Macro Morning: Easter volatility

by Chris Becker

Holidays and daylight saving changes can cause confusion or even disruption across global markets where in the last four days some observe Easter and others (particularly here in Asia) have not. Its taking some time for the algos (and me) to catch up!

Following the April Fools Day ructions, Friday night’s US unemployment report confused this even further with a genuinely bad print following the poor ISM survey which equated to risk markets seeing Fed rate rises pushed further out in the calendar as US Treasury yields rose bouncing off their lows.

Recapping the Easter trade in Asia over the break, the Shanghai Comp seems set to get to a 100% year-on-year return, rallying 1% following a solid non-manufacturing print on Friday. The Nikkei was open yesterday and lost a little ground, confused about the bad/not bad NFP print, but overnight futures caught up significantly showing this trend is still well intact (and my short swing trade petering out):

Chart Nikkei225, D1, 2015.04.06 22:41 UTC, VantageFX Pty Ltd., MetaTrader 4, Real


The ASX200 should open down a few points this morning after a four day break according to the SPI futures, however these didn’t trade yesterday so I expect a big opening gapup as it plays catch up. Add the RBA decision later today and its going to be a volatile session.

Europe is also on a catch up run with mixed results on Thursday and a data vacuum providing no catalysts except algo-derived trades pushing things around tonight.

The DAX is firming on the dailies, although its weekly chart remains highly bubblish and heavily overbought, the FTSE is shaping up a long swing on the dailies, although I expect this to be short lived up to resistance at 6900 points or so:

Chart FTSE100, D1, 2015.04.06 22:48 UTC, VantageFX Pty Ltd., MetaTrader 4, Real


The US starts its earnings season this week to add to the ructions (and greying of hair of this trader) with Easter Monday trading last night seeing the S&P500 solidly rise nearly 0.7%:

Chart SP500, D1, 2015.04.06 22:51 UTC, VantageFX Pty Ltd., MetaTrader 4, Real
I’m still wary of the similar sideways pattern on the daily chart during the latter part of last year before another small up-leg, but this time without the QE punch bowl and a Fed still firm on raising rates all eyes will be on this earnings season, like no other since the nadir of the GFC.

To currencies and the US dollar is bouncing back with DXY index rebounding up 0.4% after a significant gap down following the poor NFP print but with clear support at 96 points this indicates a strong USD for the time being:

Euro surged further on the NFP print on Friday rising over 100 pips following a significant upswing bouncing off the 1.07 handle. A big move overall, but unable to break above resistance at the 1.10 handle with the dailies still showing a downtrend and negative momentum with last night seeing a 100 pip slump:

Chart EURUSD, H4, 2015.04.06 23:05 UTC, VantageFX Pty Ltd., MetaTrader 4, Real


A further move down to the 1.08 handle is expected here and then we see if it can stage another bear market rally and hit resistance at 1.10 once more. Lovely price action for trading of course.

Cable broke out too, surging above the 1.49 handle but has also come back to its point of control at 1.48 or so remaining weak against the USD (and Euro too, the EURGBP looks like breaking out again).

Yen cracked below the 119 handle on the USDJPY pair as well on Friday night, and then sat below until the algos stepped in last night as the USD rallied, sending it nearly back to its previous high at 119.50 but not resistance at the 120 handle. The downtrend from the early March highs still not cleared, although support is building momentum is not yet positive for a long position:

Chart USDJPY, H4, 2015.04.06 23:11 UTC, VantageFX Pty Ltd., MetaTrader 4, Real


Aussie dollar provided a false breakout on the NFP, almost hitting the 77 handle against the USD before the Easter bears stepped in, had a nice weekend break and then stepped on the accelerator once more last night:

Chart AUDUSD, H4, 2015.04.06 23:14 UTC, VantageFX Pty Ltd., MetaTrader 4, Real


The longer term picture remains pretty clear – if we break the former lows its another downleg for Aussie, possibly to the 70 handle as the positioning remains bearish. However, I still would not be surprised at a 200-400 pip move the other side up the 80 handle on short exhaustion, a normal part of any secular bear market price action.

The commodity complex was in action throughout most of the Easter break with oil futures rallying very strongly, Brent up nearly 6% or over $3USD per barrel to $58, while WTI surged above $51USD per barrel alongside USD strength, probably on the back of the Iran talks which conversely look set to add supply to a market in glut.

Chart CL-OIL, H4, 2015.04.06 23:16 UTC, VantageFX Pty Ltd., MetaTrader 4, Real


This latest move is hitting resistance at the $52 level but support is slowly building for a longer term bottom in crude, as my thesis of a breakout above $54 enabling a huge upside move remains on the table.

Gold also went for a ride up the risk escalator last night before coming back in the wee hours of the morning, losing $4USD per ounce to be at $1214. Notwithstanding the rally on the dailies, I’m seeing firm resistance forming at the $1220USD per ounce level intrasession, with a breakout above that required for a significant uptrend from here:

Chart XAUUSD, D1, 2015.04.06 23:20 UTC, VantageFX Pty Ltd., MetaTrader 4, Real


The data train starts again today locally with the AIG services PMI this morning, followed by retail sales before lunch befoe the big one this afternoon as the RBA meets to nod heads and do next to nothing again. Europe is fairly quiet except British services PMIs and then in the US Consumer Credit figures and the earnings season with Alcoa reporting first up.

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