Macro Morning

By Chris Becker 

Risk sentiment overnight was somewhat mixed but still positive as US stocks advanced alongside interest rates while oversold oil bounced back 2% as the USD finished lower. This is on the back of potential delays in the US-Mexico tariff deadline while in Europe, the ECB extended its hold status, but nevertheless remains more upbeat than what the economic fundamentals suggest.

Yesterday saw Asian stock markets continue their mixed mood with the Shanghai Composite now almost in free fall with another 1% decline, remaining well below the critical 2900 point support level, to close at 2827 points. The Hang Seng Index closed up 0.3% to 26965 points, with the daily chart still showing a deceleration pattern with a target at the 27000 point area as sentiment is not yet positive enough to get back over that level. I’m still watching the daily lows here for signs of an inversion, with a growing probability of a swing higher on better sentiment:

Japanese share markets put in a scratch session as the Yen advanced throughout the day, with the Nikkei 225 finishing at 20774 points, remaining above the key terminal and psychological support level at 20000. Futures are up again this morning due as Yen remains somewhat depressed, with the oversold mood translating to a swing higher here to try to get back above the high moving average:

Australian stocks were the best performer in the region with a small blip higher with bank stocks helping the ASX200 closing 0.4% higher to 6383 points, still below previous support at 6400 points. SPI futures are up 0.4% on the continued rebound on Wall Street, so this should support a rally back through the 6400 point level to finish the week on a positive note:

European stocks were quite unstable across the continent with response to the ECB meeting and conference thereafter unsettling both shares and currencies. The German DAX slipped 0.25% during a volatile session, being unable to close above previous key support at 12000 points yet again. The daily chart remains in a weak position here with oversold momentum but there is scope for a swing play:

Wall Street however continues to support its own put rally from the Fed with rises across the three main bourses. The S&P500 finished 0.6% higher to 2843 points, still remaining solidly above the former resistance 2800 point level and advance beyond its downtrend line on the daily chart. This is looking more promising:

Currency markets increased in volatility due to the ECB meeting with a big range in Euro sending it back up to but not through the 1.13 handle again. The four hourly chart shows a potential double top pattern forming here but its really all about tonight’s NFP print that will be crucial in determining this new mood and direction:

The USDJPY pair is still trying to find a bottom here with yet 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 to punch through:

The Australian dollar again failed to get back above the 70 cent level vs USD with a failed swing and a stall price pattern here on the four hourly chart. With support still firm at the 69.50 level however, this should provide a good uncle point if tonight’s NFP print undershoots:

Oil prices came back last night from short sellers taking profits more than anything else with both Brent and WTI lifting nearly 3% with the latter closing just above the $53USD per barrel level overnight. It’s early days but there is the potential for a bottom here at the previous monthly support level, but it could also be a pause before breaking again and potentially making its way down to $42 as it likes to overshoot the fundamentals:

Finally to gold, which is really trying hard to punch through its recent surge, despite the new found strength in USD, with a new daily high at the $1335USD 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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