Macro Morning

By Chris Becker 

It was all about the USD overnight with the release of 4Q GDP figures and the latest CPI print from Europe, with the former sending Treasury yields higher and the latter jostling Euro around but giving European stocks a reprieve from impending recession fears sending them higher.

Looking first at the action on the Asian session yesterday, the Hong Kong Hang Seng Index closed down only 0.2% lower at 28700 points. Although the current rally remains intact price had gotten ahead of itself slightly so this reversion continues modestly. The interim target at 30,000 points remains intact but watch that trendline and momentum readings carefully for a correction:

Japanese stock markets pulled back the most with the Nikkei 225 closing 0.8% lower to 21385 points, but still above previous key resistance. The daily chart continues to signal a nice uptrend, but its a modest run so far with the upside target still faraway at 22700 points and while Yen was much weaker overnight, positivity across other correlated risk markets remains low:

The ASX200 was the only market in the green, launching on the good mood around the Capex figures and the lower Aussie dollar as a result, closing 0.3% higher to 6168 points, still well above the key 6100 point resistance level. SPI futures are up slightly despite the falls on Wall Street, so we may well see 6200 threatened today to end the week and start the month on a good note:

European stocks started flat but gained ground throughout the session as the positive EZ CPI print and the volatile Euro pushed stocks higher. The German DAX lifted around 0.25% to close at 11515 points, taking back some of the previous session losses, and still well above the previous bounce high at 11350. Momentum was rolling over here on the daily chart but I would not be concerned unless the low moving average at the 11300 point level is threatened:

Wall Street remain subdued however, even with a much better than expected 4Q GDP print as the S&P500 remains unable to get above the 2800 psychological key level, falling 0.3% to 2780 points. The four hourly chart is showing a marked slowldown with a series of lower highs and price gravitating here at ATR trailing support at the 2780 level, which is the one to watch tonight to finish out the week:

On to currency markets where Pound Sterling remained elevated, but all the action was in Euro with some volatile spikes each way on the back of the CPI prints, eventually finishing lower this mornign before the Sydney open at the 1.1370 level. Momentum is losing here, so I’m watching the 1.1350 level closely for signs of a reversal as the trendline is under threat here:

The USDJPY is having another huge day with a big breakout overnight, surpassing the start of week move with a launch up through the 111 handle. This should be a good tailwind for Japanese domestic stocks but the volatility here is probably overriding any risk taking:

The Aussie dollar flopped again on the solid US GDP print, finishing below the 71 handle and looking very weak coming into today’s session. Tentative ATR support at 71.20 or so could not hold and with no good news from the US/NK summit or the ongoing trade talks with China, the only hope is a good manufacturing PMI print or some other local macro news, or we’re retesting the 70.60 lows:

Oil prices remained calm overnight despite a higher USD with the WTI contract finishing just above the $57USD per barrel level as price bunches up at these session highs. Watch obvious support at $54 or so for a reversal, but also a clear uncle point to ride another long position higher up to $60 or so:

Finally to gold, which continues to wobble as USD firmed, falling $5 this time to the $1315USD per ounce level, closing below the low moving average. This may precipitate a wider reversion than expected, down to trailing ATR support at just above the $1300 level:

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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