Macro Morning

By Chris Becker 

Risk sentiment is now in a very poor place with further falls on both sides of the Atlantic overnight, the S&P500 critically falling below the key 2800 point support level as European stocks reacted negatively to the uptick in German unemployment. The USD was stronger against most of the majors, although the Aussie dollar remains resilient.

Yesterday saw Asian stock markets respond in kind to Wall Street’s poor mode although the Shanghai Composite was the only standout, up slightly to 2914 points, while the Hang Seng Index closed 0.5% lower to 27235 points, wiping out the very brief uptick to start the week. The daily chart still shows a deceleration pattern with a bottom potentially forming here at the 27000 point level but sentiment and momentum is way against it:

Japanese share markets were off the most with the Nikkei 225 closing over 1% lower to 21003 points looking in a very weak position and restarting its corrective phase. Futures are mixed this morning given the retreat in Yen overnight, but correlated risk sentiment should see a higher potential for price to fall below the once stable area around the 21200 point area:

Australian stocks are falling in line with other risk assets with the ASX200 falling 0.7% to 6440 points unable to get back to previous support, now staunch resistance at 6500. SPI futures are down over 30 points in response to the further selloff on Wall Street overnight. This could take it close to key support at the 6400 point area so watch it very closely:

European stocks are not getting any assistance with the lower Euro and Pound Sterling as German unemployment jitters and poor Wall Street sentiment mattered more, with German DAX slumping 1.6% to close well below key support at 12000 points. The daily chart was transmitting this weak position very clearly with lower momentum and price unable to get back above the high moving average so now its in correction mode with daylight to 11200 points below:

Wall Street’s foul mood continued, possibly “helped” by Mueller’s public statement that Trump should be impeached with the S&P500 fell nearly 0.7% to 2783 points. This confirmed the classical bearish head and shoulders pattern on the daily chart by breaking below the neckline so absent any BTFD crowd stepping in, we could be in for a nice Sell in May correction:

Currency markets are in full swing although Pound Sterling remains on a downtrend, its action last night was modest while Euro sank on the German unemployment print, almost hitting the 1.11 handle. The four hourly chart shows how tentative support at the mid 1.11s has been broken making a new weekly low, so there’s likely more downside ahead:

The USDJPY pair however is a surprise moving back into a bullish mode with Yen selling off overnight, pushing the pair back up to the mid 109’s. So far this week it has been unable to get back above the 109.50 level and the high moving average so this looks more exhaustive as a minor swing play here rather than a new trend with trailing ATR resistance at 109.80 likely to stop any further progress:

The Australian dollar remains in a tight holding pattern here as traders continue to wait for next week’s June RBA meeting, still above the 69 handle but unable to get above last week’s intrasession high at the 69.30 level as some selling sets in.  Just like every other trader out there, I’m watching the 69 cent level closely for signs of another inversion:

Oil prices were all over the place last night with Brent off more than 1% lower while the WTI contract briefly touched the $57 level in a sharp selloff that was then filled throughout the US session to just finish above the $59USD per barrel level. This is ominous as higher intraday volatility like this suggests more downside to come:

Finally to gold, which can’t seem to find any buying support here as the USD remains too strong, finishing again at the $1279USD per ounce level. Although daily momentum is tentatively positive the weight of previous selling is still going against the shiny metal, so there needs to be a lot more interest here to get back to the $1300 level as the overall price trend remains down:

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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