DOW, AUD/USD, US natural gas find short-term support

Macro Update

Global bond selloff pushes 10-year US yield towards 5%: Surging oil prices and rising expectations of a near-term Fed hike fuelled inflation concerns, lifting the benchmark Treasury yield to a three-year high of 4.98% and sending borrowing costs across developed markets to multi-decade highs.

Brent tops $100 for first time since May: Intensifying attacks on Middle East shipping routes, including a Houthi seizure of Yemen’s Mocha port, drove crude to a four-month high near $110 before profit-taking pared gains, leaving both benchmarks around 13% higher on the week.

Fed hike bets rise ahead of CPI: Stronger-than-expected August producer prices and the surge in oil lifted the implied probability of a September rate increase to around 70%, up from roughly 50% a week earlier, making Friday’s US inflation data crucial for the Fed’s decision.

Asian equities slump as yields surge: Rising discount rates weighed heavily on regional stocks, sending Japan’s Nikkei down 3% and MSCI’s Asia-Pacific index excluding Japan 1.5% lower, with chip-related stocks among the biggest fallers.

Dollar holds near weekly high as yen strengthens: The greenback found safe-haven support from the energy shock and higher Treasury yields, although it slipped against the yen after Japanese wholesale inflation accelerated 7.6%, reinforcing expectations of a BOJ rate hike next week.

Central banks move towards tighter policy: The European Central Bank raised rates for a second time this year, while JPMorgan now expects eight of nine developed-market central banks to increase borrowing costs by year-end, citing sticky core inflation and commodity-driven price pressures.

Dow Jones drops further still

The Dow Jones Industrial Average's descent is rapidly taking it towards the 51,663-to-51,547 support zone which consists of the early June high and July lows. It is expected to act as support, at least temporarily.

Minor resistance may be encountered around the mid-June high at 52,286, followed by the 22 July high at 52,516. More significant resistance sits between the 25 June high, late August and early September lows at 52,661-to-52,760.

Short-term outlook: bearish while below the 16 July high at 52,930

Medium-term outlook: neutral with a bullish undertone while above the 23 July 51,547 low

Dow Jones daily candlestick chart

AUD/USD recovers from sharp loss

AUD/USD's bull run from its $0.6866 late June low to this week's $0.7238 high has been followed by a sharp pullback, taking it to $0.7150 before regaining some lost ground.

Immediate resistance may now be seen around the 21 August $0.7180 high. Further resistance sits between the late May high at $0.7200 and the late August peak at $0.7208.

Were this week's low at $0.7150 to give way, the area between the 17 August high and 2 September low at $0.7129-to-$0.7122 may be revisited.

Short-term outlook: bullish while above the 11 September $0.7150 low

Medium-term outlook: bullish while above the 2 September $0.7122 low

AUD/USD daily candlestick chart

US natural gas futures recover from two week low

US natural gas futures have been rejected by their recent 285.7-to-286.0 highs and have so far slipped to a two week low at 264.7 before levelling out. If fallen through, the 25 August low at 258.1 may be hit.

The 1 September low at 271.7 offers minor resistance ahead of the 3 September low at 274.0 and the 55-day simple moving average (SMA) at 276.2.

Short-term outlook: bearish while below the 9 September high at 277.0

Medium-term outlook: bearish while below the 23 July high at 289.4

US natural gas daily candlestick chart