Macro Morning

By Chris Becker 

Risk markets were buoyed last night by another government shutdown aversion and hope that the US/China trade talks will amount to something, as rationale repairs Trumps ridiculous policies. The USD reversed course as a result, with both Pound and Euro surging, while US Treasury yields lifted again to a new weekly high.

Looking at the action on the Asian session yesterday,  the Hong Kong Hang Seng Index closed only a few points higher to 28171, just making a new daily high here, but it really just matched the previous highs before the NY holiday. This still keeps it well above former resistance, now firm support at the previous false break high at 27300 with momentum still in a good zone for this rally to continue:

Japanese stock markets reopened after a holiday and surged, with the Nikkei 225 closing more than 2% higher to 20864 points. There is still substantial resistance at the 21000 point level to overcome and temporary support at 20100 points that has to hold this week but this is looking much more positive – a classic breakout opportunitiy here on the daily charts:

The ASX200 was one of the weaker ones, but still had a solid day, finishing about 0.3% higher to remain well above the 6000 point barrier at 6079 points. This still looks way overbought but SPI futures however indicating another move higher today despite a higher Aussie dollar overnight, but the correlation with other risk markets is trumping the lower Peso meme:

European stocks started off strong and stayed there again despite a rally in both Euro and Pound Sterling with the German DAX lifting 1% higher to bounce above 11000 points, closing at 11171 points. Momentum did not go negative on the daily chart with trailing ATR support at the 10800 level also respected in the last dip, so this has the potential to at least match the previous high near 11350 or so:

Wall Street had a better night this time around with all three major bourses lifting around 1% with the S&P500 finishing 35 points higher to 2744 points. The daily chart clearly shows a break of the longer term downtrend line and resistance at 2740 points, setting the stage for a clearing rally here up to 2800 or so:

On to currencies, where remarks by the BOE Governor and the news around the China trade talks sent the USD down against most of the majors. The Euro bounced high, taking out the 1.13 handle above as it recovered from a very oversold condition. This looks good on the four hourly for a potential bottoming action, but the shorter timeframes indicate it’s almost out of puff. I’m watching for new session highs above trailing ATR resistance to see if it still has legs, but I still contend the longer term move is 1.12 or even 1.10 level:

The USDJPY hasn’t increased on its breakout on the back of a weaker USD, but remains poised here for another legup with a small symmetrical triangle forming on the four hourly chart. It’s extremely overbought so there’s going to be a small mean reversion possibly as low as the 110 handle:

The Aussie dollar is seeing some relief on the USD weakness but only managed to stage a small rally up to but not above its Monday session opening high for the week. The Pacific Peso remains under a lot of selling stress here so I’m looking for a reversion back to mean below the high moving average:

Oil prices are still trying to stabilise after last week’s stumble with the WTI contract moving steadying overnight to close just on the $53USD per barrel level. The bearish rising wedge pattern hasn’t come to fruition here with the daily chart showing obvious support at the $51.70-$52 building:

Finally to gold, which continues to slide slightly sideways with a small move higher to finish on the $1310USD per ounce level again. This reversion still has a few more sessions to run as I still 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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