Macro Morning

By Chris Becker  

The risk trade is transitioning back to the safety of bonds as the USD softened overnight on comments from Fed members that the tightening regime will probably include at least 2 or 3 hikes this calendar year. US stocks retreated, while gold and other undollar currencies were stable or rose slightly to start the week on shaky ground.

Looking at Asia’s session yesterday, the Shanghai Composite had a wobbly start to the week but eventually closed higher for the day, up 0.4% to 3250 points. The former high at 3300 points remains the target here but these fits and spurts are not confidence inspiring:


Japanese stock markets were closed due to a public holiday yesterday but futures are suggesting another slight retreat this morning even as Yen strengthened immensely against USD overnight, but the risk on factor is outweighing the usual inverse correlation:


The ASX200 closed down 0.4% to 5778 points, selling off throughout the session in a very cautious move across all sectors. Resistance at 5800 points is the key are to watch on the upside here. SPI futures are flat indicating a small retreat this morning on the poor US lead:


On to Europe, where stocks were doing well before the US open with the German DAX then retreating in the cash session to fall 0.3% but recovered some of this in post futures trade. The former high at 12,500 remains the terminal target here but a stronger Euro may provide too heavy a headwind:


US stocks are not quite jittery, but there’s really no confidence on the ground as the S&P500 retreating a few points again.  ATR support at 2345 points is key here going forward:


On to currencies, where the USD is trying to find support with Euro attempting to break out before selling off slightly at the end of the session last night, remaining below the 1.08 handle. The next target is the February high at the 1.0830 level but the previous daily highs at 1.0780 are the first hurdle to cross as I watch for a potential breakdown below the low moving average here:


Yen is building to breakout significantly against USD with the USDJPY pair moving back to its Friday low at 112.50 overnight. My target remains 111.80 to 112 if those lows break:


The Aussie dollar is continuing on its slow taper up to 78 cents against USD with prices hovering above the high moving average on the four hour chart. However, internally and looking at momentum readings, this is starting to look weak, so I’m looking for a reversion trade here back to previous resistance at the 77 handle:


Oil is trying to come back from its recent fall but the WTI contract remained only slightly below the $49USD per barrel level overnight, still depressed from its recent breakdown. Momentum remains oversold and has not yet crossed over, so no reason to be long here yet:


And to gold, the biggest undollar, which is slowly trying to get back on trend amid the USD weakness, climbing up to but not above ATR resistance, finishing at the $1234USD per ounce level. This is only a short term bounce with firm support at $1200 the key area to watch longer term:


Glossary of Acronyms and Technical Analysis Terms:

ATR: Average True Range – measures the degree of price volatility averaged over a time period

ATR Support/Resistance: a ratcheting mechanism that follows price below/above a trend, that if breached shows above average volatility

CCI:  Commodity Channel Index: a momentum reading that calculates current price away from the statistical mean or “typical” price to indicate overbought (far above the mean) or oversold (far below the mean)

Low/High Moving Average: rolling mean of prices in this case, the low and high for the day/hour which creates a band around the actual price movement

FOMC: Federal Open Market Committee, monthly meeting of Federal Reserve regarding monetary policy (setting interest rates)

BOJ/Abenomics: Bank of Japan, economic policy/direction enacted by PM Shinzo Abe

DOE: US Department of Energy 

Uncle Point: or stop loss point, a level at which you’ve clearly been wrong on your position, so cry uncle and get out!

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