Macro Morning

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By Chris Becker 

A big rally in shares on European markets overnight, followed by solid moves on Wall Street will ensure a robust session here in Asia on the open. The USD rose slightly although gold came back, but the biggest casualty was Pound Sterling dropping to a near monthly low.

Looking at the action on the Asian session yesterday, with the Chinese New Year holiday afoot this week, the HSI and Shanghai Composite wont reopen until Friday.

Japanese stock markets were somewhat paused due to an unchanged Yen with the Nikkei 225 eventually closing about 20 points lower to 20845 points. This relief rally is not out of steam as it continues to push up against firm resistance at the 21000 point level with futures indicating a more positive session today. Keep an eye on the low moving average line at the 20400 point level for signs of a reversal:

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The ASX200 was the big focus with traders pouring in to buy the now-off-the-hook banks, with most up 4-10% in a single session! The market closed nearly 2% higher given the huge influence of financials on the bourse, to finally crack the 6000 point barrier. With price finding a very solid base at the 5800 point level, SPI futures suggest another solid session today with recent resistance now pushed through:

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European stocks turned the flat start to the week into a much more robust session as the Euro cratered providing a lot of support overnight. The German DAX finished nearly 1.7% higher to 11367 points, bursting through the 11200 point resistance level and setting up a conversion of this relief rally into something more substantial:

Wall Street continues to build on solid momentum but a little more subdued as traders await the State of the Union address. The S&P500 finished 0.5% higher at 2737 points with the daily chart showing more potential here with the next technical level to beat very close – the downtrend line from the 2018 series of lower highs:

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On to currencies, where the USD is also coming back against most of the undollars as the Euro continues to suffer due to the Italian technical recession print, now pushing down to the 1.14 handle and reverting below trailing ATR support on the four hourly chart. I’m watching the session lows carefully for signs of a proper reversal:

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The USDJPY chart is looking very interesting with what looks like a false break above resistance at the 110 handle with Yen weakening slightly overnight to bring it back into line. I’m still watching the high moving average and momentum very carefully on lower timeframes for a reversal that could spill over into a selloff into Japanese equities, but so far former resistance at 109.80 is still holding as support:

All eyes were on the Aussie dollar yesterday with the RBA meeting hold result sending the Pacific Peso up about half a cent before half of those gains were lost overnight. I’m watching the ATR support level at the 72 handle proper for signs of a potential reversal, but so far its holding:

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Oil prices are failing to push higher with the WTI contract closing just below the $54USD per barrel level overnight in a weak session. The cluster of prices around November/December highs at $54-55 hasn’t been cleared here yet with a bearish rising wedge forming at quite overbought levels. I’m thinking short sellers might pile in here quickly if the $53 level is threatened:

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Finally to gold, which firmed slightly back to the $1315USD per ounce level as this minor reversion from overbought levels continues. I’ve been contending for a while now that this move had been too fast – look at daily momentum spiking well above 200 – but given the overall market move, I only expect a minor retracement to the previous January highs around $1300:

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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