the NASDAQ lost 0.8% while the S&P500 finished nearly 1% lower to retrace solidly below the 5200 point level, finishing at 5160 points.

The daily chart previously showed a consolidation that could have turned into a proper reversal here as price action broke below short term support as momentum became somewhat oversold. As I said previously, this break below the 5240 point area has setup for further downside with the 5200 point level the key control are to watch in tonight’s session:

Currency markets are seeing the swift return of King Dollar on the back of the US CPI print with falls across the board, led by Euro which was smacked more than a 100 pips lower back below the 1.08 handle, matching the previous weekly low.

The union currency had bottomed out at the 1.07 level at the start of April as medium term price action with a reprieving reversal in price action back towards the 1.09 level before the inflation print. This has changed in an instant so watch for potential falls below the 1.0740 level tonight:

The USDJPY pair was struggling to hold out at the previous highs around the 152 level as it again comes up against strong overhead weekly resistance (horizontal black line on chart below) but this was pushed aside in an instant on the CPI print overnight as USD soared to new highs.

The medium term picture was always somewhat optimistic as Yen sold off due to BOJ meanderings but momentum had been building before the CPI print, positive for all of the last week at least with ATR support upgraded throughout. This is likely overcooked in the short term but sets up for potential gains from here after a retracement:

The Australian dollar was unable to continue its mild breakout and was pushed straight back to its dominant downtrend on the US CPI print, taking it back to the start of month lows right on the 65 handle.

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. As I said previously, while this reversal looks good in the short term, longer term resistance at the 66 cent handle was just too strong:

Oil markets are pausing their breakouts following the attacks on Russian refineries, but now moving into a more supportive mode with Brent crude lifting slightly on US inflation to almost push above the $91USD per barrel level overnight.

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. I expect this pause to finish soon for another breakout this trading week:

Gold had been climbing to new highs through any volatility for weeks now but couldn’t push aside the stonking USD on the CPI print, although it did manage to remain above the $2300USD per ounce level, closing at $2334 overnight.

In the previous week 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.

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