Macro Morning

By Chris Becker 

A slump in hiring conditions in the US saw stocks improve and a possible retraction of tariffs against Mexico lifted USD against all the majors overnight. Oil prices slumped nearly 3% as long positions continued to be abandoned in the wake of decade high petrol stockpiles in the US.

Yesterday saw Asian stock markets continued their somewhat mixed mood with the Shanghai Composite still unable to get back above the critical 2900 point support level, putting in a scratch session, while the Hang Seng Index closed 0.5% higher to 26895 points, finally able to arrest the recent decline. The daily chart had been showing a deceleration pattern with a target at the 27000 point level but sentiment is not yet positive enough to get back over that level. 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 did the best again, despite a stronger Yen, with the Nikkei 225 punching nearly 2% higher to finish at 20776 points, bouncing off the key terminal and psychological support level at 20000. Futures are up again this morning due to a more sustained selloff in Yen, with the oversold mood probably translating to a nice and sharp swing higher here, but can it get back above the high moving average:

Australian stocks gapped higher in response to the overnight action on Wall Street but was unable to hang on to all the gains with the ASX200 eventually only closing 0.4% higher to 6358 points, still below previous support at 6400 points. SPI futures are up 0.3% on the continued rebound on Wall Street, so with the technical picture showing an oversold market this should support a rally back to the 6400 point level:

European stocks lifted again, but only just, with mixed economic conditions not yet convincing the bulls to go wholly in on the rebound. The FTSE and German DAX both put in scratch sessions with the latter still unable to close above previous key support at 12000 points. The daily chart remains in a weak position here with oversold momentum but there is scope for a swing play:

Wall Street got the most attention, with more doves coming out of the woodwork at the Federal Reserve, supporting more risk on action. The S&P500 finished 0.8% higher to remain solidly above the 2800 point level and advance beyond its downtrend line on the daily chart. This is not quite out of the woods but is promising:

Currency markets flipped on the USD due to the Mexico trade threat inversion with the Euro punching up through the 1.13 handle before sharply selling off to finish at the 1.1220 level this morning. The four hourly chart had shown a stall at the mid 1.12’s that was swept aside for a false breakout before the sellers stepped in and pushed the union currency off guard and back down to the dominant downtrend (declining black line). Friday night’s NFP print will be crucial in determining this new mood:

The USDJPY pair may finally be finding a bottom here with another small uptick that finished above the high moving average, signalling no new lows and a potential swing higher. I’m watching the session highs on the four hourly chart for signs of another breakout, with momentum not yet positive enough:

The Australian dollar failed to get back above the 70 cent level and the bearish rising wedge forming on the four hourly chart played perfectly into the seller’s hands, with a sharp inversion overnight. As I said yesterday, this looked overstretched, and this selloff may have legs down to former resistance, now support at the 69.30 level:

Oil prices have gone from depressed to selloff quite quickly on the back of the latest petroleum supply reports with the WTI contract dropping over 3% to close below the $52USD per barrel level overnight. Last week’s massive slump couldn’t find support at the previous monthly resistance level and is potentially on its way down to $42 as it likes to overshoot the fundamentals:

Finally to gold, which may yet be able to follow through on its recent surge, despite the new found strength in USD, surging up to its previously monthly high before coming back to finish with a new daily high at the $1330USD per ounce level. If it can beat those March highs at $1345 or so, a decoupling with USD is on the cards:

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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