Macro Morning

By Chris Becker 

A better return to form for risk markets overnight with European stocks rallying while US markets edged out with some meagre returns as the latest FOMC Minutes were absorbed. Treasuries were largely unchanged as bond markets continue to realise that the Fed is done with interest rate rises for awhile, with “lower growth expectations” the key takeaway from the minutes.

Looking first at the action on the Asian session yesterday, the Hong Kong Hang Seng Index bounced back with a solid move higher, closing up 0.9% to 28470 points. This is a clear new daily high after clustering for awhile around the 28500 resistance level, so all the stops should be out for a continuation rally:

Japanese stock markets did well taking the positive Wall Street lead higher, with the Nikkei 225 closing up 0.6% to 21431 points, getting back above key resistance that had been broken briefly last week. The daily chart continues to signal a breakout, but its still good risk management to watch what’s happening with Yen which, while weak and giving domestic stocks a tailwind, is still clustered at an important resistance level:

The ASX200 was the worst in the region, falling nearly 0.2% and closing at 6096 points, retracing back below the key 6100 point resistance level. A still stubbornly higher Aussie dollar is keeping the upside limited here with SPI futures flat coming off the flat Wall Street lead, so 6100 may not be breached again:

European stocks started well enough, slumped mid session but rallied at the end and accelerated past Wall Street for some very solid finishes. The German DAX was the best performer, closing 0.8% higher to 11401 points, pushing right through the previous bounce high at 11350 with momentum building on the daily chart:

Wall Street was positive, but generally flat following the FOMC minutes with the S&P500 closing 0.2% higher to 2784 points but still remains on track to get to the 2800 level with momentum slightly overbought and not showing any signs of a reversal:

On to currency markets where the Euro exchanged a nice breakout for a quick late reversal, taking it back to the lower 1.13’s against USD on the release of the FOMC minutes. I’m very closely watching the low moving average level on the four hourly chart where support is tentatively building at the previous ATR resistance level:

The USDJPY is slowing coming to life with a modest medium term direction for Yen no evident. Price is still anchored down below the 111 handle with a failure to breach this level on the four hourly chart, but the series of higher low is telling on the bullish side:

The Aussie dollar tried to breakout overnight but managed to find resistance at the 71.70 level, setting up for another attempt in today’s session. The unemployment print will bring this latest uptrend into focus, with a soft report leading to a big fall back to the 70 handle – or a classic numberwang saying all is fine leading to a 72 handle challenge:

Oil prices stopped their pause overnight with both Brent and WTI pushing higher with the latter just over the $57USD per barrel level. This continues to clear out all the short positions and is still poised to break higher and surge back to the $60 level with obvious support at $51:

Finally to gold, which had a small pause after getting way ahead of itself in the previous session, settling slightly to finish at the $1338USD per ounce level overnight. My original target of $1350 is almost there but this most recent was a little too fast, so expect some profit taking and a reversion back to the dominant trendline:

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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