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17.05.24 Macro Morning

Published 17/05/2024, 10:00 am

Wall Street failed to make another new record high overnight as the impact of the latest US inflation print was fully absorbed and the strong swing against USD was pared back a little. European stocks lost a little confidence as well which is likely to translate into a mixed finish for the trading week here in Asia. The USD took back some ground against Euro and Pound Sterling but both remain highly elevated compared to the start of the week with the Australian dollar currently just below the 67 cent level.

10 year Treasury yields were up ever so slightly to the 4.38% level while oil prices are still trying to stabilise with Brent crude pushed back above the $83USD per barrel level. Gold also lost som ground from its recent big move higher as well as it steadied at the $2370USD per ounce level.

Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets were doing well but are sliding back going into the close with the Shanghai Composite up just 0.2% while the Hang Seng Index is launching higher again, up more than 1.7% 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 are putting in a strong session again with the Nikkei 225 up more than 1.3% to 38920 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 below former support at the 39000 point level. Watch the 38000 support level to remain solid here:

Australian stocks are nearly the best performers across the region with the ASX200 up nearly 1.7% to 7881 points.

SPI futures are down 0.6% due to the reversal on Wall Street overnight. 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 reversed course with most bourses across the continent falling, as the Eurostoxx 50 Index closed 0.6% lower to 5072 points.

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 but that bearish engulfing one day candle is a bit ominous:

Wall Street was unable to make another new record high and slipped at the close with both the NASDAQ and S&P500 pushed some 0.3% or so lower, the latter finishing at 5297 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 and now retracing:

Currency markets remain in an anti USD mood following the US CPI print with the majors sliding a little lower having been overextended in the previous session with Euro falling back below 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 one of the biggest movers higher as it bottomed out below the 154 handle on the CPI print, now coming but almost to the mid 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. ATR resistance at the mid 155 handle will play a role in today’s Asian session:

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 on the CPI move, pushed through the 67 cent level. However overnight it gave up most of that gain to arrive at a more stable high 66 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 but some life returned overnight with Brent crude lifting back above the $83USD per barrel level yet again.

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 to a new monthly high on the weaker USD, finishing well above the previous Friday high but managed to cool its heels a little overnight, finishing just below 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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