Macro Morning

By Chris Becker 

The return of Wall Street saw risk markets nudge a little higher while a surge in USD weakness due to the leaked concerns of the US trade delegation for a more stable Yuan saw major pairs move swiftly against King Dollar, which should provide a headwind to Asian stocks here today.

Looking first at the action on the Asian session yesterday, The Hong Kong Hang Seng Index is also off, down about twice as much or 0.4% to 28240 points. Again this means no new daily high with price continuing to cluster around the 28500 resistance level, so I’m watching closely for signs of a reversion and a move down to the low moving average:

Japanese stock markets did a little better, with the Nikkei 225 closing only a few points higher to 21302 points, still back above key resistance that had been broken briefly last week. The daily chart is still signalling a clear breakout, but it pays to wait and see what’s happening with Yen given the USD reversal, but momentum is nicely overdone as risk correlation overrides the currency correlation lag:

The ASX200 was actually the best in the region, lifting nearly 0.3% and closing at 6106 points. Despite a much higher Aussie dollar overnight, SPI futures are up nearly 20 points so we should see the continuation of this trend as all the shorts have disappeared:

European stocks again started flat and stay depressed throughout the whole session with the German ZEW survey still negative, but coming in at expected levels as the only bright point as Euro flipped higher suppressing risk activity. The German DAX closed flat again, the only bourse to advance by a handful of points to close at 11309 points, unable to break the previous bounce high at 11350 although momentum is still positive on the daily chart so there is still potential to get there:

Wall Street returned after the President’s Holiday and the ongoing Huuuge national emergency at the omellette bar with earnings and the fall in USD helping across the board. The S&P500 closed 0.3% higher to 2780 points and remains on track to get to the 2800 level with momentum still cooking:

On to currency markets where all the action was with the “Yuan stability requirement” from the trade talks dominating action with Pound Sterling lifting over 100 pips, the Euro about half that but still breaking out and making a new weekly high above the 1.13 handle. This clears firm resistance at the 1.1320 level but the follow up session was not as confident, so I’m watching for a reversion below tonight, as I still contend the longer term move is 1.12 or even 1.10 level:

The USDJPY is coming to life with yesterday’s breakout reversing and then filling in again throughout the NYLON sessions, making scalpers and short term traders profitable, but providing no medium term direction for Yen. Price is still anchored within the moving average band on the four hourly chart, so watch either side for breakouts, or a bit looser down to the 110 handle:

The Aussie dollar did almost as well as Sterling, surging higher on the Yuan news after withering throughout the night as I expected after the Asian session. This clearly makes a massive new weekly high and sets up for a big return to the former resistance level at the 72 handle, but can it stick?

Oil prices had a pause overnight with both Brent and WTI pausing here after their recent breakotus with the latter closing again just over the $56USD per barrel level. This is a welcome pause and is still poised to break higher and surge back to the $60 level with obvious support at $51:

Finally to gold, which is just loving this USD volatility and surged in a big breakout, hitting the $1340USD per ounce level overnight. My original target of $1350 is almost there but this was a little too fast, so expect some profit taking:

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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