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24.05.24 Macro Morning

Published 24/05/2024, 09:42 am

The two major releases on the economic calendar – global flash PMI’s and US initial jobless claims – both came in stronger than expected, giving USD a boost against most of the majors while Wall Street stumbled yet again with some solid falls after recently failing to best its record high. European shares were more mixed so the last trading session for the week here in Asia could be a volatile finish. The Australian dollar is again dicing with the 66 cent level, unable to keep up with the Kiwi.

10 year Treasury yields were able to lift nearly 5 points above the 4.4% level while oil prices continued to lose ground with Brent crude staying below the $82USD per barrel level. Gold is now in a full slump after failing to stabilise and has fallen down to the also slumped below the $2330USD per ounce level in the wake of the stronger USD.

Looking at markets from yesterday’s session in Asia, where mainland Chinese share markets are heading down fast as they go into the close with the Shanghai Composite losing more than 1.2% while the Hang Seng Index has lost over 1.7%, currently at 18867 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 was looking way overextended but this retracement is now taking some unwanted heat out of the market:

Meanwhile Japanese stock markets are bucking the trend with the Nikkei 225 closing some 1.2% higher at 39103 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 had been defended with short term price action now rebounding off former support at the 39000 point level with short term momentum still indicating a potential breakout, but futures are not looking optimistic:

Australian stocks were unable to advance yet again, with the ASX200 falling about 0.5% to 7811 points.

SPI futures are down more than 1% due to the negative lead 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 was finally getting out of its oversold condition but it looks like any potential upside has evaporated:

European markets were fairly mixed overnight with the FTSE down on the election news while most markets across the continent lifted slightly, as the Eurostoxx 50 Index closed 0.2% higher at 5037 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 last week is now indicating a reversal:

Wall Street has lost confidence though, with the NASDAQ down 0.4% while the S&P500 lost more than 0.7%, continuing well below the 5300 point barrier to close at 5267 points.

The four hourly chart was showing a large move higher as all Fed roadblocks seemingly were cleared with price action getting well out of its previous slightly stalled position above the 5200 point area. However this mid week slump is now turning into a reversal as momentum goes into full oversold mode:

Currency markets are now moving more towards USD dominance as the latest US initial jobless claims indicate a quite firm employment market with traders swinging back to King Dollar as a result. All the majors except Kiwi and Swiss were pushed lower overnight with Euro almost below the 1.08 handle for a two week low.

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 but momentum settings are now deeply into negative territory, indicating a continued breakdown:

The USDJPY pair had a small pause in the previous session but then advanced overnight for a new weekly high to almost breach the 157 handle in a continued strong move higher.

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 continues to play a role this trading week as a launching point, with support advancing in each session:

The Australian dollar is facing increasing pressure as more pro-US economic measures come in while the local economy is staring down recession, with the Pacific Peso losing further ground to finish barely above the 66 handle this morning.

The Aussie has been under medium and long term pressure for sometime before the recent RBA and Fed meetings and while there was optimism in the last couple of weeks, resistance at 67 cents was too high to breach. I would say the 66 handle is going to break soon:

Oil markets are no longer holding on as intrasession volatility increases as Brent crude fell below the $82USD per barrel level for a new weekly low.

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 shot out of the gates over the weekend well above the $2400USD per ounce level but has been unable to hold on to this excessive volatility with another dour session overnight, losing over $50 per ounce to finish well below the $2330level.

Short term momentum was in extreme overbought mode so I was always wary that this move will stick with price action unable to be supported here at trailing short term ATR support at the obvious $2400 level:

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