Macro Morning

By Chris Becker 

Wall Street rebounded fiercely overnight on the back of the Powell Put with lower rates definitely on the agenda for the Fed in 2019. EZ inflation pulled back in May while commodity prices remained under pressure despite a much lower USD. It should be a solid risk on day here in Asia with the latest GDP print locally perhaps unsettling the rise in Aussie dollar.

Yesterday saw Asian stock markets continue in a mixed mood with the Shanghai Composite again closing below the critical 2900 point support level, falling nearly 1% to 2862, while the Hang Seng Index was down nearly 0.5% to 26761 points, making another daily low. The daily chart had been showing a deceleration pattern with a target at the 27000 point level and despite the lower lows, price does seem anchored around here. I’m watching the daily lows here for signs of an inversion, with a growing probability of a swing higher on better sentiment:

Japanese share markets are holding on the best, with the Nikkei 225 putting in a scratch session to finish at 20408 points, almost ready to tackle the key terminal and psychological support level at 20000. Futures are up a lot this morning because of the rebound on Wall Street and a very small selloff in Yen overnight, with the oversold mood probably translating to a nice and sharp swing higher here:

Australian stocks did the best in the region by advancing slightly, helped along by bank stocks that rallied in the wake of the RBA cut. The ASX200 eventually closed nearly 0.2% higher at 6332 points, still below previous support at 6400 points but holding on in this small dip. SPI futures are up over 50 points on the rebound on Wall Street with the technical picture showing an oversold market with momentum that never went negative on the daily chart. This will obviously support a rally past the 6400 point level:

European stocks lifted across the board, despite the lower CPI print and higher domestic currencies. The FTSE was the relative worst at only a 0.4% gain while the German DAX continued its bounce back and closed 1.5% higher, but still just below previous key support at 12000 points. The daily chart remains in a weak position here with oversold momentum but there is scope for another dead cat bounce here up to the 12200 point level:

Wall Street loves a put shot, and was helped by the Fed, not by the fundamentals again overnight with a big 2% surge across the board. The S&P500 finished 2.1% higher to finally get back above the 2800 point level. Does this mean that big bearish head and shoulders pattern on the daily chart is now null and void? Not yet!

Currency markets increased in volatility but not range, with the Euro oscillating wildly around the mid 1.1250 level overnight in response to the CPI print. The four hourly chart shows a stall here at that level with an inability to break higher above the high moving average level with momentum inverting and signally a slight retracement to the dominant downtrend (declining black line) probable:

The USDJPY pair remains under a lot of stress with the USD weakening meme but managed a small uptick before finishing this morning at just above the 108 handle, not making any session lows at least. It could still break down in today’s session but with a risk on mood its more likely to try to breach that high moving average at the 108.30 level:

The Australian dollar almost got to the 70 cent level again overnight on the back of the rate cut – bizarre – but failed to hold above. It’s not quite an end of trend but today’s GDP print could wipe out any upside if it comes in lower than expected. This still looks overstretched to me, but follow price first and theories later:

Oil prices remain depressed on the back of the DOE inventory report with the WTI contract still remaining below the $53USD per barrel level overnight. Last week’s massive slump should find support here at the previous monthly resistance level and is my target for the overall inversion, but oil has a volatility all of its own and could break below here:

Finally to gold, which hasn’t been able to follow through on its recent surge, finishing at the same $1325USD per ounce level, after previously bursting through previous key resistance at the $1300 level. This is still a big move, equating to the March highs with the next level not far away at the monthly highs at $1340 or so. But a small retracement is likely:

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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