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16.05.24 Macro Morning

Published 16/05/2024, 09:15 am

Last night saw the release of the long awaited US inflation print, which came in softer than expected and combined with some other softer economic measures seemingly confirming the inflation genie is getting back into his bottle, US stocks surged to a record high and the bottom fell out of the USD. Euro and Pound Sterling have rocketed higher, with the Australian dollar taken along for the ride.

10 year Treasury yields moved sharply lower on the CPI print, falling more than 10 points, while oil prices are failing to stabilise with Brent crude pushed back below the $80USD per barrel level. Obviously gold liked the lower inflation measure or the lower USD – pick your poison – and shot higher, almost making it through the $2400USD per ounce level.

Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are seeing another small pullback with the Shanghai Composite down more than 0.2% while the Hang Seng Index is stalling again, also down 0.2% to 19073 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. Price action looks way overextended without any retracement to take heat out of the market, but this looks very optimistic indeed:

Meanwhile Japanese stock markets were looking to be the strongest in the region but faltered at the close, with the Nikkei 225 up only 0.1% to 38385 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 support level to remain solid here:

Australian stocks are lifting post Budget with the ASX200 closing nearly 0.4% higher to 7753 points.

SPI futures are up 0.6% due to the surge on Wall Street overnight so we should see another strong start to today’s session. The daily chart was showing a potential bearish head and shoulders pattern forming with ATR daily support tentatively broken, taking price action back to the February support levels. Momentum is finally getting out of its oversold condition with this breakout setting up for potential upside:

European markets shook off their wobbly start to the trading week with more solid sessions across the continent, as the Eurostoxx 50 Index closed more than 0.4% higher at 5100 points exactly.

The daily chart shows price action off trend after breaching the early December 4600 point highs with daily momentum retracing well into an oversold phase. This is still looking to turn into a larger breakout with support at the 4900 point level quite firm:

Wall Street continued its solid bounceback as the NASDAQ advanced more than 1.4% while the S&P500 pushed more than 1% higher to finish at 5308 points.

The four hourly chart is now showing a large move higher as all Fed roadblocks seem cleared with price action getting well out of its previous slightly stalled position above the 5200 point area with momentum way overbought:

Currency markets had already settled into an antiUSD mood before the US CPI print with the majors having already gained a little over the weekend gap against King Dollar, led by Euro of course. This accelerated overnight as the reports came in with Euro almost breaking the 1.09 handle as a result.

The union currency had previously 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 its own inflation print. Short to medium term support at the 1.0630 level has been respected and upgraded now with this breakout supported by extended momentum settings:

The USDJPY pair was climbing slowly to move slightly beyond the 156 handle to nearly complete a rebound from its previous weekly lows but suffered a significant breakdown overnight, falling nearly 200 pips to just below the 155 handle.

This price action post the epic BOJ meeting volatility was much more welcome but this reversal is not that surprising given the weakness of the USD. I expect a little firming in today’s session as Japanese traders absorb the CPI reading:

The Australian dollar had been finally able to extend and stabilise above the 66 cent handle after starting the week in a state of hesitation as the Budget impact was absorbed and then got another kicker overnight on the weaker USD move, almost hitting the 67 cent level.

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. This tentatively looks good for the Pacific Peso but momentum looks way overextended:

Oil markets are barely holding on as intrasession volatility heats up with Brent crude falling back towards the $80USD per barrel level before returning back to the $83 area later in the session.

After breaking out above the $83 level last month, price action has stalled above the $90 level awaiting new breakouts as daily momentum waned and then retraced back to neutral settings. Watch daily ATR support here at the $86 level which is still broken and will likely be resistance for sometime:

Gold finished its retracement earlier in the week and then rebounded again overnight to a new monthly high on the weaker USD, finishing well above the Friday high and above the $2380USD per ounce level.

Short term momentum is nearly into extreme overbought status so I remain wary this will stick , so watch if price action will be supported here above the previous weekly highs:


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