Macro Morning

By Chris Becker 

Risk markets are swinging from caution to optimism and back again with US/China trade tensions running high and pulling back any nascent bounce on stocks overnight. The latest Fed minutes had a minor impact on bond yields which fell slightly, while currencies remained relatively calm as the Australian dollar stayed under 69 cents again.

Yesterday saw Asian stock markets vacillate between advances and scratch sessions again with the Shanghai Composite reading water slightly above 2900 points before selling off going into the close to finish 0.5% lower at 2891 points. The Hang Seng Index is doing a bit better, up 0.2% to 27705 points finally not making another new daily low and getting a little bit of confidence back and while the daily chart is showing a deceleration here into the mid 27000 point level, momentum remains firmly with the bears:

Japanese share markets finished flat after advancing mid session, with the Nikkei 225 closing only a few points higher to 21283 points while the broader TOPIX fell back. Futures are pointing to a retracement this morning as a stronger Yen and reduced sentiment overnight are likely to see price gravitate towards the low moving average as this swing play comes to an end:

Australian stocks effectively did the best in the region, with the ASX200 lifting 0.2% to remain above the 6500 point barrier, but its only a meagre gain helped by the lower Austrlaian dollar. SPI futures are suggesting an equal pullback today so we’re unlikely to see a new daily high that could strand this breakout:

European stocks were mixed across the continent, still getting help from lower domestic currencies but its the lack of broad confidence holding stocks back with the German DAX only gaining  0.2% to remain above 12000 again at 12168 points. While its important to keep above this level, the lack of any new daily highs and stuck daily momentum is telling and shows an inability to get back to the former highs:

Wall Street is really getting into a quagmire here with tech stocks again selling off while the FOMC minutes and the apparent hold on interest rate cuts not helping broader industrials either with the S&P500 closing 0.3% lower to 2856 points. Note how on the four hourly chart that the lack of a new session high with momentum about to crossover to negative will put support at the 2830 point level under pressure very soon:

Currency markets remain in a spot of low volatility at the moment with Pound Sterling retreating slightly on the May/Brexit saga while Euro failed to breakout again and staying in a depressed mood. The four hourly chart of the union currency shows this plainly with the currency pushed back to its Monday morning low spot at the mid 1.11’s with almost zero potential for a bounce higher as momentum remains quite negative:

The risk proxy USDJPY pair is retracing again after recently breaking out above resistance at the 110 handle proper finishing near the 110.30 level this morning in a very mild selloff. As I said yesterday, this was looking ahead of itself, but support at the 110 handle should hold here, but watch momentum and the lower timeframes for signs of an inversion:

The Australian dollar continues to struggle here post the RBA minutes release as traders are still weighing up a potential cut next month, keeping the Pacific Peso below the 69 handle. Trailing ATR resistance at 69.20 remains strong and there’s potential for a follow through below the 68.65 area again today:

Oil prices remain inverted sharply on the poor DOE inventory report with the WTI contract retracing to finish at a new weekly low, back to the just above the $61USD per barrel level. Notably its not a monthly low, but the bulls are likely to follow through here with further dumping of bets so watch the $59 level to next come under pressure:

Finally to gold, which fell again overnight, but only mildly and still not yet at the previous bottom, falling to $1273USD per ounce level. This keeps it near, but not below the previous bottom with $1260 or so the downside target here if broken:

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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