Macro Morning

By Chris Becker 

Positive sentiment on risk markets is accelerating with some big advances on European markets matched by near 1% lifts across Wall Street overnight. A solid US housing starts figure plus more hawkish Fed speak saw the USD rise against almost everything, with the Australian dollar now down in the 68’s.

Yesterday the Shanghai Composite continued to float along, closing 0.55% higher to 2955 points while in Hong Kong, the Hang Seng Index only closed with a scratch session finishing at 28275 points. Momentum was clearly way oversold and is coming back to a swing play but there’s a lot of daylight overhead to fill although futures are supporting a better return today, I’m waiting for a close over the 28600 point level:

Japanese share markets were not able to withstand a stronger Yen, with the Nikkei 225 taking back the previous session gains to close 0.59% lower at 21062 points.  Futures are however pointing to another good start this morning as Yen reversed course overnight with a significant breakdown, so this should see price to bounce off the February/March lows but I’m still wary:

Australian stocks did well in the wake of the unemployment print with the ASX200 lifting 0.7% to be at 6327 points.  SPI futures are up nearly 50 points on the Wall Street surge so we should see a new weekly high to finish out the week, helped along by a much weaker Australian dollar going into tomorrow’s election:

European stocks are taking the stage here, helped again by a much lower Pound Sterling and Euro with the German DAX again finishing nearly 1.8% higher at 12310 after recently pushing through significant resistance at the 12000 point level. Momentum is coming back strongly on the daily charts as price bounces off this key support level, with this relief rally looking to match the previous highs at just below 12500:

Wall Street was pushed higher again, but this time it was a broad move, not just tech stocks. The S&P500 continued its bounce back, lifting nearly 0.9% higher to 2876 points, now pushing well above the 2800 point support level. This was the area to watch as former resistance throughout February and the springboard for the latest rally almost up to 3000 points. That neck line forming at the solid black horizontal lower line will be the key uncle point but things are looking up:

Currency markets had even more action and the bulls are still siding with USD with Pound Sterling now in near free fall below the 1.28 handle while Euro fell to a new weekly low and cracked below the 1.12 handle. The four hourly chart continues to show the bears in charge here, pushing price below this key level and possibly to the start of May low at the mid 1.11s.

The risk proxy USDJPY pair looks like finally finding a bottom here with the recent bounce off the 109 handle this time broken through the high moving average on the four hourly chart, but not trailing resistance overhead at the 110 handle proper. If risk sentiment stays positive tonight, we could see an even wilder inversion:

The Australian dollar keeps getting sold off with the broader market reacting negatively to yesterday’s unemployment print. The 69 handle has broken – just – with new resistance at 69.60 (former blue trailing support) the area to watch. Interestingly, the usual risk proxy correlation has disappeared, but I consider the latest move to be a bit of an overshoot with momentum oversold:

Oil prices continued to firm on the hawks circling Iran with the WTI contract finishing above the $63USD per barrel level in a very solid breakout after recently making no new daily lows on the daily chart. This move could see the start of a re-engagement of the previous weekly uptrend, with my short term target at the former highs near $66:

Finally to gold, which finally folded against a too strong USD, unable to punch through the key $1300USD per ounce level, and falling to the $1286 level overnight. The double bottom pattern is no longer working with a failed breakout likely to turn into another dip down, but watch the previous support level here to see if it sticks:

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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