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20.05.24 Macro Morning

Published 20/05/2024, 09:05 am

While the Dow Jones made a new record high above 40000 points on Friday night, the broader stock market complex slipped a little with hesitation abounding. European stocks lost further ground as well, unable to continue their own breakout as a higher Euro starts to bite with USD still in a weak phase. The Australian dollar was able to finish the trading week on a high note, just below the 67 cent level.

10 year Treasury yields were able to rebound slightly back above the 4.4% level while oil prices also firmed with Brent crude pushed back above the $83USD per barrel level. Gold however outshone by blasting above the $2400USD per ounce level.

Looking at markets from Friday’s session in Asia, where mainland Chinese share markets were going down at the close before a big surge saw the Shanghai Composite gain more than 1% while the Hang Seng Index followed suit to close 0.9% higher at 19553 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 however are falling a bit faster with the Nikkei 225 down 0.4% to 38775 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 were the worst performers across the region with the ASX200 down over 0.8% to 7814 points.

SPI futures however are up more than 0.4% despite the lack of confidence on Wall Street Friday night. 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 slipped again after a failed breakout with most bourses across the continent down a little on Friday, as the Eurostoxx 50 Index closed 0.1% lower to 5064 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:

While the Dow made a new record high, the broader indicies slipped at the close with the NASDAQ down 0.1% while the S&P500 pushed just 0.1% higher finishing at 5303 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 retracing out of its overbought status and ready to re-engage:

Currency markets remain in an anti USD mood following last week’s softer than expected US CPI print with the majors pushing a little higher on Friday night after being overextended in the previous session with Euro steadying just 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 had the quietest night on Friday after being one of the biggest movers during the week following the US CPI print, rounding off and finishing just above 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 this trading week as an anchor point:

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 before Friday’s session it gave up most of that gain before a last minute push saw it finish just below 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 is not yet overbought:

Oil markets are just holding on as intrasession volatility cools down but there was some sign of life on Friday night as Brent crude firmed to almost lift above the $84USD 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, setting up to finish well above the $2400USD per ounce level on Friday night.

Short term momentum is again 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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